Discovering Your Path

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Disclaimer This manual is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the author or publisher is not engaged in rendering legal or accounting services. If legal advice or other expert assistance is required, you should seek the services of competent professional counsel.

The materials in this manual are provided “as is” and are not warranted in any way expressed or implied. Adam King and Mosaic Investments, LLC and hereby disclaims to the fullest extent permitted by law, any and all warranties, including, but not limited to A) any warranties concerning the usefulness of the content or information provided and B) any warranties of title or warranty of non-infringement.

Copyright Notice No part of this manual shall be reproduced, copied or transmitted in any form or by any means whatsoever unless in written permission by the author.

For more information, please contact us at: Mosaicrealestate@aol.com Copyright © 2005-2011 by Adam King Cooperative Purchase All Rights Reserved. No part of this book may be used or reproduced in any manner whatsoever without the written permission of the author.

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Chapters Chapter One The Missing Link you The Beginner’s Curse The Second Self Applying the second self

Page 9 Page 28 Page 32 Page 39

Chapter Two The Strategies Rental Investing Lease Options Subject To Rehabbing Wholesaling Straight Options Cooperative Options Bird Dogging

Page 46 Page 48 Page 51 Page 54 Page 58 Page 61 Page 64 Page 67 Page 71

Chapter Three Points to Ponder Rental Investing Pros and Cons Lease Options Pros and Cons Subject To Pros and Cons Rehabbing Pros and Cons Wholesaling Pros and Cons Straight Options Pros and Cons Cooperative Options Pros and Cons Bird Dogging Pros and Cons

Page 75 Page 77 Page 80 Page 83 Page 86 Page 90 Page 94 Page 97 Page 100

Time to Choose About the Author

Page 102 Page 106

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Discovering Your Path

By Adam King

Getting Prepared for the Real World Most investors will tell you their background and how they pulled it off. I think that is valuable information but not completely relevant to you, on a personal level. Wouldn’t it be great if there were as system to give you an idea if a certain real estate strategy would work for you personally? Well here’s some good news, you’re looking at it.

This manual is set up so you can get a good idea of what some creative real estate strategies look like and what is required to perform them. The manual also will go into several sections to help you find out what how you can personally fit with these strategies. Nothing is more difficult in the beginning then trying to figure out the unknown. Hopefully this manual will be a big help.

You will find throughout the manual, simple schematics and flowcharts that will help you to understand what your strengths and weaknesses are. This is so you can get a better understanding what these strategies demand based on your persona criteria.

These will be your guidelines on finding out what you’re good at, what it is you need help with, and what it is you may fear. If you are shaking your head and don’t believe this to be important, let me say this; I know no man or woman that has found consistent success without knowing themselves. We all must be able to accept the opinions of a third party source if we are ever going to see how we interact with others. And that’s what this business is about, our interaction with people.

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What the heck are you doing here?

I see it time and time again. People pulling THOUSANDS of dollars out of their pockets to pay for something they will never use. Am I guilty? Of course I am. But one thing I understand for sure, we can only stand to be accountable to ourselves and cannot blame others for our lack of success. The dumbest question you can ever ask about a system is; does it work? Quite the opposite, YOU NEED TO WORK! So in contrast, we cannot knock the personal development gurus, the real estate gurus, the network marketing gurus or the gumball machine gurus, we need to see that it is us, that needs some knocking around. We’re the ones that point all of the fingers. We’re the ones who always claim to be the victims. We’re the ones throwing our money away and it must stop! NOW! What we’re going to try to find out in this manual is who we are, what works for us, how we can apply what we know and finally, how to pick out the right (As best we can) system that compliments us. We’re not going to talk about what has worked for me and how I think it’s best for you.

Understanding who we are is integral in this business and in life in general. But more importantly as you read on, you just may discover as I did, who you are not. This may seem a little strange to you at first, but it’s something that has to be addressed. Too many of us believe our lives are governed by our own choices and decisions, but the truth is most of us allow too many others to make up our minds for us. Later in the manual you will see an exercise called the “Second Self” technique.

This was developed to help you create a defense against your own fears and self sabotaging. This technique can undoubtedly work to relieve the fear of the unknown that deprives so many of us in the beginning.

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How the manual works This manual is also kind of like a workbook. It’s going to ask you several questions about yourself to find out what your strengths and weaknesses are and some personal traits that may help or hinder your new investor career. We will also go over several examples of creative real estate techniques, examples of personal and financial obligations to those strategies, which will allow you to clearly see a link to your own personal attributes and those strategies. This will in turn hopefully accomplish the goal of allowing you to pick a strategy while making an educated decision.

Keep in mind that I am not a psychologist, or doctor and I am only able to give opinions based on my own experiences and from my relationships with successful people for whom I have worked with or have been in contact with.

Once these criteria (your strengths and weaknesses) are established, there will be more that explains what it takes to perform certain tasks and personal development aspects towards your success. This will in turn achieve a greater understanding of what it takes for you personally to perform the real world tasks that are required for a socially accepting relationship between real estate and you. Another point to make is that something strange may come about from the execution of this workbook.

You may actually realize that a life as an investor, network marketer or other entrepreneur may not be what you had in mind.

At this point I greatly advocate the further research and due diligence from other people or professionals because you just may find out you’re just where you need to be! And if that becomes the case, you’ll be glad you only spent the price of this manual and not the thousands or tens of thousands of dollars just to find out you didn’t want to do it in the first place!

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Is this the right business for me. And if so, how do I know where to start?

Anyone looking to get into real estate has asked this question.

Most of us haven’t gotten a real clear answer and the ones that have paid a price. Who’s to blame for this bombardment of determent and confusion? You may be surprised to find out. And it’s more than likely not what you think...

Starting With One Slice As previously mentioned, this manual has been created as a tool in your search for the “right path” in creative real estate. It will cover most of the more common creative real estate strategies including:       

Buying and Renting The Lease Purchase Subject To Rehabbing Wholesaling Options Note Buying and Selling

We will take a journey into these strategies not just so you can understand how they work, but also so you can understand what is required of you to make them work. We will talk about the financial liabilities of these strategies as well as the mental, emotional and commitment requirements for each.

Each strategy comes with certain tasks, risks and obligations that will be outlined within certain models, schematics and diagrams. We will then go into what I like to call The Schematic of Choice. This schematic will help you outline your strengths and

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weaknesses so you can choreograph them to their respected acquisition strategies. This will hopefully give you some insight so you can finally make a decision.

I would like to make a note here; this manual is not a guaranteed fix all and was never intended on guaranteeing success, that is up to you. And ironically that is where we will start. This is almost a mysticism that we all fail to see. We are brought up to believe in the material and the absolute. There is neither of both, we only live in possibilities and limitations. What may seem like a brick wall to most, will look an awful lot like a challenge to few. The question is where do you sit on the scale of statistic? Where do you want to be? And do you have the slightest clue what it’s like to stay there once you’ve proven yourself? The answer is undeniably no. You have no idea because all you have now is well, now.

The future for most of us is nothing but an illusion. As Jackie Chan says; my film crew and I share a common truth, we all know that what is planned never comes out that way. It’s a fact,.

I challenge you through these pages, to look deep inside yourself for that person that will take you through the good times and the bad. I challenge you to see what it takes to become successful by applying activity to your hypothesis. This is the best start we can all have within the walls of our self. To start with a clean slate because we simply don’t know what we don’t know.

And the only way to know, is to experience.

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Chapter One The Missing Link You

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Know Your Reasons Sounds simple enough right? In all actuality this is the first step towards your downfall if not answered properly. We think we know why we want to be rich and successful just to find out we were wrong. Want to save a world of heartache, suffering and pain? Read on.

Do you really want to save the world?

If the answer is yes, you may want to start with yourself.

When I first started real estate I had some issues that I needed to deal with. One of them was that I was so worried about what people thought of me, I was blinded by the fact that I was trying to impress everyone. I did this so I would be accepted and not have to worry about upsetting anyone or worse, letting them down. This wasn’t easy for me to understand at first, but I did find some comfort in one book: (Codependent No More : How to Stop Controlling Others and Start Caring for Yourself by Melody Beattie). This allowed me to see what was really going on from a third party perspective. Why this is important in real estate is the fact that if you don’t work to help yourself first, it will hurt your negotiations because it gives you this creepy persona of “I can save the world”. I.e. offering something that sounds too good to be true usually is. Now you have yourself to blame.

First step taken.

Don’t tell me this doesn’t matter either. Codependency is an epidemic in this country. Here’s an example and ask yourself if it sounds familiar: Codependent: Here, let me help you with that.

Victim: No, it’s okay really. I can handle it.

Codependent: Fine, see if I ever offer you help again!

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See the problem? This reminds me of a video clip of a dog that was sitting on a chair worrying (Uncontrollably chewing) a bone. After a couple of minutes of “worrying” the dog noticed its leg starting to come up near its face. What did the dog do? It started growling and snapping at it. Stupid dog right? Maybe we should start carrying a mirror when we worry our own bones.

Just for the record, I’m not saying to “not” care for people.

Quite the contrary, that is pretty much what this business is about, but when you smother others by overly trying to help, by trying to be accepted or look good in the process, it’s probably codependence. Just try to know the difference between creating a workable relationship or pushing someone into something they didn’t ask for.

What are “your” ideals, values and desires?

What hit the nail on the head for me was two questions from the book (The Spirituality of Success : Getting Rich With Integrity

by Vincent M. Roazzi). After almost two full years of failing at getting a real estate deal, here was the answer in plain English.

What is your version of success, are you doing what you want to be doing?

The answer was astoundingly clear. NO! I never asked these questions and after having a mire 30 minutes of getting my head straight after reading them, the flood gates opened. I was able to see what I was doing wrong and what I was missing or lacking.

Without getting too deep, the answer was pretty simple. I wasn’t doing what I wanted to do because I gave all of my tasks to a Realtor. She made all of the offers for me and did all of the negotiating. The strategy was wholesaling because I thought it was a good fit with my empty wallet. I knew I had no

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money to hold or purchase property and that’s what made it an attractive application for me. But I was wrong. I also had no knowledge of the market and needed someone to do comparables and market analysis for me. What could I offer in exchange? That’s right, a commission for someone to help me.

But the problem was simple. That was already her job and I wasn’t offering much more. And why did I allow her to do all of the talking and offer making? Because of fear. I simply never had the courage to ask myself what “I” wanted. And I wanted to talk, network and have FUN. After picking myself up off of the ground and realizing my mistakes, it only took me one month to get my first deal. It was only three months later that I had completed my sixth. And by the time I finished my first full 12 months, I had done 46 deals!

Why such a change after completely falling on my face for two full years? Again the answer was simple.

What I did wrong and what I did to fix it Number one, I wasn’t involved with the negotiations in the transaction. Number two, I was making offers based on someone else’s system that had no clue about my market. Number three, I wasn’t truly offering a service to anyone, including the Realtor.

I fixed all of it by starting to listen. It wasn’t one sided anymore. It wasn’t just, look at a property and offer 70% minus repairs. It was, what can I do for you? Why are you selling and how can I help us both get what we want? That did it plain and simple. It wasn’t what will you give me, it was what can we give “us”. I started building relationships and because of those relationships I started looking for solutions that would get everyone what they wanted. Wholesaling for me was over with. It didn’t make me feel any better about myself and it was taking me nowhere because of that.

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First off, why I wrote this manual When I was just getting started in real estate I always judged those writing the manuals in a negative sense. I used to say things like; if they’re so good at real estate, why are they selling books instead of doing deals? And, those who cannot do teach.

Well, these were BS comments based on too little information and too much judging. Now I have a totally different perspective after being in the business full time for several years. I have found other ways outside of real estate to make money as well as better ways inside of real estate to make money. Ways that are much more enjoyable than just performing one mundane strategy over and over again, and ways that produce truly passive income as well as lasting relationships that can grow and prosper over time. I guess you could say I am writing this as a way to keep score. As a way to see where I’ve been and what’s come out of it. I am also writing this because I am pissed. I am sick of seeing everyone speculate without experience. For crying out loud, let’s all at least take an educated guess before we move on with one of the greatest challenges of our lives. Ourselves.

Before we start, let’s ask a question I want you to ask yourself what brought you to this material?

