Remember the Oscar Wilde play, “The Importance of Being Earnest”? Well, I’d like to blog today about “The Importance of Being NIMBLE.”

The turmoil in the markets and the contraction in the global economy reminds each of us of the old cliche: “the only thing that’s constant is change.” So it is in business and, especially, investing.

My business partner and I founded our investing company with one very simple idea in mind: we wanted our business to outlive us. We want it to be around long after we’re gone. So all of the major decisions we make are colored by a long term perspective. What’s best long term for Live Oak? What’s best for our investors? How do we ensure that the projects we’re developing are benefiting the long term success of Live Oak (not just the next five plus years, but over the next decade and beyond) and have our investors benefit in much of the same way.

For example, our private equity company has only invested in commercial real estate to date. However, we are now expanding that. We are now investing in businesses and the passive cash flows they produce. Our criteria: the businesses must have a very high rate of return (20%+ per annum), are likely to be wildly successful even in down economies, and the management teams behind those businesses must also have a long term vision for their companies.

So our latest project, for example, is investing in a business that develops multi group dental centers and manages the practices within those centers, across the US. Dentistry is a high cash collection business, 99% of all new dental centers succeed (i.e. remain open and thrive beyond the five year start up phase), and for every 6,000 dentists retiring this year only 4,200 are coming out of dental school. So, we think this is a great play (it doesn’t hurt that the returns are phenomenal). And 65% of all Americans visited a dentist last year - up 10% from just 10 years ago (and as the population ages, particularly the baby boomers, that percentage is more likely to go up than down). Yes, there is a real estate component to it (the centers are stand alone office buildings after all) but the investment is really in the business of the dental practices (the returns are higher there than in the real estate actually). It’s an opportunity to get in on the inside of a deal which should produce a high amount of stable cash flows for many years — our investors will be able to invest in these very lucrative medical practices which are not usually open to private investors very often because of the hard work we’ve done and the nimbleness we’ve shown.

We’ve spent over 6 months of due diligence on the project (and, more importantly, all the players involved) so we took our time. But, if we were not nimble and remained closed to investing in only commercial real estate, we would not have this opportunity open up for us. The opportunity opened up for us because of some key relationships we’ve cultivated over many years — again, another thing we take a ‘long term, take your time’ view on (relationship building, that is).

Now, instead of waiting on the economy to come back around before we start seeing some great commercial real estate deals again, etc, we can monetize our nimbleness and continue to provide great opportunities for our investors who have to put their money somewhere while the options of where to place that capital are getting more and more limited by the day (stock market? CDs?). They say: “why NOT throw some capital at a private placement deal with a reputable firm and a strong offering?” Even in the worst case, it can’t be worse than losing 40% of my assets in the stock market! If you’re sitting on $1M+, why not throw 10-20% of that into this deal (as an overall percentage of your portfolio that’s not much risk exposure … and the upside could be enormous).

So, for us, this opportunity will open up other opportunities (for us and our investors). And it’s not the only opportunity. There are still commercial real estate deals and other private placement opportunities to look at. The point here is that all we, at Live Oak, care about is developing great opportunities for our investors and ourselves so that we both can benefit from them for many many years to come (although the dental centers, for example, will stop being developed in 2-3 years, the centers will still be kicking out returns for decades to come most likely or there might be even more lucrative exit strategies sooner to be looked at).

So, I encourage you to keep your eyes open and remain nimble not just during these rough times, but through all times.

I know that we will continue to make that a mantra for ourselves.

In closing, one of my favorite market commentators, John Mauldin, has a newsletter entitled: “The Frontline”. I highly suggest you subscribe to it at http ://www.frontlinethoughts.com/gateway.asp. In last week’s newsletter entitled “The Problem With Deleveraging” he gave a great history lesson on recessions and it was all pretty discouraging, negative stuff. But he concluded by saying:

“All is not gloom and doom. The last major recession and problem period, in the ’70s, saw a number of new businesses start and prosper (Microsoft, Apple, Intel, etc.). Businesses that have access to capital are going to be able to take market share and come out of this recession in much better shape. It is just a recession, after all, and will end. But I would suggest keeping your powder dry and being nimble. There are opportunities which will arise, as they do in every downturn. Just don’t expect this recession to be like any past recession. Make your plans accordingly.”

