Where is the Profit in Your Deal?

When we see Donald Trump on TV, we see a guy who is living the high life. Money, women and fame - all thanks to real estate. By media standards "The Donald" is a rich, successful real estate mogul. But, even he would have to admit that sometimes, he makes more money doing television than in real estate.

Whether you want a nice positive cash flow each month, ora cash profit on a quick resale, the only honest and ethical way to get there is EQUITY. Equity is the property value over and abovethe total amount owed on the property.

You may think that an investor who owns say, 50 houses, is probably very well set financially. He he might be...butif this investor has refinanced his properties to take all thecash out, or he paid too much to begin with, he may find himself on the brink of foreclosure or bankruptcy if vacancy rates climb.

One the biggest dangers I see today is the incredible paceat which home owners and investors are pulling equityout of their properties. (or worse, buying properties that havelittle equity to begin with)

Many investors are buying properties without even understanding how crucial equity is to their profitability.And homeowners who get 125% loans on their homesare asking for a foreclosure.

Regular readers know that I harp on the idea of keepinga minimum of 20% equity in every property you own. And the best reason to take lots of cash out of a property isfor the purpose of paying down debt on other real property.

Every week I get calls from investors who are desperate toget a fix on why they are losing money on a deal. The numberone reason I see over and over, is a definite tendency to take too much cash out of a property, which can kill yourpositive cash flow.

It's not flashy, it doesn't sell as well as telling someone theycan make $10,000 by next week, but buying, holdingand accumulating equity is the absolute bottom line rule forsuccess if you are a small investor. I don't want to burstany guru bubbles, but the facts are the facts.

Let's take my mom for example, who happens to be one of my favorite investors and also by far, the most conservative oneI know. She owns 5 houses all paid for free and clear. All are rented for an average of $525 per month. (Her location is Cedartown, GA., relatively low cost compared toAtlanta)Her personal residence is paid for too.

Mom is bringing in $2,625 per month in rent. Taxes and Insurance will get about $600 of it, leaving $2025. Over 12 months thatis $24,300. Not too bad. Added to other income and investmentsthis makes for comfortable, reliable retirement income.

On top of that, her passive income will increase over time as her rentgoes up. And, she is earning a solid 5% per year appreciation in thevalue of each property. Some of her houses have doubled in valueover the past 12 years. In terms of equity, mom is worth a prettygood chunk. In a good market, I'd guess about $800,000 justfor those 5 houses and her residence.

She took about 15 years to do it. Nothing fancy, just classic real estate investing. Anyone could do the same thing easily in10 years or less. But Mom knows that even when a property isowned free and clear, there are still unexpected events and coststhat will eat into your cash flow.

She represents the vast majority of the conservative, "never-been-toa-seminar-in-my-life", types who make up the bulk of the real investors out there. Some have 5 houses, and some have 75. I once workedfor a guy who had about 150 income properties. He was debtfree and had untold wealth in his equity. He had spent 30 yearsbuilding this portfolio, buying good deals as he came across them.

Like Mom, he also is careful to save money, avoid wasteful spending, andkeeps his equity in tact, so that his cash flow is in a safer range.

Equity gives you breathing room when the unexpected strikes. You might have a tenant that skips out on you, or a tree falls on the roof andyour deductible is $1000. Practical real estate investing requiresequity for long term safety and security.

In contrast, many of the best known real estate gurus have been broke and even filed bankruptcy. They could have used more equity.

Many people don't know that real estate guru Robert Allen, the author of "Nothing Down" and "Creating Wealth", which ignited the investing boom in the early 1990's, went bankrupt in July of 1996.

It appears that his no money down deals loaded him with too much debt. When interest rates went down and the rental market gotsoft, there was not enough real equity there to pay the bills.

Remember investing guru Robert Huff? Well known in the 1980's, he wound up in bankruptcy too.

There are many gurus and investors who like to argue that equitysitting in a property is money that is not being used. I understand their point, but I respectfully disagree. Taking equity out of a property also creates a situation in which that property requires more cash flow to sustain the costs. Then, when unexpected vacancies, higher taxes, or bad tenants come along, the investor is left with too much debtand not enough income to support that debt. The result can be catastrophic for the over-leveraged investor,some gurus have discovered.

Even "The Donald" has been broke. His restructuring of massive debt on his New York City properties during the late 1980's was the basis for his "comeback" to real estate glory. He got into a hole about 100 feet deep and then managed to get himself out. The book he wrote about the experience was a best seller that made him famous.

Mom probably won't be writing any books, but if she did, she would caution Mr. Trump not to be over leveraged. She will probably never be as famous as "The Donald" but what 'cha wanna bet she has more equity...

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Using Google

Thanks to a unique algorithm that produces most relevant results to any given query, Google has become, indisputably, the best search engine on the Internet. On the last count, Google has indexed over 4 billion pages and tackles around 200 million searches a day! A cluster of 100 thousand servers are used to store, crunch and spew out the query results with lightning speed that you are so accustomed to see.

