Rich Dad Education Blog

As an investor or a homebuyer, it’s important to do your homework. Here are some tips to help you through the process:

1. Know how much house you can afford. Pre-qualify for a loan amount before you begin looking seriously. Knowing this information ahead of time saves time and simplifies the process. A good rule to follow when determining the amount you can afford to spend on a property is that the purchase price should be approximately two and one-half times your annual salary. However, this is only a general rule. Depending on the debts and expenses a borrower has, using an alternative formula may be wise. Today, many households have dual incomes, and the amount of their combined income is what they will use to qualify for their home purchase.

2. In difficult economic times, be prepared to work with a private lender or a hard-money lender. Private lenders and hard money lenders often have different guidelines and criteria. If you are using this option, check with the lender to confirm their requirements.

3. Make sure your numbers work. Make sure that it will be a positive cash-flow rental from the start, and don’t stretch your finances too tight. If an emergency should arise, you will need to have some degree of cushion.

4. Only purchase properties that you plan to own for a long period of time. In the current state of the economy, you will need to hold your property several years to build even modest equity. (If wholesaling, this rule does not apply.) If you purchase a rental property, you may generate positive cash flow, which can offset purchase costs and make the purchase worthwhile even for a short period of time.

However, if you are planning on living in the home, the cost to purchase and other expenses you incur may not be recouped if you sell too early.

5. Determine the purpose and location of the home. Are you buying the home to rent out, and, if so, who is your ideal renter? Is the property suitable for a single person, a couple, or a family? What kind of area is the home in and is it desirable to families, retirees, or young singles? Is the home conveniently located near shops, schools, and other attractions? Make sure the property fits the plans you have for your investment.

6. Look for a good school district. Even if you don’t plan to live there or you don’t have children, your tenant or buyer may have children. Generally, families with children make it a priority to find good schools. Remember, having schools nearby helps to improve the value of your property. If you are aware of a new school being built, start looking in that area, as this helps to increase the nearby property values.

7. Inspect the property. Having a professional inspection will identify potentially major expenses. The small cost associated with the inspection is minimal compared to having major, unexpected problems down the road.

8. Pay special attention to important areas. The roof, HVAC (heating, ventilating, and air conditioning), electrical system, and plumbing are major areas to examine carefully. Check out electric, gas, oil, or steam heating systems; depending upon the age and type of the system, you may need to repair or replace it.

Be sure to examine the roof carefully, and determine its age and condition. Are the shingles dry and crumbly, or still pliable? Tin roofs are long-lasting and are popular in certain areas of the country, especially in hurricane-prone areas. Tile roofs are long-lasting and provide better insulation than tin or shingle roofs. As with anything else, the grade of the materials and the quality of installation must be considered.

In northern states where the weather is colder, older homes may have a steam boiler system. If this is the case, you might want to find out what the cost would be to replace it with an efficient, green, and cost-effective system. When considering this, remember that such homes use radiators, so you will have additional costs for air ducts and vents.

The condition of a home’s electrical and plumbing systems is more difficult to evaluate. Obviously, we can’t see through walls or floors; however, we can test electrical plugs to see if there may be an interruption of power or short circuits. As for plumbing, flush the toilets and run the water to see if there are any leaks in walls, floor areas, or overhead.

The last item to consider is the hot water system. Most homes will have a traditional hot water heater, usually with a 30, 40 or 50-gallon tank. These models usually have elements which can go bad and will need to be replaced. You should take the panel off and check. Determine how much it would cost to replace the entire system if it became necessary.

Newer homes may have new energy-efficient, tankless, on-demand electric or gas water heaters. These do save money on your electric, water, sewer, and gas bills.

9. What not to do. Consider the type of property and area where it is located. When formulating your strategy for the home, do not overbuild, overdevelop, or go to extremes. Keep it simple and within the parameters of the home and the surrounding neighborhood. If the home is in a moderate area, keep the grounds nice, but simple.

10. Carefully consider appliance purchases. Find out what used appliance stores are in the area. Look into the price range of various items—range, refrigerator, dishwasher, washer, and dryer. Check out outlet stores, as well as traditional places such as Home Depot or Lowe’s. Compare the products so you are aware of not only the difference in costs, but also in the longevity of the potential appliance. If you are setting up a rental unit, you might not want to pay a lot for the appliance, but if it is something you are going to use, you might want an upgrade.

Posted 12:18 AM | Permalink | Comments (2) | TrackBacks (0)

Real estate investing is an opportunity which allows everyone, regardless of their education, experience, family background, gender, or age, a credible way to own a home-based business, own their own life, make more money, contribute to others, and grow to be the best person they can possibly be. I must ask this question: Is your pursuit of accumulating wealth through real estate a hobby or a business? I went to my dictionary for help in defining each word.

Hobby: An activity or interest pursued for pleasure or relaxation and not as a main occupation.

When I apply this definition to my own life, I can safely say that fishing, hiking, boating, and camping are my hobbies. I have never made money at any of these. Real estate is my business, and I have made money in my business. When I let the hobbies consume too much of my time, they restrict the growth of my business. Some fortunate people start out with a hobby that grows into a business. The rest of us need to grow a business that helps us pursue our hobbies.

John Cotton Dana, a highly influential American librarian, said, “Of hobbies there are many, many kinds. For example, money-making. But money-making is not exactly a hobby, for it will scarcely carry a boy along in continuous joy, comfort and pleasure – to say nothing of a full-grown man. Money comes, not because it is ridden as a hobby, but because a real hobby is ridden so cleverly and carefully that it oozes out money on the side!”

Business: The occupation, work, or trade in which a person is engaged. A profit-seeking enterprise or concern.

Lewis E. Pierson, financier, said, “Business is like a man rowing a boat upstream. He has no choice; he must go ahead or he will go back.” In my business career, there have been times when, even though I was rowing downstream, I had to dig the oars deeper and row harder to keep the course.

Back in 1948, I floated the Colorado River with a group of scouts for 109 miles from Hite, Utah to Lee’s Ferry, Arizona. This was before Lake Powell was formed behind the Glen Canyon Dam. We were in a big, World War II Navy surplus life raft. The wind was always blowing up the river and sometimes we would paddle for a long time just to quarter across the river to get out of the wind where, in the shelter of the cliffs, we could make some headway. Many times the wind would blow hard and drive us back across the river and we would have to start over again. One day the wind was blowing down river. We held up everything we had that could catch the wind and that day made about 30 miles with very little effort.

When we work our business as a business we will have similar challenges. When they occur, do not retreat to more comfortable hobbies. As we work through the challenges, we will often feel the wind at our back and our business will gain momentum. Momentum wins in sports and in business.

On the outskirts of a small village lived a very poor man and his young son. There was also a very wise man living in the village. A tradition was that on a certain day each year, any of the people could ask the wise man a question and try to stump him. There were great rewards for the person who could stump him but nobody had ever been successful.

One day the small boy came to his father all excited and said, “Father, I think I have a way to stump the wise man.” His father laughed and said, “The smartest people in the village have tried to stump him for years and no one has ever been successful.” The boy persisted and finally his father asked him how he could do it. The boy said he would get a small bird and hold it in his hands and ask the wise man what he was holding. If the wise man said it was a bird, the boy would ask him if it was dead or if it was alive. If the wise man said it was dead the boy would open up his hands and let the bird fly away. If the wise man said it was alive he would crush it in his hands. The father agreed that this might be a way to stump the wise man.

