🤝 Rick Ross & Airbnb Stay Schemin

Happy Friday. This is the Shake 🤝 : The free 5-minute newsletter that’s as unfiltered as your fridge’s water dispenser (quit procrastinating and order a new filter).

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

• Rick Ross The Rapper Farmer 👨‍🌾 

• Airbnb Finesse 📈 

• Creative Finance Cafe☕️: Balloon Contingency 🎈 

MARKET RADAR

RICK ROSS THE RAPPER FARMER 👨‍🌾 

When it comes to his investments, Rick Ross isn’t horsing around.

The rapper-turned-business-mogul has made some creative moves that we all can learn from. One is the use of his primary residence.

Ross owns the largest single-family home in the state of Georgia. Nicknamed The Promised Land, the property sits on 235 acres and has 109 rooms, including 12 bedrooms and 21 bathrooms. Sounds like a pretty big liability right? Well, it was… for Evander Holyfield.

The former heavyweight champ lost the estate due to foreclosure and Ross scooped it up for a cool $5.8M. Keep in mind that Holyfield made ~$550M in career earnings while Rick Ross is worth an estimated ~$60M.

So how will this play out for him?

It’s a strategy as old as time - the same way Jesus turned water into wine, Ross looks to turn liabilities 🏚️ into assets 🏡 

Rozay’s first creative effort was renting out the home for $2.75M to film the movie Coming 2 America. Not too shabby of an ROI, although the property’s upkeep is estimated at around $1M/year.

His next effort was to lessen the tax burden on a property of this size. To do this, Ross began purchasing wildlife: Cattle, horses, bison, and two lions graze his farmlands.

Now dubbing it the “Promised Land Zoo” he can qualify for significant tax cuts.

According to the Georgia Agriculture Tax Exemption rule (Chapter 40-29), homeowners can participate in the industry if they do any of the following on their estate: “managing livestock, equine, or poultry; producing or storing feed for use in the production of livestock, including, but not limited to cattle, calves, swine, hogs, goats, sheep, equine, and rabbits.”

By owning some cattle, Ross qualifies for some of the Southern state’s tax breaks.

From our research, his property tax drops to a mere $500 per acre 🤯 as long as he sells at least $1000 worth of product a year, he qualifies for an agricultural tax exemption.

Quick history lesson: agricultural tax exemptions began in the 1950s and 60s due to the rapid growth of suburban areas that were taking over farmland and causing agricultural property values to rise, making it difficult for farmers to pay their taxes.

To prevent farmers from selling their land to developers, states started offering tax breaks that assessed farmland value far below market rate. This practice, known as a use-value assessment, is now used by 49 of the 50 states to significantly reduce the value of farmland, often by up to 90% or more.

Turns out the top 1% 💰️ has been manipulating this fake farm loophole for decades (don’t act surprised) 👇️ :

1. Michael Dell 🖥️: qualified for an agricultural property tax break on his sprawling 1,757-acre residential ranch in suburban Austin and saved over $1 million simply because his family and friends sometimes use the land as a private hunting preserve to shoot deer. It reduced the property’s 2005 market value from $71.4 million to an agricultural value of $290,000.

2. Steve Forbes 📰 : got more than a 90% property tax reduction on hundreds of acres of his multimillion-dollar estate in upscale Bedminister, New Jersey, just by putting a couple of cows out to pasture.

3. George W. Bush : In 1998, his tax bill on a lakeside home near Athens, nestled in a secluded pine forest, was a measly $543.07. That was taxed at a reduced value of $101,770.

Honestly, kudos to Rick Ross for embarking on this nifty hack and also putting it on the radar of his followers 💯 . That’s some real .

We hope this inspires all of you to one day become a fake farmer to reduce those pesky property tax bills.

AIRBNB FINESSE 📈

Airbnb isn’t just raking in the cash from crazy Philadelphia Eagles 🦅 fans liquidating their children’s college funds to fly to Arizona for the Super Bowl.

They’re also making serious coin 🤑 from some savvy investing (and the market doing them a massive favor).

Anyone who has ever booked an Airbnb reservation is familiar with the process of paying in part (or in full) up front, but where does that money go between booking and the actual stay?

The answer may surprise you…

Per WSJ: “The company parks it in bank accounts, money-market funds, and short-term bonds, which are considered safe and are easy to sell on short notice.”

FYI - Airbnb processed over $80 billion in payments last year ‼️ 

This is more than just a savvy move to protect the cash until they move it along to the host. With rising interest rates on money-market funds and other safe investment vehicles, Airbnb has carved out another revenue stream that earns tens of millions for just parking this cash before your stay.

Almost like a short-term bank, Airbnb profits from investing the money they hold from customers by earning interest on the funds. With the current ~4% interest rates, the returns from these investments are currently at an all-time high, which provides Airbnb with another solid source of revenue.

Even though the profit made through interest earned on customer funds is only a small portion of their overall revenue, it’s still a creative source of income without taking on massive risks 👏 

By the way, here’s the collateral damage of waiting too long to book your Airbnb before the Super Bowl and not giving the company your cash to invest for longer:

CREATIVE FINANCE CAFE ☕️ 

BALLOON CONTINGENCY 🎈 

Balloons are fun and all in the casual world but in the investing world… not so much.

We’re keeping it short in this week’s CFC (hopefully not as short as your balloon term). When it comes to creative finance deals, most of the time there is a balloon payment involved.

A balloon clause magnifies the risk of a deal due to being on a time crunch to pay off the rest of the seller's note (whatever is leftover after the down payment and recurring monthly principal payment).

The longer the balloon term, the better as it gives buyers more time to add value or let appreciation do its thing.

On the other side, it’s common for sellers to not want to hold a note for over 5-10 years. So if you find yourself in a situation where a seller won’t budge past 5 years, we got a little hack for you.

Similar to an appraisal contingency, a balloon contingency can be included in the purchase agreement to extend the balloon payment by x amount of years if the property doesn’t appraise for the initially agreed-upon purchase price when the initial balloon payment is due.

This covers your risk if you buy on the wrong side of the cycle. If property values go down and you can’t sell or refi the property for the amount you bought for - you’ll be SOL .

Obviously, every investor’s goal is to stabilize a property ASAP. So make it evident to the seller that your goal isn’t for them to hold the note, and that you plan to refi/sell when your intended investment strategy is executed.

Market factors are out of everyone’s control, so make sure you negotiate to cover yourself against terms that amplify risk in a deal 🤝 

OK 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.}