What has driven you to pick real estate? Your “why” needs to be identified so you can understand how to get over the hurdles.

And trust me, they’re coming. Anyone that tells you real estate is easy for everyone only sees his or her point of view. That’s dangerous for those who have concerns, which is just about all of us. We all have different criteria, we’re not all from a rich family or born with no conscious. Some of us can’t even walk.

Some of us cannot “talk”. We need to know what our criteria is so we can present our questions and concerns.

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Concerns like: A. B. C. D. E. F.

Do I have to talk to a lot of people?

What kind of hours will I be working?

Am I going to have to travel a lot?

Will I have to explain s strategy in great detail?

Am I going to have to call for sale by owners?

Will someone try to sue me if I do something wrong?

G. Will I have to learn to lead others?

H. Do I have to ask for money?

I. Do I “need” money?

Well, the answer to these questions is yes. You will need to find out what your strengths and weaknesses are so you can excel.

You will need to do things you don’t want to do, at least for now. You will work harder in the beginning, which will require more hours than once you’ve gained experience. And yes, someday someone will at least threaten a lawsuit.

The good news There are answers, lots of them. There are at least 10 solutions to every problem. And yes, we’re going to get through them in this chapter. So let’s get started.

Is this really for me and if so, what part of it?

Who are you? What are your fears, likes, dislikes, strengths and weaknesses? Don’t know? Let’s make it easy and just stick to strengths and weaknesses from here on out. I’ll give examples of tasks, jobs and strategies throughout this manual that pertain to performing a cooperative assignment. Your strengths should show up to you automatically as you read on. If you feel a little uneasy about the topic, (Especially when you have to physi-

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-cally do the task) then this is an indication it’s a weakness. If that’s the case, then we’ll try to find the solution here in this chapter. Each following topic will have an explanation with an opinion attached to it. Whenever there is a weakness that needs to be addressed, come back to this chapter for reference.

Ready? Here’s what we’re going to talk about: 1. Attitude 2. Negotiating/Sales skills 3. Time 4. Experience 5. Your Fear Factor (Comfort Zone) 6. Accountability 7. Organization 8. Leadership 9. Compulsive Thinking/Analysis Paralysis 10.Your Identity 11. Your False Identity 12.Pressure/Stress 13.The Big Picture (Your Big Picture) 14.BS (You know what that stand for don’t you?)

Attitude This believe it or not, is the single most important aspect of your business and personal success. If there’s one thing that needs constant attention it’s attitude. Without it you have nothing!

If you were to make a list of things most important to you, things like family, money, career, spirituality, health etc, where would you think attitude would fall? Somewhere down at the bottom? The truth is it needs to be at the top! Someone once told me you have nothing without your health, but doesn’t the mind create the body? Get the picture?

To me attitude means all of these things. It’s the core of good health and good relationship. Screw money, if you had a life threatening illness and it was your time to go then

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the right attitude would be the best gift you could give to your surviving loved ones. Sorry to be so extreme, but think about it.

I had a friend (a Realtor) that was diagnosed with cancer. Before the surgery, he taped a business card to his chest. Here he is laying unconscious ready to go under the knife as the surgeons lift up his shirt to find he’s knocked out and STILL advertising he sells houses. Damn that’s funny. He kept that attitude all the way to the end. God bless you Bob. The best way to stay positive is to think positive. Surround yourself with positive things. Don’t force yourself, just let it happen and accept it. The biggest problem we have is a life of programmed negativity. It’s on TV, the movies, the freeway etc.

Isn’t it time that the truth of your existence came to surface instead of this mundane pissed off programmed self? Ready to high five me on that one? Don’t get me wrong though, sometimes it’s healthy to be pissed!

If you already have a good attitude then great! But if there’s even a small part of you that’s shyly agreeing with me, then it’s time to make a change. Ponder this for a minute; Is the real reason that you’re getting into real estate to change your attitude?

Really let that one soak in for a few minutes. Here’s a reality check. What do you want out of this endeavor? Some common answers are more time, more control and more money. The “real” ones that seem to surface are more like; to be happier about myself and my life situation, to be a part of something, to make a difference/be accepted and finally, to know I’m reaching my potential. Man, was that some weight off your chest or what? I think that too many of us short-change ourselves because of our false beliefs. We believe that there’s some light at the end of the financial tunnel. Don’t get me wrong there is, but it’s not the 1000-watt halogen that you’d expect. As a matter of fact, it’s not even the same type of light source that gives us our version of true success. That’s something that you have to find out on your own.

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Negotiating/Sales skills Let's define sales skills: First off, everyone understands sales because we do it every day.

Children are the best at it. True sales are nothing more than getting other people to see your point of view. But keep this in mind, if you try to be a salesman you're going to put up people's defenses. This is because most of the time being a salesman means that you may have to push people. And most people will say no when they're pushed even when they want to say yes. To me being a good salesman is about belief. If you believe what you're doing and can support it with facts and a good image of self-confidence, then you have what it takes to close a deal.

On the other end of the stick, you will fail just about every time when you try to sell someone on something you don’t believe in.

And most of the time if you do, it comes back to you in some shape or form. So the true answer to this dilemma is belief.

Even if you don’t have all of the facts but you believe in it you should do just fine. Leave the sales skills to the salesman that have to push people for a living. Let’s try not to forget why we’re in this business in the first place!

Time I have included this in the list because it is a strength. As a matter of fact, it’s an asset. Here’s why. Too many investors don’t have it. They have other things like money and knowledge.

These are leverages that will transform your position once you obtain them. Having all three is the ultimate leverage because it opens up other avenues of experience, profits and successes.

But time is the most valuable for two reasons. One, it’s usually all the new investor has. They are able to leverage it in exchange for knowledge and cash. The new investor may use it to seek out other deals

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for an educating investor, or use it to perform tasks that others don’t have time to do. It’s also the greatest asset when used properly. For yourself and your family.

Experience This is usually the ultimate weakness because it opens the door to anxiety. What if they ask me how many deals I have done?

That’s a harsh question for a new investor. But the truth in this information age is that you don’t need it to get started. There are just too many tools that can help you one your way to experience.

A lot of people answer this question by sidetracking it. They usually say things like; oh, my team and I have years of experience. This is a collaboration of “your team” that may consist of someone that has truly been in the business for years. You may think that makes you look good, and God knows I’ve done it.

But be careful, if you’re not honest about your experience it may show in your face as you struggle with the truth. And that’s not a good thing.

One example to answering this question responsibly is to tell the truth. No, I am new to the business and have not done this before (See the “You haven’t done this before have you?” example in Chapter 8) But I can assure you I am well prepared with the information and tools as well as the support (If you have it) from experienced investors. This support could be a phone call from just about anyone that has done what you’re trying to do.

Control (The most common “real” reason for real estate) Let’s identify control. At first this seems like an easy one, but when you look at it on an individual level, it starts to change a bit. Take for example the most common

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answer to why do you want to be rich? The usual answers are something on the lines with; wanting to work from home, be with/there for family, more time, more freedom etc. But here’s the pitfall. Most of us really want more control to AVOID OUR FEARS! Think hard about this one, if I’m right, I have just saved you a world of grief.

Take this into consideration; if you deep down inside can’t deal with the real world and that’s why you want more control, then simply put, you may be screwed. What if you want more control because you don’t really like to deal with people? What if you want more control because you compulsively fear about your family’s safety? Think long and hard about your true definition of control. It may not be what you’re thinking it is.

Here’s a way to get past some painful decisions about this topic.

Your Fear Factor (Comfort Zone) This is one of my favorite topics. I hear it all the time, if this is such an easy business, why doesn’t everyone do it? Well, this is a double-edged sword that needs to be dulled. My answer is this; people don’t do it because they wont get out of their comfort zone, but here’s the catch. Whose comfort zone is it really?

Think about it, why are you scared of the dark? Is it because you truly are, or is it because of that damn horror movie your older brother or sister forced you to watch when you were a child? Why are you scared to pick up the phone and call someone? Is it because you feel you’re too good to talk to someone you don’t know? Or is it because society teaches us that we need to look good to survive and you cannot handle the rejection? Man, we’re getting deep now aren’t we?

Here’s the truth. Most of us accept for face value. We accept it for the simple reason that if we do what we’re told we will

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be rewarded with security. This means that we can stay where it’s comfortable and safe. A place that makes us feel good, for a while. Here’s another truth, if you weren’t reading this I wouldn’t know that you’re sick of that “security” because you know it’s false. It’s false because it too was taught to you. Now we both know that you’re looking for a different kind of security, your version of security right? Only you have the ability to be the creator of your intentions and desires. Only you have the ability to make it happen. And only you have the ability to make a change. So now I ask you what is your comfort zone?

Accountability Ah, here’s another one that our egos want to avoid. This one was the toughest for me to get past. In the beginning I didn’t care because I thought it was all about me. That was quickly changed when I started a family. Accountability is usually the direct link to your “why”. This is because it’s the first form of responsibility that comes from taking care of others. Now it’s time to be accountable. Now it’s time to be responsible. Now it’s time to understand the true meaning of success and fulfillment.

This country teaches us different. We teach each other to blame, treasure being the victim and toss the responsibility onto someone else. There is always someone else to blame for our actions.

This is a crock and a very dangerous game to play. When we don’t take responsibility, someone loses. Of course it’s not us and that makes us right. But what does it do for the one that’s wrong? Take this into the world of real estate and the answer is usually a lawsuit. Accountability has another string attached to it, a good string. This is in the form of measurement of our progress. Sharing your goals with someone else and asking them if they will take the job of someone to be accountable to, can reap huge rewards. This is called; getting a third party perspective to stay in check of your BS.

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If they are sincere in helping you, then you will have the ability to track your progress and know when you’re falling off the wagon. A word of caution here, make sure it’s someone that you have a powerful and honest relationship with. It also wouldn’t hurt to have at least a verbal agreement that if you fall short of your obligations it will not hurt the relationship. This is because you are offering them immediate power over you so you can reach your goals and finally gain power over yourself. This is a sure way of pissing off your ego so be prepared.

Organization This is the mother of all of my weaknesses. I couldn’t stay organized in a bucket with three handles. I fight it constantly day in and day out. What’s that? I’m not alone? Well there’s a news flash!

One thing that is crystal clear to me when it comes to most new investors, is that our minds are in trouble. It’s not because we’re lazy, unmotivated or lack organization, but instead it’s usually a direct result from our personal frustration. Some people call it ADHD (Attention Hyperactivity Deficit Disorder). I call it being sick and tire of being sick and tired and not knowing which freaking direction to go in.

Trying to understand it will do nothing for you. Not fixing it will make it worse. Talk about frustration, how many times have you needed something now and have not been able to find it? There’s usually a signal in our house when this happens to me. The dogs and cats SPLIT! First comes the hairs on the back of my neck rising. Then comes the slightly violent moving of tabletop items that have been piled up for days. Then comes the pure pissed off, out-of-control, self irritated total destruction, flipping of furniture, screaming, hair pulling RAGE that comes with NOT KNOWING WHERE STUFF IS! Of course this is an exaggeration but nonetheless we’ve all been there. How do we

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fix it you ask? One word, discipline.

The truth is, having things organized will give you two things, piece of mind and time. Being prepared is an incredible feeling.

Knowing where stuff is and having instant access to it is rewarding beyond measure. Not to mention that pets can relax a little more, which will save you money on their nerve medication. :) Leadership Leadership is a tough topic to discuss, but it’s necessary if you ever want more freedom from your business. Leadership will help you automate your business by placing the right people into the right jobs. This could mean something as simple as accounting, or a secretary, but more importantly someone to replace you especially with the things you cannot or will not do. Not everyone will fit the bill for this, but if you are a good leader your chances of finding and managing the right people is critical. I see too may people get into real estate to escape the rat race.

What I really see is people running right back into rat race because they can’t replace themselves or simply work too hard.

Again, if you cannot do it, sub it out. There’s a lot of people in this world that need a job.

Having good leadership skills will help you to not only get what you want, but also increase your profits. It can give you the ability to expand your areas of investment and work with others while doing different strategies. Partnerships are the first things that come to mind. Working with other new investors is in my mind the single most important move you can make in the beginning. This is because they will bring a wealth of their own advertising and deals they cannot perform because it doesn’t fit their personal strategy. Again, this is an opportunity that will put the leverage in your corner.

