Page 227 - Trump University Commercial Real Estate 101

Y ou’ll Never Get Rich by Y ourself

• Send them detailed monthly reports. They should get a profi t -
and - loss statement, a budget comparison, a variance report, and
an executive summary.

Insider Tip

It ’ s nice to deliver good news, but it ’ s absolutely crucial that you deliver
bad news to your money partners. The worst thing you can do is hide
bad news, allow it to fester, and then have it come out into the open
anyway. Should that happen, your trustworthiness will go down the
toilet, along with your reputation. People can handle bad news if they
understand why it happened and what you ’ re doing about it.
For example, I was recently informed by the manager of my Arkan-
sas properties that a big hail storm blew through and did a lot of dam-
age to some of our assets. I immediately sent out an e - mail to investors.
It explained what had happened and what our plans were to make
repairs and to be reimbursed by the insurance companies.
Even if there is no major news to deliver, conduct a conference call
each quarter. It ’ s a great way to connect with your money partners,
have them hear the answers to everyone ’ s questions, and get briefed on
plans for the next period.
One other insider tip: Never subsidize the cash flow that you pay

out to investors. If your property has the inevitable ups and downs in
cash fl ow, it ’ s a temptation to smooth them out by paying out less than
you earn in one period and more than you earn in another.
I ’ m not talking about cash reserves here — of course you should
fund your reserve account before paying distributions to investors.

What I ’ m referring to is the artificial manipulation of cash distribu-
tions to make them appear more like a bond return.
Investors who are only happy with predictable bond-like distribu-

tions should stick to bonds. When you artificially act like a bond, you
open yourself up to several possibilities, all of them bad:

• You ’ ll get the wrong type of investors in the deal — ones that
cannot handle any risk or variable returns.

207

10/14/08 11:27:22 AM
c10.indd 207 10/14/08 11:27:22 AM
c10.indd 207