By Minh Pham, Author/ Investor/ Mentor, www.GuaranteeProfits.com
Some people who doubt that there is a right time to get started in real estate investing worry that there are too many people buying houses to find a deal. Competition is everywhere. If you can’t understand — that in business, competition is normal — then real estate investing is not for you. Just take a look at the marketplace in companies such as Coke and Pepsi, Nike and Reebok, McDonalds and Burger King, and a million other services and products out in the marketplace. So if you see a lot of investors competing against you then know that it’s a rewarding business to be in because you are not the only one that sees the potential for profit. Plus, there are more than enough deals to make everyone rich, in due time. At any given time there are hundreds of properties for sale in your own local market niches, enough for each investor looking for them.
Some investors know that events such as the September 11th tragedy, the huge number of job layoffs and the decline in the stock market will kill the economy, and anything they buy will go down in value. But, once again, this need not be the time to fold-up your tent and quit before you get started. In order to be successful in investing, learn how to make money in “up” and “down” markets. Have strategies to utilize in both “up” and “down” markets to survive when the economy is bad or thrive when the economy is booming. And if everyone else is forecasting “doom & gloom” it only clears out the competition as you have more market share to profit from, as this is a good thing!
Ask yourself: “When do I want to make money?” And the answer is usually right now!
Thus, go out and get your investing business going, right now! And not base your actions on what others are saying because the majority of the population is not rich, only those few who dare to take the right risks and take the necessary steps to be successful.
Stay in ‘the Game,’ and stay ‘the Course’ (persist)
One of the major disappointments of the conventional, 'rental real estate' approach is there's just no money in it NOW, only after a long period of ownership. There's not enough spread between the income realized from rent – versus - the expenses of mortgage payments and repairs for the investor to make any money today. You barely get by in the early years of your property’s ownership. You've got to have other income to support your lifestyle. You can't just count on the rentals to support you.
Most likely, in the beginning you'll be supporting your properties with your other income if you bought via the traditional way. That's not too attractive. A lot of investors don't have the stomach to endure the rough and tough financial stresses of the rental business. Even more so — people just don't have the desire to hang in there to make it work, in due time. Thus, if you persist you will outpace your competition because they will no longer be in the business, and you will have “no competition”. This business is a long-term commitment and over 80% of real estate investors — who have been in the business for that long, go on to become millionaires. What I’m saying to you is this: Stay the course, and you will beat most all of your competitors because you can ride the ups and downs of the market in the Real Estate Game, in due time.
Opportunity is everywhere
This is ‘NOT’ a common statement I hear from new investors. True, it may work differently in some markets than in others, but there are investors making money in every city (large or small, metro-area or the rural-areas), every day of the week. You have to learn your market: the rents, the trends, the local customs, the lenders, the title companies, etc.
Then, learn the techniques and adapt them to your market. One thing is for sure, everyone needs a roof to live under, either renting or owning. People need to live somewhere. So study your market carefully, because there are tons of opportunities in every marketplace. You just have to learn your market and be able to service your market accordingly. If you don’t believe this, simply read the ‘Success Stories’ of all my students achieving financial independence and earning big profits using my field-tested and perfected real estate investing system.
Typically, the main argument of real estate “Nay-Sayers” is by associating real estate with toilets, bad tenants, property damages, tenant evictions, etc. — all the bad tasting things that may happen to an investor getting ready to jump into the real estate game.
For somebody who believes the only thing to real estate is getting a loan and buying a run-down duplex, in a bad part of town, entering the real estate game most certainly could turn into a major nightmare very quickly. However, an individual open to possibilities and who is willing to learn various techniques and strategies — will very quickly discover that’s this methodology is not the most profitable way to be transacting real estate deals.
A True Wealth Builder
Well, if you shudder at the very thought of spending your nights and weekends unstopping troubled toilets, painting scarred up walls, and pacifying angry/upset tenants, you are in good company. I have no interest in dealing with ill-affecting and time consuming renter-problems or their negative attitudes. When you follow a systematic approach to investing, you won’t have to deal with negative outcomes!! There are other creative ways to manage properties that involve no hassles and no headaches whatsoever, such programs exist in our “Automated Management System” which take away those ownership nightmares.
