If you have done your store and Internet market searches carefully and you have not found your invention, that is an excellent start! Chances are pretty good that your product is not currently being sold. However, you still have a couple of hurdles to get over before you can breathe easily that your idea really belongs to you. According to the United States Patent and Trademark Office (USPTO), over 97% of the patents that are issued to independent inventors never make it to the marketplace! We will talk about this grim statistic in a later chapter and how you can avoid being a part of it. But, what this statistic means is that the patent database is full of patents that have never been seen on store shelves. You will need to make sure that your idea is not one of those that have been patented already.

The United States patent database is huge and complicated, and it would be foolhardy for novice inventors to believe that they could do thorough enough searches to base utility patent applications on them. But, with a little bit of instruction in how to get around on the USPTO website, anyone can do a pretty good preliminary search. What we mean by a preliminary search is this: if you go into the USPTO database and, with a limited amount of searching, you find your invention idea staring back at you; it is time to reassess your idea. Is the prior art (patent) that you just found your exact idea? If it is not, is your idea an improvement over that product? If you believe it to be your exact idea, it is probably best to set it aside and move on to your next idea before you spend any more time or any money on it. But, if you think your idea is significantly different or better, print that patent and take it to a patent agent or attorney for a legal opinion.

If you find a patent that appears to be your exact idea, be sure to read the claims section carefully to make sure that it truly is identical before you abandon your dream. Sometimes two products can be made for the exact same purpose and they can look very similar or even identical in patent drawings and still be very different in the embodiments of how they are actually made.

While you are making the rounds of the stores looking at the similar products, this is an opportunity for you to do some other research that will get you ahead of the game when you are ready to market your invention. Take a small pad and a pen with you and write down the name and location of the manufacturers of similar merchandise. You will find this information on all products that are offered for sale. It will be on a sticker or a hangtag or stamped somewhere on the item. These are the companies that will be your marketing targets later if you plan to license your product for royalties.

Or, they will be your competition if you plan to build a business around your invention. Either way, it will be to your advantage to know as much as you can about these companies that manufacture products similar to your invention. If your invention is something that is not specifically a retail item, such as a medical invention that would be sold through specialty outlets, you will need to track down those specific outlets and catalogs (perhaps with the help of a medical professional) in order to search in that area. However, if you have developed such an invention, chances are excellent that you are already familiar with those specialized outlets.

If your invention is in a field that is a specialized area in which the products are not found in the usual retail outlets, you may need assistance from professionals in that industry during your research or development phase. Be sure to have each person who assists you to sign a non-disclosure document for your files.

Gross income is the total amount of money the property will bring in in a year, including rent, laundry income, garage rentals, vending sales, and anything else. This is often referred to as the “gross scheduled income” or GSI.

Although determining the GSI should be a pretty straightforward matter, one issue sometimes arises when the current owner has underrented some or all of the units. This is a surprisingly common issue with smaller units, for many passive investors get happy with a certain, reliable level of profit and don’t want to risk rocking the boat by attempting to raise rents.

How is this issue handled? Typically, appraisers will make an allowance for market rents, while bankers don’t; and investors look for underrented properties, for they can mean lower sales prices but potentially higher profits down the road.

The last method of appraising real estate value is called the “capitalization of income” approach. This method determines a building’s value based on its profitability. In the real world of ap praising, different methods of valuing property are used for different types of buildings. With single-family homes, the comparative method is used most often. The reproduction cost method is usually employed for specialized properties (like a church) and for new construction. But for investment property of multiple units, the capitalization of income method is best.

This is probably the most difficult of the three methods to use properly when valuing income property, but actually it is the preferred method. Here’s how it works:

For starters, it might help to think of capitalization rates as interest rates. When you put money in the bank you ask, “Whatinterest rate will I get?” Capitalization rates are the same thing. Let’s assume you have $10,000 in a savings account, and at the end of the year you earned $500 in interest. The following formula will show your interest rate:

Interest earned – Amount invested = Interest rate

Or plugging the savings account numbers into the equation, we get:

$500 / $10,000 = 5%

Before we get much farther in this book, I want to tattoo this concept on your brain. Not that I want you to spend every dime you have for the rest of your life saving for retirement, but you’ve got to do what you’ve got to do. Period.

