Wealth Creation – An Opportunity to Build Wealth Through Ownership of ASC Real Estate

In today’s economic environment, a greater number of physicians are becoming aware of the potential to build wealth through commercial real estate investments. Nowhere is this trend more pronounced than in the ambulatory surgical center industry. With reimbursements shrinking and costs rising, it is sound and prudent business sense to look to alternative ways of supplementing those declining revenues.

The following portion of this article will outline a few of the benefits of owning the real estate where you operate your ASC.

I. Cash Flow: One of the biggest advantages of owning real estate is its ability to produce positive cash flow month after month. In its simplest form, this means that more revenue is collected than it takes to pay for and operate the property. The end result to the Physician/Investor is that income is created passively each month and this income grows with time as mortgage debts are reduced and rents are raised. With time, these cash flows should be large enough to invest in other properties, donate to the charities of your choice, or spend more time with family.

II. Appreciation: In many circumstances a Physician/Investor will see immediate appreciation in the real estate asset that they acquire. If they have negotiated properly for a property or if they work with a skilled developer, they will bring significant value to the property by the rents they will pay from their ASC operations. The price they pay to acquire or build the real estate should be significantly lower than the market value of the property after the business entity begins making rental payments. This is an economic benefit in addition to the monthly cash flows.

III. Tax benefits:

A. Depreciation: Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for wear and tear, deterioration, or obsolescence of the property. This can be used to the Physician/Investor’s advantage come tax time. The end result is that the amount of yearly taxable income will be substantially lower than the property’s actual cash flow. In practice, a portion of the yearly cash flows would be tax free further improving the investments return.

B. 1031 Exchange: Without going into the very specific details, a 1031 exchange allows an owner of property to defer paying tax on the sale of their investment property by rolling the proceeds into the purchase of another investment property. This technique can be used to purchase larger more valuable properties on an ongoing basis while limiting the equity investment to the initial amount made to purchase the original property. The key here, from a wealth building perspective, is that the 1031 tool allows for the investor’s capital to compound tax free over time resulting in expedited wealth creation.

C. Refinance: One more advantage of this investment over other investments is the ability to refinance and withdraw cash from the property. This is a tax free transaction that restructures mortgage debt based on the added value of the property. The withdrawn cash can be used to pay back the equity investors, provide a return on invested capital, or invest in another property.

IV. Control: The ability to control your investment is of particular relevance in today’s economic environment. While many investors today are feeling that they have little to no control over their investments in the stock market, commercial real estate investors have a tangible asset that they are able to control operationally.

V. Leverage: The central point here is that a Physician/Investor can minimize the amount of capital they need to purchase real estate by using other peoples money. Typically the additional capital would come from a lender but there are circumstances where equity partners can be brought in to substantially minimize the amount of equity required of the Physician/Investor. Not only does this tool free up cash flow for the Physician but it also substantially increases the return on investment for the Physician. The reason for this is that the appreciation of the property’s value is based on the total value of the building and not just the equity portion. This cannot be done with other traditional investments.

VI. Hedge Against Inflation: Since real estate is a tangible asset-a good-it’s value will generally rise either at the rate of inflation or much higher. Today, there is a very serious inflationary concern caused by the feds need to print more currency to cover the costs of our increased national debt. In times like these, it is prudent to look at investments that will hedge this risk.

The foregoing are just a few of the main benefits that Physicians should consider when contemplating whether or not to invest in the real estate they use for their surgery center operations. If done properly, this investment can be a powerful tool to aid the Physician/ Investor in creating sustainable long term wealth.

Personal Branding For Real Estate Agents – Study Big Brands – Part 2

How to Apply What Big Brands Do

There is much to be gained by real estate professionals who study big brand marketing, especially if market leadership is your quest.  Personal branding for real estate agents is not just getting a new outfit or a new look. Person branding is all about positioning yourself to win BIG!

First, it is important to think BIG because that is what market leaders do. They know what is at stake-the lion’s share of business. You need to think big in order to out-think, not out-spend your competition.  Secondly, you need to think globally not just locally if you want to compete in today’s marketplace. Here are some examples of how you can apply big brand strategy to your personal marketing practice:  

1.  KFC– they now give health-conscious customers the option of grilled chicken. Send your farm a 7 day healthier menu for a family of four, including recipes.  You could list stores where those ingredients are located. 