Much more profitable strategies exist if you are open to ‘non-traditional’ ways of investing in real estate. For example, in our System approach, there are “Rent Credits” used to maximize your time, while minimizing your overall risks, while creating positive cash flow versus, living with negative cash flow and tenant-troubles. There is a better way!! Your properties will be beautifully managed and maintained. Your Tenant-Buyers will be happy, you will pocket plenty of positive cash flow and you’ll be able to spend your free time locating additional real estate investments, doing the things you love and have passion for doing, which is the very point of becoming a professional real estate investor in the first place!!
If you really are serious about real estate investing and do extensive research into the real estate business, constantly learning and improving your knowledge level you will realize that your risks are minimal when compared to other business models.
If you talk to any knowledgeable real estate investor and compare the cost of starting a real estate investing company versus some other type of business, you'll see that a real estate business has far less risks. I like to be upfront with you that you will need some marketing dollars at the least to launch your real estate business. You also need to have a long term vision of this venture and at least give it at least a good 6-12 months to make it work. Otherwise, your money (marketing budget) and time will be a waste.
I know this but most people don't know that it takes at least some money initially to make money as a real estate investor. I don't mean to scare anyone away but let’s compare a real estate investing business to a restaurant/carryout business. I know these types of businesses very well because relatives of mine own restaurants/carryouts, so even though I never owned a restaurant, my relatives have taught me the inner workings of that business and what it takes to sustain it to be profitable.
First, for a regular restaurant it takes $30K in gross sales just to break even each month. And this does not include the 15 hour days, and six days per week, and the initial investment of $120K down payment with great credit for a bank to even lend you the money needed to open it. You also have to have years of knowledge and experience before you invest your life savings to start a restaurant business. Then, it usually takes about 1-3 years until the profits really come in, thus, this is only if you can survive to stay in business that long. My father-in-law is currently running a carryout and he has had over seventeen years experience and he tells me how fed up he is with the restaurant business. That is why he's also getting started as a real estate investor and he’s asked me to invest some of his money into our rehab properties. He sees the huge rewards and minimal risk involved in real estate compared to his restaurant business or other businesses he has been in. And he is seriously considering selling his business to do real estate investing full-time.
When you compare risks in real estate investing versus investing in other business avenues and/or endeavors, as you can come to your own conclusion: real estate investing is the ‘Best Game’ in town, when it comes to generating great wealth, while achieving your American Dream for financial independence.
Real estate investing has cycles just like any other business
The stock market has it’s cycles. We experienced that after the September 11th Tragedy. Only less than two years prior, we saw a peak in the stock market with high tech stocks soaring and making stock market investors ‘paper rich.’ The stock market has it’s ‘ups’ and it’s ‘downs.’
Modern real estate thrives on doing things smarter, wiser, strategically — not harder, more time consuming, with profit-eating outcomes. At the end of the day, the key to success is to focus on being a ‘great entrepreneur.’ I asked an experience investor (he owned about a quarter of Blacksburg, Virginia) what his specialty was in real estate investing and his response was not that he was good at Lease Options, Wholesaling, Short Sales, REOs, Rehabs, Notes, Residential, Land Developments, or Commercial real estate. But he said he was an ‘expert at making money.’ We both laughed at that but I will never forget that conversation. You need to know about the marketplace and technical factors involved in a deal, but your main duty whenever you are investing is always to make money. Thus, at the end of the day, your job is to make money in ‘up’ as well as ‘down’ markets. And if you focus on being a ‘great entrepreneur,’ you’ll be able to make money with many techniques, strategies, and skill sets to be successful in any market.