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Compulsive Thinking/Analysis Paralysis This one is just too common a topic. We all go through it, we all get stuck in it and we all (if you want to be successful) need to break free from it. It’s okay though, it’s not entirely your fault.

This is what we’re taught with all of those thousands of “nos” our parents gave us growing up. It isn’t that they were wrong for doing it because it was just about survival and safety. We’re taught to examine the situation, get the facts to the point of trust and then make a decision. The only problem with that is that we were never taught to trust ourselves after compiling all of the information. Sometimes control from our parents does just that.

It gives them the control to make our decisions for us. Again, it’s not that I’m blaming our parents here, I’m not. I’m a parent too and I can guarantee you that I will be the teacher of safety and security for my kids. I’m just saying that when it comes time to let them have the wheel and be in control of their own lives, they’ll have it. I think it’s important for them to be able to make their own decisions, but also be able to act properly with those decisions.

Ric Edelman (Author of Discover the Wealth Within You and The New Rules of Money) talks about how we make decisions.

He talks about when is the last time you made a decision on your own? Then he talks about what decisions are and how often we really don’t make them on our own. What time you get up in the morning, what you wear, what time you eat etc. When you think about it these are decisions that others have made for us. Take our boss or spouse (Those are interchangeable sometimes) for example. Now ask yourself who makes the decisions for you about what time you get up, what you wear, what time you take lunch etc. This is a heart wrenching reality I know, but he’s right. Don’t believe me? Try doing something your peers don’t agree with, something that seems foolish or absurd.

Something like, finishing this manual and going out and making

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five or six figures a month. You’ll see just how quickly people want to control you.

Getting the information is great. Using it is better. But going over the same thing and expecting different results is insanity.

(Says Robert Kiyosaki Author of Rich Dad Poor Dad) I think that a lot of us are just worried about what other’s think. We’re worried about looking stupid or bad and that’s why we need as much information to support us in the time of need. The ugly truth is that this is incorrect. We need to DO IT to gain the selfconfidence needed to move on to the task that scares us. We make excuses when we don’t want to do something and play the victim when people call us out on it. We say how it’s their fault and go back into our self-reassurance that we’re right. Here are some answers for you. Instead of going too far into psychological rhetoric, I could give you a road map. This map would be a kind of schematic that draws out EXACTLY what you need to complete an acquisition. Step by step it would show you what needs to be done. But I have to say this; This is what most of us “think” we need but when the time comes you’ll see your own rhetoric come back into play. You may see yourself trying to hide behind something or escaping a situation because of the fear of humiliation. I still go through this so I know it’s real.

Well, I should that the feelings are real, but the reasons for believing in those fears aren’t. That I also know.

Preparing your Dragon Skin Anything that can fly, breathe fire and take a bullet is a tough cookie in my book. That’s why I think of Dragons for this topic.

I’m also thinking of them because of experience. My sister Marianne told me a story about a job interview that she was at for a teaching job. She told me of a question that she was asked during the interview.

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The question was this; would you rather be liked or respected?

Of course back then I would have answered, “liked” because of my horrible codependency. I wanted everyone to like me. As a matter of fact, I went out of my way to make sure you liked me.

I would lose sleep if I upset you in some way or I would confront you just so I could prove that you had me all wrong. The only problem with that was that it taught people to want to avoid me. And that’s a lonely place to be.

I was a wreck. I would come up with crazy ideas of flattery. I would find something that you agreed on and agree right along with you even if I didn’t. It was hard work trying to please everyone. I worked so hard at it that I lost my self-confidence. I would start to worry so much about how others felt about me that I became co-dependant. That was nothing short of tragedy.

When I was much younger, I found myself one day in conversation with a gentleman who I greatly respected. I tried to relate to him with something that I had no right to, his social standing.

I tried to let him know that I was like him when I wasn’t. I was trying to be accepted but he didn’t see it that way. Instead it came off as a kind of artificial “flattery”. He thought of me as a fraud and made it clear I knew nothing about how his life really was. I was crushed. All I was really trying to do was be accepted. I had a hard time sleeping for a week. I kept running it over and over in my head what had gone so wrong that I was considered such a thing to him. He liked me, a lot. I liked him, but there I was trying to relate to someone with the utmost ignorance about him or his life style saying the wrong thing. Damn I thought, how could I have allowed this to happen?

I look back on that now as one of the greatest lessons of my life.

I have played that scenario over and over in my mind for years.

Blaming him for judging a naive kid so harshly, blaming myself for being so stupid. How could I be so stupid?

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I even had someone with me at the time who told me I had done nothing wrong. But that didn’t lesson the pain of his negative feelings towards me. I had finally tried too hard to be accepted.

What I have learned from that experience is this; You can’t change the past for one, but you can change the now. I don’t flatter people anymore and more importantly I don’t work too hard to be accepted. If you don’t like me for the way I am then that’s just fine. I could care less. I have gotten where I’m at because I have earned it and I have been accountable. Not because I have gotten people to like me. I have reached financial success just to be asked if what I am doing is legal. I have been alone making those calls to people that didn’t want to be bothered by another damn newbie. I have had to sit in front of seasoned investor’s offices just to be told I’ll never make it. I have been told I can’t make it because real estate is too hard. I have had people hang up on me, threaten to sue me, tell me I’m lazy, tell me I’m disorganized, tell me that I can’t follow through. I have had the same people that tell me I could do anything I wanted with my life still continue to doubt me TO THIS DAY! But one thing is for sure, I can now see the truth because it has already happened. The truth is that if I had fallen into other people’s beliefs, doubts or BS, I would still be where I was five years ago. And that wasn’t a good place.

It’s not about the money. It’s about self-respect, knowing you’re making a difference and being accountable. It’s about responsibility, having what your dreams make for you and knowing when it’s time to go with your gut. It’s about love, fear and passion. Tony Petril from Pre-Paid Legal once said something that I’ll never forget. He said that it really boils down to one question; what are you willing to sacrifice? Is it the pain, or the regret?

Get your Dragon skin. Don’t worry about what people make of you. You cannot control their perception of you.

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Let me say that again, YOU CANNOT CONTROL THEIR PERCEPTION OF YOU! If you continue to try to get ahead with flattery and manipulation, you will never realize your dreams. If you want to be respected, then respect yourself and be done with it. Don’t worry about what other people think because it’s all a part of the process.

This is the great secret of life, you will one day understand through the law of attraction and intention that the process “is” the result. The path “is” the destination. And it won’t take long to realize there is no one to hide behind. Be strong on your journey and the understanding will come. There may not be words to describe it, but it’s there waiting for you.

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The Beginners Curse Here’s a question. Do you really know what Greed is? Of course, you’re thinking that there’s no way you’ll be greedy in your new real estate career. I mean, you got into the business to help people out right? Well, let me give you a news flash. 8 out of 10 new investors are greedy. They don’t know it and it’s actually not even their fault, sort of.

Opportunity: A favorable or advantageous circumstance or combination of circumstances.

Let’s start off by talking about opportunity. This is something that presents itself when a seasoned investor allows a new investor to work with them. This is usually for the exchange of a lead or equity in an acquisition. It’s called an opportunity because the seasoned investor is giving up valuable information and time to mentor the new investor. And possibly some cash.

Now think about this; What has the new investor truly done?

Did he bring something that the seasoned investor didn’t already have? Or did he bring something the seasoned investor could not have done on his own? That answer is usually the latter.

But the seasoned investor also knows that the beginner is also being given an opportunity. But there’s one more piece to the equation. To come up to an answer to this dilemma, let’s look at the following flowchart: The flowchart on the next page shows us what steps are typical in a real estate transaction and what the responsibilities are for taking those steps. The flowchart is kept very simple just to prove a point. Notice how liabilities are expanded in the “Acquisition Schematic 2”. It’s not hard to see how things can get ugly when a new investor wants too much of the acquisition for just brining the lead.

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Acquisition Flowchart A

Lead (Motivated Seller) is generated

A. Task/Jobs

B. Responsibilities

Lead Is Generated

From ads, signs cold calls etc

Evaluation Begins

Market Analysis/inspect

Negotiations Begin

Experienced Offer

Strategy/Sale Accepted

Paperwork Completed

Acquisition Performed

Sale or Liability of Holding

Acquisition Completed

Closing Paperwork Sale

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In Flowchart A., we see that there are responsibilities and obligations that are performed to get the deal done. This is where experience and a good team comes in.

As a new investor this is not something that is just given to you.

You have to go out and earn it. You will need to gain leadership skills if you don’t have then already. In some cases you will have people to work with right off the bat, but in most cases (And the main reason this was written) the new investor has no experience, little knowledge and no money.

You must overcome this hurdle by first knowing what you want, and then you must know what you are willing to give to get it.

In simpler words, you need to learn how to work a profitable relationship.

Story I had an investor bring me a lead once. He told me that he wanted $500.00 as a finder’s fee if I did the deal. I had no problem with that so I agreed to pay it when the deal went through.

Then something crazy happened, I built a relationship with the “lead” that he gave me. The lead or seller, turned out to be an investor herself. We talked only twice before we realized we had a lot to offer to each other. During this time, I called back the investor to thank him for the lead and that the deal was going to go through. I asked him where to send the $500.00 check.

To my amazement I got this as a response; Oh, that was a great lead huh? Well, I want $500.00 for every deal you do with that investor from here on out. Naturally I laughed. But then there was a long moment of silence. I couldn’t believe this guy was serious. Needless to say he wasn’t happy with me when I asked if he was on crack.

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As a moral, we can see how this investor was wrong in his thinking. He was taking this too damn seriously and didn’t see the other steps in the process. He couldn’t see that it was “me” that brought on the relationship with the other investor. And ironically and not to sound egotistic, he never saw the opportunity to have a relationship with me. That obviously cost him quite a bit.

Be careful with your greed. You may not see it so get a second opinion if necessary. You may want to try to put yourself into other people’s shoes before you start barking demands. As a matter of fact there’s a simple solution to all of this. A simple solution to make sure you’ll always be okay in situations like this before they blow out of control. It’s called “asking”.

How to treat success as a game The lesson: Artificial beliefs At the heart of the matter, it is a fact that we forgot life was a game. This makes it so hard to achieve our dreams and goals because we become so damn critical of ourselves. It is the daunting egoic voice that keeps lying and telling us it’s life or death. What is the opposite of life the ego asks? Death the ego replies. Wrong, the opposite of death is birth, life has no opposite, it just is deal with it.

Should I take the path that gives me security? Or should I take the path that gives me freedom? Logic gets thrown out the window the second the hairs on the back of your neck begin to rise.

The ego does have it’s place, it’s called survival. But if the ego is allowed to control the outcome of something that starts as an illusion, then that can only make matters worse. Realize that this thing called real estate investing takes skill. It takes a plan and it takes strategy. That’s because it “is” a game, not life or death. It takes time to build up your team and put the pieces in the right place. The sooner that is realize the better.

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The Second Self

Organized Witty

Courageous

Caring

Intelligent

Outgoing

The Second Self

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The Second Self The second self was an idea originally created to help with the fear of being rejected while making cold calls. It was the idea that if you weren’t you when making the calls, why should you care? It has then developed into a system that had startling results.

At first the system was more like child’s play. It was a development based on imagination and creativity much like a child would have playing army in the woods or having a tea party with imaginary friends. The premise was to create a carbon copy of your physical body while leaving the interior (The “you” part) blank. Almost as if you created a clone of yourself but with the insides of a mannequin.

What was done next was to take the best attributes of yourself, such as things others liked about you and implant them into your carbon copy. You would of course, leave the bad or negative things that you didn’t like about yourself out. This could be things such as; your ability to be creative, to work well under pressure, to be kind to others, to play an instrument well etc.

You would also implant attributes of those you looked up to.

These could be a real person you like or even a character in a good novel. This is in fact almost like creating your own super hero but with the intention of keeping real estate negotiating in mind. (Although this can be used with other issues such as ADHD or anxiety attacks, which I have used it personally for.

Again, I’m not a doctor so these are just my opinions so let’s just have some fun.)

