Cash Flow Series Part 4: 360 View! How to Structure a deal to maximize profits! Discuss, Cap Rates, Debt, Equity, ROI & More
Thursday, October 21 | 6:30pm-8:30pm | Zoom Conference
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We discussed previously that there are 3 sides to every deal:
- The Money – your cash, loans, private money, etc.
- The Asset – where the money is invested such as real estate, businesses, notes, etc..
- The Capital Structure – optimal amount of debt vs. equity AND how to structure both.
Now we are going to look at the 360 degree view on how to put all of the components of a deal together. Structure, Debt, Equity, Risk, Management.
Most courses out there teach The Money or The Asset side, but very few (if any) teach The Capital Structure side, or “how to structure the deal”.
Worse yet, most investors THINK they know how to structure deals correctly, but very few actually do. This is where most investors lose money!
At the end of the day, knowing how to structure capital and risk correctly is the foundation of success (or failure) for every investor, and here’s a simple example to prove it. If you buy real estate with all cash (no debt) and the market tanks, are you at risk of losing the property? No, of course not! Why? It’s because of the Capital Structure.
So, the question in part #4 of the series is what is the optimal way to structure your deals?
- How do you structure a deal?
- How much debt vs. equity should you have?
- Should you use a HELOC (Home Equity Line of Credit) for your down payment, or not? Why or why not?
- Should you structure the private money you raise as debt or equity?
- What if your money source is Aunt Mary, should that be different than if it’s Uncle James?
- Should you put your own money in the deal? Why or why not?
- How much money should you have in reserves?
- How can you QUANTIFY and MEASURE risk? (i.e. give risk an actual number – a measurement).
- How much return should you aim for? (HINT: the higher the better is the worst mistake)
- How can you have the CONFIDENCE that this is indeed a great deal? (Good return and low risk, backed by real data instead of a “gut feeling”)
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