The great day arrived and many villagers challenged the wise man with profound questions. He quickly answered each of them correctly. Finally, it was the boys turn. The villagers laughed as he came up in front of the wise man. He had the bird in his tiny hands and its feathers were sticking out. He asked the wise man what he had in his hand. The wise man said, “It is a bird.” Then the boy said, “Is it alive or is it dead?” The wise man hesitated and the crowd became silent. They had never seen this happen before. The wise man turned away and thought about the question. Then he faced the little boy and said, “My son, the fate of the bird is in your hands.”

So it is with us. Will we choose real estate investing as a hobby or as a business? Our fate is in our own hands.

Posted 06:10 PM | Permalink | Comments (0) | TrackBacks (0)

According to Realty Trac, the amount of foreclosures in the military areas and towns has exceeded the nation’s average rate of foreclosed homes since the beginning of 2008. These military families remain stationed—usually for several years, especially during wartime—while the soldier is deployed. Some of the soldiers are on a rotating basis, thus, the family stays behind in the town in which that soldier is stationed. Families want stability. They want a familiar community in which to raise their families, and they want the ability to give their children a stable environment and a loving home

Unfortunately, during the last several years, there have been some people who have preyed on these families, and others. Yes, there are some unethical, ruthless, and unconscionable people in the mortgage brokerage and lending industries.

Military families have been shipped all over the country and across the world. In every move or relocation, their bills may take some time catching up with them, and this has created a vicious circle. By the time the bill arrives, it is already late, and this lateness may have created a derogatory status on their credit reports and scores.
This author has a family member that has been caught up in this mess, and is still dealing with this issue. As her husband has been deployed overseas in Germany, Korea, and Iraq, she faces the added time delay for the mail catching up with where he was currently located.

During this process over the past four years, she has been approached by several people to purchase a home. She so desperately wanted to purchase a home, and was told by these people that she could afford to do so. However, in going over the details of her circumstances, I became aware that there was no way that she could have purchased that home and still lived comfortably. She is now biding her time, and when all is right, she will purchase a home, when she is ready to buy. Why does this happen? Because they—families like this—are just at the brink, the fine line of passing credit-wise, to purchase a home they can barely afford. This is the military family’s dilemma.

This problem has occurred in various parts of the country; it is not just localized in only military towns. Throughout the country, there are “hot spots” such as Vegas, the Atlanta area, and a few others, so check to see what is happening in your area. Be informed concerning in what and where you are investing and do your due diligence. There are many properties and some banks who really want to move these homes, so take a shot at it. All they can say is no, but if they say yes, then you are good to go!

Just remember this. As much as we want the deal, just like anyone else, as investors, we too must keep in mind why we are procuring the property. As long as the numbers work, then it is a do-able deal—if it is not…don’t do it!
While doing some research, I discovered that the VA had authorized the least amount of VA loans for veterans in many years. These subprime mortgages the financial institutions were offering had great low rates and easy terms to get into the loan, compared to the standard VA government-backed loans that were created for the “G.I.s” as well as the general populace, hence the foreclosure problems.

The Housing and Economic Recovery Act (HR-3221) had been set into action to protect military families. However, the given nine months of mortgage protection, after their return from active duty, can help tremendously and is much better than the original 90 days afforded by its predecessor. In some areas, the prices of homes far out-price the VA loan caps for VA loans, and the result is that the family must shop the commercial finance market for their purchases. Like the rest of us, they are at the mercy of what is available. The VA may eventually raise the cap for their loans. Still, as an investor, if we are diligent and willing to put forth the effort, we can find good deals out there.

As with any important decision in our lives, when considering the purchase of a property, we need to be certain to ask ourselves the right questions. Some of these questions are: 1) Why am I purchasing this property, or what is the purpose for this property? 2) Is this property a turnover wholesale, a long-term rental, or keeper? 3) How much can this property bring in? 4) What is my output of cash on this property? 5) How much am I going to offer? 6) Did I do all diligence possible?

After answering these questions, you might have an idea of what you may want to offer, as these questions will help you determine your bottom line.

Try to keep up with what is happening in the financial world. There are legislation and programs that are up-and-coming or recently put into place as a result of what is occurring in the economy. You can search the web for what is new. You can also ask your attorney, or even with your title company, to obtain another perspective. The more informed you are, the more competent you become and the more confidence you will have.

Posted 05:18 AM | Permalink | Comments (0) | TrackBacks (0)

In today’s real estate market, at least in most areas around the country, opportunities abound for purchasing properties at discounted prices. Foreclosures are at record highs and REO properties are everywhere. The good news is that any investor who puts a little effort into finding these properties will have all the properties they want. The bad news is that if you are planning on fixing and selling the property right away, you will have to compete with the same glut of homes for sale that allowed you to buy so easily. You will have to make sure that you negotiated a substantial discount during the purchase, so you will be able to offer the rehabbed property at a big discount to get a fast sale.

However, another strategy is to buy as many properties as you can now and hold them as long-term rental properties, or at least hold them until the market rebounds in a few years. In order to successfully buy and hold rental properties, you must make sure that you buy them at the “right” price, which is a price that allows you to have a decent cash flow from each property. Negative cash flow properties are hard to hold onto for the long-term unless you have very deep pockets! The key is to buy the property at the “right price” to start with. But what is the “right price?”

How often have you seen an ad that says, “Positive Cash Flow Investor Special – Rent income is $1000/mo. – Buy at $800/mo. (PITI) – Call Today.” At first you think, gosh, $200/mo. cash flow … it must be a good deal. But, nothing could be further from the truth. This would be a negative cash flow property! If you want to be successful, you need to be able to determine the maximum you can pay for a rental property to provide you with a true positive cash flow right from the start.

Here is a way to analyze rental properties, from single family homes to large, multi-family apartment complexes, that will help you determine the “right price.”

1. First, determine the amount of monthly rent you will be able to get from the property. This is your gross monthly income. Note: if the property is an existing rental, the gross income is the current rent the property is generating, not the potential income once you do a lot of rehab.

2. Next, determine your net monthly income by subtracting all of the monthly operating expenses and a vacancy factor from the gross monthly income.

3. The vacancy factor you use will be partly determined by the general rental market in your area. Even in a tight rental market (more renters than units to rent), you will still have a vacancy factor. For example, if your rental property were vacant for an average of two-and-a-half weeks per year (time the unit is vacant for cleaning, refurbishing and re-renting in-between tenants), you would have a five percent vacancy factor. Find out from your Power Team real estate agents or landlords’ association what a reasonable vacancy factor is for your area. If the vacancy factor is five percent, for example, the wise landlord will put five percent of the rent into a reserve account each month to pay the mortgage during the time no rent is being received from the unit.

4. Monthly operating expenses should include all expenses associated with owning and operating the property. A typical list of expenses is shown below. This is not a complete list. You need to get a complete list of expenses from the property owner and add to it for projected future repairs. Don’t forget to ask for a copy of the owners’ schedule “E” for the subject property.

• Real Estate Taxes
• Insurance
• Maintenance (perhaps lawn mowing or snow removal, if the tenants are not required to take care of these items).
• Utilities (gas, electricity, water, sewer, garbage) if tenant is not required to pay for any of these items.
• Advertising for new tenants
• Legal and accounting
• Cleaning and refurbishing in between tenants – even if a tenant leaves a unit “clean,” it usually pays to repaint and clean carpets for the new tenant
• Repairs – you may not have repair expenses every month, but the wise landlord will set aside at least five percent of the rents each month, so that when the roof or furnace needs work, there is money to cover these repairs
• Management – even if you plan to manage the unit yourself, set aside at least six to eight percent of the monthly rent for a management fee (find out what the typical management fee is in your area to get an exact number. Pay yourself this fee, if you are managing the unit. If this is figured into your budget, you will be able to hire a manager when your time becomes too valuable to do the management yourself.

