How to sell your business follow up

[Rich Weese]

There was a previous thread about " What happens when you want to sell your real estate business?"Most of the answers have already been given, so I'm starting a follow up thread with a different slant to some of the replies and a couple real life case studies.

. I'm confused also with the original post outlined above. It stated poster wanted to NET 3-5 mil per year. But, then said she wants to go to a passive position. I'm assuming she is going to have someone else manage it. If that is the case, her 3-5mil won't drop much since everything else stays the same.
On the other hand, if she is talking about selling the assets, then she'll receive a gigantic chunk (until she pays her 75% gains tax!) and go on her merry way. As others have pointed out, she's not really selling a business(which is her) but selling her assets.
I've posted many times that selling isn't a great idea. Continue collecting the passive income, maybe 1031 into something larger for an uptick in your basis for tax purposes (if there are still tax allowances for RE) and get rid of the management.

As to those that said it can't be done as she outlined, they're probably correct. Times are much different now and bound to change for the worse still. I believe this could've been done in the 70's. Here are the reasons.
1. FHA loans were fully assumable by anyone that could fog a mirror with next to nothing down.
2. Lenders were making unlimited conventional loans to those that could qualify.
3.Inflation was sometimes 20% per year.
4. Properties were plentiful and there weren't as many "investors" as there are today.
5. The investors that were around, were not knowledgeable or were timebound and would join limited partnership syndications for their investments so less competition for the rest of us,imo.

Now, what are your arguments for why/why not it could be done today?

I was in the VERY best area at the VERY best time (so CA in 70's) and was doubling my NET worth a couple times per year. Like with a penney doubling, that isn't much at first, but just wait. After awhile, it explodes beyond your wildest dreams.

In 1979 Dr Jerry Buss bought the LA Lakers for 16 mil, as part of a 67.5 mil deal for lakers, kings, forum etc. I remember thinking that if I kept doubling every year for a couple more years, I could buy the Lakers! Of course, that probably wouldn't happen because:
1. inflation was slowing down
2. There were too many other investors ahead of me in $$$$$.
3.My health was suffering and I had a DR. tell me I would be "the richest man in the graveyard."

For these reasons, it didn't happen for me. I retired instead. I'll never know whether I could've done it, but I do know I would'nt have stayed married, may have passed on and wouldn't have enjoyed my kids and grand kids.
I was happy with where I had gotten to and could play again with RE after kids were grown. It worked for me.

That is one case study, now another.

Now, as they say , the rest of the story.

You may think I'm blowing smoke and wouldn't have succeeded and maybe you're correct. I'm just basing my thoughts on the previous experiences in creating the wealth I had prior to that time.

Now, lets talk about DR. Gerry Buss, the man that bought the Lakers. He was working, I think at Boeing and saving $83. per month until he had $1000. He and others partnered up and for a$6000 downpayment, and bought their first apt complex in 1959 in so LA, CA! This led to the eventual creation of a real estate empire in multiple states.

That means in 1979, 20 years later, he had reached a point where he HAD obviously doubled his $1000 a few times and he DID buy the lakers. I wonder how fast he doubled his money from that first $83 to 67 mil to buy what he did? Yes, smart alecs, I know it wasn't for all cash, but this wasn't the only thing he owned either!

So, before I say with complete certainty that no one could do it today, I'd hesitate. Buss did it from 59-79 and to a smaller extent, I did it from 72-78. I'm sure you can name others that have done it recently in the 80's, 90's etc.
Maybe in 2030, we'll be reading about someone on BP that did it during the time from 2010-2030. Good luck to all those that are trying. Rich

[Bill Gulley]

Interesting. In the original thread, we were saying to goals were too lofty. Since you'll only get 10 to 20% cash flow on a buy and hold, on the average, to yield 3M would be about 15M captal requirements. So that's not starting out.

Rich, what you were explaining was the velocity of money during an inflationary period, if we experience similar economic periods your strategy will work again. However we don't have such conditions and will not likely have such an inflationary period as the Fed will be moving in to cap interest rates, The regulatory environment has changed compared to the good ole' days.

If anyone is going to make big bucks quickly, I would think it has to be on the sales side. It will require a huge inventory. If you makes an average of 6K per property and does 500 properties you'll have your 3M. So is that possible? Sure it is, if you can set up an operation to run 500 deals through or with a capacity of say 750 deals consistently.

I do have some ideas that would support this, but the strategy is probably not what most investors here consider. It is difficult for one person to achieve such a volume, but if you had 4 specialists, with some adminstrative support, turning 2000 properties would not be impossible. Lining up with several banks and agreeing to take all they have might provide the necessary inventory. Having MAJOR buyers in various geographic locations of the country that could move the inventory or groups that could renovate and sell would be needed as well. Buying properties from tapes, assigning the properties to a retail/fix group as in wholesaling is the only way I know of to move such an inventory quickly enough to yield that kind of income. I think everyone along the chain would have to be onboard to take all properties that come down the pike and turn them at a minmum price level, for what they are, leaving some investment potential for the end user

There are salvage operations that buy all kinds of property that has been totaled through inusrance companies. For the insurance company to sell these damaged goods, the salvage company agrees to take it all at some price level. We don't really have a system for properties from the damaged goods level to the retail/end user level that is on a large scale, organized basis. If there were, such operations would have the capacity to make 3M or much more. Just a thought. Bill .