Kim smiling sitting outdoors.

Turning a Good Deal into Great Deal

Learn what it takes to rise above mediocrity and land comfortably in extraordinary

You’re familiar with the term, “glass half full,” right? Well, when it comes to investments, I like to talk about a similar concept, called “upside.” What exactly is upside? It’s what makes a prospective investment especially attractive to an investor. It’s the opportunity to significantly increase the income or the value of an investment in the future. After all, it’s in the upside where the greatest profits and returns are made — it’s music to an investor’s ears.

For instance, the upside of a poorly managed apartment building might be to increase revenue by replacing non-paying tenants with ones who pay on time. The upside of a pharmaceutical company’s stock would be the announcement of a medical breakthrough. Are you starting to see the big picture?

Winners Solve Problems

It may seem counterintuitive, but the upside is often found by examining the problems. Think about the greatest entrepreneurs of our time — most of them began their businesses because they came across a problem in their own lives and thought of the solution. Steve Jobs solved the problem of individuals needing access to personal computers. Sara Blakely solved the problem of smoothing out the lumps under her own dress and invented Spanx. Anita Roddick solved the problem of chemicals in skincare products and launched the Body Shop.

Investing is really no different. And while many investors shy away from problem investments, I can tell you from personal experience that the problem is actually where the profit lies.

How to Find the Upside

If you’re a landlord of rental properties, for instance, you’ll want to give your tenants what they want. And for many years, what they wanted was safety. Nowadays, however, the number-one item on their wish list is in-unit washers and dryers. As such, one of the simplest upside potentials for several of the apartment buildings Robert and I have invested in was to add washers and dryers to the units. Yes, there is an upfront cost to consider, but the advantage is that it increases the net operating income (gross income minus expenses). And we all know where the value of an investment property is derived from — the NOI. The higher the NOI, the more valuable the property.

The simple task of putting washers and dryers in the apartment units allows us to charge additional rent. Now, it may only equate to $50 more per unit, but if you have 200 units, that number turns into $120,000 a year!

Investing is a surprisingly creative process, because you have to find ways to create upside in a property or business. You might have to do more market research, pick more people’s brains, and think way outside the box. And if you can’t find the upside? Then it’s simple: you don’t make the investment.

The Holy Grail (aka, the Ultimate Upside)

Obviously the goal of any investor is a return on investment (ROI). Let’s say you invest $1,000 and that investment generates $1,000. That’s the ultimate return, right? But what if you could get a $2,000 or $3,000 return? Amazing! When you’re gotten back exactly what you invested, you’re now playing with that is called “free money.” You have none of your own money left in the deal, you still own the asset and it’s still creating cash flow. It just doesn’t get much better than that.

Do you have a creative mind? Are you a problem solver? If so, then financial freedom could be within your grasp. Now is a great time to dip your toes in the real estate investment waters. If you need some help with the basics, I’d suggest starting with my book, “It’s Rising Time.” Today is the perfect day to take action on building a better future.

Original publish date: August 30, 2018