By Minh Pham, Mentor/Investor, www.GuaranteeProfits.com
If you want to be successful, the first thing you have to do is have the right mindset. Without the right mindset, all you do will be fruitless. Start first by giving, and it sounds like a overplayed slogan, but it’s true. I read this concept not in some Christmas book or holiday card but instead in many, many motivational and financial self-help books back in 1998 when I was dead broke and my first financial planning business went down. So when I was emotionally and financially down, I turned to motivational and inspirational books and tapes to give me ideas and the courage to ‘pick myself up.’ I know some people don’t believe in these things, but it worked! Boy, did it work! Without those books and tapes that helped me build my mindset, I probably would be working some lousy JOB today and given up on myself.
One of the amazing things I learned from those books was the power of karma. It taught me that in order to ‘receive’ I had to ‘give.’ I grew up like most people in life, wanting something for nothing or just waiting for that ‘big break’ to make me successful and rich! Well, I can tell you that some people will be waiting for a very long time, just like I did. The karma of life is really an ‘ebb and flow,’ and that in order to manifest realities in life you have to ‘make it happen.’ You must ‘set things in motion’. That starts with yourself and no other. You are the ‘Creator’ that makes it happen and no one else can do it for you.
The next important thing I learned was that I needed to know what to do to it make happen. There are thousands of things you can do to get you on the path to success but what exactly do you do first? The first thing you should and must do is to get your mind ‘right.’ You must get your mind to think in ‘abundance’ in order to be successful and wealthy and in order to have ‘abundance.’ If you are wanting riches and financial independence and lifestyle then ‘abundance’ is what it is all about. ‘Abundance’ is the vision and mindset you must have to be able to actualize what you want.
Thus, start by ‘giving’ in order to achieve ‘abundance.’ You may say, “What can I give? I have nothing to give”. Well, you have lots to ‘give.’ You can give time, money, ideas, energy, support, love, or whatever is needed. There is so much you can do to help or give to another. You just have to be creative to get that process going.
One of the first things I did when I had no money was I decided to work on my finances. That was a part of my mindset I knew I had to tackle to change my financial life/ status. Although, I had lots debt and wasn’t making anything at the time (nothing you could be financially independent on), but whatever money I had, I made a point to ‘give.’ So on a monthly basis when I was paying my bills, one of the first things I paid was to charity. I would always set aside money to give to a charity I liked. I had to do this ‘first’ because I knew if I paid everybody else first that there would be nothing left when it came time to ‘give.’ Once again, I knew in order to change my life I had to do something ‘different.’
I have to admit that in the beginning, it seemed very silly to implement this practice. I even had some negative thoughts such as ‘why am I doing this?’, or ‘this isn’t going to work’, or ‘I’m broke myself why do I need to give something I don’t have?’ I had these negative thoughts but I blocked it out and continued to work on my mindset. After a couple of years, things started changing for me. You see my mind really didn’t know the difference between $1.00 and $1,000,000.00. That’s right, the mind doesn’t know the difference in dollar value, all it understands is ‘abundance’ and ‘scarcity.’ So if you have a ‘broke’ mindset, no matter how much money you make, it’ll never be enough. But, if you have a mindset of ‘abundance,’ you’ll keep on getting more and more. So what I created for myself was a mindset that there was lots and lots of money out there for me (and there is), because by giving, I ‘tricked’ and ‘confused’ my mind to thinking that ‘hey, I have money to give therefore, I must have lots more because I keep giving.’ The mind no longer thought that I was ‘broke’ because I was ‘giving’ and it started to think in ‘abundance.’ You see, in all my life I knew that if I had money, I would help others by charity or donations, and because my mind knew that if I had something to give I must have had lots of it to give. The mind was convinced that it had ‘abundance’ to do so. And it worked; my mind is set just the way I like it to be, to think ‘abundance.’ Now, the world is my oyster.
The other important thing that you create from this mindset of ‘abundance’ is that by ‘giving,’ you’ll also be ‘receiving.’ A person cannot constantly ‘give’ and not ‘receive.’ Once again, it’s the natural ‘ebb and flow’ of life. It’s as constant and certain as the sun rising in the morning. So if you constantly ‘give’, you will receive. Try it. You don’t have to believe me. I know if you give it a try, you’ll see and know that it works.
Here are charities that could use your help. They are also some of my favorites:
Food for the Poor
www.FoodforthePoor.com Helping families with food and necessities.
