🤝 Arnold Schwarzenegger’s First Million

Happy Friday. This is the Shake 🤝 : The free 5-minute newsletter that leaves you feeling like James Brown in his iconic interview 🕺 every Friday.

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Here’s what we've got for you this week:

• Terminator Investments LLC 🤖 

• Commercial Corner: (Goose) Ground Leases Are GAS⛽️ 

• Celebrity Portfolio 🎤 

MARKET RADAR

TERMINATOR INVESTMENTS LLC 🤖 

Arnold Schwarzenegger has been a household name for decades. I mean, the dude even has auto-correct for his last name (ask me how I know).

But before he could flex his muscles in Hollywood and earn millions, he took a risk in the real estate game that paid big dividends in setting up financial freedom to pursue his acting career.

Growing up dirt poor in Post World War 2 Austria, Arnold always had the vision to get to America.

So what does he do? Get extremely yoked, of course 💪 

After winning Mr. Universe and becoming an icon in the bodybuilding world, he realized his dream of moving to America in 1968 at the age of 21 with a couple of hundred dollars in the bank.

Fast forward a bit, and Arnold was living in LA with fellow bodybuilder, Franco Columbu. They both realize there wasn’t a lot of money to be made in bodybuilding. Luckily for them, Franco was also a master bricklayer hailing from Italy 🤌 

So in between pumping iron, they both set off to create a business laying bricks with a European spin.

At that time, anything defined as “euro” was in style and perceived as expensive so they up-charged when they could (sometimes even playing “good cop bad cop” when negotiating with potential customers). Arnold was thankfully the good cop.

Their first big marketing move was placing an Ad in the LA Times, calling themselves “European bricklayers and masonry experts”. Literally a week later, the 1971 San Fernando earthquake hit and their business started booming.

With the phone ringing off the hook, they began employing other bodybuilders to meet the demand - pitching them a workout 🏋️ while also getting tan for their next competition.

The business began producing great cash flow 💸 and Arnold redirected this surplus (alongside his mail-order business for workouts) into LA real estate 🏘️ 

The motivating reason behind this strategy was that he didn't want to be like the other bodybuilders and aspiring actors that would say yes to any work due to their lack of income. They needed the gigs and he didn’t want that problem.

So his solution was investing in cash-flowing real estate 💡 

His journey started with a ~$27k downpayment on a 6-plex that was valued at $214,000. Arnold quickly saw success (with the help of rapid inflation) and implemented the “trade-up” strategy to leverage his equity into bigger buildings.

He sold that 6-plex for $360k just a short while after purchasing it and then rinsed and repeated the process - putting his $146,000 gain from the 6-plex into a 12-unit building.

Fast forward a few years and that 12-unit building turned into a 36-unit. And then 36 units into 100 🚀 

Sounds lucky?

Well, Arnold’s humble and does credit the 70s inflation as the main driver of real estate prices increasing so rapidly, calling it the “magic decade” where it was almost impossible to lose.

But don’t get it twisted, it takes a good amount of risk appetite and discipline to not spend that initial cashout on materialistic things like cars, watches, parties, or women as most early 20’s males do living in LA. Would you think anything different from someone that doesn’t ever cheat a rep at the gym?

His clear vision kept him on track, meanwhile, he also knew the importance of growing his network. #network=networth

He later became fortunate enough to get mentored by real estate magnate Albert Ehringer and invest alongside him in commercial properties on Main Street, Santa Monica 🌴 

By the time Arnold was in his late 20s, he was a millionaire with a steady source of passive cash flow 💰️ . This allowed him to focus on what brought him the most joy - acting (and terminating robots 🤖 , of course). The rest, as they say, is history.

Arnold Schwarzenegger’s net worth is now over $400M and FYI he can smoke stogies wherever the hell he wants… Hasta la vista, baby

COMMERCIAL CORNER 🏢 

(GOOSE) GROUND LEASES ARE GAS ⛽️ 

Ahhh yes, Wawa.

In Philadelphia, New Jersey, and the surrounding areas, this religion convenience store is more than just hoagies, donuts, and a place to fill up your gas.

Wawa is actually an extremely sought-after ground lease tenant. Before we get into the real estate, let’s talk about the history of Wawa and the growth the company has seen.

Wawa was started in 1964 by a man named Dick Wood (Stop laughing, you child). The name Wawa actually comes from a community within Folsom, Pennsylvania, a suburb of Philadelphia.

More intel if you’d like 👇️ 

Back to the real estate… So what’s a ground lease?

A ground lease is the simplest form of a commercial real estate lease.

In many ways, a ground lease feels like investing in a bond: they’re pretty simple and safer than many other real estate investments, but also provide a lower return for the landlord.

Ground leases are the types of lease agreements in commercial real estate where the tenant is given the right to use and develop the land for a specific period of time while the ownership of the land remains with the landlord.

People always say that owning real estate is better than renting, right? In many cases yes, but for Wawa, ground leases actually make a ton of sense. First and foremost, Wawa is actually one of the pickiest tenants out there.

Here are 5 of the characteristics that Wawa has listed for their site submissions:

• Corner location at a signalized intersection

• Out-parcels and pads of shopping centers or portions of mixed developments

• Sites should be located on a high-volume intersection

• Visibility must be good, at the posted speed limit, from each approaching direction of travel

• Frontage must be adequate to permit convenient and safe access to the site

At this point, I swear Wawa is harder to please than my girlfriend! (I’ll find out if she actually reads the newsletter now 👀 ).

In all seriousness, Wawa ends up getting prime-time real estate and paying lower rents due to its stability. Though they are a private company and don’t have a credit rating, they are seen as an extremely strong long-term tenant.

Another advantage of a ground lease for Wawa is that they almost completely control the improvements.

Since they’re constructing 🚧 their own space, they don’t need to try to fit into an existing building and are able to customize their construction to their exact specifications. Sounds satisfying.

Live look at every person from Philly after the bars at a Wawa 👇️ 

So what are the benefits to landlords in this scenario outside of just landing a popular brand at one of their sites?

The biggest advantage comes with the sale of the property if they choose to do so. Per Net Lease Advisor, the average Wawa sells for $7.2 million at a 4.40% CAP Rate! 

This means that many landowners who hold land for a fraction of that price see their value skyrocket based purely on the fact that Wawa is their tenant 🚀  

As a landlord, it’s all upside: either they get an excellent tenant in a relatively simple lease (usually on a 20-year term), or they can turn around and sell the property for millions of dollars.

We call that a Wawa win-win 🤑 

CELEBRITY PORTFOLIO 🎤 

To cap this edition off, we’re digging into a music mogul’s real estate portfolio to see how well our readers guessing game is.

Answer here.

Done deal 🤝 If you enjoyed this week's edition, don’t be selfish — share The Shake with a friend!

^{DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.}