2.  Toms Shoes– they give shoes away to the needy.  You could donate a part of their commission to a client’s cause, or find someone in need at a private school and sponsor them.   

3. Heineken-they help prevent DUI (driving under the influence). Encourage employment.  Pick up donated clothes suitable for single moms returning to the work force who live in their farm.  

4. Range Rover-they build long lasting luxury cars.  Range Rover says, “A well made product is “luxury beyond luxury”.  How about having all your marketing and sales materials not only look sharp, but stand out because they are congruent and cohesive? How about designing your web site so it is truly user friendly?  A refreshed look and website that is built to last is a luxury for you and your clients.  

Study the big brands to help craft your personal real estate agent brand.  Think big. Think Global. And, win BIG!

Top Ten Real Estate Tycoons For 2009

Forbes has announced its 400 richest Americans for 2009, and as expected, real estate tycoons still enjoy many of the top spots. Real estate fortunes have declined in recent years, so these millionaires represent the canniest financial minds in the industry. Here, without further ado, we present the top ten real estate tycoons.

Donald Bren

With a net worth of $12 billion, Donald Bren has earned his place as the top real estate tycoon for 2009. A native of Newport Beach, California, Bren is credited with developing the central Orange County area, and currently owns 475 commercial buildings, 115 apartment complexes and over 40 retail centers. Despite recent real estate industry difficulties, Bren’s net worth has remained stable over the past year.

Richard LeFrak

New York City’s real estate billionaire Richard LeFrak follows in his father’s footsteps in land development in this prestigious and competitive real market. Investments include a combined residential, retail, and commercial development in Newport, New Jersey and 5,000 apartments in Queens. LeFrak’s portfolio has lost value in the last year, but still weighs in at a cool $4 billion.

Paul Milstein

The last year has seen significant losses in Paul Milstein’s financial investments, down from last year to $3.8 billion this year. Milstein Properties owns a number of apartment towers and commercial developments throughout Manhattan that were hard hit by recent economic events; additionally, the acquisition of New York’s Emigrant Bank paid huge dividends in the past, but now may seem like a liability for Milstein’s shrinking portfolio.

Samuel Zell

Even after filing for bankruptcy in December 2008, Samuel Zell remains one of the wealthiest real-estate tycoons in the U.S. with a net worth of $3.8 billion. His international holdings include Brazilian shopping centers, commercial storage and residential properties in China, and housing developments in Egypt; this complements his extensive investments in distressed real estate within the U.S.

Leonard N. Stern

An alumnus of New York University, Leonard Stern made a significant donation to the university that led to the business school that now bears his name. His investments include Edison Towne Square, a mixed-use redevelopment project located on the site of the former New Jersey Ford Plant, and Soho Grand and Tribeca Grand hotels in Manhattan; in total, Stern owns 38 million square feet of property in New York and New Jersey and boasts a net worth of $3.6 billion, making him a force to be reckoned with in the New York real estate world.

Theodore Lerner

Since he founded Lerner Enterprises in 1952 with the help of a loan of $300 from his wife, Theodore Lerner has had the golden touch in real estate in Washington, D.C. His current net worth is $3 billion, down from last year but still an impressive feat. Lerner owns 20 million square feet of commercial and retail space, and recently demonstrated his green credentials by moving his headquarters to a new environmentally-responsible building in Maryland. Lerner is also the owner of the Washington Nationals baseball team.

Stephen Ross

After recent losses, Stephen Ross is looking for international real estate investments to bolster his faltering corporate portfolio. His net worth is $2.9 billion after sustaining significant financial losses on luxury properties in New York City. Ross recently purchased the Miami Dolphins football team for $1 billion.

John A. Sobrato

With his real estate holdings down 30% in value this year John Sobrato is suffering the effects of recent Silicon Valley stagnation. Sobrato Development owns and manages over 7 million square feet of commercial space, with Yahoo and Nvidia as its largest clients.

Donald Trump

While Donald Trump’s celebrity quotient may never have been higher, his real estate fortune certainly has been; it’s down to $2 billion dollars, significantly lower than in previous years. He still owns Trump Tower, but many of the buildings bearing his name actually belong to other developers who pay for the privilege of attaching the Trump name to their properties.

Alan Casden

At $1.85 billion, Alan Casden’s fortune is nothing to sneeze at; it’s down from previous years, however. Based in Beverly Hills, Casden Properties owns over 200,000 square feet of office space and more than 3,000 luxury apartments.