Rich Dad Education Blog

Don’t worry, you are in good company. Keep asking questions, apply the techniques you have learned, make the offer, and follow through with the techniques you have learned through your education, If things do not go as planned (e.g., you can’t find a wholesale buyer or the seller’s tax returns do not jibe with what he said in the listing), then use your escape clause and get out.

How do I get past all of my fears and make my first offer? First thing to know: it does get easier. These are common fears and concerns, and with each offer and deal you make, it will get easier.

One word can describe the best way to overcome your fears: preparation. Run the numbers as you were taught. If you are unsure about anything, call the real estate hotline, or if you have a Mentor, get him/her scheduled to come out. Once you have scheduled your Mentor, you will have direct access to their help and support.

Let’s examine the process for a wholesale or a rehab property, as the numbers gathered are the same for either strategy. Work through the MAO (maximum allowable offer) and then analyze your deal as a rental property, if that is your strategy.

First, as a wholesale or a rehab, you must determine within a fairly close margin the ARV (after-repair value). This number need not be as hard to find as it seems. I do not have enough room to teach you in this article how to do a full appraisal, but I can get you off on the right foot. The first step in determining the ARV is to pull comps. What has sold recently nearby that is similar to the home you are looking at? To pull up recently sold properties, you can either call your Realtor and ask them to send you a list of sold homes (this list will not include FSBO homes though). Your county’s website may also offer a list of recently sold homes near your subject. www.Zillow.com is another option to obtain a list; however, this may be a bit out of date. If you have the new software offered by the Wealth Intelligence Academy, you can pull up recently sold homes yourself. Ideally you should find comps which meet the following criteria:

• Houses sold in the past six months
• Houses within a quarter of a mile
• Houses of comparable size – within 10 percent of the square footage of the subject home
• Houses with the same number of bedrooms and bathrooms

Seldom are we so lucky to match all of these, so you need to find out (from your Realtor or a local appraiser) how much value to add or subtract for each item that is different. For example, if the prospective home has three bedrooms and the comparable home has four bedrooms, you would subtract some cost from the sold price of the comparable home for the value of that extra bedroom.

Now that you have pulled up a list of homes, you need to drive by those homes to verify that they match your subject home and finish analyzing the property. If the profit potential that you are looking for is there or if you think the price is low enough to attract a wholesale buyer, then make the offer!

If you want the property for a rental property, then you need to analyze the income minus the expenses and minus the debt service. We recommend that you have at least a $100 per unit, per month positive cash flow. If the numbers are in the profit range that you are looking for and/or have the ROI (return on investment) that you want, then make the offer!

Always have your attorney review your contract to make sure it is appropriate for your strategy. Trust your calculations, not your emotions, and make the offer! After the offer is made, you have a due-diligence period or your inspection period to verify all of your work and the seller’s representations. Again, please review with your attorney as to the amount of time you have and qualifications for backing out, if necessary, to make sure you know your escape clause.

If a property seems to be a great deal, trust your instincts and make the offer! You can always use your escape clause if you find something you did not count on or a mistake that you or the seller made. So make the offer and then verify the numbers again.

You can’t get rich in slow motion! If you are too slow…someone else will get it first.