5. Next, determine the amount of “positive cash flow” you want to get from the unit. Most landlords want at least a $100 positive cash flow for each unit, right from the start, but you should decide what is reasonable and best for your situation.

6. Once you have the monthly dollar amount for the vacancy factor, all of the monthly operating expenses (including repairs and management), and the amount of monthly cash flow you want to receive from each unit, add these numbers together and subtract them from your gross monthly rent. What is left is your net monthly income that can be spent on the principal and interest for a mortgage payment.

7. You then back-calculate how much you can pay for the rental unit by determining a loan amount with a payment amount no higher than the net allowable monthly payment that you have calculated in Step 6. At this point, you will need to know the terms of the funding (loan interest rate and term) you intend to use to finance the property. Knowing the maximum payment amount from Step 6, the interest rate, and the term of the loan, allows you to calculate the loan amount. This loan amount is the maximum amount you can pay for the property and still get the cash flow you specified in Step 5.

8. If you have to pay a higher price than the amount you calculate in Step 7, you will have less positive cash flow than you want and may even end up with a negative cash flow property. If you can’t negotiate the price to give you a positive cash flow, move on to the next property.

An example calculation is given below. Please note that all of the percentages and dollar figures used are for this example only. You will have to determine the actual operating expenses and vacancy factor for each individual property you analyze. You will also have to determine what interest rate you can get on financing at the time you are buying the property.

EXAMPLE CALCULATION

Gross monthly rental income - $ 1,000/month

Vacancy factor – (5%) - $ 50/month

Monthly operating expenses –

* Maintenance / repairs (10%) - $100/month
* Insurance (5%) - $50/month
* Property taxes (7.5%) - $75/month
* Advertising (1%) - $10/month
* Accounting / legal (1%) $10/month
* Utilities (4%) - $40/month
* Management fee (8%) - $80/month

Total Operating Expenses - $ 365/month

Desired Positive Cash Flow (10%) - $ 100/month

Now add the vacancy factor, the monthly operating expenses, and the desired positive cash flow ($50 + $365 + $100 = $515). Subtract this amount from the monthly rent to get the amount of money left available to make a mortgage payment
($1000 - $515 = $485). Thus, in this example, you have $485 left each month to make a mortgage payment (principal and interest).

If you don’t have a mortgage calculator, you can go to: www.mybuildingwealth.com
and click on “student tools,” then click on the “mortgage calculator” and determine how much money you can borrow that will end up with a mortgage payment of $485/month. The payment will depend on the interest rate, the length of the loan, and the amount of money borrowed. Assuming you can borrow money at 6 percent interest for a 30-year term, a loan of $80,900 results in a payment of $485.04 per month (principal and interest). Thus, you could afford to pay no more than $80,900 for the property in this example and still get your $100/month positive cash flow.

This is a very conservative analysis method that assumes that you are borrowing 100 percent of the money needed to buy the property. But even if you are putting 25 percent down, don’t treat that 25 percent as “free” money. Money, even if it’s your own, has a cost associated with it. Include it in the analysis.

How many properties can you buy if the property pays all of the debt service, pays for all of its operating expense, covers its own vacancy, pays for a management company, and still gives you a positive cash flow? As many as you want!

Posted 02:12 AM | Permalink | Comments (1) | TrackBacks (0)

Many new investors are overwhelmed with the amount of information presented in introductory seminars and training sessions. There are many choices at the real estate smorgasbord table. Some instructors say, “Buy, fix, and sell—it’s the easiest way to payday.” Others say, “Buy, rent, and never sell—it’s the only way to long-term wealth.” Who is right, and who is wrong? Well, there is no right or wrong answer…if you know what you are doing.

As an investor, you must choose which strategies to use to build your wealth. You must decide what your short and long-term goals are, and then establish a plan to meet those goals. It is more than likely that such a plan will include both “buy, fix, and sell” and “buy, hold, and rent.”

Each time you look at a property, you must determine your exit strategy before moving to buy the property. If your exit strategy is to buy, fix, and sell the property for quick cash, you need to buy a property that will be easy to sell. You must also analyze that property with a buy, fix, and sell analysis formula to make sure you are buying at a price that will allow a quick sale, which will usually involve offering a substantial discount to the new buyer. Buy, fix, and sell strategies are great for generating quick profits, but unless those profits are invested in an income-producing asset, they generally will not provide you with long-term wealth and financial freedom. “Buy, fix, and sell” is a great strategy, but if you stop buying, fixing and selling, your income also stops.

If your exit strategy on a particular property is to keep the property as a rental, buy a property that will be easy to rent. You must analyze the property using a rental analysis formula, rather than a buy, fix, and sell formula. The rental-analysis formula will ensure that the price you pay for the property will allow you to have a positive cash flow right from the start. This is a key ingredient to being able to keep the property for the long haul. Buying a property and keeping it for several years, only to lose it because you can no longer afford the negative cash flow, does not make sense. Only keep rental properties that provide you a healthy cash flow right from the start!

Many people are afraid of rental properties because of all the landlord horror stories they have heard over the years. Most of those stories are probably true, but they don’t have to be your horror stories. If you “buy right” to start with, a lot of potential problems are already eliminated, and you will have enough cash flow to hire a management company to manage the property. Then you will not be faced with conducting day-to-day interactions with your tenants.

However, even if you hire a management company, you do need to know enough about the rental business that you could manage the properties yourself should it become necessary. Here are a few tips about buying and managing rental properties that can help you get rid of your fear of buy-and-hold properties.

Advantages of Owning Income-Producing Rental Properties

• Generate real-time cash flow you can spend now. You can use this cash flow to live on, and/or invest in additional properties.
• Create long-term wealth. Your tenants pay off your mortgage over time, leaving you with a free-and-clear (no mortgage) property. If you had 10 free-and-clear properties, each bringing in $1,000 per month, could you have financial freedom?
• You get the additional benefit of long-term property-value appreciation. This factor alone can create millionaires. Yes, property values do go up and down with real estate cycles, but the overall trend of property values is always up.
• The property you own is always working for you, no matter what you are doing. Your property doesn’t go on vacation with you; it keeps right on working twenty-four hours per day, seven days per week.
• Provide you with some tax shelter for your rental income. You can depreciate the property over time, creating a paper loss to offset other rental income.

Types of Income-Producing Real Estate

* Residential Rental Property

* Single Family Homes/Condos
* Duplex
* Tri-plex
* Four-plex

* Commercial Rental Property

* Larger multi-unit apartments
* Office buildings
* Retail buildings and strip malls
* Warehouses
* Industrial buildings
* Mixed-use properties

Keys to Good Property Management

1. Good property management begins with buying good buildings.
a. Choose good locations.
b. Take pride in your properties.
c. A well-maintained building will attract better tenants and will bring higher rents.