Who knows. You may be sitting on a business right now that could be the next Microsoft, Apple, Intel, etc. If you have a long term, deeply compelling vision with a business model that can stay nimble while you keep your eyes wide open to the opportunities that are all around you right now, you may be able to generate a wealth of abundance for not just yourself and your loved ones but for generations to come. Maybe even become one of those businesses John Mauldin will write about.

Photo Credit: Mayr

This material is neither an offer to sell nor the solicitation to purchase any security. The information is for discussion and information purposes only. It is not intended to replace competent legal, tax or financial planning advice. This information is provided from sources believed to be reliable but should be used in conjunction with professional advice that is consistent with your personal situation.

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Tags: business, investor, opportunity, real estate, real estate investing

Greetings from the metropolis of Cedar Crest, NM. Wow….It feels good to be back!

It has been a long six weeks for me.  You see, six weeks ago, I returned from Maui Mastermind and came down with the flu…then pneumonia.  Not only was I stuck in bed but I was also hooked up to an oxygen machine.   It was definitely a humbling experience.  But it did get me thinking…..

During my time in bed….I did not do anything.  Fading in and out of consciousness and long hours of really bad daytime TV….In my long absence….my businesses continued to run without me.  How could this be?  How could the businesses that I spent that last seven years building, run without me?  How did they not LOSE money while I spent weeks coughing, vomiting, and hallucinating?   Well….It was all intentional….it was all planned.  The plan five ago was to make my business a “level three buiness.”

You see, five years ago, I learned about a concept of a “level three business”.  I remember attending the very first Maui Mastermind, where a speaker, Curtis Oakes, said a statement that I would never forget.  “My weekdays are my weekends, and my weekends are my holidays.” Curtis had built a successful business that ran without him.  At least, that I how I understood it.  When I heard Curtis Oakes say that magical phrase….I knew what I needed to do.  I needed to figure out how to make my businesses run without me.

So what is a “level three business”?

 
Well….it is a business that runs without you.  But, not only does it run…but it grows without you. At the same time, you can

So…..

How was I going to take myself out of the the day-to-day operations without driving my business into the ground?  Well needless to say, it was very difficult and there was no magic bullet (no matter what others tell you).  And still, to be honest, there is a lot of room for improvement. But….here are three big areas that I concentrated heavily to make the transition to a level three business (there are a lot more but…give you a good idea):

1)  Technology - Automation of several of the business processes was a priority.  Identifying the processes and implementing the correct technology was key.  Technology not only allowed for consistancy but also allowed for “easier” business management overall.  A big “plus” is the right technology is easily leveraged for other areas of the business.  For example, one of my companies is a commercial property management company.  We implemented Yardi Voyager (web-based property management software) in order to not only help on the management and accounting side but also to assist on the asset management side (more on asset management below)  This was a huge financial and time investment…and loaded with mishaps….but I can look back as say it was well worth it.

2) Outsourcing - We looked at all business areas to identify what could be outsourced.   Many areas were outsourced.  For example, our human resource department (including payroll and benefits) was outsourced to a Professional Employee Leasing company (Trinet).

3) Asset Management - Implementing  Asset Management  (True North Asset Management) was probably the most helpful in transitioning to a level three business.  I never heard of Asset Management before.  But asset management is a power concept of “managing the manager.”  I deal with one person who is managing all the property management companies that manage my properties (including my property management company)  different parts of the country.

Tags: business, entities, real estate business, running your business, structures

When you first start out in this business (real estate investing) most of your deals and leads will come from your marketing activities such as bandit signs, direct mail, the Internet and door knocking. After a while, if you are networking properly, many of your deals will begin coming from referrals from other investors. The key word in the last sentence is networking properly!