This phenomenal growth has made Google from a garage startup to an Internet behemoth faster than any company has done before. The prodigies behind this unique search engine, Larry Page and Sergey Brin in the process already got enlisted themselves in billionaire club.

Google is no longer a mere search engine! It is increasingly broadening its offerings to include great new services and excellent tools. Among these services, most notables are News - a news aggregation and searching service, Blogger - an online journal-keeping solution, Froogle - a marketplace for comparison shopping, Groups - online discussion groups, Answers - a place to get hard-to-find information for a price, etc.

Google also recently unveiled two more programs. Orkut - a social networking service and Gmail - a free web mail service. Orkut is an online community, where a person can participate in it by invitation from a member only.

If you constantly frown over limited space of your hotmail or Yahoo accounts because they get filled up with junk mails and force you to delete old messages frequently, you will love Gmail with its 1 GB of storage capacity. There are several great features available in Gmail system too. One of them, dubbed as Conversations, allow you to view all exchange mails with somebody, once you select one of the mails. Sorting and searching emails also become much easier with Gmail. The only catch is Gmail displays relevant ads - based on the keywords found in your email - on the right side of the screen when you view an email, much like Google displays ads when you view search results.

Although, Google is constantly adding new and extremely useful features, most of us unfortunately do not use all the capacities of the search engine itself. The following tips will make your Internet browsing more effective if even you are an avid net user.

Choose most specific search words

Google returns web pages that contain all the words in your query. If you would like to see the most relevant pages on the first page of your search result, be very specific with your choice of words. For example: if you would like to research on former NHL hockey player Makarov, you should start your search with Makarov not hockey player. Even better if you search for the words: hockey player Makarov. Because just the word Makarov will show web pages on "Makarov" a Russian-made handgun and numerous other people and products with the name Makarov. Refining your query in Google means adding more specific words to your initial search. In this example you will hit the right web pages if your search contains: NHL hockey player Makarov.

Sets - a new feature

What if you are looking for a pair of Valentino designer jeans but can't recall the name of the designer? Query on Italian designer jeans may bring you the right result; however, there is a better tool that Google is planning to implement soon, called "Sets".

Fill up the names of some designers that you remember in the given form such as Levis, Wrangler, Versace and click either of the two buttons and voila! You will get a list of designers name and probably, Valentino will be there. But bear in mind that this feature is still at Beta stage.

Calculator

The other day, I was sitting in a colleague's office. She needed to calculate some basic stuffs and looking for her calculator on her desk. Much to her dismay, she could not find the calculator and started to fumble through her computer programs in her attempt to find Microsoft calculator. I noticed that she was online and the browser was open. I, politely, asked her whether she knew that Google could actually calculate most common mathematical expressions. It came out to be, she did not! She was just amazed after trying it herself. Google is even capable of unit conversion! Give it a try!

Definition

If you are looking for a definition of a particular word or a phrase, Google is the best place to get it. In Google search box, write "define: the word or phrase" without the quotation marks and click search button. If there is a definition available for your search term you will, most certainly, get it. It's a very useful feature for students and people, those who write research papers.

Synonyms

You may think that search engines are too dumb to show query results of the synonyms of your search term. It's not so! At least, in the case of Google! If you use tilde "~" in front of a keyword in your search term, Google will bring results on the synonyms of that word as well.

Searching within a website

Another great feature of Google search engine allows you to make your query within a specific website. First you write your search term in the Google search box and then write "site: the website or domain name". For example: if you are looking for word "Microsoft" within the websitewww.micromedia.com you will write: Microsoft site: micromedia.com.

Check backward links to your website

If you have a website, Google search engine also has a nice feature to show you which web pages are linking to yours. In the search box, write: Link: you website address.

Other important tips to remember are:

There is no need to use "AND". Google always relate all the words in a search term with Boolean "and".

However, if you would like to make your query for two words - one or another - you can use "OR". You have to write "or" in capital letters to give it Boolean value.

Google is not case sensitive. You can write your search terms either in capital or in small letters. You can even mix them up.

Google omits most of the very common words, such as the, in, etc. If you, indeed, need to add a specific word forcefully, use plus (+) sign in front of that particular word. Same way, you can exclude a word from your search expression by putting minus (-) sign in front it.

If you would like to make a search on an exact phrase or expression, put the words within quotation marks. That way, your search result will show only those pages where the exact expression was found. In order to search the phrase: For whom the bell tolls, write "For whom the bell tolls" in the search box. I'll also suggest you to download the Google Toolbar. Apart from the search box and its ability to block pop-ups, Google Toolbar also shows the pagerank of the website you are visiting now. Pagerank is a system of evaluating web pages - developed by Google founders and used as the core of Google's search engine algorithm. The Toolbar also includes feature with the ability to fill up online forms from stored information automatically. You can also keep your daily journal or blog right from the toolbar.

Much to net users delight, Google, in accordance with its ambitious mission statement to organize world's information and make it universally useful and accessible, so far doing a great job by providing us the best search engine and extremely handy features and services. We can only hope that the flow of innovative ideas from Google will not slow down in future, when it becomes a public company.

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