2. Managing Tenants
a. Keep your relationship with your tenants strictly professional.
b. You should be friendly, pleasant, and treat your tenants with respect; however, maintaining a business relationship is essential.
c. Make sure your tenants know the rules and then enforce the rules.
i. Tenant responsibilities vs. landlord responsibilities
ii. Accountability

3. The paperwork for tenants
a. Application with permission to conduct credit and background checks for every responsible applicant.
i. Fee of $20 to $50 to conduct these checks
ii. Red flag if they show any reluctance regarding credit and background checks!
b. Reference from past landlords, not the current landlord, for every applicant
c. Legal photo I.D. of every applicant; make copies for your records
i. Information must match applications and credit reports
d. Evaluate debt-to-income ratio.
i. Rent should be no more than 30 to 35 percent of the total monthly income
e. Rental agreement or fixed-term lease that covers all facilities covered by the agreement (i.e. parking, storage locker and unit description) and that covers every occupant of every property.
i. Firmly establish the number of occupants allowed in the property.
ii. Do not allow unregistered or unsigned tenants to occupy the unit!!! (Except guests, who should be limited to one or two nights per month)
f. Make sure pet restrictions are very firmly established
g. Move-in condition inspection form – signed by all tenants and the landlord or property manager
h. List of any special rules for pools or other amenities

4. Keeping your tenants
a. Getting new tenants costs you money; try to keep the ones you have (if they’re good tenants)
b. Remember tenants’ names, as well as their children’s
c. Remember tenants’ birthdays, and send cards or small gifts
d. Do maintenance promptly. If a request for a repair can’t be handled promptly, call the tenants and tell them when it will be done
e. Set high expectations for your tenants in keeping the property in good condition, and compliment them on doing so.

5. Single Family Homes (SFH) vs. Multi-unit Apartments
a. Single family homes can be very easy to manage.
i. Tenant is responsible for all maintenance and minor repairs, subject to state and local laws and regulations.
ii. Tenants are often former homeowners who are just “between” homes.
b. Multi-unit apartments provide economy of scale for management and maintenance.
i. Consider hiring a management company to manage the property
ii. Condo conversions are possible on some buildings (potential for large profits).

6. Recordkeeping
a. This is a business, not a hobby; keep very good records!
b. A good CPA or accountant can save you money
c. Know what your expenses really are

7. How to hold title
a. For asset-protection purposes, each rental property should be owned by its own separate legal entity.
b. Seek knowledgeable, competent, professional assistance in establishing how title will be held for each property.

Owning income-producing rental properties can be your key to a financially secure future if you buy right and manage right. Additionally, when you are older and tired of managing your properties, you can sell and reap the harvest from your rental tree. I advise you to consider a 1031 exchange into a tenant-in-common structure (apartment complex or commercial property) where you get all the benefits of real estate ownership, but have none of the responsibility. It’s nice to become a “mailbox manager.” Just go to the mailbox each month and get your check. You’ve earned it!!!

Posted 12:52 PM | Permalink | Comments (0) | TrackBacks (0)

Question: I am feeling frustrated because I haven’t done my first deal yet and I’m wondering what I may be doing wrong. Any advice?

Answer: Your statement raises some interesting questions and I will try to address a few of the issues that you may be facing:

1. The number of deals finalized is directly related to the number of offers made. It is not uncommon for successful investors to make 50 offers per week. How many offers are you making?

2. Are you dealing with a motivated seller--someone who needs to sell as opposed to someone who wants to sell?

3. Do you sound confident and business-like when you deal with others? Uncertainty, indecisiveness, and low self-esteem suggest that you lack experience. Practice explaining deals and negotiating with family members and friends until you get the hang of it.

4. Marketing is an important component to the number of successful deals. Are you placing ads that get noticed? Do you pass out your business cards to everyone you meet? Do you have magnetic signs on your vehicle? Are you using bandit signs? All these things help.

Log on to the discussion board to interact with other students and new investors: www.board.richdad.com

Posted 01:38 PM | Permalink | Comments (0) | TrackBacks (0)

In today’s world of real estate investing, there are many different ways to structure deals and make money. One can invest in tax liens and deeds, foreclosures, rental properties, commercial properties, raw land for development—the list goes on. For most investors, the starting point of the investing experience is the basic rehab project: buy a property at a discount, rehab the property, and sell it for a quick profit. For some investors, their first project may be a wholesale deal where the investor contracts to buy a property at a discount and then assigns the right to buy the property to a rehabber. The investor makes a quick profit from an assignment fee, and the rehabber makes his money by buying the property at a discount, rehabbing the property, and selling it for a profit.

In the past, the common advice you would hear from most real estate experts was to concentrate on finding “motivated sellers,” and success would follow. This is still wise advice. Without a motivated seller, there is no deal. However, today’s real estate market has changed dramatically in the past few years. In most parts of the country it is a “buyer’s market,” meaning that there are many more homes for sale than there are qualified buyers. With the collapse of the “easy money” sub-prime mortgage market, and the tightening of loan requirements, there are fewer and fewer buyers who can qualify for real estate loans resulting in many homes sitting on the market for months and months before being sold. And the problem is made even worse by the glut of bank-owned homes (REOs) flooding the market.

According to numerous real estate investors from around the country, the number one problem in today’s real estate market is not finding motivated sellers, but finding motivated (and qualified) buyers. A lot of investors are not taking advantage of the current buying opportunity because they are afraid they will be stuck with a property they can’t sell in a reasonable amount of time. Their fear is based on truth. No matter how good of a deal you get on a property you plan to sell, a long holding/selling period can eat away most or all of your profit.

You will hear some people say, “Well, if you can’t sell the property, just rent it.” This may work sometimes, but is definitely not a cure-all solution. Properties that can make a great profit from a resale, very well may be negative cash-flow rental properties. Unless you have pretty deep pockets, you should stay far away from negative cash flow rental properties; they can eat you alive!!!

However, there are many investors currently buying properties as fast as they can in today’s buyer’s market and they have little fear of not being able to sell. Why? Because they have taken time to develop a buyers list.

If you have a list of ready and willing buyers, you can make offers and contract to buy properties without the fear of not being able to sell the property. Many times, you may have the property “pre-sold” even before you finalize the purchase. Having a good buyers list gives you the power to take advantage of today’s fantastic buying market.

So how do you create a buyers list? In the long run you will create two different buyers lists: a wholesale buyers list (other investors and rehabbers) and a retail buyers list. The topic of this article is building a retail buyers list. A retail buyer is basically defined as someone who is going to live in the property.

There are many creative ways to build a buyers list, so network with other investors at your Wealth Intelligence Academy (WIA) training classes and your local real estate investment clubs. See what others are doing to build their list. Here are a few suggestions:

1. If you have a property for sale and people are calling on your ads or your signs, be sure to get their names and contact information, even if they are not interested in the home you are advertising. Let them know that you will have other homes in the near future and get a description of what type of home they are looking for. Find out as a minimum:

* What area(s) they are interested in
* Their desired price range
* Desired size of home, number of beds, baths, etc.
* How soon they are looking to buy
* Available down payment
* Are they pre-qualified with a lender
* Indication of their credit
* Do they have a contract with a real estate agent (buyer’s agent)

Create a database to store this information so you can retrieve it easily as you get homes under contract that match your potential buyer’s needs. Your coach can help you in setting up this database.

2. When the home you are advertising sells, don’t cancel the ad right away, but let the ad keep running for several more weeks and keep capturing the names and data of potential buyers. When they call on the ad, just explain that the home is sold, but that you will have more homes in the near future and ask them what they are looking for.

3. If you don’t have a property to sell yet, you could run a blind ad and still capture the names and data of people who call. Make it clear that you are not acting as an agent to help these people find a property, but that you will simply notify them when you have another property ready to sell.

