Starting in November, the Leominster game for the Twin Cities Rich Dads and Moms Cashflow Club moves to the 2nd Saturday of the month to line up with the Northern Worcester County Real Estate Investors meeting. The NWCREI begins meeting in January.

The Fitchburg game continues to be generally on the 4th Saturday of the month. It follows the Worcester Real Estate Investors meeting.

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Change in game days

I couldn’t make the game on October 27th for the Twin Cities Rich Dads and Moms Cashflow Club but I understand that it was a good game. In attendance were James and Debbie Greelish, Mike Marques and Sue Sudhalter, Danielle Rocheford and Dan Langford.

The following was sent in By Debbie Greelish:
We had 6 people playing Cashflow 101 tonight. James and Debbie took opposite stratagies. James bought anything that was either underpriced or had a good return on investment…no matter how much he had to borrow or how negative his cash flow went. at one point, he had a negative $6,000 per month cash flow. That equates to living off your credit cards and borrowing from your 401K. One player commented on how it was hard to believe someone with that negative a cash flow could ever get out of the rat race. One house buyer later and he paid off all his dept and left the rat race behind.

Debbie played the doctor and was ultra conservative. She would not buy anything unless she had the cash required for the down payment. No borrowing from the bank at 120% for her. She eeked along with a few stock deals, paid off her retail debt, bought a couple of undervalued 3 bed/2 bath houses that were good deals, but didn’t have much for cash flow. Then came the $1 stock. After buying 10,000 shares at $1, (not borrowing, just paying with cash) she hit it big with a $50 / share payoff. Sitting pretty with 500K in the bank, Debbie paid off her credit cards, school loans, and car loan. Then she went looking for big deals. She got lucky and any draw was gold. 8-plex, 24-unit apartment building, Car wash. Then that same house buyer that put James out snapped up 3 houses from Debbie, bringing her back to over 500K in cash in the bank. Another 12-unit building and Debbie was out of the rat race as well.

The best thing learned tonight is the benefit of having capital gains properties as well as cash flow properties. The cash flow gets you out of the rat race, but the capital gains speeds things up. James could not have overcome his negative cash flow without having a property to sell that had lots of equity. Debbie would not have even looked for those great big deals if the stock sale had not given her cash. She also may have been driven back to small deals before reaching her cash flow goal if the small properties with big equity had not sold. Both strategies required the player to be willing not only to buy properties that had cash flow(the end goal) but to be willing to sell properties for profit (the means of reaching that goal). There is great truth to what is said: ‘You make your money when you buy the property, not when you sell it.’

Lee’s comment: I find it interesting that there was no partnering on deals in this game. I can’t really say why since I wasn’t there though.

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Lessons from October 27th 2007

For a while now, we’ve been talking about adding a house rule that allows someone in the Rat Race to leave their job and become a full-time real estate investor. If you’ve been around real estate investment clubs for any length of time, you’ve met someone who’s done this.

Starting with the game on Saturday, October 20th 2007, we’ve finally pulled the trigger on this rule. Essentially, when you are down-sized, you can choose to go to work for yourself if you like.

Instead of waiting two turns to get a new job, you pay your expenses and roll normally on your next turn if you want. Your income is limited now to your passive income. Pay close attention as you play or you will be bankrupt!

If land on down-sized again, you roll one die.
Role a 3 or less: the space acts as a another pay check. Essential, as a self-employed person, you control your destiny and work life. You take a month off, you can even if it’s not always the most wise thing to do. And lose a turn.

Role a 4 or higher: there is an economic downturn and your passive income cuts in half for 3 pay checks. But you don’t lose a turn.

If you choose to wait two turns and get another job, everything is the same.

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Self-employed in the Rat Race

I continue to be amazed at the turn-outs for games and the energy everyone brings to games. We had 11 people for the October 20th Twin Cities Rich Dads and Moms Cashflow Club and for the very first time, both games played were Cashflow 202. People in attendance were regulars James Greelish of Worcester REI, Bob Kay, Terry Fairley, Danielle Rocheford, Bill Holmlund, Herb and Lee Johnson of Beko Investments and Worcester REI. Here for the second time was Ann La Roche and first timers playing with us were Greg Aldrich of Impact Networth, Kim Shreffler and Gus Martino. Like many of us, Kim and Greg are both real estate investors. So once again in Leominster, we had 11 people.

