Part 4: Quick-Start Guide to Investing – Exit Strategies and Mastering Your Craft

We’ve been outlining the 8 Steps you need to take as a beginner to get your real estate investing business off to the quickest start possible:

1. Understanding Real Estate Cycles
2. Identifying the Key Indicators in Your Market
3. Building Your Power Team
4. Making Offers
5. Finding Financing Sources for Your Deals
6. Implementing Finding Strategies
7. Understanding Exit Strategies
8. Constantly Learning and Mastering Your Craft

In this final installment, we’ll be looking at Steps 7 and 8.

Step 7 – Understanding Exit Strategies

To effectively get started in the investing business, you must understand exit strategies and how to use them to get into and out of deals profitably.

Every property that you encounter is a different situation. Each one has a different need, a different financing challenge and one or more appropriate exit strategies. The more exit strategies you know and master, the greater your chances of success as an investor!

For starters, make sure that you have a sound understanding of wholesaling, lease options, seller financing, rental properties, and rehabbing. These exit strategies will provide you with a solid foundation to be able to put together deals that are profitable for you and helpful for sellers. (Rich Dad Education’s Elite Training courses are designed to give you detailed instruction in each of these areas.)

Step 8 – Constantly Learning and Mastering Your Craft

Like most things in life, learning is a journey and not a destination. Truly savvy investors realize that they must remain in constant search of new ideas and information if they want to stay one step ahead of their competition.

Rich Dad Education offers classes, a Mentor Program, and personal coaching that are designed to help you realize your full potential as an investor and entrepreneur. We also encourage you to utilize many of the resources you have, from your local library to the Internet, to stay up-to-date on current market conditions and strategies.

As you continue on your path to financial freedom, get help as you need it.

By Mark Justice

Rich Dad® Education Elite Training Mentor

Acquisition Strategies and Exit Strategies: Why Both Are Important

I met a new Rich Dad Education student at a recent Symposium. He was from California and had enrolled in our Elite Training Program a few weeks earlier. He was excited to take his first training, the Foreclosure class; but he was even more excited to begin investing in real estate.

He told me that he wanted to “do a foreclosure deal.” I informed him that in the Foreclosure class, he would learn some great acquisition strategies. I then asked him what exit strategy he wanted to use on his first deal. He was puzzled by my question. He is not the first student I have met over the years who failed to initially think about both sides of the formula. You need both “acquisition strategies” and “exit strategies.” The more of both you have, the better equipped you will be to handle (and profit from) future transformations in your local real estate market.

There are a lot of great acquisition strategies. One way many newbies start is with simple marketing that declares, “I Buy Homes, Ca$h or Terms.”  When we buy with cash, whether it is our cash or OPM (other people’s money), we need a significant discount.  The Wholesale Elite Training covers cash strategies in great detail.  Terms purchases can involve a multitude of contract engineering techniques.  These strategies are covered in two different Elite Trainings: Lease Options and Creative Real Estate Financing.  What is neat about these three “cash and terms” trainings is they also teach valuable exit strategies.

With exit strategies, you convert your acquisition into cash, cash flow or a combination of cash and cash flow.  Investors who want the benefit of passive income from holding rental property will find great value by taking the Property Management & Cash Flow Elite Trainings.  Investors who want to convert their acquisition into immediate cash have two popular exit strategies: sell it wholesale or sell it retail.  Creating a combination of cash and cash flow can be a bit more complicated, but all the details are covered in the Lease Options and Creative Financing trainings mentioned above.  If you took one of these classes before this year, it may behoove you to retake it soon, since there have been some recent changes in federal law that affect seller financing transactions.

By Eric Buchanan

Rich Dad® Education Elite Training Mentor

Overwhelmed? Help for New Investors

Many times as a new investor you feel that you have been fed information through a fire hose. As trainers and instructors we have to show you how to eat this gigantic investing elephant one bite at a time. Rich Dad education is here to show you how to set up successful processes, reduce stress, make more money, and breathe. We have all been there; know you are not alone.

Some of us deal with this stress better than others and some are better at hiding it. Delegation and having the right power team are the most important parts of becoming and staying a successful entrepreneur. The key to success is being able to delegate as many things as possible to others, especially those tasks that we hate or are just horrible at doing. Assembling your power team is critical to your success. Here are some places to start.

• The Rich dad Education team can help you answer many of the questions that you still have. There are:

Elite Trainers
Coaches
Mentors
Other students
For more information visit http://www.richdadeducation.com

• REIA (Real Estate Investment Association): If you haven’t been to your local REIA yet or you are not sure where to find a list of available REIA’s start at http://www.Nationalreia.com.