4. You can network with other real estate investors through your local Real Estate Investment Association (REIA) and actually share other investor’s buyers lists. Let other investors know when you have a property for sale and even if they are not interested in buying it themselves, they may have someone on their list who would be interested in your property. You can return the favor when they have a property to sell by helping them find a buyer from your list.

5. In today’s real estate market, many banks are using auctions to sell their ever increasing number of REOs. The auction companies, hired by the banks, spend thousands of dollars attracting buyers to these auctions. You can use these auctions to build your buyers list. Your strategy is to find out when the next auction is being held in your area. Your coach can direct you to the websites of auction companies in your area. The night before the auction or the day of the auction, go to the area where the auction is being held and post your signs everywhere along the main roads leading to the auction site. These signs need to be made to attract attention and need to say something like “Desperate Seller” or “Handyman Special.” Your headline is critical. The signs will attract buyers because the language indicates you are motivated. Your signs should be up before the auction starts and should be up when it ends so you can get the traffic going to and from the auction. Again, when you get calls on these signs, capture the potential buyer’s information and build your buyers list.

Note – check with your local city for the signage regulations. In some cities, even with strict signage laws, signs put up and taken down the same day shouldn’t cause a problem.

Note – you can hire someone to place and remove these signs for you. A wise investor, however, will drive the “sign route” before the event to make sure the signs were posted properly and on time.

6. You can also leverage local home shows and other events that attract potential home buyers. Strategically place your signs to take advantage of traffic that is generated from other people’s advertising dollars.

7. In today’s real estate market, more and more people are going to the Internet to find homes to buy. You can spend a lot of money setting up a website, and it will be money well spent in the long run. But many new investors don’t have a large advertising budget. A great alterative to a potentially expensive website is a blog. Property blogs are popping up all over the Internet. Blog sites can be a very effective way to build your buyers list and get people to view your properties. Two of the most popular blog sites are WordPress and Blogger. With both sites, you have choices of templates that will get your site up and running in no time, at no expense. Your visitors can post comments and if you provide solid, interactive content with regular postings, visitors will be more inclined to come back to your blog often. Your signs and advertising can direct people to your blog.

8. You can create a video or virtual tour of a property you have for sale and post it on your blog or website. This will attract more visitors and thus build your buyers list. Video tours give you the ability to not only sell the actual home, but also allow you to sell the city, the neighborhood, the schools, etc. It’s a 24/7 open house! Creating videos can be fun, but don’t forget to sell yourself. Remember, people do business with people they like and trust.

9. Another way to get lots of calls on your ads and add lots of names to your buyers list is to offer seller financing. There are many potential buyers in today’s market who have good income, have a substantial down payment, but who have less than perfect credit. The banks and lenders are getting more selective every day and are continually raising the loan-qualification bar. If you offer seller financing, you will open the door to hundreds of buyers who can’t get reasonable loans from the banks. Add these names to your buyers list.

10. Standard advertising, such as advertising on-air or in newspapers, costs a lot of money. But with more and more people going to the Internet to find properties, why not advertise your properties on the many free Internet posting sites. Free posting sites are all over the Internet and they are generating great results. Maybe there is such a thing as a free lunch after all. Some of the most popular sites are:

• CraigsList.org (can post descriptions and pictures).
• Postlets.com (allows you to submit an ad for free and then distributes the ad to numerous other free posting sites). Is that cool or what!
• Zillow.com (a site that has primarily been used to find comparable values, but is now expanding into other areas of real estate).
• Base.google.com (site is in beta version, but is very effective).

There are many other free sites and new ones are showing up everyday.

There are many buyers out there right now…you just need to put forth the effort to find them. Start to create your buyers list, today! Your buyers list will grow every week. You can then fearlessly buy homes in today’s buyer’s market, knowing you have many hungry buyers just waiting to gobble up your properties.

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By Mark Gilliland

It is no secret that if you have two similar homes, the home that looks nicer typically sells faster. A concept people fail to understand however, is that with a few smart choices you can make your rehab look nicer without much additional cost and in some cases, not even a penny more!

In this market, asking a realistic price is crucial and this article is intended to help sell your home faster for market value.

Color is a powerful tool and it is useful in attracting people to the home. There are a few important things to keep in mind that many people gloss over as if unimportant. Small details have a huge impact on our subconscious appreciation for the work of art we are looking at, and your rehab is your canvas. Too often, I see remodeled homes with no attention paid to how colors complement each other, especially on the exterior.

First, we will start with the exterior of the home and the psychology of color. We as humans have a few subconscious responses to color, but we rarely pay attention to color when we are remodeling, installing a sidewalk, or, heaven forbid, putting on a roof! However, color choices send out signals to potential buyers, and if you replace a sidewalk, you must consider how it will affect the property as a whole: the siding, the trim, the roof, and the gutters.

Color can affect our mood. Yellow is a color of joy and happiness, but it is also the color of caution and deceit. The sight of yellow flowers triggers us to be cautious in our subconscious. With this in mind, we want to avoid using yellow flowers and decorations on the exterior of the home where people get their first impression. This phenomenon seems to prevail most in small quantities, which researchers think is related to a yellow traffic light, whereas a house painted entirely in yellow does not necessarily have negative connotations.

If the exterior of the house is having improvements done, it does not cost a dime more to choose colors that complement each other. I cringe when I see someone paint or side a house that clashes with the roof. Even worse is when they replace both and they still clash! Yuck! It is the details that really make a house stand out. When replacing the roof, you are probably replacing the gutters as well. Many people are unaware that gutters are made in approximately 24 different colors, none of which are more or less expensive.

There are also the shutters and the front door to consider. Careful selections can set a house off and make it shine without additional costs. If you are not planning to replace the front door, a paint job is inexpensive and will make a huge difference. The last main exterior component is landscaping. Since an entire article (or book) could be devoted to this topic, it will suffice to say that you must consider the landscaping when choosing your colors. Your selections should have colors that work with the rest of the home.

Now we will talk about the interior of the home. There is a lot of advice telling us to keep the home neutral in color. This can be okay to a certain extent, but carried too far, neutral colors can have the opposite effect— it can leave a prospective buyer rushing to get out of a drab-looking house. Using neutral colors for the bulk of the home can be a good choice, but you need to add interest or the buyer will be bored by the time he or she has seen the third or fourth bedroom and finds that it looks exactly the same as the first.

One of the ways you can do this is to install inexpensive window coverings, paint the trim different colors, or install one color carpet for the hallway and a complementary color for the bedrooms. You also want the bathrooms and kitchens to stand out and make an impression. I recommend that the permanent fixtures (such as the sinks, bathtubs, water-closets) be neutral in color. You can, however, use accents with mirror frames, window treatments, or other decorations. As long as you do not choose a fad color, you can put some color in your countertops. The family room carpet and a few select walls can make some color statements, if chosen carefully. A one-wall color statement, or accent wall, is easy to change and can potentially affect the entire flavor of the home.

If interior decorating is not your thing, don’t worry. Stores such as Sherwin Williams and Home Depot hire recent interior design graduates who will help you free of charge…just ask. Both stores, and many others too, have photo samples and even computer programs that you can plug in different colors to see how they go together. The most important thing to remember is that thought given to these details will play a large role in the selling of your home.

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At some point in time virtually every broker of discount residential mortgage notes will be drawn to the lucrative commercial side of the cash flow industry and the world of invoice factoring and alternative commercial finance. And, rightfully so. With its almost legendary potential for earnings and its uniquely prestigious nature, factoring offers an exceptional career option for those exploring opportunities in the cash flow industry.

