Rich Dad Education Blog

People do business with people they like and trust. However, being trusted is an uphill battle in today’s world. Twenty years ago people thought, “I trust you until you give me a reason not to trust you.” But today, it’s just the opposite. People think, “I don’t trust you. You’d better give me several reasons to trust you.”

A Gallup Poll study on trust resulted in some very interesting conclusions. It rated the trust levels people had for various professions. Topping the list in trust level was pharmacists with a trust level of 64 percent, the highest of any profession. Medical doctors had a trust level of 57 percent, bankers 30 percent, journalists 22 percent, and stock brokers 19 percent. Congressmen were ranked at 17 percent and real estate investors at only 16 percent. Only lawyers, insurance salesmen, network marketers, and car salesmen rated lower than investors. This means, that as an investor, most of the people don’t trust you to start with, so you have to work pretty hard to gain their trust.

One of the most important things you can do to gain a person’s trust is to really care about them and their problems. You need to take off your hat that says Real Estate Investor and put on a hat that says Problem Solver. When we are talking to someone about purchasing their home, they really don’t care how much we know about real estate, but what they do care about is if you can help them solve their problem.

In order to be able to solve their problem, you must learn about the problem. You will find that as you listen, listen, listen, you will eventually find out what problems people are trying to solve. If you listen carefully, you will learn that most people will even give you some good hints as to how to solve that problem. So, learn how to listen and get to know the people you are dealing with.

In addition to being a good listener, there are five other components to developing trust. Kurt Mortensen, author of Maximum Influence and Persuasion IQ, defines the five C’s of trust as:

• Character
• Competence
• Confidence
• Credibility
• Congruence

If you are weak in any of these areas, it could cause a lack of trust and the loss of a good deal.

Character is comprised of honesty, integrity and sincerity. Do what you say you will do, every time. If you promise you will get back to someone with an answer today, get back to them today. If you make an appointment to meet someone, be there. You need to be as good as your word.

Be honest in everything you do. If you make a mistake, quickly admit it. Nothing hurts trust more than a person knowing you made a mistake and you won’t admit it. If you quickly admit your mistakes, it makes you more human and your trust level grows.

Find out what is good about your competition. If you talk about what’s good with your competition, your prospect will see you as impartial and will think of you as someone looking out for their own best interests, whereas, if you openly speak negatively about your competition, then the trust level between you and your prospect will decrease.

If you honestly and sincerely try to help people solve their problems, you will be perceived as a person of impeccable character…someone people can trust.

Competence is based on your intelligence, expertise, and knowledge. Your prospects need to know that you are competent, but this will become apparent through your actions, rather than through your words. This is why real estate investing education is so critical to your success. Knowing how to put the deal together correctly will validate your competence.

While you don’t want to brag, citing your past work as an investor will help you look competent. As you buy, fix, and sell homes, be sure to take before and after pictures. That way you can show new prospective buyers and sellers your past work. A picture is worth a thousand words in building peoples’ perception of your competence.

You can also get testimonials from previous customers with positive experiences. Testimonials are one of the most effective techniques used in sales today. Don’t be afraid to use them. Just get permission from the individuals before showing their thank you letter to others or using them in your advertisements.

Confidence comes with experience, so until you are very confident, you may need to fake it a little. But you can do a couple of other things. Lower the tone of your voice. When we are unsure of ourselves, our tone tends upward. Deflect your vocal tone downwards at the end of a sentence and you will sound more confident. Also, ask more questions and you will be perceived as more confident and in control. Good doctors, managers, and lawyers ask questions.

Credibility relates to people getting the feeling you know what you are talking about. But, when speaking with clients, you need to be careful not to come across as arrogant. Just present yourself in a calm, organized, and authoritative manner without being overbearing. Having a third party give you an introduction is always helpful. And if you are truly helping people solve their problems, you will have lots of people ready to refer you to their friends.

Congruence is basically consistency. Your words must match your actions. Again, do what you say you will do, when you say you will do it. Follow-up is necessary on all the details. Create a system to keep things from falling through the cracks.

We do business with people we like and trust, and we like to do business with people that are somewhat similar to ourselves. These are not necessarily conscious thoughts in our minds since 95 percent of our decision-making process takes place in the subconscious mind. A big part of our buying or selling decision is based on emotion and not on logic. So we need to deal with people more on an emotional level. If we trust someone, we emotionally feel safe with them and we are more likely to go along with what they say or offer.

One last trait that will help you get people to want to do business with you is to have charisma. It can be added as the sixth C of trust.

Charisma can be defined as people’s perception of your enthusiasm and likeability. People may trust you, but your enthusiasm is what will finally get them to do business with you. How can you gain the skill of charisma? For starters, just smile. Smiling is universal around the world. A smile can warm up any conversation, even if it is on the phone. People can hear charisma in your voice if you are smiling.

In face-to-face conversations, make good eye contact. If you talk to someone who doesn’t make eye contact with you, you will have a feeling you can’t trust them. Good eye contact says, “You can trust me.”

When talking to people, show your passion. If you believe in what you are doing (and you should), show your excitement in helping people solve their problems. People can feel your passion and enthusiasm and will follow your lead.

You should always be working to improve all of these components, but pay close attention to those areas that may need additional improvement. Improving these traits will pay off in your investing. Practice your people skills every time you talk to someone and soon your new skills will become habits. Give people numerous reasons to trust you and they will like you and want to give you their business!