Once your positive attributes are implanted into your double, it’s time to “shift” into that double and experience him or her. This at first may feel a little strange, but if you keep an open mind it’s quite an experience.

See the Second Self Diagram on the following page

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The Second Self You Personal Self “Real You”

The “real you” obviously is going to consist of all of your attributes whether they are good or bad. The idea is to pull out only the ones you see as helping you in your real estate career.

You are also looking to dump the ones that are either self abusive, slow you down or hinder your success. Don’t forget, this isn’t an exercise to make you feel guilty or bad about yourself, it’s an exercise to allow you to see the potential that lies within you. The trick here is to realize that once you create your second self, what you’re actually doing is reprogramming your brain based on your own decisions and choices.

Nothing is more powerful.

Here’s an example of some attributes you may want to leave out of your double.         

Laziness Disorganized Inability to focus Listening to other’s opinions and taking them as fact Thinking you’re stupid or not good enough Concern of what others think of you Lack of self esteem Thinking you’re not attractive Fear of talking to people

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The Second Self Double Second Self (Clone)

After making a list (not too long) it’s time to create your second self. Your only limits are your imagination. Create your double with everything you want to be and more. Everything you have ever dreamt of becoming whether you truly believe it possible or not. Just have fun with it.

Here are some example attributes you may want to implant into your double.            

Outgoing Witty Intelligent Organized No fear of crowds, public speaking or of what others think Ability to make sound choices based on own intuition Courageous Free spirited Financially set Caring Great provider Anything else you can imagine.

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What to do next with the second self once you have created her or him, is to make the shift. This is simply done with the use of your imagination. At first you may actually feel a physical difference. This is normal and your mind may be telling you it likes it. If not, you may need a little more time to convince your ego that this may be good for both of you.

In the beginning it’s a game. But after some time you will start to notice that this little technique may just be leading to something else.

Here’s an example of failure: Jan was sitting down for the first time with the local paper. She had just finished her first real estate course the night before and was ready to make some money. She circled all of the ads and was now ready to make the calls. But all of the sudden a strange feeling reached up into her stomach and started to pull. It was fear.

After sitting there in front of the phone for what seemed like hours, she finally decided to make a call. She was so nervous that her voice was quivering and she knew the seller on the other end of the line would notice. The phone call went poorly. After making several more attempts, the feeling in Jan’s stomach became stronger and stronger making it more and more difficult to make the calls. This business isn’t for me she said to herself.

The little voice in her head started to make up excuses for why things weren’t work ing. She even started to think of returning to the life she so desperately wanted to leave because it was at the very least more comfortable.

Even with all of the effort to convince her ego this was the right path for her, the fear continued to pull her back to her comfort zone. Jan simply made no more phone calls and began the search of the next “product” that could get her passed this.

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Here’s an example of Success: Jan was sitting down for the first time with the local paper. She had just finished her first real estate course the night before and was ready to make some money. She circled all of the ads and was now ready to make the calls. But all of the sudden a strange feeling reached up into her stomach and started to pull. It was fear.

Jan knew she had to do something to get rid of this feeling but what? Could she work through it alone? Or would she have to give up and go back living in the world she was so eager to change? Jan decided to start treating her fear as though it was a game. She easily remembered the feeling of what it was like to be the person she always dreamt of and created through the practice of building the “Second Self”. After only a few minutes of concentration her confidence grew. She was now picturing being in her dream house with a beautiful family and the feeling of unrivaled accomplishment. She was now attracting this and she could feel it. She picked up the phone and started making calls again. She was hung up on twice. She was forced to leave answers three times after that. And finally, she talked with more than ten homeowners looking to sell their homes and not all of them were pleased to talk with her. She knew this was only the first step and was excited about the opportunity. She was excited to now know that she was gaining experience and it was taking her closer to her goals. She also could feel that this person she wanted to become was already here. This wasn’t an exaggeration, this was reality. She could smell the ocean air of her dream home and see the lifestyle she wanted as it was taking place in the present. But more importantly she felt “whole” for the first time. Jan realized what was meant when others talked about it being easy. She smiled as she reached for the phone to make more calls. Within minutes, she finally got someone who responded well to her new attitude. The rest is history...

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This is experience talking. This is the way it works. We don’t give up because we can’t do it, we give up because we can’t find a way to do it. The Second Self technique is very similar to the fake it until you make it technique. However, there’s something much more profound here. So with that said, here’s a wrench in the works of logic. If you’re creating a person of who you want to be, or if you’re trying to set aside the person you think are, let me ask you a simple question. Which one do you think is the real you? Hum… This is a glimpse of the future for you. This is a seed that must be planted. Once again I challenge you to think about who you have become. I challenge you to think about who you “will” become and which one of you is the real one? Kind of mind blowing isn’t it?

The coolest thing about this is you can do it with anything. I have used it to battle anxiety and stress. Again I am no doctor but I know it through my own experience that it works. I know it can be used as a tool to get through hard times. I also know it to be something that is fun to do just about any time. I’m not saying act out a super hero in public if you don’t want the exposure, but like the saying goes; dance like no one is watching, sing like no one can hear and love like you’ve never been hurt.

It’s just fun to have the power to be who you want when you want. And the greatest thing of all is that you “can” become whomever you want to become. This is what life is about. You can redesign yourself at any given moment. Get as creative as you want and experience the results in life itself.

And for one more motivating factor I will add this: Do the thing and you will have the power; Ralph Waldo Emerson Jeff Olson (MLM Multi Millionaire) repeats this quote so much that I have started looking for a “re-play” button somewhere on his forehead. All fun aside he’s right.

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Applying the Second Self

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The Ultimate Illusion And how to overcome it in 30 days The following is a four week program to creating and using the Second Self technique. I have included it here because I believe it will help on your path to not only finding a niche, but also to further help you in just about anything you decide to do outside of real estate. I know this because it has worked for me from everything from being a better listener and negotiator to sleeping better.

Working with the Second Self technique should also allow you to see more of your strengths and weaknesses. This should help you prepare for the requirements that real estate or any other entrepreneurial venture demands. Of course just having the information about yourself is a help, but I also believe utilizing the information for the future will give you an edge towards your success.

Week One: Change everything you do to bring out your resistance towards habitual patterns Begin by doing what you don’t do, and do nothing you normally do. This will help you become aware of common habits and patterns that deter you from accomplishing every day goals and tasks.

The main purpose is to bring out your BS, or show you just how much you procrastinate or disguise fear from negative or habitual patterns. These are the patterns that stop us dead in our tracks.

Such as:  Watching too much TV  Overeating (or emotional eating)  Surfing the web  Emotionally spending money  Over thinking or talking and not doing  Making excuses  Over criticizing yourself

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

Calling someone to try to justify avoiding the situation all together. I.e. getting someone to agree with your BS

The last one there is my favorite. One day I called my life coach Mark to explain a dilemma I was having and what to do about it. The dilemma involved my lack of focus which resulted in wasting a lot of time. After throwing up on him for an hour, I asked him for his opinion. He stated simply that the phone call itself was part of the problem. You’re doing it right now dude, he said. I was amazed by the fact that I didn’t see it. I didn’t know it, but I was only calling him to have him agree with me.

I.e. buy into my BS. He immediately saw what I was doing.

The premise of week one is to distinguish the relationship between yourself (your desires) and your basic survival mechanism, I.e. your ego. This way you can see the two different patterns of decision making. The one pattern will tell you your desires, wishes and dreams and the other will tell you that you either don’t deserve them or can’t have them and to just sit still and stay safe. Proceed with caution because this can be painful.

But it can also be healing if you can learn to accept it and move forward.

As you go through week one, use the following Diagram to help you keep track. This is a very simple exercise that may have you talking to yourself in public. Just nod and smile if someone gives you a look like you’ve clearly forgotten your medication.

Also keep in mind that your ultimate goal here is to find out what you truly want. This is the first and most important step to getting over the hurdle of not knowing where to proceed.

See the next page for the Keeping Track Questionnaire

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Keeping Track Questions What are some of your strengths? ___________________________________________________ ___________________________________________________ _______________________________________  What are some of your weaknesses? ___________________________________________________ ___________________________________________ _______________________________________________  What patterns do you use to avoid uncomfortable situations? ___________________________________________________ ___________________________________________________ _______________________________________  What types of things do you do out of habit? ___________________________________________________ ___________________________________________________ _______________________________________  What are some things you would like to change? ___________________________________________________ ___________________________________________________ _______________________________________  How do you react when someone does something you dissagree with? ___________________________________________________ ___________________________________________________ _______________________________________  Are you able to admit that you’re wrong when you know you’re not? ___________________________________________________ ___________________________________________________ _______________________________________  What was it you wanted the most when you were a child? ___________________________________________________ ___________________________________________________ _______________________________________ 

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Week Two: Create the Second Self which can handle the objections and rejections and create discipline against negative thought patterns trying to recoup old habits.

After a week of doing things differently, you’re actually reprogramming your brain to see things in new ways. Now it’s time to stick those new patterns into overdrive.

Get ready to create your dream double. Again, this “personal double” can have attributes like an actor or character you like, or someone that you well respect. It can also be someone made up from scratch. The key here is to create someone that you see as successful and self reliant. This person should be confident, witty, smart, or have whatever traits that you respect or desire yourself to have.

As mentioned before, this identity will also act as a safety net when the negative thought patterns become present and try to sabotage the program. Each time a self abusive negative thought arises struggling to go back to old patterns, this Second Self should be able to handle them because he or she becomes an outside or third party observer therefore not taking sides or anything personally.

This can be some pretty powerful stuff so don’t take it lightly.

Have fun but be persistent in the practice of this double. The more you focus on becoming this person the more you’ll realize it’s really you. The human being is the most adaptive animal on the planet. Use that towards your advantage and this will be effortless.

However, if this does becomes a struggle, then that’s a clear sign it’s your ego stepping in the way. Just remember what it is you want and begin to think of how your Second Self would get it.

It shouldn’t be hard to talk your ego into following your footsteps.

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Week Three: Become aware of your true desires and goals and find what you can offer others.

This week is the “make what’s against you for you” week.

This means that you will be able to not only review what previous “debilitating” or negative patterns have shown up in the first two weeks, but also how to recognize those patterns in other people so you can create a situation of service. This week is also time to go over who you really are, (or think you are) what you want out of life and finally, how you can apply those desires and goals as strengths to help others. This is the time to work on attitude, self potential and service.

Once you start to realize the changes taking place you can start to apply them into the real world. Think about these strengths while considering real estate acquisition strategies. You may notice that there are traits you may have had, or are starting to develop that can help you.

An example of this is the trait of having a good attitude. Cindy Scheets, a past student of mine, has made this very clear during her phone conversations with sellers. Attitude alone has gotten her many more yeses than other investors. She was also one (The only one) to get a lead from a recent boot camp with a well known speaker and teacher. There were thirty plus people in that class! How was she the only one? Her attitude.

I have had the opportunity to ask many sellers what they thought of her and listen to their reactions. EVERY SINGLE ONE was positive and had nothing but good things to say. At one point because of her attitude, I even had sellers super excited to hear from me because she got pumped up that I was going to call.

Now that’s powerful stuff!

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Week Four: Accepting the Illusion and Moving On This final week will allow you to review what patterns were holding you back and what patterns are good for your future.

This is the time to open our minds and lock in our new positive beliefs by accepting the old patterns and letting them go. This is the week of total change. It is time to shed the old skin and begin our new adventure of service, self worth and prosperity.

Now that the old patterns are removed, or at least brought into the light, it is time to continue our paths towards personal achievement in whatever field that we desire.

We get what we give. We cannot give if we do not appreciate ourselves.

The gift is us.

Something else to consider while going through the Second Self process. This does not have to be a four week program. This however needs to be a four “step” program. But in all honesty I have done it in one week. If you’re like me you may not have the patience or time to do it every day for four weeks. This can become a task and that is not the point. I just know that when I did it in a short period of time it worked because I had fun with it. I acted, played and dreamed. I simply awoke one day and I realized that I had become what I desired. So again, if you would like to “try it before you buy it” you can certainly dabble with it and have powerful results. The point that I would like to repeat is to have fun with it. I have several examples of how it has helped me focus and not take life so seriously. The hardest part for me was noticing how negative I could be. I couldn’t believe the things that were coming up for me. I found so many instances where I would get side tracked and then beat myself up for it. That was horrible to realize but a relief to overcome.