Traditionally, factoring is most often defined as a well-practiced method of commercial finance in which a company (the factor) purchases commercial trade debt (invoices) from a business (the client) at a discount to their face value.

An accurate definition, but so what? What does it tell us about its benefits, and why a business would want to sell their accounts receivable anyway? If you are going to define factoring, and you will have to when making sales presentations, present the definition in terms of benefit to the business owner. A “working man’s definition” is as follows:

Factoring is nothing more than a method of commercial finance that relates to the accounts
receivable of a business. It is not a working capital loan to be used at the business owner’s whim. It is arguably the most powerful of all commercial finance tools and simply does one of two things:

1) Allows businesses that are currently operating on a cash basis with their customers to offer terms of payment (30, 45, 60 days) for goods or services provided. In virtually all cases, when terms of payment are offered, customers tend to buy more. Therefore, factoring is a form of commercial finance which finances terms of payment and allows the customers of a business to buy more products and services on credit provided by the factor.

2) Allows businesses that are currently offering terms of payment to their customers and subsequently may have tens of thousands or even hundreds of thousands of dollars of working capital “trapped” in accounts receivable, to free up those funds by selling the accounts to a factor for immediate cash. Once sold, the business can use the freed up capital for any number of reasons, such as purchasing inventory, paying vendor obligations, purchasing new equipment, investments, payroll, etc. Therefore, factoring is also a form of commercial finance which liquidates the accounts receivable of a business and frees up capital for growth and expansion.

The Role of the Independent Broker in Today’s Factoring Industry

Although a $125 billion industry in the United States annually, factoring is not a well-known source of finance in small and mid-sized business circles. Large providers of domestic factoring services have easily recognized names such as Wachovia, SunTrust, GMAC, and CITI Financial, yet a trip to a local branch of these banking giants will turn up little information on the billions in factoring and alternative commercial finance services they routinely provide to cash-strapped U.S. business owners annually. Internationally, factoring volumes are exploding, and the service itself is now universally recognized by the world’s central banks as “essential” to the financial health of small and midsize business owners across the globe.

Even more unknown than the actual service and its financial providers is the lucrative sub-industry of the independent loan broker, or alternative commercial finance consultant . Each year these knowledgeable and often home-based entrepreneurs refer thousands of new clients to banks, factors, asset-based lenders, purchase order finance companies, and other providers of alternative commercial finance services, earning attractive consultant fees and residual commissions in the process.

One of the primary reasons many are attracted to brokering in the factoring
industry is due to the way brokers receive such fees and commissions. As a norm, industry brokers will earn 10% of the factoring fees charged to the client (seller of invoices) by the factor. Most importantly, this arrangement is often for the life of the account. This means once the client is referred and the factor begins to purchase invoices each week, the broker will earn 10% of the factoring fees charged for as long as the client-factor relationship exists. Successful industry brokers learn to build “books” of client referrals and, as a result, will receive multiple commission checks each month for their portion of the factoring fees earned on each referred client. Adding to the earnings attractiveness, such extended commission relationships (and monthly checks) can often last for many years.

Entering the Brokering Community

Though some independent loan brokers uncover this lucrative vocation while performing their normal daily job of accounting or bank-lending, many others discover this unusual career opportunity after being exposed to the cash flow industry and, in particular, the well known product area of discount mortgage notes. In reality, brokering mortgage notes and consulting in factoring and alternative commercial finance have little in common from a business standpoint. However, more factoring consultants are recruited from the ranks of note brokers and the discount mortgage note industry than from any other single source.

While some find entering this unique brokering community difficult, the truth of the matter is success as a factoring and alternative commercial finance broker is really not that hard to achieve once you fully understand the various products and the financial benefits they can provide to cash-strapped small and mid-sized owners. In addition to factoring, most industry brokers will also offer consulting services in asset-based lending, purchase order finance, import-export trade finance, and equipment leasing as well. While a certain level of product knowledge in all these areas is important, most essential to success in the industry is the ability to develop a “marketeer’s” mentality and to acquire the direct marketing and prospecting skills necessary to make the business of brokering commercial finance transactions not only financially rewarding but physically and emotionally enjoyable as well.

Successfully entering this challenging area of commercial finance requires acceptable product knowledge, a strong work ethic, and general marketing savvy and is clearly not for everyone. For career-minded, success-driven entrepreneurs willing to meet the challenges, few professions offer the combination of prestige, respectability, and income potential as those found in the factoring and alternative commercial finance industry.

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Real estate investing can generally be summarized into three steps:

• Find It
• Fund It
• Finish It

You must be good at all three steps in order to be a successful real estate investor. In today’s real estate market, “finding it” has become a lot easier. Foreclosures are at record highs. REOs (Real Estate Owned) are numerous. Motivated sellers are everywhere. All you have to do is go out and spend a little time, and you can usually find all the properties you want. The third step, “finish it” (sell or rent), is a topic for another day. But if we can’t “fund it,” we don’t have to worry about “finishing it,” because we won’t even have it!

So let’s talk about the second step: “fund it.” Funding it is a lot harder these days. If you happen to be a cash-rich investor who can afford to pay cash for deals, you are set. But most investors, especially new investors, don’t have a lot of cash lying around to fund their deals. In order to purchase properties, these investors have to use other people’s money (OPM), usually in the form of a loan originated by a mortgage broker or from a traditional bank.

Banks are still making loans to real estate investors, but they are getting harder and harder to get with acceptable terms. The rules have changed. Investors are many times required to come up with larger down payments; 25 percent to 35 percent down is not uncommon. No-doc loans and stated income loans are things of the past. LTVs (Loan to Value) are getting lower, and are usually based on the purchase price, not the value of the property. Even seasoned mortgage brokers are hard-pressed to get decent terms for investors.

We are all hearing a lot of talk from Washington about bailouts for banks and homeowners. No one knows what the outcome of such discussion will be, but one thing is certain: there is no talk of bailouts for investors. We are on our own.

So what must we do to be able to invest in these hard times? Well, the trusty hard-money lender may just be the “knight in shining armor” we are looking for. I can hear you saying it now, “Hard money? That’s too expensive! I can’t afford it!” “Those hard-money lenders are scary!” “I don’t know any hard-money lenders!” Well do you want to invest, or do you just want to make excuses? The choice is up to you.

First of all, it needs to be said that a hard-money loan is not the solution for all situations.You need to run the numbers and see what will work. The numbers never lie, and will tell you if you will make a profit based on accounting for all of the project’s costs, including the costs of a hard-money loan. Do your homework, and you will know if a hard money loan is even an option in your situation.

Next, let’s get rid of some myths about hard-money lenders.

Myth #1 – The hard-money lender mainly wants to get title to the property.

FALSE! Hard-money lenders are in the business of lending money to make a profit. Many, if not most, hard-money lenders were first successful real estate investors, and are now using their money to make a profit for them without having to find, fund, possibly fix, and finish properties. Many still own several properties, but they focus on lending rather than buying for their profits. They don’t want your property. They just want a return on their money based on the risk they are taking.

Myth #2 – The hard-money lender works for the local crime boss.

FALSE! Many people associate higher interest rate loans with loan sharks. A hard-money lender is not a loan shark. First of all, in the case of a loan default, a hard-money lender mainly looks to the property for restitution, rather than looking to you. The interest rates and points they charge are usually commensurate with the risk they are taking in making the loan. Having said this, you still have to be careful concerning with whom you do business. If you feel uncomfortable with a lender, don’t do business with him or her.