Compassion
www.Compassion.com Sponsoring a child, giving hope to others.
Heifer
www.Heifer.org Helping families feed themselves, i.e., buying a cow for them for milk.
Habitat for Humanity
www.Habitat.org Helping under privileged families build affordable homes.
Jimmy Carter Center
www.JimmyCarter.org Waging Peace, Fighting Disease, Building Hope
Memorial Sloan-Kettering Cancer Center
www.mskcc.org Cancer Research
Mission of Mercy
www.MissionofMercy.com Child Sponsorship, nationally and international.
American Stroke Association
www.StrokeAssociation.org Advocacy and research on stroke and heart wellness and disease.
Shriners Hospital for Children
www.shrinershq.org Non-Profit Hospitals for children to receive free medical care.
So Others May Eat
www.SOME.org Helping the homeless and poor of our nation’s capital.
The American Diabetes Association
www.diabetes.org Providing diabetes research, information and advocacy.
By Minh Pham, Investor, Mentor, Author www.GuaranteeProfits.com
Staying the Course – Keep Moving – Keep Focused
· What are your goals for this week? This month? This year?
Marketing Goals
· How many distressed homeowners did you call this week?
· How many distressed homeowners called you this week?
· Which methods did your potential deals come from?
· List all advertising methods used, amount used, and calls generated from each.
(Example: 1,000 postcards mailed, 85 calls received; ran 6 ads, 45 calls received;
put out 200 signs, received 35 calls).
· How many hours did you spend prospecting this week?
· How much money did you spend on marketing this week?
Deals in the ‘Pipeline’
· How many deals did you put together this week?
· What types of deals were they? (Lease Purchase, Pure Option, Subject to, Wholesaling, Retail, etc)
· How many offers did you make this week?
· When will those deals close with the sellers?
· When will those deals go to settlement?
· Properties on the market for rental?
· Properties on the market for sale?
· How long has each property been on the market?
· What are you doing to market your properties?
· Did you add any properties to your ‘Pipeline’?
Evaluation for Improvement
· Did you achieve your goals for this week?
· Deals that fell apart this week?
· Why did those deals fall apart?
· Objections you were unable to overcome?
· Answers to those objections are?
· What do you feel you could have done overall to get better results this week?
· What was the most important lesson you learned this week?
· What are your goals for next week?
· What will you do next week to meet your goals?
Constant Learning and Growth
· What audio programs are you listening to in order to continually improve and learn the real estate investing business?
· What seminar programs did you attend in order to continually improve and learn the real estate investing business?
· What books/manuals are you reading to further your knowledge about this real estate investing business?
· What key relationships are you developing in order to build your team or acquire deals?
· What grand idea did you come up with to help you get more deals, cut costs, build systems, build greater network of key influencers, make more money, enjoy life more, and anything else that can help you?
HOW MUCH TIME DID YOU SPEND THIS WEEK TO ACHIEVE YOUR GOALS?
HOW MUCH OF THAT TIME WAS ‘PRIME TIME’ efforts?
HOW MUCH MONEY DID YOU SPEND ON MARKETING THIS WEEK?
WHAT KEY CONTACT/RELATIONSHIP(S) DID YOU DEVELOP THIS WEEK?
HOW MUCH MONEY DID YOU MAKE THIS WEEK?
DID YOU ENJOY YOUR LIFE THIS WEEK?
By Minh Pham, Investor, Mentor, and Author www.GuaranteeProfits.com
Now that you are going to write an offer, you still have some decisions to make. The first is what kind of format to use. Because you will be signing a legally binding contract, this decision is an important one. The process of trying to reach an agreement on price and terms with a Seller can vary from state to state, and even within some states. Part of your education process will be to learn the specific procedures used in your area. Generally, offers are made in 1 of 4 ways:
Having an attorney draw up a contract of sale
Using a standard preprinted contract supplied by your agent
Using a simplified letter of intent
Using a Turnkey contract (from a course you bought and modified and legalize by your attorney for use)
Although the purchase of a piece of property is an important financial decision for your business, an attorney can be used to draw up your initial contract to ensure that you are not making any mistakes. This probably stems from the fact that it often takes many counter-offers before parties come to terms. It can get fairly expensive to have an attorney draw up and review what sometimes amounts to countless contracts. Usually, for my students who want the ‘peace of mind’ and comfort of having an attorney draw up the contract, they can count on an initial retainer of about $500-$1000. This rate can change of course depending on which attorneys you use or how complex the purchase is, but this is an average from what I’ve seen.
