The System

Why did I title this page "The System"?  Simply put, investing done correctly should be based on following a plan that is actually a complete system that is self sustaining.  What does this mean?  What it really means, is that the system is in the shape of a circle...where the back end touches the front.  This allows the system to sustain itself in the form of being self funding...and thus repeatable.  This means that once it is self sustaining, you shouldn't need to "babysit" it...just monitor it and let it live on its own.  The obvious beauty of this is you can then go on to another investment system and set that up to do the same thing, then another, and another, and so on.

This is my favorite system.
My system involves the use of:

1. The stock market to feed the cash into it, 
2. Taking the cash and investing in NNN commercial (or residential) properties to neutralize the tax impact of the income from the stock profits, 
3. Since this means you will have 100% equity in the real estate, you can then season the property (how long depends on each component of this step) in order to:
• buy in an LLC for both tax and asset protection,
• refinance a portion of the equity out, in the name of the LLC, using private funding.  The amount refinanced will depend on what is left of the NOI after the depreciation deduction is factored in.  This will be explained below.
4. Payoff the refinancing quickly using the recommended "fast mortgage payoff program" I use,
5. ...and, repeating the above steps, over and over again.

How much you should finance depends on how much NOI you have left after you factor in the Depreciation Deduction and subtract that from the original NOI.  Based on the remaining NOI, you calculate how much "equity" you can "buy" using that left over NOI to make the payment on the refinanced amount.

Here is an example:

Suppose you wanted to buy a NNN commercial building and after negotiations the price came in at $4M.  Keep in mind, a NNN property means the only expense you have is the debt service.  Here is how this part of the system works:

1. Purchase Price: $4,000,000 of which $500,000 is the property/land and not depreciable. 
2. CAP rate:  7.5%
3. NOI:  $300,000
4. Depreciation:  17 years at a little over $205,802/year.
5. Available Payment for Loan:  $300,000 - 205,802 = $94,198/yr (approx. $7,850/mo)
6. Loan Assumptions:  7% interest compounded over 30 years.
7. Amount Financed:  $1,180,000

Now, understand that the NOI that is offset by the Depreciation deduction becomes tax neutral, and since the refinanced amount (income) is in the form of a loan ans also is not taxed, you end up with a very nice income and tax control situation.  Please talk all this over with your professional advisors since everyone's situation is different, but it does work.

Now, the Fast Mortgage Payoff Program
Next, you incorporate one of the "Fast Mortgage Payoff Programs" that are available (ask me if you're interested).  Depending on a number of factors such as access to some type of Simple Interest Debt/Credit product and the interest rate of that product, you can usually payoff a compound interest loan such as this (30 years) in 10 years or less.  These programs can also payoff other debt at the same time, and how much other debt you have, and the existing terms of the other debt, will effect the timing of the payoff.  Add this to the mix...your tenant is paying all of this off for you.

In the above example, using the access I have, I can pay it off in less than 10 years...using ONLY the income coming from the property itself...the left over NOI after depreciation is factored in (see above).

...and put the System on Steroids

I would chose to pay it off in 10.  Why, because if I set myself up with 10 of these deals, I can have a rotating system of 10 properties with a different property being paid off and refinanced every year.  Think about what that means.

The system is not only self sufficient, but the system addresses the tax issues as well.  In the above 10 property scenario, I have tax free income for life.