If you love those around you, you will learn to love yourself.

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Chapter Two The Strategies

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The Strategies The strategies will be laid out in the following manner:        

Rental Investing The Lease Purchase Subject To Rehabbing Wholesaling Straight Options Cooperative Options Bird-Dogging (Locating deals for other investors)

There will be a brief description of each strategy and what obligations (Physical, financial, experiential etc) will be required to perform certain tasks that particular strategy demands. Once this is done you will be able to align the strategy’s requirements with your strengths and weaknesses which will help you to see what will work or not work for you.

The strategies will also be broken down into three categories based on the requirements for completing the acquisition. These categories are: Time Cash Knowledge/Experience After learning your limitations, strengths and weaknesses, you will be able to better match yourself with a particular strategy.

The more requirements you match, the better your chance is to being able to take on that particular strategy. Be careful though, you may find more than one and that’s okay. But just make sure you have a sound reason for diversifying if you decide to do so.

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Rental Investing

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Rental Investing Buying or “Purchasing by cash or mortgage” and then renting is just about the oldest form of real estate investing there is. This strategy is done by the investor using their own cash or mortgage, or another partner’s cash or mortgage to purchase property. To keep things simple, the following is for a cash/ mortgage purchase only.

How the acquisition works:   

Investor purchases property (Single family or apartment complex) via cash or third party financing Investor prepares property for renting for cash-flow Investor intends to hold property for a long period of time

What is needed to complete the acquisition.

Time The investor will need time to do research on the property to find out its market rental rate as well as its current and future market value. The investor will also need time to market the property to find a tenant.

Cash The investor will need money to purchase the property unless there is a 100% financed mortgage put down etc. The investor will need money to hold the property until he or she finds a tenant or if there is a vacancy. Money is also needed if the property needs repairs.

Knowledge/Experience The investor must know how to determine the current rental market and cap rate. This will help him or her with the negotiation of the purchase price and the rental price. The way it helps with the negotiation of the purchase price by comparing the

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rental market to the price of holding a mortgage. I.e. if the rental market price is $800.00 a month and the mortgage will be more than that, the investor would find it in their best interest to either negotiate the price down, or offer some terms in exchange fore equity.

There are many other variables involved with renting a property.

If time is what you are after, then hiring someone to collect rents and manage the property is a must. This will cut into your profits but at the same time buy you more time/freedom. Some other variables are the cost of physical upkeep, vacancies etc.

General ware and tear of a rental property usually means replacing carpet, painting and general upkeep. This cost can sometimes be menial, but in some cases (As in my experience) it can cost thousands. This is especially true if you have had a deadbeat tenant, or a bad eviction in where the tenant tried to kill the house. Repairing drywall and broken windows can then be another source of wallet shrinkage.

These are some things the new investor may overlook. Sure you can get properties with as little as $10.00, but holding them can be another cost all together. I have seen where investors have put themselves in the middle of deals only to find out they could not handle it financially. If you’re making a $100.00 a month cash-flow on a property that has a $1,200.00 a month holding cost, it will take only one month of vacancy for you to lose an entire year of profit. Now how’s that for a reality check?

On the other side of the coin, most of the millionaires that I know have started with rentals. They now own most, if not all of their properties free and clear and can borrow thousands against the equity if they need to. This gives them the ability to pay cash on other investments and other opportunities. And paying cash in my book is one of the strongest leverages you can have in your career as a creative investor. But we will also see that cash is not all you need to do deals.

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Lease Options

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Lease Options For this section we will use the strategy of the “Sandwich Lease Option”. The sandwich lease option is simply taking over a property with a lease while having the option to purchase during the time of the lease. The investor then puts his or her self into the middle by subleasing to a tenant/buyer and gives them the option to purchase at a higher price.

How the acquisition works:   

Investor leases the property with the option to purchase Investor markets the property for a tenant/buyer Investors subleases the property to the tenant/buyer for cashflow/equity and allows them the option to purchase but at a higher price.

What is needed to complete the acquisition.

Time Locating the deal, doing the market research to evaluate rental costs, running comparables to find property value and locating a tenant/buyer. Rental mentality and upkeep applies here too.

Cash Sandwich lease options are a great way to hold property without having to qualify for a mortgage. The seller is willing to give you the opportunity to purchase in the future while leasing the property. This in theory means you do not need money to purchase the property, but it does not mean you do not need money all together.

The lease option requires the same liabilities as the rental if there is a vacancy or any damage to the property. Although in most cases the lease agreement may be forfeited if you cannot perform your obligations. But if there is equity involved and you back out of the contract, you will also lose that equity.

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Knowledge/Experience Lease options are a very easy concept to grasp. They are also easy to do because of the lack of bank involvement and minimal paperwork. The paperwork usually only consists of a rental agreement, option agreement, memorandum of option and any disclosures that your state requires. Although they seem easy at face value, only experience can achieve desirable results over time. This is because many new investors make mistakes when prescreening tenant/buyers (and sellers), property values and rental market comparisons. This can lead to over paying for the property (or option to purchase) and putting someone in the property that has had a bad track record with evictions. One more red flag is that SLOs can be risky because you are not taking the deed. This requires (in my experience) a very certain level of negotiating confidence with the seller to make sure the future stays bright on your behalf. Not something very exclusive to the new investor. When I first started I allowed just about anyone to get into the property. I was so scared about having a vacancy that most of the time I didn’t even look at their credit reports. Now after several years of full time experience, I know better. I have story after story about people deliberately lying on their applications. I now know what someone with three bankruptcies looks like. I also know when people blame everyone but themselves for bad credit they usually will add you to the list of “people not getting paid”. Unfortunately, only experience has taught me this.

Now I’m not saying you cannot learn that in a manual, but you will not get good at it until you do some deals. So to be safe I would say that cash is required to hold the property if you get derailed with a bad tenant or unpredicted situations.

The opportunity of utilizing the leverage of the lease option is incomparable. Just make sure that if you negotiate well and you are able to hold the property until your payday comes.

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Subject To

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Subject To Subject Tos in my book are some of the most complicated strategies there are for the new investor. But they have their place and are one of the most powerful tools of seller financing available if done properly.

The Subject To is basically a form of investing that allows an investor to assume a non-assumable mortgage. This is done by putting the property into a Land/Trust and assigning partial or all of the beneficial interest to the investor. It can also be done by simply taking the deed. In the first case there is argument that there is no true sale of the property. In the latter there is.

Either way the investor then has all right of ownership but the mortgage stays in the seller’s name. The liabilities of the Subject To to the investor are greater than the Sandwich Lease. This is because the investor has true ownership and the liability to pay the seller’s mortgage.

One point I must make. I do not agree that an investor can take over a property subject to and forfeit their obligations to the seller. Some teachers advocate that if times get rough for the investor that they can give the house back to the seller such as in a sandwich lease option. In my opinion if you are going to take over someone’s payments (Sandwich Lease Options included) then you should stick to your obligations. This means that you have more liabilities and must take these promises seriously.

How the acquisition works:   

Investor locates a seller willing to give up their house Property is put into a trust in which the seller then assigns their beneficial interest in the trust to the investor Investor then markets to rent, lease option or sell the property for profit.

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In my experience I have seen most investors lease option the property once they have taken it subject to. But I have also seen investors turn right around and market the property to a mortgage producing end user. This can be more complicated because of *seasoning issues, but is still a great way to invest no money down. *Seasoning is the amount of time required by a lender that the seller has owned the property. In my experience, FHA has been more strict on this rule than conventional lenders. But because of recent cases of loan fraud, the rules have become tighter with most lenders.

What is needed to complete the acquisition Time As with the previous acquisition strategies, time is needed to locate, negotiate and sell the property. But the subject to uses quite a bit of paperwork including a trip to the registration of deeds office like the memorandum filing of a sandwich lease option. This is because during a subject to acquisition there is an actual deed drafted up that needs to be recorded.

Cash This is where I get a little frazzled by teachers that say subject tos do not require any capital. I have seen more investors get into trouble with subject tos versus any other form of investing.

This is because they have promised the seller that all payments would be taken care of and took over the property with little or no money. Then they lease option the property and there’s an eviction. Or they simply could not sell the property or get it leased in time. This can be a one way ticket to court if you promised to make payments and cannot. I also have an issue with putting properties into trusts and avoiding disclosure to the bank. This is some cases can be considered loan fraud. Just something else to think about.

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Cash is also mandatory to hold because of the same reasons with the lease option. The property may need repair or upkeep even if there is no eviction.

A special note here: If a property is sold by lease option, it says that the tenant/buyer is to pay for all repairs. But in most states there are laws that do not hold the tenant liable under certain repairs. First off, any non disclosed existing issue with the property not told to the tenant, is considered illegal to make them responsible for taking care of the problem. Second, if they just gave you their life savings as consideration to purchase the property, you better think twice about having them take over “your” problems because they’ll never afford to cash you out.

Knowledge/Experience The experience involved with subject tos is extensive. You can learn it from a course, but doing it is a whole different experience. The paperwork involved is almost impossible to the new investor. You will undoubtedly need help in the beginning. Although I know several people who have done subject tos with no help, they did not do it right the first time. My opinion? Subject tos are a great seller financing leverage. Just make sure you have someone to answer your questions when doing the paperwork and by all means, if you don’t have the money to hold property look away from this form of investing until you are good and ready to stick to your obligations.

A quick note about the Due On Sale Clause There is so much controversy about the DOS clause about whether taking a property subject to is legal or not. In my experience (Again, I am not an attorney this is just my opinion) I have never heard of anyone having the loan called due, ever. I have however, heard of people getting sued for not making payments when they said they would. I have even heard of someone going to jail by letting several properties go into default after collecting considerations from tenant/buyers. No Duh.

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Rehabbing

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Rehabbing Rehabbing is one of the most enjoyable but time consuming investments you can get involved in. There is so much needed for this form of investing that it must be thoroughly looked at before attempting. As a matter of fact, I have no problem coming right out and saying that if you do not know how to swing a hammer, lead people or have very deep pockets, forget doing a rehab as your first deal. I made this mistake and I still have scars (physical, psychological and financial) to prove it.

How the acquisition works:    

Investor finds a property in need of repair Investor negotiates repair cost and profit Investor rehabilitates the property and prepares it for sale or rental Investor sells or rents the property for a profit

What is needed to complete the acquisition.

Time You either need a whole lot of time, or you need time to baby sit contractors. Don’t be offended if you’re a contractor, I was too for several years before real estate. I just know what it’s like to have other contractors work for you and it ain’t no picnic. Rehabs are the same as any other property when it comes to finding out the fair market value, but you will also need to know how to estimate repair cost. And that can take up a lot of time when there’s a lot to do on the property. Also selling and showing the property takes time unless you hire a Realtor.

Cash The cash requirements for a rehab can be astounding. Either you can pay with lines of credit, your own cash or someone else’s.

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Either way you will still need money to finish the job. And in most cases a lot more than what you originally planned. Don’t forget the cost of a hard money loan. This can be a frustrating expense if the job takes longer than expected.

Now I will not try to be too negative about rehabs because the truth is I like to do the work. I just can’t emphasize enough that in my opinion they are not for the new investor unless you can make the commitment financial and personal. But the more I get into my career as an investor, the more I would like the opportunity to just do one deal over a period of several months for an attractive profit. Rehabs for me usually mean a straight sale at the end. This can mean a sizable profit in cash. That in itself is very attractive.

Knowledge/Experience You need experience for several things during a rehab. Knowing what repairs and their cost is integral. You must be able to estimate the cost of repair as well as the market price of the property. And the margin of error is less forgiving when it comes to involving other factors such as unforeseen issues. You must also know how to find the right contractors to get the job done. Otherwise you will be paying to do things twice while dishing out the cost of holding the property.

I have a rule with rehabs. If you cannot do the job yourself make damn sure you get someone who is reputable. You can always pick up the slack by doing it yourself, but frustration sets in easily when you cannot and your contractor has taken a unplanned trip to blowyouoffville.