Myth #3 – Hard money is almost always too expensive for most deals.

FALSE! Look at the numbers for the deal. They will tell you if the cost of the money will still allow you to make a profit. Remember that some profit is better than no profit at all, which is what you will get if you don’t fund the deal. Don’t get hung up on the higher interest rate. A high interest rate over a short period of time is usually not a deal breaker. But keep in mind that hard-money loans are not long-term loans. If you’re going to buy, fix, and sell, the hard-money loan gets paid off with the sale of the property. If you get a hard-money loan to initially purchase a rental property, plan to refinance as soon as possible in order to get a long-term, fixed, lower interest rate loan. This is a requirement for maximizing your cash flow.

Getting at least one—and preferably, more—hard-money lender on your Power Team is one of the smartest things you can do as a real estate investor because it gives you one more funding option for your real estate purchases. The more ways you have to fund your deals, the greater are your chances for success.

However, don’t be like so many real estate investors who just do a Google search, get a name, call on the phone to ask their current lending criteria, and think they have a hard-money lender on their team. It takes much more than that to develop a good relationship, but the effort is well worth it. Here are some tips that will help you in dealing with hard-money lenders.

Find and work with a local hard-money lender. There are many national hard-money lending groups that you can deal with, but there are real advantages to dealing with a local lender. Once you find a local lender, call and introduce yourself. You can ask some basic questions about lending criteria in order to break the ice and become acquainted. If you feel that he or she is someone whom you would like to work with, set an appointment to go to his or her office. After the office visit, if every thing looks good, take the lender to lunch someday soon. At a relaxed lunch, you can talk about lots of things and get to know each other even better. Find out how he or she got into the lending business. Ask about his or her philosophy on hard-money lending. Equally as important as getting to know hard-money lenders is allowing them to get to know you. Share your goals and plans for your investing. Now you are really building a relationship with that lender.

When you have a deal that you want the lender to look at, take a detailed plan that spells out the specifics of the project and why it is a good deal (cost and potential profit). Show the lender that you know what you are doing and have a plan for the duration of the project, including a clear exit strategy. Most importantly, show the lender how and when he or she will be getting his or her money back.

Another advantage of working with local lenders is that once you have a good relationship, you can call them in the morning, meet them at the property midday, have a loan approval later that same day, and have documents and funding at the title company the next day. Cash and speed of funding will allow you to close lots of deals that would be lost if you only had traditional funding sources to call on.

A good relationship with a local hard-money lender has other advantages. Remember, the hard-money lender makes a good share of his profit on points, so the faster the money turns (meaning the loan gets paid off and a new loan is originated), the more money the lender makes. If you get the reputation as someone who gets things done fast, the lender will want to deal with you. You can also start negotiating reductions in points and interest rates, which could save you quite a bit of money and will put additional profit into your deals.

Now that you know that working with hard money really isn’t so hard, go out and get your share! Find your hard-money sources now, and cultivate those relationships before you need them for a specific deal. That way, when you get that frantic call from a distressed homeowner who is losing his home to foreclosure in five days, you will be able to help!

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If you are taking the time to read this magazine, you are probably seeking to gain the knowledge necessary to create wealth through improving your financial intelligence. Whether or not one is conscious of such a fact, we all seek to discover investment opportunities which fit our personal “investor DNA.” As you read, aren’t you just waiting for that one, life-changing idea to pop out of the pages, give you a V-8 smack on the forehead, and experience that satori moment that will change and charge your future forever?

As entrepreneurs, our goal is to find people with problems for which we can passionately produce solutions for that create a profit. The realm of real estate holds far more opportunities for generating revenue than the traditional means of simply buying, selling, or renting properties. Remember, the more problems you solve and the more people you help, the greater the value you will create and the more appreciation you will receive. This appreciation is usually expressed in the form of money. The opportunities to create a profit are there; you just have to employ a little entrepreneurial creative thinking!

While you are building your real estate business, it is possible to create multiple streams of revenue that complement your real estate business activities. For example, while managing a large portfolio of several thousand residential units, I was struggling to control costs, particularly the cost of payroll. In an effort to control costs and minimize rental income lost to turnover time, my associates and I began negotiating with a contractor to establish a turnkey price for cleaning vacant apartments between tenants. Just as we came to an agreement on a price and standard of quality that everyone was satisfied with, we were informed by the contractor that he was offered and had accepted a bigger contract for cleaning commercial buildings.

Refusing to become discouraged, I turned to a fellow investor who I knew used the cleaning services of independent contractors and I asked him if he would be interested in vamping up his business by creating a company to fill the need that was just created. I helped him develop a system that worked, and within a year or two, he was billing between five and twelve thousand dollars per month! His company now does turnkey cleaning and painting for a number of large and small owners and management companies. His people are able to knock out several units a day, including emergency turns so the owners don’t lose a lease.

A student from one of our property management classes found a niche working with banks and Real Estate Owned (REOs) before the outbreak of the foreclosure crisis. When a lender takes ownership of a property as a result of the foreclosure process, her company is hired to go in, “trash out” the property, change the locks, get it ready according to the lender’s instruction to be listed on the market and maintain the premises. She simply arranges for the labor and manages each project. Her side business did several thousand dollars per month before the foreclosure crisis. Because she is also an investor, she has a valuable inside opportunity to pick up the properties she wants and still get paid for the ones she preps for the banks. What a fantastic concept for investors specializing in foreclosures and rehabbing!

Now, what about the areas of real estate management and sales? Most states require those who are involved in the sale or rental of real estate for a fee, or for another, to be licensed in real estate. With the appropriate licensing in place, a property management company can solve an owner’s problems by having their team manage the property, by purchasing the property, or by listing the property for sale. Surely you can see the potential for profit that this type of company could make in management fees and commissions, and by buying properties at good prices or through terms agreements. If you are building wealth with your own cash flow (rental) properties, this could be a wonderful complement to your business. Wealth Intelligence Academy’s “Property Management and Cash Flow” course is the perfect source for practical knowledge on this strategy.

Property owners are not the only people we encounter in our real estate businesses. Right now, there are many people who are having trouble getting financing due to stringent loan qualifications. The problem could be a matter of not knowing where to find non-conventional financing, it could be a need for credit repair, or any number of other things, but they are all problems in need of a solution. Becoming an affiliate, consultant, or independent contractor for a reputable credit enhancement and/or lending organization may help you to help others achieve their goals while enabling you to achieve yours. Many of these companies have very good training and support programs so you can learn and earn! If you are an investor focusing on lease options, this type of service integration would be a natural choice.

As with all business plans and strategies, you should seek legal advice and comply with disclosure, licensing, and any other requirements in the area in which you are investing. The point is that there are as many opportunities to complement your real estate investment business as there are consumer problems that need to be solved. Oftentimes, you will not be the one who does the actual work; rather, you will simply create and implement a system that is effective. By widening the scope of services that your investing business offers, you can not only generate extra income, but you are likely to expand your investing network. People do business with friends. If you develop and cultivate relationships with banks, property owners, and potential purchasers, you will become a friend with whom that they can do business. If you have yet to explore all the options open to you as a real estate investor, I encourage you to give this subject some consideration. These ideas could be part of a great transition into the arena.