The Unskilled Real Estate Networker
I attend all of the REIA meetings in my area and I see people who walk around in the beginning of the meeting and just pass out their business cards to everyone. They don’t even talk to you, they just make their way around the room passing out the cards. This is the most bone headed thing to do! Networking is about relationship building, not about how many people have your business card at the end of the meeting (and anyone who just walks around and gives their card to me without talking to me; well, I immediately trash their card.)

Effective Real Estate Networking
When you are networking it is not about you, it is about the other person. When you first meet someone at an event, ask them about themselves. Find out what type of investing they do. Do they specialize in lease options, subject-to, wholesaling, or short sales? How can you help this person out? After you have talked with them for a while, ask them for their business card (by the way, when you ask for their card, they usually ask back for yours.) Most importantly, be genuine when you are asking people questions and talking with them.

Also, try not to spend too much time with one person. We all like our comfort zones and I know a lot of you talk to the same people every month at your REIA meetings. This month decide that you will meet new people. It’s really simple. Just walk up to them and start asking questions about their real estate investing activities (we all like to talk about ourselves, so people will appreciate that you are asking them questions.)

Don’t forget to be unique. At all networking events that I attend, I wear a black suit and my red Converse shoes. Everyone knows that I am the “red shoe” guy. Often people will seek me out and say “so and so told me to see the guy in the red shoes because he could answer my subject-to questions.” Another investor that I know always wears a Hawaiian shirt at all events. Every time that I see this guy it looks like he just got off of the beach.

The Importance of Follow-Up
Lastly, and of crucial importance to your success as a real estate investor, is to follow up with people after a networking event. If you said you were going to email someone the name of your attorney, then make sure and get them the name of your attorney. Or, if they are looking for a rehab and you just came across a new property, shoot the information to them.

So what are three networking events that you can attend this month and what value can you provide to the people you meet?

Tags: business, effective networking, how to network, networking, real estate clubs, real estate investing, relationships

Kiss those stodgy old companies goodbye . . . I just saw something that blew my mind a bit and I thought I’d share. Below is a list of the largest US Companies By Market Capitalization.

Other than seeing that there is now a beast of a business with a whopping half-trillion dollar market-cap (Exxon Mobil), take a look at what is now the fifth largest company in the US. That’s right, the Google Monster has eclipsed most of the largest corporations in the United States to become the most valuable advertising company ever (we might be talking orders of magnitude here)! While Google is more than a mere ad-machine, virtually all of its revenues are derived from advertising, so I’ll call a spade a spade here.

Not only has it climbed the American charts, but this World Idol is now in the Top 20 list of the World’s largest companies.

Here’s a look at our largest American Corporations in market-cap (in billions of dollars-US - data as of 10/30/07)

It all just blows my mind a bit and I felt like sharing.

There is a lot of talk out there about people fearing Google. With 75% of the search market, the company has a monopoly over information at home and abroad. They can, in a single stroke, bring fortune, or misery to any website, or blog.

Do you think Google has grown to be too big for its britches? Do you fear Google?

Please share your thoughts and enjoy your Halloween!

Tags: business, google, google revenue, google watch, pagerank, search, search engine

This week, our post real estate partnership questions was featured in two blog carnivals, The Carnival of Real Estate Investing hosted by Fliperati, and The Carnival of Business, hosted by Business & Technology Reinvention. We were notably absent at the carnival of real estate, however, as a consolation prize, we were mentioned as having submitted our material.

That said, we have the distinct pleasure of hosting next week’s Carnival of Real Estate! If you are interested in submitting a post, please do so - we’ll post our results next Monday the 27th. I’m not sure what we’ll focus on, but I’m going to try and spread the love a bit!

See you there!

Tags: blogging, business, carnival, estate, fliperati, real, Real Estate Investing

In addition to the Carnival of Real Estate, we were also mentioned today in the HJL Money Blog for the Carnival of Business regarding our post investigating Pinnacle Development Partners.

Tags: blog, business, carnival, development, estate, for, of, partners, pinnacle, real, Real Estate Investing