The stock market is very unstable. At this time it is going up and down while interest rates are so low that you want to be a borrower and not a lender. Would you like some suggestions on how can you get most out of low interest rates while being assured your principal will not disappear while you are trying to make some money? Of course, there is always danger of borrowing money and then spending it just because it is there.

So, would you also like to know what is best way to borrow money at today’s low rates without spending it? Buy real estate. Not any real estate but real estate that will hold its value, even if single family houses go down. It is apartment buildings. Because apartment rents are still going up, value of apartment buildings have best chance of appreciating while everything else goes down.

Low interest rates mean that you can have a positive cash flow at real estate purchase prices you would have lost your shirt on, even two years ago. Rates are currently 4.5% to 6.5% interest rates when we used to pay 9% for apartment loans just a few years ago. Apartments have become a better investment for two main reasons. First, carrying costs (interest costs) have been going down. Second, income has been going up, substantially. Can things be better than this? YES IT CAN.

I have developed two programs. One is to take people with a small net worth and build an estate or self directed IRA (tax free retirement plan) that is worth up to $800,000 in 15 years and that generates an income of $60,000 per year with both still going up after that.

Before we begin, I would like to make one comment. Whenever a CPA has done an appraisal of a body shop, I find that their opinion of value is much greater than actual value market place will pay. This is not because CPA’s do not know what they are doing because they do; it is just that market place places a much higher risk on buying a body shop than accountants do. The following is an excerpt from one of those appraisals.

THE THREE WAYS TO APPRAISE A BUSINESS 1. The ASSET VALUATION METHOD. This method is basically used when a body shop does less than $400,000 a year in gross income and seller is making wages, but no real profit above what he would be paid if working for another. On this size business, a buyer is willing to pay for assets of business but little or nothing for goodwill. The equipment is usually worth between $50,000 and $100,000, depending on how many frame machines business owns and how nice a spray booth business owns.

I have seen some specialized shops sell for more than above number because they have a truck spray booth or another business attached to main business. Examples of attached business might be an auto repair shop or towing operation. Also location, size and real estate rental amount will influence value of any business, to some degree.

2. The second method, I call GROSS SALES METHOD. This is used when sales are over $1,000,000 a year but profit is unknown or financials are not available or reliable. Because of experience, a Body shop buyer can make reasonable estimates of future profits, if they have some basic information. The basic information includes rent, source of business (DRP, STREET, or a CAR RENTAL AGENCY), and desirability of location.

When this method is used, value appears to be about 3 months sales or 25% of last 12 months sales. This method is not very reliable on businesses with sales of less than $1,000,000, because question of being profitable is very questionable. Why is this breaking point $1,000,000 in annual sales? Multi-store buyers will have well paid managers, so many figure their breakeven point is around a million.

Less than $1,000,000 in sales is not even worth their time. Of course we know that there are exceptions to rules. Some of exceptions are A. when a new location will be a satellite store to a bigger location. B. The buyer must have a location in a specific area to please a DRP. C. To get rid of a competitor.