YOU BUY COMMERCIAL REAL ESTATE FOR CASH FLOW…

PART VII (a)…I wrote PART VII a while ago but reposted it yesterday and it took that long for my weird brain to realize that the whole story. YOU BUY COMMERCIAL REAL ESTATE FOR CASH FLOW…is a lot bigger and there is, literally, the pot of gold at the end of the rainbow. In the example of the adult care facilities, you not only have the real estate valuation, and that is only a valuation of comps, but you also have a going concern business that is netting, after ALL related expenses and debt service, approximately $250,000 in cash flow a year and the likelihood is that it will go up and up and up!!! Getting back to the case at hand, the total value of the care facility is the real estate and, as a separate component, assuming that the buyers are going to continue the business, a separate valuation of the business. Businesses like this are valued using a method called the Discounted Future Cash Flow method. I am not going to teach this to you now but just be aware that it exists. My off-hand valuation of a business like this, and do not hold me to it, is between $1.5 million and $3 million or maybe more and that's in addition to the value of the real estate which, in Southern California, appreciates like crazy. Based on what I know about this type of business, and with the cash flow and increased value it will have, it should not be difficult to execute an exit strategy at the appropriate time. Bingo, you just got the gold ring on the Merry-Go-Round!!! And, if you remember that, you are as old as I am, and I was 77 on May 6th!!!So, the moral of the story is that you have to know SOOOO much to do business in today’s world. How many of you who are reading this would not have valued the business separate and apart from the real estate, raise your hands!!! Good, a lesson learned that’s really, Really, REALLY important!!!!!Actually, the real moral of the story is to call me at (818) 298 – 4000 after 10 AM Pacific Time if you want more information about this type of investment. My partner, Fred Sams, and I will walk you through the whole process and we WILL hold your hands if you need it. Besides being really smart and very resourceful, we are really nice people who care about our clients!!!This was the last post for getting cash flow when you purchase commercial real estate but at least one more is coming. The next section will be getting wonderful income tax benefits when purchasing commercial real estate. I will add additional articles to the cash flow section as I deem appropriate, and I will publish them here and, on our website, WWW.LSPROPERTYPARTNERSLLC.COM.Tomorrow I will be writing something as a bridge but on Monday, yes, you will have to wait until Monday, another surprise is coming.