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How much cash flow do you need for a Lamborghini and Mansion?
To keep your assets and not go broke after purchasing a Lamborghini and Mansion you need to have assets that generate enough cash to afford the purchases and your lifestyle.
Assuming that you are starting out brokering long distance real estate deals from your basement office using free Skype calls you need to imagine what your lifestyle will be once you close a multi-million dollar deal. Many of you have leads to 100 million dollar real estate deals that you are trying to close. Imagining your lifestyle when you’re rich allows you to budget how much cash your assets need to generate for you to buy a Lamborghini and Mansion.
How much will you earn from closing your real estate deal?
Assuming you close a $100 million dollar deal and earned a 3% commission you will have $3 million. That is probably not enough to satisfy your appetite given your connections, deal flow, and the information sitting on your computer. You might be happy earning $20 million from a few more deals.
You could own a share of the real estate that you joint-venture (JV) by partnering with or bird-dogging for the buyer. This is how I closed my first deal and earned cash flow from the property that closed.
What are your cash flow generating assets going to be?
Real estate of course.
If you purchase tangible real estate the price of the properties going up and down might not affect the cash flow that you generate. The rental market affects the cash flow that you earn. If you purchase a REIT fund your cash flow could be affected by its variance because the approximate 4% yield (which is your cash flow) is tied to how much of the fund you own.
Let’s say you have $20 million and invest that in real estate that cash flows $800,000 a year using a 4% yield.
How much is your rich lifestyle going to cost?
It depends on the location that you want to settle and how much you travel to close more deals. A private midsize jet costs about $20,000 per flight in the U.S. Let’s budget for 10 flights during the year ($200,000 per year).
You could move out of your basement to office space that you own in the most glamorous parts of L.A., Texas, Ohio, New York, Florida, or potentially Missouri. These are the hot markets; You might want to settle there so that you can close more deals and be close to the action. Let’s budget for $100 per square foot per year for 5,000 square headquarters in California and mansion ($500,000 per year). Everyone is going to want to work with you.
What will your expenses be?
A Lamborghini Gallardo or Spyder that is a good investment because it has good parts can be rented out is about $100,000. Let’s not figure out the cash flow on it and assume that it is a one time expense even though it can be rented and requires maintenance.
Here are your total first year cash flow after closing $20 million in deals:
- Real estate income: $800,000
- Private midsize jets (10 flights): $200,000
- California real estate headquarters and mansion: $500,000
- Lamborghini $100,000
After you close your first $20,000,000 in real estate deals you will be able to invest in enough real estate to produce $800,000 a year in cash flow that you can invest in building your real estate empire further.