Jay's Money Tree & The Profit Bulbs

Each bulb represents one of Jay's unique money-making techniques or long-term profit strategies.

Picture if you will a naked Christmas tree with long willowy branches to which we will attach a variety of money-making profit bulbs! We’ll call this Christmas tree “Jay’s Money Tree” or our basic skeleton representing a rundown (beat-up) multiple unit income property with excellent potential for creating additional cash flow and higher profits. Each profit bulb shall represent one of Jay’s unique money-making techniques or long-term profit strategies.

When I began my investing career, I had very little money to buy real estate. I was pretty much forced into buying properties that better funded investors would likely pass over. Most of my properties were older, rundown and a bit unsightly to look at. My mother had always taught me that beauty was only skin deep! I was hoping this might also apply to ugliness as well! Surprisingly, yet little known to me at the time – it was how my properties looked, that would eventually steer me into creating new profit-making techniques not always available to investors with cleaner, nicer-looking properties. These techniques were what I would begin to call; “Jay’s profit bulbs”.

Obviously, the first two profit bulbs are pretty well known to every investor. Namely, monthly cash flow and selling profits. However, well known or not doesn’t necessarily make them happen. Many properties with much greater appeal than mine, “Pride of Ownership”; they’re called, can sometimes struggle for years before they achieve cash flow or produce profits from a sale.

With my kind of properties, when using my adding value profit bulb, I’m almost guaranteed better cash flow and quicker profits.

In my latest book; “SWEAT EQUITY”, KJAY Publishing, I’ve written in detail about my 12 favorite profit bulbs; when I use them, how I use them and benefits each one provides for me. If you find yourself in similar circumstances like I was starting out; that is, broke but more than willing to learn! You may find that many of my profit bulbs can offer you similar benefits as well! At the very least, give you a solid boost!

Obviously, preserving your cash when you have very little to start with is a “no brainer”! The big question of course, can this be done? The answer my friends is yes, yes and yes. There are many different ways. I want you to think about giving sellers something they might agree to take in lieu of cash. When you acquire properties like I did; unsightly – okay, I’ll admit some were just downright butt ugly, you’ll find sellers are a whole lot more flexible – much more apt to listen to your proposals. Lonely sellers, they’re often called! These are sellers who don’t get many offers because of how their properties look! They become real “don’t wanters”. With this bunch, creativity has no limits.

One of my favorite down payment cash stretcher techniques I call “lemonading”. Let’s say the seller wants a $30,000 cash down payment! I’m agreeable with $30,000! Just not all cash! Depending on how the property looks of course, and the seller’s motivation, my offer might be $30,000 down payment consisting of $15,000 cash; plus my used ski boat appraised by me at $15,000. To be fair, I’ll even toss in 4 sets of water skies and matching life jackets. The question often arises: What seller would take that kind of an offer? The answer my friend is a seller who wants what I’m offering more than he wants the property he owns! Using my money stretcher concept, it’s totally possible to empty your cluttered overstuffed garage - everything you’ve outgrown, saved and no longer want or need. Weight lifting equipment, hunting gear, dune buggies, camping trailers and even that old motorhome you don’t drive anymore. Naturally, values are what you say they are – ya got it!

I want you to read everything you can about seller financing. Seller financing is a very important profit bulb because it’s the “heart ‘n soul” of building real estate wealth. For investors like me who routinely acquire properties with only 10% down payments or less, our biggest single expense will always be the carrying charges – or interest payments on the remaining mortgage debt. For example, a regular 30 year amortized bank mortgage written at 6.5% interest rate will cost $664,978 before it’s paid off! Almost $365,000 is the cost of financing.

Banks are normally not negotiators where their existing mortgage balances are concerned – but sellers are! That’s why dealing one-on-one with sellers who agree to finance your properties is one of my most lucrative profit bulbs. Millions of dollars are at stake! But here again I will remind you – property selection, meaning the kind of properties you acquire sets the stage for this top earning profit bulb. When you purchase older rundown-looking properties, you are pretty much forcing the seller to participate in the financing. The reason is: Banks consider mortgages on properties with more than 4 units to be commercial mortgages. Banks prefer to make commercial loans (mortgages) on Trump Towers and shopping centers – not rundown junky-lookin’ duplexes.

Sellers who sell junky rundown income units are generally poor managers. That’s almost always the reason they’re selling. Not only are they poor property managers – they are poor money managers as well. When I told you banks don’t normally negotiate existing mortgages – but sellers will, believe me, this is like finding a hidden gold mine. More than 30% of all the seller carryback notes (mortgages) I’ve negotiated when acquiring my properties were paid off with less money than what I owed. I’ve gone back to the sellers and negotiated discounts! Poor money managers will always need more money. Private financing keeps you in total control till the mortgage debt is fully paid.

I urge you to read the chapter in my book, (SWEAT EQUITY), about how my skilled student, Dan S., negotiated with his private mortgage holder to pay him lump sums of cash on multiple occasions when he needed money. Every time the mortgage holder would ask Dan for cash; he also agreed to reduce the mortgage balance by twice the amount. When you control your own mortgage debt, there’s no end to how creative you can be.

Seller financing is a springboard to many of my other profit bulbs. Obviously, you should leave out any “due-on-sale provision” when you negotiate the seller’s carryback mortgage. Now you’re free to bring in a Money Partner or sell a portion of your property to what I call a “Half Sale Buyer”. Both of these profit bulbs will generate additional income for you in the form of guaranteed monthly payments. Guaranteed monthly payments are exactly what cash-strapped investors need most.

Control is very important to me. My good friend, the late Jimmy Napier, would always advise his seminar students: 

“Never allow anyone to have control over your money.” You won’t find better advice anywhere! Naturally, that includes your properties as well. With standard home mortgages written by the bank, you’re required to ask permission to borrow, lease with an option to sell or sell part of your equity to generate more income. Obviously, we all know investors who cheat a little or violate the banks’ rules. Still the final say or outcome will always rest with the bank. As an investor, I feel that’s giving away far too much control over my livelihood. 

To me, having restrictive bank mortgages on my income properties is a lot like dancing with a gorilla. THE DANCE AIN’T NEVER OVER TILL THE GORILLA SAYS SO!