Rich Dad Education Blog

It is always a shame when you leave profits on the table. This is particularly true in the area of real estate investing. Many entering into the real estate arena spend time learning strategies, putting together a Power Team, and acquiring marketing skills. Meanwhile, they relentlessly make offers until they find their deal. After they have acquired their property, and despite all of their hard work, few fully maximize their potential profits because they don’t take the time to properly present their property. Novice real estate investors should not feel alone, as many veterans make the same mistake, too.

The little extra touch that goes into the presentation of the property can dramatically alter its perceived value. When the presentation is properly executed, properties move faster, and sell and rent for more. This all leads to more profits for the investor. As a real estate investor, you have invested the time; now, just spend those few extra hours on the fine tuning that makes a big difference in your bottom line.

Many of the suggestions below require a bit of an artistic touch. This might not be your specialty, and may cause a level of anxiety. If you don’t feel you can refine these skills, then you may have someone in your life that can offer assistance. When there is money to be made, there is no shame in admitting that you don’t have a dormant interior designer inside you. If those around you are also lacking an artistic flair, there are several professional companies that can offer their services to help you present your property through staging your home and landscaping. Perhaps after utilizing these services, you can decide to continue to work with them, or you may have learned enough that you can duplicate their efforts in a reasonable manner.

Staging Your Home

When an individual walks into a home, a first impression is made. The nature of this impression is influenced by certain factors that you have no control of (number of bedrooms, bathrooms, etc.). There are things within your control, however, that can enhance your chances of creating that positive first impression in the potential buyer. Home staging is one area that increases the probability of creating a good first impression. Don’t spend countless dollars in attracting potential buyers to see your property just have their first impression be a bad one.

Home staging is a relatively simple process that involves decorating a home with temporary furnishings intended to create a more inviting home. It is likely that you have walked into a home that just had a certain ambiance to it. The home felt inviting, comfortable, and undoubtedly, you gave the homeowners credit for having a sense of style. This is the atmosphere you want to create for potential buyers when they walk into the home you have for sale. When done right, proper home staging can not only create a good first impression, it can create that wow factor that leads to quick closings.

If you have doubts to your creative ability to properly stage a home, there is no shame in hiring a staging professional. Not only do these individuals have the skill set to properly stage a home, they undoubtedly will have creative ideas that will lead you to purchase items that are inexpensive, yet create the desired feel. Many of these items will be able to be used repeatedly in your real estate investing career.

There is always the option to narrow down your home staging to a room or two. If you go this route, make sure one of the rooms you stage is the first room that potential buyers will see. Your second room might be a bedroom, particularly a child’s room that can be done inexpensively, creatively, and help potential buyers visualize their own children growing up in that room.

The bottom line is that staging a home gives you a tremendous advantage over an empty house. In time, it might become your favorite part of the selling process. If you don’t find enjoyment in staging, then the quick sale results you get will be well worth the effort.

Landscaping

While staging a home can help create that positive first impression once inside, it doesn’t hurt to grab buyer’s attention on the way up to the front door. When done in combination with proper home staging, landscaping can help create that one-two punch that makes potential buyers want to buy your property. The effectiveness of this approach will quickly make you become a true believer in home presentation.

Perhaps the single biggest reason most real estate investors don’t invest in landscaping is their fear that it will cost too much. While naturally, you don’t want an overly green thumb to drive your costs overboard, there are numerous things you can do to increase the appeal of the outside of the home without sinking your budget. Simple use of colors, patterns, and a good design can create this presentation without breaking the bank. The proper placement of plants, creating a clean feel to the yard, and a touch of creativity are all relatively inexpensive and go a long way to achieving your objective.

Your overriding goal with your landscaping project is to create a presentation that is appealing to potential buyers. Extravagant features are not needed in order to achieve this goal. You are not attempting to create an elaborate design that will win a contest. Clean and simple is best if you don’t have experience in landscaping. Drive up to the house, get out, and pay attention to what you see on your walk to the front door. What sticks out? What feel empty? What are your impressions?

Much like home staging, there is definitely an artistic element to landscaping. Your own creativity and taste can make a big difference in your landscaping efforts. If you don’t feel comfortable, and don’t have someone that is close to you willing to help, don’t be afraid to hire a landscaping company to create a design for you, or give you a quote that can help you achieve want you desire.

Both landscaping and home staging are avoided because many investors don’t want to put those extra dollars into home presentation. This is beneficial to every real estate investor that is willing to spend the little extra time and money, as their homes will stand out, and simply are more appealing to the average buyer.

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The number of things a sophisticated trader can do with simple calls and puts is truly amazing. The buying and selling of calls or puts can be combined in numerous option strategies, each offering its own unique way of capitalizing on the various market conditions a trader will encounter. The key for any option strategy is to know what market conditions a particular strategy should be utilized, how to execute the strategy, and whether the option strategy fits within a trader’s risk parameters.

