Sunday, November 26, 2006

1 is better than 5

Recently I helped an investor in the South Bay increase his cash flow significantly and reduce his stress. He had acquired 4 single family homes and one duplex over the last 25 years. He was very dedicated to his investments and was able to pay off most of his debt down to less than $150,000 on approximately $3,200,000 of asset value. But he was equity rich with little cash flow to show for it. His before tax cash flow was approximately $75,000 per year. Not bad, but a low rate of return on his equity. I helped him with the purchase of a brand new Rite Aid drug store in northern Michigan for $3,000,000 through the 1031 exchange from his sold 5 properties. The new investment gave him a 7.4% cap rate, a 20 year lease and NO landlord obligations. Rite Aid will take care of the building from asphalt to roof and everything in between. His before tax cash flow increased to $220,000 per year! I see much more travel and enjoyment in his future.

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