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In my 30 years as an entrepreneur, I have invested in many different businesses, funds and stocks. Some ventures have been very successful; others have completely flopped.
I met Tom Burns through one of the best investment deals I have ever joined. We were finally able to sit down and discuss the number one secret the wealthiest people in the world already know.
The secret is: Do your own deals. As crazy and complicated as it might sound, putting smart deals together and creating leverage can produce high returns with minimal risk.
Tom began his medical career as a sports doctor for the U.S. Ski Team until he realized he wanted something different. The money wasn’t worth his sacrifice of time and relationships.
He pivoted and became a real estate investor. In the beginning, Tom worked both as a doctor and a real estate investor, burning the candle at both ends. Today, he owns a private equity real estate company with half a billion dollars under management and has authored a best-selling book, Why Doctors Don’t Get Rich: How You Can Create Freedom With Passive Income Investing.
His questions and systematic approach forced me to think about deals in new ways. I realized there are some smart strategies to help build leverage into a deal, sometimes with limited or no investment, and deliver exponential returns. It works, and many, including myself and Tom, have gained monumental returns using this system.
Here are four categories for managing money with relative returns.
• No deals, no investment, no leverage: This yields no return.
• Other people’s deals, some leverage: You invest 100% of your money at full risk, but have no control. An example of this would be your investment in a real estate fund, oil and gas, or tech start-up. ROI is 10% to 800%.
• Your deals, your money, more leverage: Your investment is 20% to 30% of the deal, and the bank carries the rest. You're at risk for 100% of your money and the loan. Typically real estate. ROI is 20% to infinite.
• Your deals, other people’s money, maximum leverage: In this scenario, you invest little or nothing but have 100% of the control. The deal is typically funded through investors and occasionally government grants, partners or other resources. While there is still risk exposure, it is limited. You architected the deal and have meaningful ownership with minimal to no capital investment, so your ROI can be unlimited.
There are five parts of a deal: people, deal, money, structure and rules. It seems intuitive, but often we don’t build deals with these essential components in place.
It’s imperative to find the right people with the right mindsets and habits to create successful deals. If you create deals with perfect partners, you attract the right money and can leverage the best structure for the greatest return with the least risk.
“Apply the right rules that are replicable and produce predictable, profitable returns.”
Elon Musk, Development And The Best Deal
Tom’s team partnered with a developer to build an apartment complex right outside of Austin, Texas. They pieced together enough land for 200 units, but only built 140 so as not to overbuild. They planned to hold the investment and finance it with a low-interest rate 40-year FHA loan. The complex was fully leased within seven months, built in 10 months and had competitive offers within 36 months.
They didn’t know at the time that Elon Musk was building a factory 20 minutes north that would increase the demand for housing. Tom’s company got crazy offers for the property but chose to work with a buyer who had creatively engineered a way to build 200 units. The deal closed and investors doubled their money in three years. It was a home run deal.
Here is what I learned and want to share with you:
- Get educated or find someone who can educate you in your investment field.
- Ensure tangible value-added.
- Take care of your investors first.
Tom’s company sold the complex and had to pay a penalty for paying off the loan early, but even with the penalty, investors doubled their money in less than three years and came out ahead. This is a perfect example of “Your Deal, Other Peoples’ Money” with the right partners, smart structure and clear rules.
I have always believed that it is important to work with the “right” people. Mindset and networking are what I do! But so is systemizing profit structures. The best part of this for you and me is how relevant this applicable system is to growing wealth. This system is easily replicable in any industry or business vertical. There is so much freedom when you build and manage your own deals, and the return can be exponential when you create leverage with limited risk. This is a game changer for investors and entrepreneurs looking to build a “rich life” and all the adventure that comes with it.
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