One of the more popular option strategies is the Iron Condor. The Iron Condor’s popularity stems from the cash flow and potential monthly income it can generate. The Iron Condor is simply the combination of two of the first strategies that beginning traders learn:, the bull-put spread and the bear-call spread. These two credit spreads are used in different market conditions. If the broader markets are at least moderately bullish and your underlying stock is also moderately bullish, then the bull-put spread is a viable option strategy. Conversely, if the broader markets are at least moderately bearish and your underlying stock is also moderately bearish, then the bear-call spread is a viable option strategy. These two basic credit spreads serve as the basis of numerous trades that option traders make, as they can capture profits in both market conditions.

The Iron Condor is often used in a third market condition, one where the market or stock is neither trending up or down, but moving sideways. In combining the bull-put and bear-call spread in this particular market condition, a trader can collect credits on both spreads which leads to the option strategies strategy’s popularity. As with any potential trade a trader makes, proper due diligence should be conducted to ensure that the trade makes sense from both a technical and risk management standpoint.

Stage One: Technical Analysis

Whatever stock or broad market is being analyzed, you are looking for a market that has demonstrated the following:

1) No dominant trend; sideways moving stock or market
2) Clear area of resistance
3) Clear area of support

It is important to identify clear areas of support and resistance, along with properly identifying the trend of the stock, as this increases the probability of a winning trade occurring. Identifying these areas also help determine the strike prices that will be used, as they will be chosen above resistance and below support. A stock that has been trending sideways should have relatively clear support and resistance areas that you can identify. If it does not, then it might be best to look for another potential candidate.

Stage Two: Determining Strike Price and Expiration Date

Once you have identified areas of support and resistance, your strike prices need to be selected. Where you place these strike prices will depend heavily on your own trading rules and risk tolerance. For example, company XYZ has been moving sideways with clear support at $40 and resistance at $50. If a trader sells close to the money credit spreads, they will receive a higher rate of return if successful. However, aA trade with strike prices close to the money, however, will have a lower probability of succeeding than a trader who sells far out-of-the money spreads. Simply put, the stock has to rise or fall farther for you to be wrong. These out-of-the-money strike prices will produce a lower credit, and henceand rate of return, but, as a general rule, will have a higher probability of succeeding.

The expiration date traders choose between can also vary. A balance between the amount of time remaining in the option, versus the net credit received, heavily influences this decision. If a potential Iron Condor expires in three weeks, but offers little premium, then is simply would not make sense to do that trade. As a general rule, shorter term options are preferable, but often times, you have to go four to six weeks out to have sufficient time value associated with the premium. This can vary dramatically depending on market volatility.

Stage Three: Determining Risk vs. Reward

Your maximum reward will occur if the price of the stock at expiration is between the two spreads you created. This is why determining what strike prices to buy is critical, and why you should always determine the trend and support and resistance before entering the trade. Never blindly enter an Iron Condor trade simply because the credit looked appealing.

Your maximum risk occurs when support or resistance is broken and the price of the stock rises above or falls below one of the spreads you entered. At this point, you will lose the spread between the strike prices minus the net credit you initially received.

Other Risk-Reward formulas for Iron Condors:

Net Credit = Credit from bear call spread plus credit from bull put spread
Max Reward = Net credit
Max Risk = Spread between strikes of either credit spread minus net credit
Upper Breakeven = Lower strike call plus net credit
Lower Breakeven = Higher strike put minus net credit

If the risk of losing an Iron Condor trade violates your personal trading rules, then you should not make the trade. When properly executed, the Iron Condor trade is a high probability trade that can generate a significant rate of return. However, losses can occur, and, as with any trade, you should exercise sound money management principles.

Stage Four: Trade Management

Ideally, the stock stays in the expected range, and the options expire, worthless. In this scenario you keep the entire net credit. Many traders have developed their own personal rules involving Iron Condors (and credit spreads in general) that force them to close out of a trade when they have achieved the majority of their net credit. For example, an Iron Condor was placed on company XYZ. The price of the stock remains in a sideways trend, and enough time passes so the trade has realized 90% of its potential profit. In this situation, some traders might evaluate the risk remaining in the trade and made a determination on those factors. Others might simply close out the trade ,and move onto the next trade. How you approach this scenario is highly influenced by your own approach to trading.

Both of these scenarios involve managing a winning Iron Condor trade. Naturally, there are times that trades don’t work out as expected. There are numerous techniques that traders can utilize to help mitigate losses or repair Iron Condors. Next month, this section of the Rich Dad Ezine will address repairing Iron Condors trades.

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He said, “Raise your price. Make it ridiculous. That would make people perceive it as value.” ~Robert Kiyosaki

The power of a quote should never be underestimated. Sometimes quotes serve as simple inspiration, allowing individuals to find motivation or maintain a positive attitude in turbulent times. Other times, quotes change the direction of lives by inspiring new careers, changing bad personal habits, and helping put importance on things that truly matter. Quotes can also transform the mindset of an individual so they fundamentally see the world differently than they ever had before.