Again, rehabs can be incredibly profitable. They can also be enjoyable and rewarding when done right. I believe rehabs are for a certain individual who owns the gift of patience. Thinking of only doing 5 or 10 deals a year to make a hundred grand or more appeals to many people. It could be a nice goal to reach in your investing career.

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Wholesaling

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Wholesaling Wholesaling can be construed as a lot of things but the basic premise is buy cheap and then sell cheap. It is true that wholesaling can require no money if you flip the property, (Assign your purchase agreement etc), but from what I have learned it is another “intention based” form of investing. What I mean by this is that if you’re intention is to make sure the seller is going to get their property sold, you need to be able to close and purchase it yourself if you cannot find a buyer to wholesale to. On the other end of the stick, if your intention is only to assign your interest or flip to another investor, then that needs to be disclosed. Reputation is one thing but ethics are another.

Note: For this segment we are going to assume the route of wholesaling as a cash or mortgage transaction and not a seller financing transaction.

How it works: 



Investor finds a property (usually one that needs work) and puts it under contract with the intention to wholesale “or flip” to another investor.

Investor locates another investor to flip to and assigns their interest in the agreement. (Usually a purchase agreement or Straight Option agreement) Or the wholesale investor performs a double close where they purchase the property with their buyer’s finances and then turns around and sells it to the purchasing investor in the same closing. This is also called a simultaneous close.

 

There are also key factors here if the purchasing investor is paying with a mortgage. You may need to know about seasoning. Some lenders will not allow a double close if you have not owned the property for at least a year or if you are not on title.

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What is needed to complete the acquisition.

Time Wholesaling in my experience takes a tremendous amount of time. Locating properties that can be purchased at a low enough amount are not easy to come by. You have to make an incredible amount of offers to get one accepted. UNLESS you have a good network.

Cash If your intention is to never actually own the property unless for an hour or less during a double closing, you can wholesale properties with zero cash. The only cash needed would be for marketing and even then it is possible to find deals without spending money accept to pay the phone bill and gas for your car.

Knowledge/Experience Not too much is required to wholesale accept the ability to do a market analysis and a property inspection. You may also need to estimate repairs, but if you have a list of buyers already, they can do that for you once you get it under contract. This would just mean that it would be hit and miss with the accuracy of your numbers.

Some other points to make about wholesaling: Wholesaling to me is a great way to get started for the new investor. This is because of the actual amount of money needed to start is minimal. However, there is a lot of work involved because getting a property under contract is one thing, but getting it sold or assigned to another party is another.

You need to have your ducks in a row to make sure you are able to get cashed out. This may include the use of a title company that is able to do a double close, or a lender that your buyer has chosen that will allow an assignment or does not require seasoning on the title.

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Straight Options

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Straight Options Straight options are by far one of the easiest and less risky ways of tying up property. The straight option gives the Optionee or “buyer” the irrevocable right to purchase without the pressure of having to. This is because an option is just like it sounds, an option to purchase. Not to mention intention is fully disclosed up front. It allows the buyer to have the option to buy with no enforceability if they do not.

This is accomplished by a time frame or “term” in the agreement itself. This allows the buyer the option to purchase within an agreed amount of time. If the option does not purchase the property within that agreed amount of time, the option expires and all obligations from both parties are forfeited. This is a good thing for the buyer unless they put down a sizable “nonrefundable” amount of money called “option consideration”.

This consideration is the amount of money given to the seller allowing the buyer to purchase the property. It is almost always non-refundable.

Again, this simply means that if the buyer does not purchase this is the amount of money they are looking to lose. And that amount can be a little as one dollar!

How it works:  

Investor controls property with an option Investor then purchase the property by exercising the option or assigns their interest in the option to a third party for an assignment fee

What is needed to complete the acquisition.

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Time The amount of time needed to do straight options is minimal because it is usually not hard to put a property under contract.

That is because many times a straight option can be used as nonexclusive. This means that once a price is agreed upon the seller is still allowed to sell the property while the investor holds the option. I.e. the if the seller sells the property during the time of the option to another party not in direct relation with the investor, the investor must forfeit the option. The other time requirements are performing a market analysis on the property and of course, closing when you purchase. Some other requirements may be if you decide to assign your option or sell the property you just purchased it is good to know the ins and outs of the strategy used to exercise the option.

Cash The money to be put down as consideration for a straight option can be as little as $1.00 or as much as $1,000.00 or more. In my experience I have put down $10.00 on most of my acquisitions and one time put down $1,400.00 as non-refundable consideration. You want the seller to cash the check to make the agreement legal.

Usually when I put myself in a position of putting down a lot of consideration is when I intend on purchasing the property outright. This way I have some leverage with putting down a sizable amount of cash and the seller takes me more seriously.

This also gives me time to sell/rent it before I buy it. Other cash that may be needed could be used to fix up a property if you decide you want to wholesale it. Yes, you can wholesale a property controlled with an option. This may include cleaning up the yard or making small repairs. I advocate using caution when putting money into something you don’t fully own yet. This I a technique that may be better used once you create a reliable buyer’s list. And finally, the money needed to purchase if you choose to exercise the option yourself. This may be cash to pay outright, or capital used for a down payment to hold a loan or a mortgage.

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Cooperative Options

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Cooperative Options Cooperative Options are simply straight options with the cooperation of the seller. This opens up an entire world of leverage for the investor. This means that instead of an option being exercised just by cash, it could be exercised by lease option, land contract, subject to or even an assignment...of ALL three.

For the new investor this is a powerful leverage because it allows for investing along a broad spectrum while learning. Also, the use of the option allows for the creation of the acquisition “after” it is put under contract. For example; if the property is put under option and can be exercised by lease option (or sandwich lease option) this gives the investor throughout the time of the option (Say 90 days) to not only exercise the option, but to find a tenant/buyer to sublease to. In other words, you could have your buyer before you even exercise your option.

The other leverage of the Cooperative Option is that you are able to make money on properties with little or no equity. Now you can do this with the sandwich lease option and subject to, but with the use of an assignment you can do it without putting yourself in the way of holding costs. I.e. create the acquisition, find a buyer and assign your interest for a fee. This opens up the ability to do an acquisition with little or literally no cash.

How it works: 



The property is controlled with an option. The option can be to pay cash, lease option, land contract or subject to. Whatever is negotiated with the seller.

The option is exercised by purchasing, taking over payments or assigning interest

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What is needed for the acquisition: Time The time needed to do a cooperative option varies. If you are looking to always exercise the option by controlling the property yourself, then much time is needed. This would be the same as taking over by paying cash and holding, lease option or the other strategies. This means that you would also be liable to sell or rent the property once it is controlled.

On the other hand, if you decide to start your investing by only using assignments, then the time needed would be any marketing of your option or finding a buyer to exercise based on the terms negotiated. I.e. finding a tenant/buyer and pre-qualifying them before assigning your interest. This would also include showing the property to prospective buyers.

As mentioned before with the straight option, you may also spend some time getting the property prepared if you are sure you are going to exercise your option. This may include clean up of the yard and general cleaning of the interior.

Cash The cash needed for a Cooperative Option is usually only $10.00 (or less). This is because most of the time the option will be based on terms. This does however, depend on the specific terms of the deal. Again, I have put down larger amounts of money on properties that required me to do so to tie up the deal. Everyone responds to cash.

Other money involved may be the use of marketing through ads in the paper or signs to put in the front yard. These are usually a minimal investment compared to the potential profits. One thing to consider is that once you system is completely in place it is totally possible to do a deal with literally no money out of pocket. You would be of course, offering others incentives for their efforts.

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Knowledge/Experience Although having the knowledge of all of the strategies the Cooperative Option allows is good to have, it is not necessary. My first Cooperative Option was a land contract assignment and I had no prior knowledge of how to put together a land contract. I simply had the option to purchase and found an investor. He created the land contract for the deal based on our negotiations of the price and terms. I also had a Realtor help me complete it by explaining how amortization schedules worked.

Experience will always help you build a buyer’s list and understand the process of exercising your option. It will also help you to properly find a buyer or tenant/buyer for your option. But experience is not mandatory because of the simplistic leverage of the option. Having the ability to control within a certain amount of time gives you the leverage to gain the information needed before exercising your option.

On the other hand, I do not advocate a bunch of people running around putting options on properties that they will never be able to exercise. A motivated seller is motivated for a reason. They either need debt relief or the money out of their property so they can move on. I realize that you have no liability (minus the loss of your consideration if you do not purchase), but if your intentions are not clearly disclosed to the seller then don’t do the deal if you cannot do what you say you can do.

Again the Cooperative Option allows you to do almost all of the other investment strategies already talked about including the assignment of those strategies. It is the most powerful tool that I know of for the new investor with little or no money. But it is also the most powerful tool for the seasoned investor that has a lot of knowledge and experience with multiple acquisition strategies.

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Bird-Dogging

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Bird-Dogging This is where the new investor works for another investor simply to bring deals. In exchange for brining the investor leads, the bird-dog is given information on how the deal is put together. I do not like the term bird-dogging not because it sounds humiliating, but because it is not a good description for what it truly is. A partnership.

Think of bird-dogging this way; you are working with another investor to locate potential acquisitions for the reason of making a small profit to learn. Now that’s an incredible opportunity if you think about it. Instead of taking a fee for bringing a deal (Which can be construed as acting as a broker without a license), you should consider it a partnership. This to me is in all actuality, the way it is. You are exchanging service for service.

Another part that people get wrong (As mentioned in the Beginner’s Curse) is that that the bird-dog miscalculates the leverage of the relationship. This is because in America we seem to be wrongfully taught that we should always have the biggest piece of the pie. I.e. the bird-dog brings a lead they never could have done anything with to another investor. The investor and the bird-dog have an prior agreement that there will be a $500.00 fee (Partnership fee) paid the bird-dog and also the knowledge of how the deal was put together. Now let’s say the bird-dog knows the investor is looking to make $100,000.00 on the deal.

What makes more sense: A. The bird-dog gets greedy and cries they want to break the prior agreement and wants more money.

B. The bird-dog gets paid $500.00 and learns what it takes to make good on a $100,000.00 deal?

Which makes more sense? A or B?

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Think about this; have you ever heard the phrase, give a man a fish and he’ll eat for a day, teach him how to fish and he’ll eat for a lifetime.

That is the premise of bird-dogging. You’re into this for the long hall not the quick buck. Think about it, it’s an important and valuable lesson if you work this opportunity properly.

Now on the other hand, I believe that it is your duty to move yourself up in the world. I do not believe in passing up on too many $100,000.00 deals especially if you at least have the basic knowledge to put it under contract yourself. This doesn’t mean you have to complete the acquisition on your own, but it does mean that you will have more leverage with a contract with your name on it. Whether it’s a purchase agreement or an option, an assignment fee is usually substantially greater than a bird-dog fee. But if you’re just starting out, nothing is more important than experience and knowledge. And yes, in that order.

How it works:  



Bird-dog partners with investor to locate and examine a potential deal Bird-dog takes the potential deal (lead) to the investor for exchange of a small partnership fee and knowledge of how the deal is put together.

Bird-dog does this enough to be able to do the deal on their own, or at least start putting properties under contract on their own so they can assign their interest or find a partner to help complete the acquisition.

What is needed for the acquisition: Time The amount of time needed is generally only to find the lead.

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This can be done by making calls to FSBOs (For Sale By Owners) or working with other types of advertisements such as signs or ads in the paper.

Cash Usually the bird-dog uses very little or no cash. Making calls to FSBOs requires no money unless you count paying for the phone bill. Also, there is no money to hold property since the bird-dog is not putting anything under contract.

Knowledge/Experience The bird-dog must only have a basic knowledge of the market and property value. Many times bird-dogging starts out its lessons the hard way by teaching the bird-dog how to analyze property. This is because they will most likely be turned down several times because they don’t know what a deal looks like yet. This can be remedied by simply asking the investor they are working with what to look for. The investor is usually more than helpful because they have someone locating deals for them.

So in essence there can be very little to no knowledge for the bird-dog when they are starting. The whole idea is to learn from other investors and find out what to look for and then of course, learn the strategy put in place by the investor.

