Deal of a Lifetime?! $50k to $7M

I am a part of several masterminds and a few investor groups, and we talk about deals and share what is working and not working. So I wanted to highlight an investment deal that embodies what we dive into in the Passive Wealth Community.

In this edition of The TradeOff, I dissect a "Deal of a Lifetime" that turned a $50K refundable deposit into a staggering $7M in just 18 months. All thanks to an ingenious strategy revolving around an Absolute NNN Ground Lease.

TODAY IN 4 MINUTES OR LESS, YOU'LL LEARN:

✔️ Convert active efforts into Passive Wealth

✔️ What is a Ground Lease

✔️ Finding Opportunities

✔️ Doing your homework

✔️ Taking Action Now

Let's break down this deal of a lifetime, linking each stage to your key takeaways:

Finding Opportunity:

A significant part of any successful investment is identifying profitable opportunities. This is why I often talk about your Vision first. I had this conversation with my sons in the car the other day. It started as a slug bug game down in Mexico and has evolved into finding specific color cars while we drive. They remarked that it seems like when you start saying you want to find an Orange car you start seeing them all over. Hint that's why first determining where you want to go is so important. Back to this deal the investor capitalized on the upcoming development of a new highway interchange. By doing so, they found a plot of land perfect for commercial purposes, it was the first hard corner off of the interchange and this highlights the value of vision for what was needed. The first hard corner off an interstate is significantly valuable from a traffic flow perspective and which lead to being proactive which is often rewarded in the real estate world.

Controlling the Dirt:

So great a new interchange jump right into the deal right? Not so fast. Timing and due diligence matter. The land had been on and off the market several times, indicating a potentially flexible seller. Instead of reaching out to the broker they reached out to the owner directly, they were able to secure the deal for a $1M purchase with a $50K refundable deposit. And here is the big kicker negotiated a feasibility period with options to extend. This allowed them the ability to land a buyer/tenant without having to buy the land. Again showing the significance of doing your homework and planning ahead to limit risk. At this point small amount of time commitment, and $50k of refundable deposit. No risk all upside.

Searching for the Ideal Tenant:

After securing the property by being “in contract”, the race was now on to land a tenant. This is how the deal starts to become very lucrative. They began reaching out to potential national tenants, this is the critical practice of taking action. Note they didn't have any contacts for those tenants but called brokers, searching news articles for other deals that had closed in similar areas to try and find a quote from someone on who to contact.

Finally, persistence and strategic communication brought them in contact with two national operators, both expressing interest in the location given the hard corner and traffic flow. Having more than one party involved triggering a bidding war.

The two national operators were competitors to each other so the fact that they both were interested led them into trying to get market share in that area. Initially, both groups wanted to just buy the land contract or give them an assignment fee and make a few hundred thousand right away. Not back right? Tie up a piece of property, and then sell the contract and make a few hundred thousand dollars. Home run deal right?

Well no they didn't want to just flip the deal for the quick profit they told them they wanted to do a ground lease. The initial offer was $100k/yr with some rent escalations. Not terrible but because of competition the back and forth lead to a much more profitable lease agreement.

Ground Lease, terms, and its Perks:

An Absolute NNN Ground Lease allowed the investor to generate a steady passive income with zero obligations, this is like the holy grail of Passive Wealth type of deals in my books. Because it requires no effort and no responsibility from the owner and is creating long-term wealth.

Just for clarity for those that don't know in an Absolute NNN Ground Lease the owner owns the land, the tenant pays an annual rent for the use of the land, they build their building, and at the end of the lease, the land owner gets the building and or improvements. The leases tend to be very long as the tenant signing the lease wants a long period to more than pay back the cost of the improvements. It’s sort of like carrying back a loan on the land purchase and paid over time.

Tenants like a gas station, a drive-thru restaurant. They need traffic on a specific corner and that is why the location becomes very crucial to their success. Here's where the concept of Ground Leases comes into play.

Remember the initial lease offer was $100k/year the final lease terms were:

• Term: 15 years + options

• Rent: $275k+ base annual rent + escalations

• Type: Absolute NNN

• Landlord obligations: None

The Payoff Process, Closing, and Outcome:

The investor remained minimally involved in the permitting process and closed on the land after ensuring that the tenant would proceed. Meaning they never had their capital at risk unless there was a guarantee that the tenant would complete the ground lease.

This deal perfectly illustrates the conversion of active work into passive wealth all while eliminating risk.

In short, there was a Vision to find the opportunity, taking action and due diligence to get the property into contract with a good structure. Add the additional proactive communication to create value and getting two interested parties leading to a bidding war from two competitors.

This allowed a refundable $50K deposit to be turned into a $7M cash cow in just 18 months. Or for my math folks it is $275k/year or $23k/mn in passive income with no ongoing obligations.

This is the way passive wealth is built and designed through vision, leveraging a system, taking action, and clever strategy implementation.

In the coming weeks, we will dive deeper into these themes and explore more detailed case studies like this one. Stay tuned to continue your journey toward converting active efforts into passive wealth!

Share your thoughts, questions, or experiences in real estate investing - your interaction makes this a vibrant community of learners and achievers!

I'll see you again next week

-- Jake