Thursday, June 19, 2014

How Sunder made a deal....

I was recently reading the book 'Rich Dad, Poor Dad' by Robert Kiyosaki. (My Review). In that book Mr.Kiyosaki posits that many rich people are deal makers.

What is a deal?

A deal is when you assemble multiples of investment options and sells the same as a deal where everyone involved gets a 'deal'. He shares the example of how he once made 40000 dollars in 5 hours by creating a deal. 

While reading this, I was reminded of my friend Sunder who made one such deal.

The year was 2000. The real estate market in Bangalore was slowly picking up. Mantri Group came up with an apartment complex named 'Mantri Paradise'. At that time a two bedroom apartment was being sold for about 13 lakhs. 

Sunder booked one apartment in the complex. He took a bank loan of about 11 lakhs. Mantri was ready to pay the 'Pre EMI' annuity payments to the bank. In fact Mantri facilitated the deal. 

By 2003 when the apartment was ready, the block which Sunder bought was being sold for about 25 lakhs. Sunder promptly sold off the house and paid off his bank loan and was left with a profit of about 12 lakhs. 

He did not rest with it. He used 3 Lakhs to buy a 3000 Square feet of land in Rajarajeswari Nagar, one the outskirts of Bangalore. He paid 100 per square feet. 

With the remaining 9 lakhs, he constructed 5 houses in the land. Fortuitously, Bangalore was starting to expand and Mind Tree set up their campus and office in Rajarajeswari Nagar, almost next door to Sunder's housing complex. 

Sunder saw an opportunity and promptly negotiated with Mindtree and leased out 5 apartments to the company at a tidy three year lease of about 10 Lakhs per house. 

Sunder's total out of pocket expense? About 2 lakhs

Sunder's cashflow from the 5 buildings? About 50 Lakhs

You do the math...

No comments:

Post a Comment

As a policy I publish all the comments except SPAMS. Please be moderate and constructive in your comments