Real Estate Investor Magazine South Africa May/June 2015 | Page 19

CASE
STUDY
TRUMP’S COMMODORE-HYATT
PROJECT
Trump’s first big real estate deal in 1974
was the transformation of the vacant,
dilapidated Commodore Hotel on 42nd
Street, near Grand Central Station, into
the Grand Hyatt hotel. Trump, then only
27 years old, plan was to convert the old
building into a 1, 400-room convention
hotel — the largest since the New
York Hilton was built 25 years earlier.
Trump’s relationships, negotiating skills
with all roleplayers involved in the deal,
as well as his enthusiasm and tenacity
for the project made it a huge success.
Selecting Investment Properties
A prime location is important but
there are no guarantees that your
investment will be profitable. An
incompetent investor can own a
property at a good location but can
still lose lots of money.
Although, according to Trump,
“You do not necessarily need the
best location. What you need is the
best deal.”
When planning on implementing
a deal for a particular property, you
must think big. “I like thinking big.
I always have,” he says.
“To me it is very simple: if you
are going to be thinking anyway,
you might as well think big,”
Trump adds.
A property in a prime location
close to essential amenities will
always be in high demand by
buyers and tenants. These people
will always pay a premium price to
live in this prime location.
You have to avoid the trap of
looking only at the average selling
prices in your local market, and
be willing to ‘overpay’ if this
overpayment is warranted. In
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“How to Get Rich Trump Style”
other words, the so-called ‘average
market price’ of property is
computed based on limited general
information relating to an entire
neighbourhood, not the value of a
specific property which may have
a desirable size and be in a better
location.
You may have to pay 50% - 100%
more to get a decent property in a
good location, but it is worth if that
will allow you to attract superior
tenants or buyers.
The key to making a big profit
and getting better returns on your
investment is to pay less than what
the property is worth. You can do
this by purchasing the property at a
price below market-value, buying it
below the use value, buying below
the conversion value, buying with
below-market-costs
financing,
buying with a b