The Unique Property Site Blog

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Buying a Business and a Holiday Home for no Money

This week's Unique Property site members section is devoted to the sale of islands and vineyards.

Expensive? Nothing's expensive if it's the right deal. You, of course, only buy into the right deals, so no matter how high the price, if the deal works, then go ahead.

I started in real estate with nothing. I dont say it's easy. You do have to have some ability to spot what is out there and how you can do a deal that will pay for itself. I have always assumed that if a deal wont pay for itself, then I wont do it. And if it will pay for itself then even if you have no money you can afford to buy in. In a world built on credit, it's easy.

The important issue to note is that any deal, REPEAT any deal can be done with borrowed money so long as the outcome is positive.

You do not, REPEAT do not borrow to buy anything that does not pay for itself. All borrowing deals require an equation where the equals sign produces a positive number, which means the deal pays for itself.

If the deal does not pay for itself, then it's a lousy deal. Dont do it!

Such a deal came up with I first reached my teens. I was just going on thirteen when mother decided she wanted to buy a large estate that was a couple of miles down the road. Here's a picture of it.

It was up for sale for the grand price of £15,000.

I explain how in my book Being Rich is Easy. I went about showing the local bank manager how we could buy the place despite the fact that we had a deposit and nothing else. The bank manager couldn't handle being told how it would work by a teenager, so we dont now own the place.

But here is a modern version. I am going to show how it was possible to buy a Portuguese vineyard that was for sale on the Unique Property website last year. This is taken from the above quoted book.

I start with a simple assumption: it is always possible to do deals with no money of your own. Let us assume you have noticed an advertisement in the Unique Property website. Someone is selling a vineyard in Portugal.

Let’s assume that you fancy buying a holiday home in the sun. Why not? Only an idiot, or someone who has no idea how to get money working for themselves, would look at the local estate agent websites and consider buying an apartment in a tourist zone.

You could buy a nice 3 bed apartment a mile or so back from the coast on the outskirts of a village for €400,000, or you could buy a similar sized villa with a nice garden for about €600,000.

That’s the route you’d expect ordinary folks to take. However, you are made of sterner stuff. You know that all your financial deals must conform to the golden rule that every financial equation must end up with a positive number to the right of the equals sign. On its own, I admit that rule does sound almost pointless, but it is crucial to the way a smart person thinks.

The deal from the estate agent would get you your desired holiday property, but you would have to pay for it. Who would want to do that? You, using the secrets of the rich, would expect other people to pay for everything in your life, or at least, you’d expect your money to do the heavy lifting. Better still, you’d probably prefer to pinch other people’s servants, and get them to do the work.

What you want is a deal that will make you a financial profit. Buying a simple house or apartment will cost you money, and that cost will go on for decades, and will be making other people money. That is not the way to structure any financial deal that I would consider doing. What you will need to do is look at deals which fit the criteria we have already established. As you do more and more of these deals you will begin to easily spot the ones that fit the parameters we need to observe.

So you spot this deal. Let me quote you exactly what I’ve put on my website, which is the deal we are going to look at, not only with the intention of getting other people to pay for it, but in order for us to make a profit out of buying it.

Vineyard for sale: Peninsular de Setubal, Portugal.
Price: 850.000€
Three bedroom house.
House size: 250 m2
Total land area: 6 ha. The estate has drip irrigation.
Maximum production capacity: 80.000 litres of wine
Vineyard area: 4 ha (20 acres)
Grape varieties: Castelao, Fernao Pires,
Topsoil: Alluvial soil, Subsoil: Ferruginous Clay
Altitude of vineyard: Min: 50m, Max: 500m
Temperature: Min: 4°C, Max: 24°C;
Annual rainfall: 85 l/m2“

This looks interesting. There is a detached house with one heck of a large garden (the vineyard). It’s in a reasonable area. The vineyard is in the Setubal region. This means you are within easy access of Lisbon, but in the countryside. You are also close to the sea. The temperature range is equable. No fierce heat, and no frost. It’s certainly more expensive than the average house or apartment in the tourist south, but what do we really mean by that word ‘expensive’?