Look for the “Vendors” section on your local REIA webpage. If they don’t have a vendor section then you will need to contact someone in the REIA and ask them, “If you were me and needed a ____________ to help on one of your properties who would you contact?”

Ask about contractors, locksmiths, mortgage brokers, hard/private money lenders, attorney’s, CPA’s and many more. After finding this list you will want to start contacting them and establishing a mutually beneficial relationship.

• Other Investors- Adding investors to your power team is very important. Start by looking at: REIA’s, craigslist, meet up groups, online meet up groups, Facebook, cash buyers list, etc. You need to deal with other investors that are doing this business on a daily basis. When you contact them, make sure you ask where they are buying and what their buying criteria is. Also find out what exit strategy they use most for their business. For example: are they a wholesaler, rehabber or landlord. Make sure that you network with other Rich Dad Education students as well.

• Family and Friends: If you are thinking about hiring a family or friend as an employee, make sure you are also able to fire them. Many times family and friends can become great birddogs.

• Little Hacks: When you find a great power team member they will be able to help you build an entire team. Anytime you speak to someone you should ask for a referral. It may take 20 people to finally find that one that fits on your team. You have to be patient and test everyone to make sure they fit your business.

Know that you will be firing ¼ to 1/3 of your power team members every year. Some people will drop the ball over and over again and you cannot be afraid of firing them. This doesn’t mean burn bridges, there is always a good way of letting people go.

• Jobs for your power team:

• Drive for Dollars (Driving in your area and collecting boarded and vacant houses.)
• Research Properties
• Walk through Properties
• Place craigslist ads

For more information on similar topics check out the following blogs: http://blog.richdadeducation.com/2013/12/14/networking-for-an-event
http://blog.richdadeducation.com/2013/11/27/interviewing-potential-partners
http://blog.richdadeducation.com/2013/08/13/real-estate-deals

Do You Have What It Takes to Be a Mentor or an Elite Trainer?

Rich Dad Education Elite Training

A few months ago I posted a topic on this blog entitled, “How I Became an Elite Trainer.”   I got some good feedback as well as some questions.  One of the questions was, “Eric, how can I become a Trainer or a Mentor?”  I’d like to answer that here.

First, let’s take a moment to define a couple of terms.  A Rich Dad Education Trainer is someone who teaches a class, either in a 3-day format or online over a few hours each week.  A Rich Dad Education Mentor is someone who usually travels to a student’s market and spends three or four days showing them how they can improve their investment results in that market.  Trainers and Mentors are not Rich Dad Education employees; they are considered independent contractors.  But, since the Trainers and Mentors have direct contact with students, the company goes through great lengths to make sure that they are of the highest caliber.  For this reason, anyone who wants to teach or mentor must go through several steps of a comprehensive vetting process.  This process includes the following:

1.  Let Rich Dad Education know that you are interested in teaching and about your investment successes.  You can do this by staying in email contact with your former mentor or trainer(s).  Another way you can do this is by contacting Rich Dad Education directly using the “Share Your Success” link on the company’s website.  Some of those “Share Your Success” investors go on to become Hall of Fame winners. This certainly gets the company’s attention.  Remember that occasionally existing Trainers and/or Mentors take breaks from teaching … sometimes for extended periods of time.  So the company is always on the lookout for new  talent.
2.  If Rich Dad Education likes what they have heard about you, then they will invite you to go through the official vetting process.  They are looking to see that you have been, and still are, a successful real estate investor.  You will need to show them actual proof that you meet their hallmarks of personal net worth through active real estate investing.  Sometimes this process can seem a bit invasive, but it is a necessity.
3.  Once the company sees proof that you are the real deal, they will next want to see if you have the ability to teach other to be successful too  (there are a lot of great investors who are terrible teachers). So, you will need to do a series of “ride-alongs” with other Trainers or Mentors.  This will be on your own dime, and the Trainers or Mentors will have to give favorable reports back to the company before you can move on to the fourth stage.
4.  Finally, you will be given an opportunity to train or mentor actual students while a seasoned trainer or mentor observes you.  It is only after you have successfully passed this last step that you can become an official Trainer or an official Mentor.

Wow! That is a lot to do, yes?  Why, in the world, would anyone put themselves through that kind of scrutiny?  Well each of us has his or her own answers to that question.  If you want to know what my answers are, then read my previous blog post entitled, “How I Became an Elite Trainer.”