Playing on table 1 were Bill Holmlund, Bob Kay, Ann La Roche, Danielle Rocheford, and Lee Johnson (myself). Our table did a ton of partnering on deals. I personally partnered on no less than 5 deals! Some deals I did myself and some deals took everyone at the table to put together. In some cases, the person drawing the card had little cash and the other 4 people all wanted to participate. Instead of fighting for the deal, we each agreed to reduce our stakes and keep cash on hand to do more deals. Remember, Cash is king.

I started with what probably is the worst portfolio, which is stock only, and included overpriced purchases of MYT4U and OK4U. Generally, both tank and I don’t make anything on them but this time I actually made something small on one of them.

Additionally, this time I had owned no businesses, had no royalty income, etc. It was all real estate. Considering that we started playing about 6:30PM and there was a lot of talk and recording of deals, etc., the last person got out of the Rat Race by 9:45 PM. I got out first of the Rat Race first but I was not the first to win.

I started with just my savings and monthly cash flow, which is okay for the engineer. Some others started with cash and cash flow so I felt confident starting (and staying) with big deals.

Almost immediately, I partnered 50-50 on an 8-plex, taking a bank loan for part of my share of the down payment and a few “months” later, sold it to a plex buyer that made both owners happy because we both pocketed $33K. That took care of my bank loan that had grown to $16K and paid off my credit card and retail debt. My cash flow had dropped to about $1000 per month but because of the sale, it jumped back to nearly $3000 per month. And I still had cash that allowed me to buy duplexes and the like with what I would previously have considers large down payments, and still have cash. I even was able to sell a option.

I find it rather ironic that with my cash flow growing past $6000 and $7000 and with cash growing at one point to $140,000 +, because of deals I completed on my own or as a partner, my cash shrank to $680. And then I got downsized. However, because of my cashflow (substantial and not negative), I was able to borrow $4000 to cover the short-fall.

And it was control, dealmaking, and ability to negotiate and cooperate that enabled me to get out. For the longest time, I was the only one with all risk insurance and therefore everyone wanted me to control the deal which meant therefore I could sell when I needed cash. However, I also looked at others situations when talking about selling which won me trust on future deals. I joined a deal when I drew a card for a 1031 exchange. My fee for transferring it was to join the new deal with Danielle for a portion of what was now a 16 unit apartment; so they didn’t have to pay me any money to buy the card, I took a portion of the deal AND became the general partner because of my all risk insurance.

The final deal that got me out was a 1031 exchange deal in a market card. I was the managing partner/trustee/manager or the property on large property that I owned 75% of it before the exchange. Bill paid me $4000 (which covered my bank loan) and I kept enough enough of a percentage to keep cash flow that would put me at passive income being 2X expenses. That exactly worked out to giving up 25%, receiving $4000 and getting a substantial increase in passive income. It cost Danielle nothing, she still had 25% of the new deal and Bill because general partner because he now had all risk insurance.

Within another “month” or two, Bob joined me on the Fast Track, followed by Ann, Danielle and Bill. There were some business buyouts and I started two franchises and actually had one franchisee, which again shows the power of working together. Bob won first, and then Ann and I won almost simultaneously. We stopped at this point because Bill was the last person on the Fast Track and he would have won in probably 3 more rolls.

And this was all by 9:45PM!

I’ll try to record the number of months (paychecks, etc.) I get next month so I can show the number of months to translate into life.

On the other table, James and Greg both pursued a strategy of heavy negative cash flow. As a result, nobody partnered on deals. Gus got out of the Rat Race first about the time that most of us on the table I played on had won already on the Fast Track.

This got me thinking about the power of partnering on deals. Had there been a pattern of partnering instead of borrowing large sums and paying out more than one receives because of negative cash flow, I have no doubt that everyone would have succeeded and exited the Rat Race sooner. That doesn’t mean negative cash flow is always bad but it needs to be a measured, educated response and fit with your risk tolerance. I’ve played both ways and I’ve certainly done the former in real life and am actively pursuing the later in real life. Because of the results I’ve been experiencing, I’m finding that partnering is maybe the most powerful way to get out where everyone goes for the ride.

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Lessons from October 20th 2007

The next two Twin Cities Rich Dads and Moms Cashflow Club are coming up. There’s is a game today, October 20, 2007, here in Leominster and another game in Fitchburg on October 27, 2007. Networking starts at 5PM, and the game starts at 6.

Subscribe to the newsletter for directions and to RSVP if you are coming and sharing in pizza. It’s free to play. Expect to contribute $5-7 if you want pizza.

Last month in Leominster, we had a hard money lender as speaker, 14 people here during networking and 11 playing on two tables. In Fitchburg last month, we had 14 people on 3 tables.

We play both Cashflow 101 and Cashflow 202 and all are welcome.

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October 2007 Cashflow Games