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Robert Kiyosaki is scheduled to appear in TIME Magazine’s “10 Questions” feature, which spotlights well-known celebrities who answer questions submitted by readers. We are thrilled to have Robert join the company of recent “10 Questions” personalities such as CNN’s Larry King, director Spike Lee, and actor Michael J. Fox, just to name a few.

Don’t miss this opportunity to possibly have your question - and Robert’s answer - published in TIME Magazine! Go to http://10questions.time.com/2009/06/25/ask-robert-kiyosaki/ to ask a question!

Sincerely,

The Rich Dad Team

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By Chris Craig

Approaching investing in the markets is very similar to how I approach a mountaineering quest. The most vital part of my trades is the preparation I put in before pushing a button to buy or sell. Much like a mountaineer has a check list before going on a trek, a trader must have a checklist for each strategy. Consequently, after choosing a stock and strategy, I run through my checklist before pulling the trigger. Furthermore, my checklist changes depending on which strategy I’m utilizing.

When contemplating the relation between trading and hiking, I can think back to one hike in particular which taught me a vital preparation lesson. As the thunder clouds became visible through the thick green canopy overhead, I immediately regretted the decision to leave my poncho out of my pack. Standing there four miles up in the Uinta Mountains, I franticly searched through my pack looking for any makeshift cover from the downpour about to be inflicted by Mother Nature. My hope was to reach the summit within the day, but getting wet would defeat any chances of reaching my goal. At the current altitude, it’s about 55 degrees and getting wet wouldn’t do more than cool me down for a little while. The problem was, in less then an hour I would be reaching altitudes where the rain comes as snow and the temperature would be at least twenty-degrees cooler. Now that I was drenched from the storm, trying to top out the hike was too risky.

I go hiking almost every weekend and I always try to pack as light as possible so I can get up the trail faster. This trip I had failed to properly prepare myself, and I paid the price for my lack of preparation. The most important part of my hike is the time I spend preparing before stepping foot on the trail. I lay out all my essentials and make sure everything is in order. The last thing you want on your hike is to be faced with a sudden storm and not have your poncho, or slip into a stream and not have spare socks.

Not only is it crucial to make sure I have everything I’ll need, I also want to make sure I don’t bring anything that’s not a necessity. Carrying extra gear just weighs you down and makes getting to your destination more difficult. This concept of packing light and efficient is referred to as “Streamlining”.

STREAMLINE

It is imperative to know what is essential to your decision to move on a stock, and what isn’t. Investors often think that spending more time making the decision to place a trade lowers their risk. These investors are the same that miss out on an opportunity when it presents itself. If you want to get in and out closer to the top and bottom, make your strategies more streamlined so you can make your decisions quicker.

Saving time is one of my main reasons in streamlining my trades. I don’t trade for the fun of it, or the thrill of predicting the market. I want to get in as soon as I can, start accumulating profits, and exit when the appropriate time comes. All too often I see traders focusing more on doing all the research possible on a trade prior to jumping in, and time and time again they miss their opportunity to take profits. I could spend eight hours a day for a month checking the fundamentals of a company, running through all the technical analysis I can get my hands on, and have a great prediction on the direction of the stock. However, I could also commit twenty minutes going through five to six quick steps to arrive at the same conclusion. Thanks to our advanced software, the Edutrader, everything I need is right in front of me at the click of a button.

Another reason I have my checklist is it allows me to have more confidence in my trades. I have a strategy that works for me and I’m confident in its ability to produce profits. The past performance and success of my strategies helps to buoy my confidence and comfort level in trading. Moreover, sticking to a checklist helps keep emotion out of trading.

TURNING BACK

One thing important to remember about my experience hiking that rainy day is that I made the educated decision to turn back. I could have stuck to my guns and said, “I’ve committed to reach the top, and that’s exactly what I’ll do!” This is the kind of mentality investors sometimes adopt that burns them all too often. Don’t let your emotions get the best of you. Many people adopt the mentality of winning at all costs. In other words make whatever decisions are needed so that you never lose. Never surrender! While this may be conducive to success in sports, business or other parts of our lives, it is disastrous when applied to trading in the financial markets. Remember, our goal as traders is to maximize our gains and minimize our losses. Make no mistake about it folks, losing trades are inevitable! It’s not about winning every trade, but knowing when to take a loss (turning back). Those who seek to win at all costs HATE to take losses and thus try to avoid the unavoidable. Talk about an exercise of frustration. Rather than simply selling losing trades, they began to rationalize and justify, seeking to hold on until the trade turns into a profitable one.

Just as there are millions of trails to hike in the U.S. alone, there are thousands of stocks to invest in. Be disciplined enough to invest in the right ones, not just the one’s your committed to, or the one’s that have been “so good to you over the years”. Although I was disappointed that my hike was cut short, I can look back and be thankful I came down.

Create your checklist, keep it “streamlined”, and don’t forget that minimizing your losses is as equal in importance as maximizing profit!

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So you have this great idea, and you’re thinking of going into business to capitalize on it. You’re pretty sure that all you need now is a little guidance on how to get started. Starting a business is never easy, and you want to be as prepared as you can possibly be for what may be lurking ahead. With that said, let us do a little litmus test to see if you really want to choose the path of entrepreneur.