Eric Buchanan
Rich Dad Education Elite Trainer and Mentor

Rich Dad Education Investing Series – Using Lease Options with Prospective Buyers

This is the fifth article in a continuing Rich Dad Education Investing Series covering the subject of lease options. The area of lease options is just one of the numerous trainings offered by Rich Dad Education. Through these elite trainings, Rich Dad Education students are given the ability to transfer their knowledge as quickly and as profitably as possible to the real world. With this goal in mind, Rich Dad Education trainings are designed to teach students relevant strategies and to also give students a blueprint on how to implement these strategies from the moment they leave the classroom.

Becoming financially successful using the lease option strategy involves far more than simply learning what lease options are and how they work. Successful real estate investors that use lease options are also successful at marketing, interacting with people, and in understanding their local markets. These are just a few additional skills that are needed in order to reach your full potential as an investor who chooses lease options as an investment mechanism. While these skills aid your success in the realm of lease options, they also help the Rich Dad Education student in their journey to become successful at other real estate investing strategies.

Using Lease Options with Prospective Buyers

In a previous article in this Rich Dad Education Investing Series, the subject of motivated sellers was discussed.  Motivated sellers are classified as sellers who need to sell their home because of various circumstances that arise in their life. As a lease option investor, you can provide motivated sellers real solutions to real-life problems.  For example, a motivated seller might have to move out of state. After listing their house with a Realtor for a long period of time, their home might still remain unsold. As time is ticking down the seller of the home might be faced with a situation where they feel they have to:

1. Drastically cut the price to move the home or;
2. Attempt to rent it out and manage the rental from out of state.

Neither of these options are going to be enticing for an individual who wants to move onto the next stage of their life. As a lease options investor you have the ability to step into this situation and offer the homeowner a better solution. You can step in and offer to lease the home for five years and agree to take on maintenance and repairs for the home. You also agree that during any point in this five-year window you have the option to purchase the home at an agreed upon purchase price. Let’s say that the homeowner’s monthly mortgage payments are approximately $1,500 and the home has a value of roughly $200,000. Let’s say you offer to make their monthly payments of $1,500 and agree that if you exercise the option to purchase the home, you will pay the owner the $200,000 they are asking for. Providing a motivated seller a way to get out of their problem is going to catch their attention. If you have to get the deal done with an owner that is on the fence, then some level of up-front money will likely seal the deal.

Each real estate investor brings with them different levels of negotiating skills. Depending on your negotiating skills you might be able to negotiate lower monthly payments, a lower lease option price, and no up-front money in the deal. With good negotiating skills you can still leave the owner happy to do the deal as you are providing them a real solution to their problem while pocketing a little extra for yourself.

Now that you have successfully completed a lease options deal you can turn around and use the power of lease options to lease the home to a prospective buyer! Just as some individuals find themselves in situations where they are motivated to sell, others find themselves in situations where they want to own a home but have circumstances that are providing roadblocks to obtaining a traditional loan. Through your marketing efforts, you can attract these individuals in similar manners that you attract motivated sellers. Individuals that want to own their own home are easy to find through simple marketing efforts.

For individuals who want to own a home but cannot obtain traditional financing, the prospects of leasing to own is going to be very intriguing. There are a couple of key things you need to do in setting up the parameters of the lease with these new buyers:

1) When setting the time of length of the new buyers lease, you always want to make it a shorter lease compared to the amount of time you originally leased the home. For example, if you agreed to a five-year lease with the motivated seller, you will want to target a two- or three-year lease with the new buyers.

2)  The amount you charge for rent on the monthly lease should naturally be higher than the amount you agreed upon with the motivated seller. Your knowledge of the local area will be valuable in helping to determine what you can charge for the monthly lease. In negotiations, don’t hesitate to ask for a premium on what the average rent is as you are giving them the ability to own the home.

3) In negotiating what price the new buyers can purchase the property for during the time of the lease, calculate what the home should be worth at the end of the lease. If homes in the neighborhood have been appreciating at 5%, then make the appropriate determination on what you should ask for the new buyers to exercise their option.

4) Be sure to ask for an up-front down payment. This up-front down payment can be deducted from the price of the home should the buyers exercise their lease option, but is not-refundable if they do not.

In using lease options to purchase and to sell a home, real estate investors can find themselves doing deals where they put little to none of their own money into a deal and still make substantial rewards.  In the next Rich Dad Education Investing Series article we will look deeper into the negotiating process with motivated sellers and prospective buyers and give examples and tips on how to maximize your profit when negotiating with both parties.