Anyone who has read a book in the Rich Dad series has most likely found a quote that was highly influential in their life. The Rich Dad works are not simply a guide to building wealth. The philosophy that serves as the foundation of Rich Dad not only addresses ways to increase one’s financial literacy, but also speaks to human nature itself. Quotes that are derived from this philosophy can be transformational in nature, if one simply takes the time to absorb their meaning.

Quotes, by their nature, are often brief. Their brevity draws a reader in, but too often, the short time spent reading the quote is the only time invested. A reader may read the following quote from Robert Kiyoskai:, “The most life-destroying word of all is the word tomorrow,” and think, “How true that is!” After the few seconds it takes to read the quote, the reader has had their moment of affirmation, and then moves on with their thoughts. While this may serve the purpose of inspiring the individual to maximize that particular day, the transformational value of that quote may be lost on an individual who doesn’t take those few extra minutes to reflect on the quote.

Examining the deeper meaning of quotes can be an entertaining and rewarding exercise. You likely have quotes that you already enjoy or are inspired by. Take your favorite quote, and spend a few minutes contemplating how it applies broadly and analyze how it applies to the strengths and weaknesses you have as an individual. Uncover the meaning of the words and phrases within that quote to uncover additional insight that might apply to you. The following exercise is just one writers attempt to find deeper meaning in the quote, “Raise your price. Make it ridiculous. That would make people perceive it as value.” If you spend time contemplating this quote’s meaning, you are likely to glean additional insight. That is the beauty of the written word, and the power of meaningful quotes.

“Raise Your Price.”

On the surface, this seems like the most straightforward part of the quote. If you charge a certain price, the simple task would be to increase that price. However, when you think about it, you may ask why you originally set that price in the first place? What made you sell the good or service you are providing at a price that needs to be raised? Why didn’t you instinctively set a price that didn’t need to be raised?

Convention is a likely suspect. A person might think, “tThat’s the going rate.” It is easy for individuals to look around at similar goods and services, and set their prices at levels that would make them competitive. This could be due to a lack of originality, or perhaps even a lack of faith that what they offer is not better than their competitor’s’ similar offerings.

What an individual believes their time is worth can be influenced by the occupation and jobs they have done in their careerslife. At some point, an employer told them that their work was worth a certain amount, and this mindset stuck. Their time had always been worth the “going rate,” so what would be different about their new work now? This individual runs the risk of judging their ongoing worth simply based on the past categorization of one individual or company. Our time and creativity is worth far more than another person’s opinion.

There are many potential causes for why you might have your price set at the level it currently is. Whatever that level might be, the call to action in the quote is simple. Raise them!

“Make it ridiculous.”

While “Fortune favors the bold” is a quote to examine at another time, it is most applicable here. It is easy to get trapped in a negative mindset when thinking of your worth in ridiculous terms. This mindset creates words and phrases like “unrealistic” or “nobody will pay that.” The ridiculous mindset tells itself, “Damn right I am worth that.” Remember, the quote reads, “Fortune favors the bold,” not, “Fortune favors the reasonable and practical individual.”

Ridiculous. That word will conjure up a different number for each individual. Here’s a rule of thumb:, when you think of a ridiculous price, the first number you think of is probably too low. Be bold. You are that good.

“That would make people perceive it as value.”

A few years back, a painting by Jackson Pollock titled No. 5, 1948, was reported by the New York Times to have sold for $140 million. Another paining, Woman III by Willem de Kooning, sold around the same time for $137 million. Search online for original paintings done by lesser known artists, and you can find thousands of such paintings for under $100 dollars each.

While you might find it outlandish, (i.e. ridiculous), that a particular painting sold for $140 million, the price of the painting sparks curiosity. You might search online to find more about it, or contemplate why a person would pay that much. The bottom line is, these paintings did sell for these sums, and on some level, you now attach tremendous value to works of art that you may never have heard of before. You might not like the paintings, but you still attach value.

This perception goes far beyond the artistic world. Assume a person meets two different people of the same profession at a cocktail party. One of these individuals charges $25 an hour for their services, and the other charges $300 an hour. An instant impression is made. A normal reaction is that the person that charges $300 for their services must be significantly better at their chosen craft than the other. This might not reflect reality, but that is inconsequential, as that is the perception that has been created.

In our society, the “best” is not always judged by a fair standard, as sometimes it is simply determined by price. When people feel that they have hired the best, they will always associate value with it. Start telling yourself that you are worth it, and don’t be surprised when others start seeing you that way.

The quote examined here has fourteen simple words, but carries powerful meaning. It speaks to our self-worth, societal norms, the nature of constructed reality, and can be applied in countless ways to individual circumstances. The next time you run across a quote that catches your eye, take a few extra minutes to think about what you just read. You will be surprised at what you discover.

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