The first thing you must understand is that in order to get things up and running, there may be times that you will need to dedicate extra time and energy to your business. These longer hours may cut into what would typically be personal or family time. Are you willing to make that sacrifice?

The second thing you must ask yourself is if you are willing and able to leave your ego at the door. Are you willing to seek out the advice of those who have been there and succeeded in doing what that which you are working to achieve, and are you willing to take that advice? Are you aware of your strengths and your weaknesses, and are you willing to bring on board others who are skilled in the areas in which you are lacking?

How much do you truly desire this? Are you ready to commit to what you are beginning, and see it through to the end? It is here that you will find yourself most greatly challenged. It may challenge everything that you thought you knew about yourself, and then some. Do you have what it takes to absorb the highs and lows of building a business, and do you truly possess the unmitigated drive to succeed?

If you doubt yourself, then do not get started until the time comes that you have the confidence to do what is necessary to prevail. If you can honestly answer yes to all of these questions, then forge onward with my blessings.

The Business Plan

The first thing that a business needs is a good, solid business plan. A business plan is your road map to your final vision. It will help you to focus on exactly what it is that you are trying to accomplish, and how you plan to get there.

It is also crucial to have this written plan when presenting your ideas to others. The ability to visually see your proposed road to success will allow them the chance to develop confidence in your vision, and hopefully, will spark in them the desire to get on board.

Funding

Generally speaking, the bigger the business, the larger the overhead. Understand where your capital is coming from. If you are starting on a smaller budget, then you may want to consider starting out of your home and expanding as finances allow. You may later be presented with an opportunity in which it makes sense to borrow money to grow your business. For this reason, it is be important to work to build or keep a good credit rating so that institutions will be more readily willing to lend.

Entity

You must decide on the type of entity your business will be. Will you be a sole proprietor, or do you want to enter into a partnership? Depending on your situation and your business idea, perhaps a corporation or limited liability company would be a better choice. This decision is an immensely important one, and it may behoove you to seek the advice of a professional or professional organization, such as a CPA or an attorney specializing in the development of professional entities.

You will also want to consider the fiscal year of your business. Depending on your circumstances, you may want to use the regular calendar year as a start and end date, or it may be more beneficial to use different months as start and end dates.

These decisions will have an impact on your tax filings at the end of the year, so choosing the most appropriate entity and fiscal year for your situation will both be very important decisions.

Federal Identification Number

A federal tax identification number, also referred to as an (EIN) Employer Identification Number is given to you by the IRS as a means to identify your business for tax reporting purposes. If you form a business entity, you will certainly need a Federal Identification Number. It is easy to get an EIN, and you can set one up by contacting the IRS. If you decide to establish a professional entity through the means of an outside resource, they will probably get the EIN for you.

Accounting

The method for keeping accounting records will be another choice that you will have to make. There is a variety of accounting software that is available on the market these days that does a very nice job of keeping the books organized. You will want to do some research in this area, since some of the software will be more user-friendly than others, and you want to purchase a software package that will be most appropriate for your circumstances. It is possible, however, to keep records without software, and if you feel that your situation lends itself to a non-computerized method of accounting, then there is nothing wrong with going that route.

Contracts

If you will be presenting contracts or are presented with contracts as a part of your business model, than you may want to discuss them with a licensed professional before implementing them. Make sure they will meet your requirements for personal and professional protection, and, if applicable, that they meet any federal, state, or local regulations, as well.

You want to start your business the right way, and taking the proper initial steps will go a long way in helping you to do that. There have been countless unfortunate situations in which people tried to cut corners when first starting out, only to learn too late that doing something differently in the beginning would have made the difference between success and failure.

Starting a business may feel a little overwhelming in the beginning, especially if you have never done it before, but with guidance from the appropriate professionals and by following a few carefully-plotted initial steps, much of the fear and uncertainty should be lifted, leaving you free to begin your new adventure toward achieving your dreams.

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“Life’s tough; it’s even tougher if you’re stupid.” – John Wayne

Wouldn’t it be nice if there was a simple formula that guaranteed success in the real estate investment business? Getting started in real estate investing is challenging at best, and there are no magic formulas for success. However, there are some basic rules that, if followed, can help you avoid committing the deadly “sins,” or mistakes that could knock you completely out of the real estate game.

No matter their level of expertise, all real estate investors get careless at times and make one or more of these 13 common errors. Usually, a seasoned investor will get up and keep going. Unfortunately, when new investors make any of these mistakes, they sometimes walk away from the real estate investing business before they have really even gotten started.

Life is much easier if you know the rules. By becoming aware of these 13 commonly made mistakes, the new investor can avoid being forced out of the game before he or she has even learned to play.

Sin #1 – Lack of Basic Real Estate Investing Education

While most investors realize the importance of learning the basics of real estate investing before jumping into the market, there are many new investors who feel as if reading a book or two should supply them with enough knowledge to make a killing in real estate. Don’t shortchange yourself. Get all the education you can. You should spend at least an hour each day improving yourself and studying the real estate investing business. Learn something new every day. Expand your mind.

Not too long ago, a fledgling investor had to look long and hard to find good information on real estate investing. Today we have easy access to information in virtually every facet of the real estate investing business. The Wealth Intelligence Academy provides some of the best education available anywhere. Its live classes are taught in numerous cities throughout the country, and are even available in your own home via the Internet, leaving no excuse for not getting a proper education.

