Page 172 - Trump University Commercial Real Estate 101

TRUMP UNIVERSITY COMMERCIAL REAL ESTATE 101

Marginal deals have numbers below ten percent cash - on - cash
return. I know I ’ ve mentioned this target number before. Some investors
will think I ’ m crazy to expect to get a ten - percent minimum cash - on -
cash return to get into a deal. Some realtors and owners may even tell
you that it is impossible to get such a return in their area.
Let them talk, but don ’ t listen to them. These people are specula-
tors. I have nothing against speculators, but I don ’ t believe in doing
business that way. Maybe I ’ m old school , because I believe that Cash
Flow Is King.
Speculators can and do make huge chunks of money, as do we
more conservative investors. The difference is that speculators bet on

appreciation. They are willing to live with very little cash flow. In fact,

they ’ ll sometimes buy a property with negative cash flow with the hope
of that big payday down the road.
Speculating is similar to investing on the basis of pro forma num-
bers: If the market takes a sudden shift from that hoped - for trend, the
speculator now must hold the property for an extended period.

Contrast that strategy with investing for cash flow. If the market

suddenly shifts on me, I simply have less cash flow. I like that better.

Little or No Traffi c

Traffic is known as a leading indicator . In other words, when traffi c is
strong, it results in other things being strong, such as sales. The reverse
is also true.
Be wary of properties that are hard for customers to get to, or that
do not have enough traffic to support them. As I mentioned earlier,

traffic can vary significantly from one side of the street to the other, or
one block to the next.
Some commercial investors make a point of noticing where the
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big boys like McDonald’s and Starbucks locate their stores. It ’ s
called the follow - that - cab approach , and it can work very well. These
companies have site selection down to a science, and you may be able

to benefit from that. At the very least, try to notice everything you

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