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In today’s world of real estate investing, there are many different ways to structure deals and make money. One can invest in tax liens and deeds, foreclosures, rental properties, commercial properties, raw land for development—the list goes on. For most investors, the starting point of the investing experience is the basic rehab project: buy a property at a discount, rehab the property, and sell it for a quick profit. For some investors, their first project may be a wholesale deal where the investor contracts to buy a property at a discount and then assigns the right to buy the property to a rehabber. The investor makes a quick profit from an assignment fee, and the rehabber makes his money by buying the property at a discount, rehabbing the property, and selling it for a profit.

In the past, the common advice you would hear from most real estate experts was to concentrate on finding “motivated sellers,” and success would follow. This is still wise advice. Without a motivated seller, there is no deal. However, today’s real estate market has changed dramatically in the past few years. In most parts of the country it is a “buyer’s market,” meaning that there are many more homes for sale than there are qualified buyers. With the collapse of the “easy money” sub-prime mortgage market, and the tightening of loan requirements, there are fewer and fewer buyers who can qualify for real estate loans resulting in many homes sitting on the market for months and months before being sold. And the problem is made even worse by the glut of bank-owned homes (REOs) flooding the market.

According to numerous real estate investors from around the country, the number one problem in today’s real estate market is not finding motivated sellers, but finding motivated (and qualified) buyers. A lot of investors are not taking advantage of the current buying opportunity because they are afraid they will be stuck with a property they can’t sell in a reasonable amount of time. Their fear is based on truth. No matter how good of a deal you get on a property you plan to sell, a long holding/selling period can eat away most or all of your profit.

You will hear some people say, “Well, if you can’t sell the property, just rent it.” This may work sometimes, but is definitely not a cure-all solution. Properties that can make a great profit from a resale, very well may be negative cash-flow rental properties. Unless you have pretty deep pockets, you should stay far away from negative cash flow rental properties; they can eat you alive!!!

However, there are many investors currently buying properties as fast as they can in today’s buyer’s market and they have little fear of not being able to sell. Why? Because they have taken time to develop a buyers list.

If you have a list of ready and willing buyers, you can make offers and contract to buy properties without the fear of not being able to sell the property. Many times, you may have the property “pre-sold” even before you finalize the purchase. Having a good buyers list gives you the power to take advantage of today’s fantastic buying market.

So how do you create a buyers list? In the long run you will create two different buyers lists: a wholesale buyers list (other investors and rehabbers) and a retail buyers list. The topic of this article is building a retail buyers list. A retail buyer is basically defined as someone who is going to live in the property.

There are many creative ways to build a buyers list, so network with other investors at your Wealth Intelligence Academy (WIA) training classes and your local real estate investment clubs. See what others are doing to build their list. Here are a few suggestions:

1. If you have a property for sale and people are calling on your ads or your signs, be sure to get their names and contact information, even if they are not interested in the home you are advertising. Let them know that you will have other homes in the near future and get a description of what type of home they are looking for. Find out as a minimum:

* What area(s) they are interested in
* Their desired price range
* Desired size of home, number of beds, baths, etc.
* How soon they are looking to buy
* Available down payment
* Are they pre-qualified with a lender
* Indication of their credit
* Do they have a contract with a real estate agent (buyer’s agent)

Create a database to store this information so you can retrieve it easily as you get homes under contract that match your potential buyer’s needs. Your coach can help you in setting up this database.

2. When the home you are advertising sells, don’t cancel the ad right away, but let the ad keep running for several more weeks and keep capturing the names and data of potential buyers. When they call on the ad, just explain that the home is sold, but that you will have more homes in the near future and ask them what they are looking for.

3. If you don’t have a property to sell yet, you could run a blind ad and still capture the names and data of people who call. Make it clear that you are not acting as an agent to help these people find a property, but that you will simply notify them when you have another property ready to sell.

4. You can network with other real estate investors through your local Real Estate Investment Association (REIA) and actually share other investor’s buyers lists. Let other investors know when you have a property for sale and even if they are not interested in buying it themselves, they may have someone on their list who would be interested in your property. You can return the favor when they have a property to sell by helping them find a buyer from your list.

5. In today’s real estate market, many banks are using auctions to sell their ever increasing number of REOs. The auction companies, hired by the banks, spend thousands of dollars attracting buyers to these auctions. You can use these auctions to build your buyers list. Your strategy is to find out when the next auction is being held in your area. Your coach can direct you to the websites of auction companies in your area. The night before the auction or the day of the auction, go to the area where the auction is being held and post your signs everywhere along the main roads leading to the auction site. These signs need to be made to attract attention and need to say something like “Desperate Seller” or “Handyman Special.” Your headline is critical. The signs will attract buyers because the language indicates you are motivated. Your signs should be up before the auction starts and should be up when it ends so you can get the traffic going to and from the auction. Again, when you get calls on these signs, capture the potential buyer’s information and build your buyers list.

Note – check with your local city for the signage regulations. In most cities, even with strict signage laws, signs put up and taken down the same day will cause no problem.

Note – you can hire someone to place and remove these signs for you. A wise investor, however, will drive the “sign route” before the event to make sure the signs were posted properly and on time.

6. You can also leverage local home shows and other events that attract potential home buyers. Strategically place your signs to take advantage of traffic that is generated from other people’s advertising dollars.

7. In today’s real estate market, more and more people are going to the Internet to find homes to buy. You can spend a lot of money setting up a website, and it will be money well spent in the long run. But many new investors don’t have a large advertising budget. A great alterative to a potentially expensive website is a blog. Property blogs are popping up all over the Internet. Blog sites can be a very effective way to build your buyers list and get people to view your properties. Two of the most popular blog sites are WordPress and Blogger. With both sites, you have choices of templates that will get your site up and running in no time, at no expense. Your visitors can post comments and if you provide solid, interactive content with regular postings, visitors will be more inclined to come back to your blog often. Your signs and advertising can direct people to your blog.

8. You can create a video or virtual tour of a property you have for sale and post it on your blog or website. This will attract more visitors and thus build your buyers list. Video tours give you the ability to not only sell the actual home, but also allow you to sell the city, the neighborhood, the schools, etc. It’s a 24/7 open house! Creating videos can be fun, but don’t forget to sell yourself. Remember, people do business with people they like and trust.

9. Another way to get lots of calls on your ads and add lots of names to your buyers list is to offer seller financing. There are many potential buyers in today’s market who have good income, have a substantial down payment, but who have less than perfect credit. The banks and lenders are getting more selective every day and are continually raising the loan-qualification bar. If you offer seller financing, you will open the door to hundreds of buyers who can’t get reasonable loans from the banks. Add these names to your buyers list.

10. Standard advertising, such as advertising on-air or in newspapers, costs a lot of money. But with more and more people going to the Internet to find properties, why not advertise your properties on the many free Internet posting sites. Free posting sites are all over the Internet and they are generating great results. Maybe there is such a thing as a free lunch after all. Some of the most popular sites are:

• CraigsList.org (can post descriptions and pictures).
• Postlets.com (allows you to submit an ad for free and then distributes the ad to numerous other free posting sites). Is that cool or what!
• Zillow.com (a site that has primarily been used to find comparable values, but is now expanding into other areas of real estate).
• Base.google.com (site is in beta version, but is very effective).

There are many other free sites and new ones are showing up everyday.

There are many buyers out there right now…you just need to put forth the effort to find them. Start to create your buyers list, today! Your buyers list will grow every week. You can then fearlessly buy homes in today’s buyer’s market, knowing you have many hungry buyers just waiting to gobble up your properties.

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