Sin #2 – Not Taking Action

Although extremely important, education is only part of the success equation. You must take action to make things happen! Simply obtaining an education will not make you successful; rather, it is the application of that education which will put you on the path to success. A good real estate coach can help you apply the education you have obtained through real estate books, classes and seminars. A good coach will keep you focused on your goals and help you keep going when you hit roadblocks on your path to success.

Look at yourself in the mirror and ask yourself, “Am I taking action, or am I just making excuses?” The list of excuses is endless, but none of them produce results. Take action, and do it now. Nothing will help you overcome your fear better than taking action.

Sin #3 – Rushing into the First Deal Just to Get That First Deal

New investors are under an extreme amount of pressure to do that first deal. They often endure numerous disparaging and discouraging comments from family and friends who believe they will fail because real estate investing doesn’t really work. This sort of criticism makes even the most confident rookies anxious to prove to the naysayers—and themselves—that they are capable of success. While this ambition can be a powerful motivator, too much eagerness can make one impatient enough to disregard the rules and jump at the first “deal” that comes along. This can spell disaster. A bad deal is certainly worse than no deal at all. In fact, it is crucial that your first deal be a good deal, so take your time. Make sure the numbers work; if they don’t, go on to the next deal.

Take massive action now! Make a multitude of offers, but remember that every one of those offers will, at a minimum, be contingent upon a final inspection and approval by your associates. Including a provision for an inspection period gives you time to thoroughly inspect the property and meticulously reanalyze the deal to be sure that you will benefit from the transaction. If the deal turns out to not be a good one after all, do not hesitate to walk away. A bad first deal ruins a countless many new investors.

Sin #4 – Not Starting with the End in Mind

Steven Covey said that highly successful people always begin with the end in mind. These are words to live by. While this is of especial importance to the beginning investor, it is an area in which even seasoned investors need to improve. Far too often, investors get so swept away by excitement over the potential profitability of a prospective deal that they fail to think all the way through the process. Many new investors buy a property without having a clear picture of their exit strategy; this is a big mistake! It is of crucial importance to have a plan for a property before you buy it!

Determining whether or not a property suits your purposes is a fairly simple process. For example, if your end goal is to sell, then buy a property that will be easy to sell. If you are in search of a rental property, buy a property that will be easy to rent.

Sin #5 – Not Conducting Your Own Due Diligence

When you encounter a deal that, according to the “experts,” appears to have a considerable potential for profit, keep in mind that the speculations of others are not necessarily factual. Even the opinions of so-called experts are just that—opinions. It is imperative that you always run the numbers yourself. It really doesn’t take that much time, and it is time well-spent. Once you have the property under contract, have the professional inspector on your Power Team do a detailed inspection. Make sure you get good repair estimates based on that inspection and, because it is quite rare to complete all repairs under budget, add several thousand dollars to the estimate to ensure you have a good cushion. Once you have determined the revised amount of the repairs estimate, recheck your numbers to be sure you do have a good deal

One note of caution: there are groups that look for excited, new investors, and try to sell them a “deal.” If you come across a deal in which the real estate agent informs you that he or she has a friend who can get you the financing, and the financer tries to sway you toward using his or her “preferred” appraiser, be very cautious. Double check the property value and analyze the real estate market in that area to ensure you do not get taken to the cleaners.

Sin #6 – Overanalyzing

This is where a lot of new investors get stuck. Because they are so afraid of making a mistake, they overanalyze a property so long that by the time they decide to make an offer, the property is already under contract with another investor. Learn to quickly analyze the data you have and make a fast offer (always subject to a final inspection and approval of your associates, of course). Once the property is under contract, you will have time to gather the specific data you need to perform a more detailed, accurate analysis. If the numbers still look good, buy; if the numbers don’t look good, re-negotiate a lower price or walk away.

Sin #7 – Paying Too Much for a Property

This is the biggest mistake a new investor can make. In order to avoid this common pitfall, you must learn to perform an analysis which takes into account all of the expenses. Remember, the analysis for a “buy, fix, and sell” is completely different from the analysis of a “buy and rent” property, in that your goal for a “buy, fix, and sell” is to make a profit when you sell, while your goal for a rental is to acquire a positive cash flow right from the start.

Sin #8 – Not Having Proper Reserves for Your Rental Properties

As you know, most new businesses fail due to a lack of positive cash flow and sufficient operating capital. Assume that after correctly analyzing a potential rental property, you proceeded to purchase it at a price that produces a positive cash flow. As part of your analysis, you should have included a vacancy factor and a future repair fund, meaning that each and every month, a portion of the rental income should be set aside in your operating account and saved for that rainy day. I assure you, that rainy day will come. No matter how well-managed your property is, at some point, you will have some vacancy and you will need to perform some repairs. If you have money set aside to cover those expenses, you can weather the storm; otherwise, you had better have some deep pockets. In order to keep the property long enough for your equity to grow into a nice nest egg, you must plan for these inevitable occurrences.

Sin #9 – Underestimating Repair Costs

Not much needs be said on this point, save that the importance of becoming adept at making repairs estimates cannot be overstated. Having the ability to perform a cursory evaluation of properties will allow you to make offers expeditiously on suitable properties. Once the property is under contract, get a professional inspection to more accurately assess the cost of repairs. Get several bids on repairs, and interview as many contractors as is necessary to find a contractor you can trust at a price that fits within your budget.