Let’s be sensible and remember to use the right words, or we start to get our equations set up incorrectly. The right word here is ‘price’.

We have a three bed house totalling 250 square meters. That’s fine. I’m sure that since we are also looking at nine hectares of land, which is about twenty acres, there will be plenty of opportunity to increase the size of the dwelling.

But can we afford the deal as we have no money?

Remember you live in a society built on credit. The money in your pocket is itself credit. Cash is credit. If you dont understand that, check out Alastair Macleod.
Since cash is credit and credit is the same as cash (it is also credit), increase your cash basis by using credit cash, BUT only if you are doing a deal that will bring in a profit. You NEVER, NEVER, NEVER us credit cash to spend, only to make more money. In other words, you should ALWAYS use credit to increase your credit.

We can get three credit cards to give us most of the deposit for the above deal at 0% interest for fifteen months. That gives us plenty of time to get the deal set up at no cost. That covers the first problem.

But how are we going to pay the rest of the money?

Before we move forward on this we need to know we have the means to not only pay the purchase price, but also cover any mortgage payments. We have a business here that produces 80,000 litres of wine. That is equivalent to about 100,000 bottles.

The vineyard is in a registered wine region which I consider to be one of the better areas in the country. In fact, a considerable number of the bottles in my cellar come from this region. To own a vineyard in this region would give me a thrill. So there is a pleasure element in this venture, and hopefully the financial side of things will bring a certain amount of joy as well.

Okay, let’s get stuck into the figures. What would an average cheap bottle of wine retail for in the local supermarket?

Three euros would probably be about right. If the wine can be vinified to a higher than average standard, then the price will go up. But let’s be pessimistic, and stick to an average low price.

I like my wines, and for reference I am currently drinking a rather nice French rosé which I bought in the local supermarket for just under two euros. My usual everyday drinking wines here in Portugal cost me anything from about four euros to about ten euros. That means the vineyard would probably sell a bottle to a supermarket for two euros minimum. An average wine would cost about €1 a bottle to make, leaving the wine maker with a profit of about €1 a bottle. That would mean an annual profit of €100,000.

The next question is, do you want to run a wine-making business?

I'm not a wine-maker. That means I’d have to employ an existing wine-maker in the area. Always assuming I can find someone interested in a deal, I would go on to the next stage. That means I would buy the house and grounds, but not run the business. That means I would need to find a good wine-maker, and would need to pay him. I have already set aside the equivalent of €1 a bottle for the costs to make the wine, giving the business side of the equation sufficient liquidity to function, except that I could afford to take a profit of €0.25 a bottle to go towards paying the mortgage.

This means this is a self-funding business, so the house and vineyard are costing me nothing, but, on the contrary, I end up with an annual profit in the region of just over €13,300, which is a small but comfortable pension. Excuse me, but that is a home plus a nice little pension, and the whole operation is costing me absolutely nothing.

Let me summarise.

For the deposit you could operate five credit cards, each with a limit of 10,000. That immediately can give you 50,000 at 0% interest for 15 months. You need at least two bank accounts. Go and see the managers and ask each of them for 10,000 to buy into your new business. That gives you almost all of your deposit. You could of course get extra credit cards, open another bank account, or end up with slightly different cash borrowing equivalents. Obviously you can adjust these figures to suit the circumstances. I’m only trying to show that if you use money properly this deal is possible.

After fifteen months when the no-interest credit card deals run out, you can obtain three more cards and swap each deal for another free starter loan. Even if you increase the mortgage and add in the bank loans you will find you are still running a healthy profit.

Put that another way, if I did this deal some folks would be giving me a house, a nice business and a pension. Aren’t people nice?

I told you it’s ridiculously easy being rich. You just need the right mind-set and a few simple rules. I've been working like this all my life. It really is easy. The secret is to make sure that every deal you do is self funding, and produces a profit. In this instance, the deal does several things. It buys you a house. It buys you a business. And it gives you a pension. And all the way along the line someone else is paying for it all.

Now you know how it’s done, it's over to you.

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