A word of caution though. Even though I do not advocate becoming greedy and wanting more than you deserve, you do deserve a competent investor to work with. There’s nothing wrong with asking questions about them and their business. I don’t think the amount of deals an investor has done should be the single more important factor in determining their credibility. You should also look to see how they present themselves and how they have learned and grown over their career. This is a relationship you are about to buy into. You should make sure it will be one worth your while.

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Chapter Three Points to Ponder

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Points to Ponder In this section we will go over some individual points about each strategy. These points will be laid out with the intention to focus on their flexibility with the new investor.

We will go over how difficult they can be and why, as well as how they compliment the lack of time, cash or knowledge.

Each strategy will be given a rating system on ease and simplicity, but more importantly there will be individual points that will be examined and brought out towards the end.

Adding Yourself to the Equation Once we have finished with analyzing the pros and cons of the strategies, you will be given the opportunity to put them together with your strengths and weaknesses. This should give you a pretty good idea of how you will fit to each strategy.

Now we will do our best to not be too specific to one strategy over the next because I truly believe that some people may be more advanced than others. This also rings true if you have already been investing for a period of time and are ready to move on the your next niche. This is part of the reason for this manual. Not just so the new investor can get started, but so you as an individual can make a decision based on dissecting the strategies and you personal attributes.

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Rental Investing Pros and Cons

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Rental Investing Okay. We have looked at the main structure of rental investing, but there is much more to look at.

We have stuck to the strategy as a cash acquisition. This is not the only way to purchase property to rent as we have seen.

There are many ways to control property including some we have not covered. For now we will continue to stick to the basics but it is good to know there are other ways to skin a cat.

The Rental Advantage Some points to make on rentals are the long term strategies that just make sense. These are strategies that include someone else paying off your home (the renter) so you can either cash out one day or borrow against the equity for more investing. Other attributes are tax advantages. You may need a place to put money and a residual creating asset is a good start.

One thing is clear about borrowing against a property, it’s the cheapest money you can buy. Interest rates as low as they are today make it an easy choice to pull money out of property.

Having someone pay for that money is also very attractive. Not to mention paying above and beyond your obligations. This is called cash-flow and in my opinion is the most attractive form of income you can get. But we must be clear here, the cashflow from real estate is usually residual and not passive. Passive means that you do not work for your money, it works for you.

Residual means that at one point you worked for it and still maintain the liability of working for it again. That is my opinion based on experience holding rentals.

So to get into specifics about rental investing, let’s look at the pros and cons of the strategy.

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Rental Investing Pros and Cons Pros    

Residual Income (cash-flow) Someone (renter) paying off your debt Ability to borrow against your equity Tax benefits and depreciation

Cons     

Vacancies (Loss of cash-flow) Tenant issues; evictions, neighbor issues etc Property upkeep; I.e. repairs, cosmetic etc Need cash or good credit to purchase Need cash to hold if there’s a vacancy

Now there are some ways around some of the cons of having rental property. You cannot get around the issue of vacancies because it will happen. You can however, get around the issue of having to manage the properties by hiring a management service. They can do everything from making repairs to collecting rents and filling the property for you. This is a small fee for the trade off of having more time for yourself.

Having cash to hold a rental or even purchase a rental is something that may deter the new investor. And for good reason.

Even if this section wasn’t strictly based on cash and you could purchase terms, you would still need money to hold the property. Just something to keep in mind when thinking about rentals as an investment strategy.

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Lease Options Pros and Cons

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The Lease Purchase Now moving on to the lease purchase or “lease option investing”. This is clearly a new investor strategy. But let’s look at the details to make sure it’s right for you.

The Lease Purchase Advantage Leasing with the option to purchase means no bank qualifying.

Or at least not for you. When you sublease as with a sandwich lease option, you are allowing someone the same opportunity you have been given with the seller. The advantage is that they are willing to pay more than what you are paying. I.e. say you took over a property on a lease option at $850.00 per month on a three year lease at a purchase price of $105,000.00. Now let’s say you found a tenant/buyer to pay you $1,050.00 per month with a two year lease with a purchase price of $130,000.00.

This would mean that you are getting $200.00 a month cashflow and a potential profit of $25,000.00 when the tenant/buyer exercises their option. But wait, there’s more.

Don’t forget that you have negotiated with the seller (in most cases) that your option consideration was only $10.00. Now let’s say the tenant/buyer puts down $5,000.00 consideration for their option to purchase. This money is going to go into your pocket.

So we need to look at this possibility and see if it makes sense if you’re completely broke. This is because in theory, you could take an option and not exercise it until you found the tenant/ buyer with the $5,000.00 to put down. This would take care of your money problem if you did not spend that money right? Be careful here, what is your financial criteria? Do you already have that money spent? If so, you may need to reevaluate.

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Lease Option Pros and Cons Pros       

Residual Income (cash-flow) Quick cash with tenant/buyer’s option consideration No bank qualifying. No need to have good credit Ability to pay a little more because of seller financing leverage, which opens the doors to more deals Tenant/buyer takes care of property repairs and upkeep Ability to back out of the deal if you cannot pay the seller rent (Although you will lose your option consideration) More option consideration if there’s a vacancy

Cons      

Vacancies (Loss of cash-flow) Tenant issues; evictions, neighbor issues etc Need cash to do repairs (usually cosmetic) if there’s a vacancy.

Time to refill the property if there’s a vacancy.

Need cash to hold if there’s a vacancy Seller may be more likely to back out of the deal because you have not taken the deed.

It’s not hard to see the advantages of the lease purchase. The pros outweigh the cons. But once again keep in mind that the cons can sneak up on you quickly if you are not financially able to hold the property. Now this is more of an ethical reason if anything because if your contract states it, you are able to give the property back to the seller or they can evict you if you don’t pay. That limits your liability. But if you are liable to take care of the property (Which you are) and the tenant destroys it, then you better be ready to cover the costs. And why wouldn’t you?

You’re going to make money on the end if you stick it out!

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Subject To Pros and Cons

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Subject To I have a rule that I have made for my business. If I have to put money down on a property and I’m not taking out a mortgage, I must get the deed. This opens the doors to the subject to strategy. It also gives me more control versus the sandwich lease option, but more liability.

Two more rules I have while taking property subject to: 1. I must have the money to hold the property no matter what 2. I must make sure that if I had to take out a mortgage or pay cash (for example that the Due On Sale clause was exercised), then I would have to purchase with enough equity to do so. I.e. buy right!

With these two rules the subject to strategy is an incredibly powerful form of investing.

Another point to consider is the use of the trust or an LLC (Limited Liability Company). When you purchase the property you are also protecting an asset. Even if you owned the property yourself with your own mortgage a trust can protect your interest.

On the other end of the stick, if you’re selling with a trust (I.e. allowing someone to have partial beneficial interest of the trust), then they can get tax advantages. This can also make the investment property insurance transferable to a regular homeowner’s insurance policy. And finally, when I take a property subject to, I will also entertain selling it on a lease option. This brings more money up front and hopefully some cash-flow. Either way if I stick to my first to rules it’s a great alternative to paying cash.

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Subject To Pros and Cons Pros        

Possible Residual Income (cash-flow) Quick cash with tenant/buyer’s option consideration (if you sell on a lease option) No bank qualifying. No need to have good credit Ability to pay a little more because of seller financing leverage, which opens the door to more deals Tenant/buyer takes care of property repairs and upkeep True ownership Tax advantages and depreciation More option consideration if there’s a vacancy

Cons         

Vacancies (Loss of cash-flow) Tenant/Assignee issues; evictions, neighbor issues etc Need cash to do repairs Do On Sale Clause Time to refill the property if there’s a vacancy.

Need cash to hold if there’s a vacancy Liability of ownership Complex paperwork to complete acquisition Most attorneys don’t think it is legal

As you can see the subject to is a great way to hold property. It also seems to be a valuable tool when in need of having more control without bank qualifying.

Although it is another “no money down” technique you must use caution when considering this strategy. I cannot emphasize enough how important it is to be able to accommodate holding costs. As I have mentioned before, if you take someone’s deed and don’t make their payments you could be in big trouble.

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Rehabbing Pros and Cons

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Rehabbing As mentioned before rehabbing requires more special skills than just doing a market analysis and negotiating. There is almost always a need to figure in extra holding and repair costs. This is because of the inconstancy of contractors in addition with hidden factors that almost always seem to show themselves in the middle of the project.

Having special skills is one thing, but knowing how to overlook an entire project from start to finish is another.

Some Important Things to Consider  

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Make sure you know who you’re working with. Not having a good team in the beginning can spell out certain disaster.

Make sure you have the funds to complete the job. Always, always, always consider there may be an extension of the project or extra costs that may pop up during the rehabilitation. To this day I know no one that hasn’t had something come up unexpected during a rehab project.

Have more than one exit strategy. Thinking you’re guaranteed a cash buyer at the end of your rehab is plain lunacy. In some seller’s markets this may work, but not in a buyer’s market. I would consider the possibility of renting or lease optioning the property if I couldn’t sell it to a conventional or cash buyer. Don’t take this lightly because if you had to rent it, who’s going to pay back the hard money loan? You may need good credit to refinance if you get into a bind.

Plan on doing a top notch job. If you’re going to spend the money to fix a property do the best job you can. Not only will it help sell the property, it will help when the buyer’s lender needs to see proof of why you are charging so much for it.

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If you decide to do a rehab in the beginning have a partner.

This is how I started and I couldn’t have done it without him.

He helped purchase the property, finance the rehab and pay for the holding costs. Even knowing it was disaster, the deal was still not a loser. We spent way more than we had planned and the property still wound up with over $60,000.00 in equity!

If you cannot swing a hammer and have no partner to help or mentor you, think twice. As I mentioned above I had a partner on my first rehab, which was coincidently my first deal.

We went $30,000.00 over budget and six months over our predicted completion time. I had little to no help even after I was promised it from friends and other fellow contractors. I will never forget the feeling of failure I had spending all of those nights alone working on that damn house. But I still cannot give enough thanks for the opportunity. It was the one deal that got me started even if it was a hard lesson. I do not and will never regret it.

One last thing to consider about rehabs is the emotional value they can bring to you when complete. Taking something that was an eyesore and making it beautiful is something that can have lasting positive effects. This business isn’t all about making money, there are personal benefits also and this is one of them.

And of course, I don’t care what ANYONE tells you don’t EVER stick bread into a pipe to stop it from leaking so you can solder it. EVER! This is a bad idea from the start and if you’re dumb enough to try it, (no fingers pointed at me right?) you deserve to be blown up and covered with steaming hunks of “Aunt Millie’s best!! Seriously, get a professional opinion before trying anything yourself that involves fire, little sleep and a severe lack of common sense from the local hardware guy!!!

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Rehabbing Pros and Cons Pros   

Great potential “cash” profits Emotionally rewarding when done properly Ability to do deals on vacant or damaged properties

Cons        

Inconsistent contractors Hidden issues and over budgeting Cash to do repairs Cash to hold the property Credit to secure loans Credit to secure a mortgage if property does not sell The need of multiple exit strategies if property does not sell The need of specialized skills if you plan on doing the work yourself

I can think of many more cons but I do not want to knock rehabs to death because I truly believe in them. I also think they’re a great way to help out the community. Making a wrecked house beautiful is one thing, but raising the bar on property sales in the area is another. If only every home on the block was nice!

Something more to consider is the amount of rehab performed.

Not all deals are going to be fix or six figure profit deals. And on the same note, not all deals are going to require mass amounts of effort. You could spend $50,000.00 in repairs or $500.00 in repairs. It truly depends on the area and the specifics of the property. I have done some of by best rehabs for under $5,000.00.

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Wholesaling Pros and Cons

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Wholesaling As talked about, wholesaling is a great way to get started if your abilities are aligned properly with your intentions. I.e. if you cannot purchase don’t say you will. Disclose your intention that you will find someone who will or simply don’t do it.

We must also note that wholesaling is the act of buying cheap and selling cheap. Focus on the word buying and think of the liabilities attached to that. One thing I can assure you is that if you have cash wholesaling comes a lot easier. This is because money talks and when you are sincere while using it, you will get more people to trust you.

But also, we cannot forget that wholesaling is also the process of selling to a third party. In other words, your intentions are usually disclosed and your desire is not to purchase or hold the property yourself. So that means that cash now doesn’t matter.

Or does it?