Sin #10 – Overestimating Rental Income

Never take someone else’s word on the price at which a property will rent. Do your own homework. Drive around and get to know the area, and research the amounts at which similar properties are renting. Be sure to compare apples to apples. When in doubt, err on the side of caution when calculating your maximum allowable offer by underestimating the rate of rent and aiming to buy the property at a lower price. If you are then able to charge a higher rent than you allowed for in your calculation, you will have improved your cash flow, which is a much more pleasant surprise than the alternative.

Sin #11 – Trying to Do It All Yourself

While you should strive to learn as much as possible about all aspects of real estate investing, you needn’t—and shouldn’t—attempt to handle every aspect of your business on your own. No matter how educated, talented, skilled, or motivated you may be, there are only 24 hours in a day. Build a team of hand-picked experts, and be willing to delegate a lot of your work to those team members. Doing so will allow you to spend more of your time on finding, analyzing, and negotiating potential deals.

Sin #12 – Quitting Your Day Job Too Soon

Confidence, commitment, and enthusiasm are valuable traits that are vital to the success of any investor. While it’s great to jump in with both feet, unless you have at least a year’s worth of living expenses in savings, you would be wise not to quit your day job just yet. There are many investors who make good money fairly quickly and are tempted to do just that. Although this is a personal decision, it is usually best to hang onto that job until you have a system in place and are consistently generating a steady income from your real estate investing business. Even then, have a good cash reserve set aside for living expenses before you tell your boss good-by for ever, just in case.

Sin #13 – Not Working With a Coach

You have heard it said many times before, “Even an expert needs a coach.” In fact, I would argue that the greater your knowledge and skill, the greater your need for a coach. New investors in particular have a need for proper coaching in order to effectively apply their new knowledge. A good coach can keep the new investor on track and help him or her to avoid committing any of the 13 deadly real estate investor sins.

Posted 03:02 PM | Permalink | Comments (1) | TrackBacks (0)

Imagine, if you will, that you are standing in front of an apartment building with your commercial real estate broker. When you inquire as to the price of the building, your broker replies, “The seller is asking for three million dollars.”At that point, it is up to you to determine whether or not the asking price is reasonable.

When buying a commercial property, it is important to remember that it is the income that the property produces that creates its value and, therefore, the sales price. This is a numbers game. You are not just buying a piece of real estate; you are buying a business, and that business must make money! Banks like to finance businesses that are financially strong, possess good management, and carry minimal risk. While it is certainly necessary to perform a detailed financial analysis before purchasing a property, it is also necessary to possess the ability to perform a preliminary analysis in about a minute.

If you are doing a full analysis of a multi-family property, it is important that you know the five basic mathematical equations. There are also rules of thumb that can help you quickly determine how a property is valued relative to the market. The five ratios are:

1. The debt service coverage ratio
2. The cash return on investment (cash on cash return COC)
3. The capitalization rate
4. The total return on investment
5. The gross rent multiplier

Before you ask your broker to provide you with a full package so you can do this in-depth analysis, you may want to do a quick assessment. Brokers and sellers use what is called a “set-up sheet,” which provides basic information, such as asking price, address, number of units, gross revenue, and the terms of the transaction, especially if their loan needs to be assumed. As a general rule of thumb, your total operating expense should average between 40 to 60 percent of your gross income. Most well-run apartments with a property manager, leasing agent, and all other the costs included, with the exception of the debt service, will be running their expenses at 40 to 45 percent. If expenses are high, some may be running closer to 60 percent. If you split the difference, you will end up with 50 percent on an average. By taking your gross revenues and divide by .50, you will get a reasonable estimate of your net operating income, or NOI. Additionally, cap rates generally run between 8 and 12 percent. In some markets today, cap rates are so compressed, you may see them as low as 6 or 7 percent. Let’s keep this simple by using 10 as an average.

Now, let’s go back to that apartment and figure out if this asking price is even worth considering. Here is my step-by-step conversation:

1. “How many units are there?” The broker responds, “100 units”

2. “What is the average rent?” or “What is the gross revenue?” The broker responds, “About $500 per unit.”

Now you can multiply the number of units by the average amount of rent. In this situation, we would have a gross monthly revenue potential of $50,000 per month, or $600,000. To calculate our operating expenses, we would then take our potential gross revenue of $600,000 and multiply by .50. Our operating expenses would be estimated to run around $300,000, leaving us with $300,000 a year in revenue. We would then take our net operating income of $300,000 and divide by your purchase price of $3 million dollars, getting a cap rate of 10 percent. Now compare your results with the market cap rates. Are you close, are you too high, or are you too low? If the numbers are way out of line, a wise investor will move onto the next deal. As a buyer, please keep in mind that the higher the cap rate, the better the deal is for you!

Let’s recap:
1. Divide the gross revenues by two. The result is an estimate of your NOI.
2. Calculate the cap rate by dividing the NOI by the asking price.
3. Determine if the resulting cap rate is in line with the marketplace rates.

Remember that cap rates will vary with the condition and age of the building. The area or market you are in will also play a large role in determining value. This example is only a quick and very general method of determining approximate value. Before you make any final decisions, you will need to ask to see the trending operating statements for a minimum of the last two years, and the last 3 months of rent rolls to current. You don’t want to just see the yearly totals; you are looking for trends, or highs and lows, in either income or expenses. Keep in mind that most sellers usually start with a high asking price. As is the case with residential properties, you should look for motivated sellers and properties that need some type of improvement.

