Someone once said that financial creativity begins where credit stops. Another person phrased this slightly differently when he said that creativity goes into high gear when you’ve given someone a check to seal a deal on a Friday and have until Monday to get enough money into the bank to cover it.
There used to be a teacher in the Florida Graduate Realtors Institute who was a major developer of office buildings. Now with a net worth in the tens of millions of dollars, he confessed that he got his start by putting a $25,000 check into escrow with his attorney to bind an Option contract on a perfect site for a high rise office building. In the escrow instructions he specified that the check not be negotiated for 90 days.
His next step was to enlist the aid of a prestigious architectural firm to render drawings of the completed building, and to agree to do the planning for a fee equal to 10% of the value of the building, but to be paid only out of the sale proceeds when the building was sold. He had the site drawing painted on a large two faced sign situated on the site with the name of the Architects prominently displayed.
His next step was to show the site to a number of companies that leased office space and offer to pay them commissions on the same basis as the architectural firm once the building was pre-leased.
Finally, he used the reputations of the Architects and leasing Brokers to obtain financing for construction. Out of the first draw, he was able to replace his escrowed check with cash. He didn’t wait for the building to be completed. With all the pieces in place, he sold his Option for $100,000 and was off and running.
In his class he mentioned that he had started off free of any personal debt with an Option worth $100,000 and at that point he owe $130,000,000 in personally guaranteed debt secured by a number of prestige office buildings. He asked the class whether he was getting ahead or falling behind.
If you plow through all his steps, what he was doing was parlaying his vision into hard cash by daring to do things others wouldn’t do. That’s the essence of being creative; being willing to take that first step without someone to hold your hand or show you the way. When you can do this, you can accomplish just about anything you want to.