To get the answer to this let’s look at the possibilities.

1. If you have a buyer already you may be able to offer cash knowing you will be able to wholesale it to him or her.

2. If your buyer doesn’t want it and you offered cash now where do you stand?

3. Motivation is motivation, if you find a seller wanting out of a property just about any solution will work. Even the one with you finding another buyer.

So cash is not a mandatory criteria for wholesaling. Unless you make it one through your negotiations. Want to play it safe?

Disclose your intentions. Make sure the seller knows that there’s a possibility that you may not be able to complete the transaction if you cannot find a buyer. But if you don’t disclose, close on the deal anyway! You can always sell it later.

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Wholesaling Pros and Cons Pros   

True no money down technique (I.e. no money needed to purchase or put down if you are using a purchase agreement) No liability to hold property if you wholesale it to another investor Possibility of quick cash

Cons    

Building a buyer’s list of competent buyer’s can be a difficult task You must be able to close if your buyer doesn’t show up or the seller gets screwed.

Seasoning and assignment issues with investors that use mortgages Finding a title company that will perform a double close

A couple of points about contingencies.

The use of contingencies is integral if you cannot close or wholesale to another investor. Having a financial contingency allows you to back out of a purchase agreement if your finances (Buyer) fall through. Also, the use of an inspection clause can get you out of a contract if you have entered into one without looking at the property. Although these are valid ways of getting out of a contract they should not be abused. The word for the abuse of contingencies is “weasel clause”. This can easily hurt your reputation if you become known for using them. My advice is to simply do what you say you can. Then you will not have to use these clauses for anything other than their intended purpose.

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Seasoning and Assignment Issue As I have stated before seasoning is a typical bank requirement and can make or break a deal. Most bank owned properties (REO or Real Estate Owned) have special “no assignment” clauses written in them. Of course there are ways around this issue as well, but if the lender still does not allow it in any form because of seasoning, you may have a tough time closing.

However, I have seen deals that never should have closed, close.

For example I have seen a friend take a property subject to, do a small amount of repairs and sell it at a higher value within only two months to an FHA borrower that required seasoning. If you’ve been investing for some time you’re probably shaking your head right now in disbelief. But it happened.

Stories like this can make things confusing, but I would simply chalk it up as a rare deal. They don’t happen very often and when they do it’s usually because someone overlooked something or made a mistake.

So staying on track, if you have a property under contract and intend to wholesale it I would be looking for cash buyers. This is a good practice in the beginning because of two reasons.

1. You’ll get your cash faster 2. You wont have to deal with seasoning or assignment issues from banks.

These are two pretty attractive reasons for looking for cash buyers. But if you are not able to find all cash buyers than I wouldn’t turn my back on mortgage buyers either. They are more plentiful and in some cases pay more for property.

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Straight Options Pros and Cons

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Straight Options Straight options once again, can give the investor leverage before having to purchase or exercise their option. Still, you need to understand the paperwork while using straight options.

The Exclusive Option The exclusive option or “straight option” is a binding agreement that does not allow the seller to continue marketing their property while you decide if you want to buy or not. This can be an advantage for you but a disadvantage during your negotiations with a seller. If that happens then you have one more ace up your sleeve.

The Non-Exclusive Option The Non-Exclusive Option allows the seller to continue marketing the property for a buyer whether you decide to exercise or not. Of course if you do decide to exercise your option you have the right to do so and buy the property. This also stands true if you decide to assign your interest in the option. But the assignee must be forewarned of the conditions of the option.

Because if they want to take time before they exercise the option and the seller sells the house, then they will be out the assignment fee and will probably be calling you asking for their money back.

Note: This is NOT an invitation to screw someone, but it is the responsibility of the person you assign to, to know what they’re getting into. I just believe the world is a better place when our communication with each other is solid. I advocate you practice the same philosophy.

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Straight Option Pros and Cons Pros     

Very little money down ($10.00 or less) if you choose No liability to hold property if you assign your right to the option Possibility of quick cash during assignments Controlling without owning Ability to have time before making a decision or locating a buyer for the option or property

Cons  

You must have cash or good credit to purchase You may lose your option consideration if you do not exercise your option

There are not many cons with using options. The leverage is too great because of the lack of liability if you do not exercise the option.

The nice thing about options is that the intention is clearly stated up front. You are not buying now but instead have the option to buy within the agreed amount of time. However, (once again) if your intention is to assign interest you should disclose that up front.

Say it with me, it’s not hard: Mr./Mrs. Seller, I may also look to assign my interest in this option if I decide not to purchase myself. Would that be okay with you?

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Cooperative Options Pros and Cons

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Cooperative Options Cooperative options can be a little mind boggling to the new investor, but if the concept is grasped, it wont take long before the lights go on.

Think of the cooperative option as a straight option but with the leverage of all of the other strategies. Now think of all of those strategies being put under one contract that allows you “the new investor” the irrevocable right to purchase, lease, take subject to existing financing, land contract, cash or simply assign your interest to any of the other strategies. Wow… Now think of the opportunity to take as much time as you need (The time period of the option) to go over all of the details of any particular chose strategy before you exercise the option.

Are the light’s coming on now?

This means that if you truly were new and did not know how to completely do a sandwich lease option, but knew you had the money to hold property, you could take the time of the option to get your ducks in a row.

Think of this too. We have not talked much about true seller financing. Financing where the seller actually becomes the bank.

This can be done with a land contract, deed of trust or a mortgage note. This Cooperative Option allows this to be done. But once again, the ability to put a house under contract and then perform the “other agreements” within a reasonable amount of time is incredible. This gives anyone a jump start without having to know everything.

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Cooperative Option Pros and Cons Pros      

Very little money down ($10.00 or less) if you choose No liability to hold property if you assign your right to the option Possibility of quick cash during assignments Controlling before owning Ability to have time to do research or prepare yourself before exercising the option Time to locate a assignee for the option or a tenant or buyer for the property

Cons  

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You must have cash or good credit to purchase if you go that route You must be able to purchase or control by the chosen strategy chosen. This means you must have some knowledge in order to move forward, but have time to do so if you need to seek consultation.

You may lose your option consideration if you do not exercise your option

Some points to consider with the cooperative option are that even if you do not know the chose strategy to exercise the option, you still will have time to learn it. Again I advocate that you at the very least get the information and knowledge beforehand, but it is not mandatory. Having a good team in place of people and professionals will help you with this. Attorneys can help you with the paperwork and business set up while other investors may be able to help by partnering or purchasing your option. The opportunities are limitless.

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Bird-Dogging Pros and Cons

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Bird-Dogging I believe we have gone over enough of the definition of birddogging so lets just go straight into the pros and cons.

Pros    

No money needed to hold property Little to no knowledge to get started locating deals Partnering with other investors is a great way to learn hands on Small fast profits for locating deals

Cons  

No home runs for locating deals Time consumed for locating deals

Bird-dogging in my eyes is the best way to start learning. Think of it like getting paid to go to college. You are being told what to do and getting paid for it while learning from the teacher.

There is no better way than I can think of.

The other cool thing is that it is a shortening of your learning curve. Getting the hands on training by watching a seasoned investor perform an acquisition is priceless. Keep in mind too that if you worked hard enough you could make a nice living just locating deals. I know people who do just that.

It really depends on your intentions and level of ambition. Like I have said before, it doesn’t take long to be going it alone and getting the bigger profits. And look at it this way, if you birddog for multiple people you will have a list of buyers to assign interest or sell to. That means a quarantined paycheck.

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Time to Choose

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Picking Your Niche With all of the information here and knowing what you can and cannot do, you can start to have an idea of what can work for you. Also, knowing what you want is integral. You will need to see that if time is required of a niche that you will have two basic choices. One, you will need to make time to perform that tasks at hand or two, you will need certain leadership skills as well as something to offer others to do things you’re not willing to do.

This is a huge part of this business. Leadership and the ability to talk people into working with you in a profitable relationship cannot be overlooked if they are required.

Learning what your financial goals are, what you want, what you’re willing to get to get it will allow you to look at potential strategies with a little more clarity. This has been my greatest leverage.

Let me explain.

We have a saying during our coaching programs that there is an ultimate goal. It’s the one goal that gives you the greatest gift you will ever have, freedom. We call this the faucet.

Just like a normal faucet with a valve, when you really know what you want and need, you will be able to see the benefits of a particular strategy. The only thing missing at that point is the ability to perform that strategy within the bounds of your limitations and desires. For example, if you need to go on vacation, don’t want to work hard but need say, $5,000.00 quickly, you need to make a choice between wholesaling for cash, or assigning some kind of interest on terms. This could be something that requires you to understand wholesaling or options.

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The other part of this would allow you to see the strategies in a different light than just information. You may look at a wholesale like I do.

1. I need to find a property that is distressed 2. I need to grab a buyer’s list and make sure I can help with financing 3. I will need to do most if not all of the paperwork so the buyer feels the deal is “turn key” 4. I will have to make sure I know their liabilities so we can get around issues such as seasoning if they require a mortgage.

5. I will have to give the exchange of information and knowledge to make sure that buyer knows what they’re getting into so we have a future relationship.

6. Etc, etc, etc.

To me, this is not the answer unless all of the hidden factors are in place.

For example: 1. I have an attorney to refer my buyer/seller to 2. I have a relationship with a mortgage broker/hard money lender that fully understands investments loans and can perform 3. I need someone to come in and do a value check/appraisal 4. I need time to put together a buyer and seller contract package 5. I need patience with a new investor because I will have to prove to them I can be trusted 6. I need time to make sure I can take care of their concerns an issues 7. Etc, etc, etc You can see there’s a lot more going on in the background. This is a business and having a smooth running company can do quite a bit for you if you desire more time.

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To wrap up here, consider this; All you have to do now is get more information about the strategies. But let me give you some words of wisdom. I have said it before, this is a business.

You will get the most pleasure when you have enough information and are willing to relinquish control and hand it to other people. You will NOT get rich alone. There will be people that need to be put into specific places so you can accomplish your goals.

One last thing It is always better to have more than one strategy to chose from.

But even if you find you are able to do more than one strategy, it still doesn’t hurt to specialize. I really got going when I decided that cooperative options were my thing. I still to this day use the one option agreement on just about every deal I do. In my eyes, it is the easiest and most non threatening way to put a house under contract.

Whether I’m paying cash, terms or total seller financing, I can accomplish them all with one contract.

Now it is your turn to work on “you” to see where you fit in.

There are so many decisions to make, but with a little guidance I hope you are put on the right track. So whether you decide to be the type of person that stuff envelopes, puts up we buy houses signs or simply works with a network and offers information, enthusiasm and wisdom, the choice is completely up to you!

Good luck!!

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About the Author

Adam King Adam King has personally been involved in countless real estate acquisitions since his first deal in mid 2002. These acquisitions span from Rehabbing to creative financing, money lending, subject to, wholesaling, pre-foreclosures, short sales and lease options. Adam has been a speaker for many creative as well as general acquisition strategies for real estate clubs, real estate broker agencies and investment businesses.

Adam is also the author, videographer and force behind the free website www.TheFrustratedInvestor.com. The Frustrated Investor is a free article and video information tutorial website for individuals looking to understand real estate before they purchase a course, individuals looking to gain information on current, updated real estate investing strategies and individuals just looking for cutting edge tools and information for no money down investing.

Adam was also a key developer of the Fidelity Power Group, Inc. The FPG is a company that teaches and shares wealth-building strategies to the middle class. They performed educational seminars all over Michigan and have created over $400,000.00 in revenue their first 4 months of business, which in turn has helped many people reap the benefits of truly passive income. These seminars included wealth-building strategies involving the use of real estate and passive income producing assets.

Adam now works exclusively with his Tessera Method™ . The Tessera Method (www.TesseraMethod.com) Tessera is a program that allows the participant to “project” themselves through the vehicle of specialized mental and emotional scenarios, and then “reflect” in order to greatly open ones awareness. The benefits are an incredible sense awareness that can opened at any time in order to realize ones greatest potential, purpose and fulfillment.

Adam lives in MI with his wife, daughter and son.

For more information about Adam or to get on the Frustrated Investor newsletter, please visit us at: www.TheFrustratedInvestor.com or email us at: mosaicrealestate@aol.com

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