If there is a real value play, my opportunity may be increasing the income by increasing the rents, reducing the expenses, increasing the occupancy, thereby reducing the vacancies, adding vending machines, or installing or increasing the laundry capacity. It is important to know that for every dollar you increase your income or reduce your expenses, you multiply the value of your apartment building by approximately 10 times!

For more information, sign up for our Commercial Real Estate Class, which we offer on a monthly basis.

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By Jacquelyn Lynn

One of the appeals of starting a home-based business is that it can often be done with a minimal investment. However, even if you have not invested a lot of up-front cash in your business, you still have both physical and intellectual property in need of protection. And just because you live and operate your home-based business in a “good neighborhood” doesn’t mean a burglar won’t find you. Be sure your start-up plan includes a security evaluation of your home, and then conduct a security audit once a year to be sure that you’re still protected as your business grows and changes.

Of course, you need to protect your data. Install a computer backup system that will routinely duplicate and store your electronic files away from your office. Be sure your computers are protected with up-to-date anti-virus and spyware software, along with firewalls.

You also need to protect your physical assets, yourself, and any employees and/or clients who may visit your business. Take a look at your operation through the eyes of a criminal. Are you an attractive target? If you’re not sure, contact your local police department and ask if they can help you do a security analysis. Many of the security measures you can take are simple, common-sense steps:

• Install secure locks on all exterior windows and doors—and use them! Keep doors locked even when you are home and keep windows locked unless they are open and you are in the room. Make a habit of locking doors behind you, even when you’re only stepping out for a minute.

• Installing peepholes or one-way viewing glass in doors will let you see who is on the other side without having to open the door or speak. Never open the door to someone you don’t know. Insist on seeing identification from repair people, especially if you’re not expecting them. Don’t be afraid to call the police if any visitor, whether unexpected or not, makes you feel uncomfortable.

• Install a monitored electronic security system that covers all the entryways of your home. Include motion detectors. Talk to your security consultant about zoning the system so that you can arm your business area when you are in other parts of your house. Be sure the system has a distress feature which allows you to alert the monitoring center to a hostage situation without letting the intruder know what you have done.

• One of the most basic deterrents to burglars is exterior lighting, so be sure your house and front and back yard are well-lit. Use motion sensors and timers.

• Landscaping can be an effective security tool. Maintain trees and shrubs in such a way that they do not provide visual shields for someone trying to gain unauthorized access to the house. Consider planting holly bushes under ground-floor windows; the prickly leaves provide an extra deterrent to someone trying to open a window.

• Keep windows covered, especially at night, so that people can’t see and be attracted by what you have.

• If possible, keep your car parked in a garage so it is not apparent to a casual observer whether or not someone is home.

• Arrange for discrete package and mail delivery. Your mail receptacle should be secure. If that’s not possible, receive your business mail at a post office box or through a mail drop service. Be sure delivery drivers know to leave packages in a location that is out of the view from the street.

• Leave a radio or television on when you leave the house so it sounds occupied.

• If you have important documents or other valuables in your possession, keep them in a locked fireproof safe when not in use.

• Post emergency numbers—fire, police, and other critical numbers—in clear view of every telephone.
Much of maintaining a secure home-based business is a matter of practicing common sense and awareness by keeping doors and windows locked, refusing to open your door to strangers, and trying to avoid anything that could make you an attractive target to criminals. If you receive unwanted visitors or other unwanted attention, contact the police, especially if threats or accusations are involved. Be sure your family knows, understands, and follows the security precautions you have implemented.

Of course, in spite of all the best security precautions, you may still be a victim of theft, vandalism, or some other crime. Be sure you have adequate insurance to cover your business losses and remember that your homeowner’s policy may not be sufficient.

Posted 06:35 PM | Permalink | Comments (0) | TrackBacks (0)

Chapter 8 excerpt:

"We can all create money out of thin air - derivatives of our thoughts. We all have the power to print our own money - if we train our minds to think in terms of derivatives. In other words, money can be a derivative of financial knowledge. This is why financial education is so important, and why I believe it is not taught in schools. The conspiracy does not want you and me getting in on their game!"

Posted 12:51 PM | Permalink | Comments (2) | TrackBacks (0)

Read the book that is being called the Bible of Real Estate Investing, The Real Book of Real Estate. For the first time ever, Robert Kiyosaki has assembled a exceptional cast of real-estate experts in one book to give you the insight and tools needed to be a successful real-estate investor!

Gain powerful insights into all aspects of real-estate investing, from finding the right deals to managing deals effectively, all from experts with years of experience putting their advice to work - the same experts whom Robert relies on for his own investments! Truly, The Real Book of Real Estate is the final word and authority on successful real-estate investing.

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January came, a new year and a new beginning, and you made goals. Hopefully, you broke the bigger goals down so that you had weekly activities to help you achieve those goals. Now, time has passed, you have hit some road blocks, and you are starting to get discouraged.

There are several ways to keep you motivated. Many of the techniques that help in this area can also help your business. One of the keys to being successful in real estate is networking to find other investors so that you can assign contracts. Networking can also help you put together a good Power Team and help you find properties.