I’m not going to show you step-by-step how to calculate the exact amount you should save each year, but I do want to give you a rule of thumb and show you how painful procrastination is.

My rule of thumb, based on a decade as a retirement planner, is that you’ll need to have 20 times your “unmet income need” for your first year of retirement in the bank on the day you retire. In other words, if you think you’ll need $50,000 per year for the rest of your life, and Social Security is going to give you $20,000, you’ll need $600,000 in the bank ($50,000 minus $20,000, multiplied by 20). This amount would provide you with a large enough nest egg to live off just the interest of your investments.

Not using up the investments themselves is crucial because none of us know how long we’re going to live.

As a financial planner who spent the first part of my career helping people save and invest money, this opportunity cost is the single scariest. It is not just a missed opportunity that you’ll someday kick yourself for, snap your fingers, and say “Aw Shucks!” Rather, it’s an opportunity cost that will determine the day-to-day existence of possibly one third of your entire life. I’m talking about retirement.

Now, a good percentage of you reading this book will say something along the lines of “retirement is so far away that I’m not worried about it” or “I’ll worry about retirement when I get out of debt.” But, the key thing I want to pound into your head is that retirement planning is monumentally less painful the earlier you do it. In fact, if you wait until 15 to 20 years before retirement to start planning, you may not be able to pull it off.

Why is it such a big deal? Well, the biggest problem is that people are living longer and longer, and our employers and Social Security system are giving us less and less. In fact, it is very possible that you might retire at age 65 and live to be close to 100 years old. That means that 35 years, or one third of your life, will be spent without income from a job. If you are hoping Social Security is going to cover even the majority of that, think again.

I don’t mean to scare you, but rather hope to give you some major motivation for moving forward. Just like my wife kept her eyes on that little sailor outfit during delivery, you need to keep your eyes on retirement as you try and decide what to do with each and every penny of your income and expenses.

If you buy a fully leased commercial property at a fair market price, you are going to have to wait for inflation to increase the value of your rentals and thus the capital value. Alternatively, if you buy a property that has some vacant space, with some rents that are below market, rooftops that are underutilized, storage space that is not leased, and a host of other features that you can do something with, then you can exchange your ideas, thoughts, energy, and enthusiasm for huge chunks of capital value very quickly. In other words, you are an extremely important factor in the real estate you acquire.

Another way of expressing this is to say that when I buy a property, it is a different property from when you buy it. Physically it is the exact same property, but since the ideas that I bring to the table are likely to be different from the ideas that you bring to the table, the property itself ends up being different.

Whether you like it or not, you end up being part of the equation. That is why the more ideas you have in your head, the more value you add. That is how I came up with another signature statement:

The most valuable piece of real estate is the six inches, give or take an inch or two, between your right ear and your left ear. What you create in that space determines your ultimate wealth and happiness.

Based on this simplistic analysis, the country should not be doing very well at all economically, and yet the gross domestic product (GDP) is robust and strong. The reason, of course, is the so-called invisible income that Great Britain derives from more than a century of having made judicious and fortuitous investments abroad. Take the insurance industry, for instance. Great Britain controls more than 70 percent of the reinsurance industry, largely through the operations of Lloyd’s of London (with Switzerland mopping up most of the remaining 30 percent). Britain similarly has substantial investments abroad in banking, pharmaceuticals, and transportation, to name a few. No doubt the Brits making these investments 100 years ago were also branded as being unpatriotic, as they were taking pounds sterling out of their country back then, but the entire nation is now benefiting from the ongoing repatriation to Great Britain of dividends, profits, rents, and realized capital gains.

Just how do these repatriated profits benefit the entire nation rather than just the companies and individuals controlling the investments? First, on entering the country, these funds push up the value of the British pound. And once the profits are in the coffers of a recipient company, that company will tend to spend the money in a number of different ways. They will invest some into research and development, employing scientists, engineers, physicists, chemists, and a slew of technical support staff. They will conduct marketing surveys and advertising campaigns, employing PR firms, communications experts, marketing staff, and legal spin doctors.

They may expand their premises, employing architects, engineers, construction workers, electricians, plumbers, painters, and the like. I think you get the picture. Money coming into a country tends to end up benefiting everyone. Money leaving a country tends to disadvantage everyone. That is why a balance of trade surplus is so healthy for a country, and a deficit is so debilitating.