There are many ways to network. The easiest way to find other investors in your area is your local Real Estate Investment Association (REIA) meeting. A quick search on Google will point you toward your local REIA. When you go to the REIA meetings, make sure you collect a business card from everyone there. If Realtors are at these meetings, it is likely they are willing to work with investors. If lenders are there, they have loan programs for investors.

The REIA meetings are a great way to refocus every month and be reminded that you can do this. If you are discouraged, ask other investors what kinds of problems they are experiencing. Ask the experienced investors how they get around similar obstacles. One thing to remember is that if someone tells you it can’t be done, it probably just means that they don’t know how.

Ask investors what they are doing for money and what strategies they are implementing in your current market. There is always a strategy to make money in real estate, but you must evaluate your market and determine which strategy will work best for you. The investors who are making money have a good Power Team in place. If you have an agent who is bringing you good opportunities, this will help to keep you motivated and focused.

Another way to meet other investors and exchange ideas is to go to conventions. This is a great way to renew your excitement and to meet people with whom you have much in common. You can ask questions, network, and find out what steps are working for others. Plan to go to your training classes. Whether you take them in person or online, the instructors know what is going on in the current market and how to be successful.

You can advertise to find investors or you can call investors who are advertising (“I buy houses”) in the newspaper or on bandit signs around town. If someone is advertising that they buy properties, don’t you want to talk to them to find out how they are doing it, what they are buying, and how much they are willing to pay for a property? These are people to whom you can assign your contracts.

Finally, you can visit the WIA discussion board at http://board.wiacademy.com.

As a company, we try to provide you with the necessary tools to be successful. This website has a huge variety of topics and links to help you in your business. The discussion board is a place where you can post your questions and get other people to respond with their own personal experiences. There is a section on this discussion board where you can post the potential properties you have available and find out if they are a good deal. You can network with other investors in your local area.

One of the obstacles we all face when we are trying to do an assignment of contract is finding another investor quickly enough. By posting your deals on the website, you have instantly let thousands of other investors know what you are doing. Granted, not all of them are in your area, but some may be. If you are worried that you may not have a big enough discount, post the information and ask others to comment on what they would be willing to pay for the property if they were in your area.

You can also find out what is working and what isn’t working for other people. Finding a hard-money lender is not the easiest job. You can look on the Internet, but how do you know if they are reliable? By going to this website, you can ask other investors who they are using. Who do they know and who have they worked with before? This is a great way to tap into a huge resource at the tip of your fingers.

When you go to your training classes, you will meet many investors, and the discussion boards are a great way to stay in touch with them. You can motivate and help each other as you are learning and doing at the same time.

The important thing to remember is that you are not going to build a real estate empire overnight. You have to build it one brick at a time. Set goals that are attainable. Once you have achieved those goals, set bigger goals. This is a career in which many become easily discouraged. I think that it helps to know when you hit obstacles that you are not the only one. I know it helps to network with other people who are out there doing the same thing you are.

Find ways to keep yourself motivated, find ways to get started. You can do this!

Posted 11:49 AM | Permalink | Comments (1) | TrackBacks (0)

I’ve been trading for a year now and have seen some success with trading stocks and options. One of the problems I have had is that I’ve made a lot of money on some trades, and then proceeded to give it right back on others. I’m wondering if you have any suggestions on how I can achieve more consistent results.

I appreciate the question, as this is probably a subject that many beginning, as well as experienced, investors have trouble with. As traders, we’d all love to arrive at a point in our trading career where we have developed the ability to produce consistent profits day in and day out. Unfortunately, this is easier said than done. To identify the heart of the matter, consider the following question: Is it realistic to expect consistent returns from your trading if you have an inconsistent, unsystematic approach? The undoubted answer is no! Thus, to better improve your results in trading, you must focus on developing a trading plan. Each and every time you place a trade, make sure you have a specific exit strategy. In other words, have a plan for how to manage the trade if the market goes up or down.

In addition, too many traders become a jack of all trades and master of none. Simply put, they try to learn every available strategy, rather than simply mastering one or two and applying them on a consistent basis. Most successful traders find a few strategies that work and implement them the same way over and over to produce consistent results. Consequently, narrowing your focus to one or two strategies may also improve your results.

Posted 12:27 PM | Permalink | Comments (0) | TrackBacks (0)

By David L. Boyd

Is the fear of hearing the word no getting in the way of your real estate investing success? Now, be really honest with yourself in answering that question. Don’t be afraid to admit that you don’t like to be told no. When the answer to one of his or her offers is no, it can really take the wind out of a new investor’s sails. It’s easy to say, “Don’t take it personally,” but people are told no, they tend to ask themselves what they did wrong. The truth is, maybe you did do something “wrong,” or at least, maybe there were things you could have done differently that would have given you a better chance of hearing yes.

Let’s talk about “no.” The more you know about “no,” the more you’ll hear the word “yes.” First of all, it’s important to understand that no doesn’t always mean no (at least not forever). It could mean:

• No, not at this time, but maybe later.
• No, I don’t understand everything. A confused mind will always say no.
• No, I don’t like you. Now that hurts, but sometimes it is the reason you hear no.
• No, I don’t trust you, which is a common reason people say no.
• No, you don’t understand what I really need.
• No, you haven’t listened to what I said.
• No, I don’t think you really care about me.
• No, give me some more reasons why I should say yes.

And the list goes on. The more offers you make, the easier it will be for you to hear no without taking it personally. However, you need to realize that there are a lot of things you can do to turn a no into a yes.

Did you realize that in almost any business dealing directly with the public, 15 percent of your success is based on your knowledge of the business and 85 percent is based on your people skills? Now don’t let that scare you. People skills are not necessarily a natural trait and can be learned by most everyone if they put a little effort into it. And those people skills will help you in all aspects of your life.

People do business with people they like and trust. They also like to do business with people that are similar to themselves. These are not necessarily conscious thoughts in a person’s mind, since 95 percent of the decision-making process takes place in the subconscious mind. A big part of a person’s buying or selling decision is based on emotion and not on logic. The more you deal with people on an emotional level, the more you will be successful. You need to build rapport with people and get to know them as quickly as possible.

One of the most important things we can do to connect with people is to sincerely listen to them. A lot of us think that we are good listeners, but few people really are. Listening is a skill that can be learned, but, there are many challenges:

• All sorts of sights, sounds, and distractions are around us: it takes real concentration to shut out these distractions.
• Thinking more about our next response to what is being said, rather than trying to understand what is being spoken. All investors fight this one at times.
• Interrupting a person while they are still speaking. This tells them that you think you are more important than they are.
• Jumping to conclusions before you know all the facts.
• Pre-judging someone based on their looks, their attitude, and the condition of their home and so on.
• Letting your mind wander to other problems of the day. This can be controlled, but it takes work.

You can learn to be a better listener. What is your goal as a listener? When dealing with motivated sellers, you are trying to find out why they are motivated and what problem they need solved to ease their pain. If you actively listen, they will eventually tell you what their problem is and how it can be solved. If you can solve a seller’s problem, you will be more likely to get a yes to your offer.

Here are some things you can do to become a better listener:

• Focus on what your potential client is saying. Give them your undivided attention.
• Make eye contact with them. Don’t stare, but good eye contact is key to a good conversation. It also helps you build trust.
• You need to have a sincere interest in the person and what they are saying. You need to care about them. If you are only thinking about the deal, they will be able to see that you are not sincere and your chances of a yes on the deal goes down dramatically.
• Resist the urge to interrupt. Let them finish what they are saying before you respond, even if what they are saying is wrong or you don’t agree. You’ll have your chance to talk soon enough.
• Keep the conversation going by asking open-ended questions until you get to their root problem.
• A good way to let them know you are really listening is to repeat what they just told you and ask them if that is what they meant. For example, you could say, “Now if I understand correctly, you said that your husband just ran off with his secretary and you don’t care what you get for the house as long as he doesn’t get a dime! Is that what you mean?”
• Pause before replying to a question or comment. Again, it shows that you are thinking about what they said and trying to understand.
• When you do reply, use the person’s name. Don’t over use their name in the conservation, but people love to hear their own name, and it lets them know you care.
• Use humor (clean humor) if you can. It creates a positive environment. Laughter is the shortest distance between two people.
• Practice, practice, practice being an active listener. Remember, when you talk, you hear what you already know. When you listen, you learn something new.

Entire books have been written about the art of listening. As a rule of thumb, listen twice as much as you talk. You can talk all night trying to convince someone that you are good, trustworthy, friendly, kind, and know all there is about real estate and still not be successful in connecting with them. If you can get them talking (and you really listen), you can build good rapport in a matter of minutes. If you give someone your undivided attention when they are speaking to you, you will quickly win their trust and they will like you.

Just think of the people you know in your life. Most of us know someone who can make friends with strangers in a matter of minutes. If you watch that person closely, you’ll probably find that they listen intently to what the other person is saying: they learn about the other person and let them be the star of the show. As Stephen Covey reminds us in The 7 Habits of Highly Effective People, “seek first to understand, then to be understood.”

In building rapport with someone, you should know that your words are the least important part of your interaction. Establishing rapport with someone is based on:

• Your visual body language—55%
• The tone of your voice —38%
• Your verbal words—7%

So what you say isn’t the most important factor. However, what you say does need to show you are knowledgeable and competent, but how you say it is most important in developing a higher level of trust

There is an entire science on how to interact with people, but basically people feel more comfortable around people who are somewhat like themselves. So as you are actively listening to people you need to notice their rate of speech, their tone, their gestures, etc. Adjust your speaking to be similar to the person you are talking to. You have to be careful in this area, but just be aware that if you normally talk at 150 words per minute with gusts up to 300, you will not easily build rapport with someone who only talks at 75 words per minute. Slow down a little and you will be amazed at how much better you will communicate. Use your common sense in the area and you will do okay.

The more people you talk to, the better your listening skills will become. A good way to overcome bad listening habits is to practice active listening. Here is what you can do. Go through the paper and write down the contact information for 20 For Sale By Owner properties. Call each of these sellers and make an appointment to go see their home. Don’t worry about these being good deals or not. These are your practice people. It doesn’t matter what happens.

Go meet with them and just focus all you energy on getting to know them by actively listening to what they have to say. Keep asking questions until you feel you really know them. You will be surprised at how easy it is to really listen when you focus on it. And if you do find a motivated seller during this practice, go ahead and make them an offer! If you really listened, you have a much better chance of getting a yes.

Posted 09:39 PM | Permalink | Comments (1) | TrackBacks (0)