It is a good idea to have an attorney review your transaction before it becomes binding. As part of your initial research on real estate, you should ask around for referrals of good attorneys when you are networking to build your team. If you are part of our team you are welcome to ask my staff and they would be happy to supply you with reliable real estate attorneys we use. It is best if you can find one who specializes in real estate if you are using one of your own. He or she might charge more per hour, but a specialist usually will be able to give you a quick answer specifically ‘niche’ for real estate investing, which is what you need after you have negotiated a deal. I do not recommend a general attorney who does not specialize in real estate because you will not get someone who will know the ‘ins and outs’ of real estate contracts.
Especially use attorneys primarily in the purchase of larger properties with complicated financing and intricate leases. You will definitely want to have an attorney review your documents in the following situations:
In most real estate transactions, deals are put together using preprinted sales contracts provided by the agents. If you are using an agent who is a realtor, the contract probably will have been drafted by the state or the national association with which the realtor is affiliated. These contracts have been drawn up by the attorneys with the goal of equitably protecting the interests of each party in a real estate transaction. We don’t draw many contracts up using realtors because most of our deals are creative and we can deal with the Sellers directly and thus we do not need realtors to be involved. In a transaction where the house is listed on the Multiple Listing Service however, you almost have to use their contracts but for the most part try to use Turnkey contracts because there are certain language/clauses that protect your interest and favor you in the deal. We will discuss more about Turnkey contracts later in this article.
If you are using the preprinted forms, make sure you use the form designed for the type of property on which you are making an offer. Look for the following types of forms:
The goal of each of these contracts is to include all the necessary clauses so you and your agent can make offers without having to hire an attorney each and every time. However, this can be a binding contract if the Seller accepts your offer. Therefore, include a provision that it is contingent upon your attorney’s approval.
Many Sellers get scared off when they receive offers written on preprinted purchase contracts. This is because these contracts often are lengthy and always are complicated. For this reason, many offers to buy begin with a much simpler format known as a letter of intent. We have what we call, ‘Short Offer Forms’ for all types of transactions (Purchase, Lease Purchase, Subject To’s, Options, etc.), but it would be a good idea to have your attorney review it for use in your local area.
A letter of intent is meant to be a simple (usually 1 page), straightforward expression of the buyer’s desire to purchase a particular piece of property. It outlines how much the buyer is willing to pay and the kinds of terms for which he is looking.
By eliminating all the legal mumbo-jumbo, the principals can find out quickly whether they can put a deal together. Sometimes the fact that the agreement is not meant to be legally binding allows the parties to concentrate on working out the important issues that solidify a transaction.
Some Sellers who are not familiar with letters of intent might not take your offer seriously if you use one, so be sure that you warn (if they are represented by one) the listing agent beforehand. In fact, you may have to fax the listing agent/Seller a blank letter of intent in advance. This way, there won’t be any surprises if he is not familiar with this kind of agreement.
This is what we use most. These contracts are from national speakers and local gurus who sell their courses for hundreds and thousands of dollars at real estate conferences and seminars. What we do is take all the contracts that we feel best represent our interests and fuse the best ideas into one ‘Ultimate’ contract (of course we have contracts for all different types of transactions) and have those contracts reviewed by our attorneys.
It is a must to have the contracts reviewed before using because what may work in the West Coast may be different in the East Coast. And what may be law in one area may not be a factor in another. In addition, some ideas that are presented in a seminar format may not be applicable in your marketplace. Thus, having Turnkey Contracts which have been reviewed by a local real estate attorney is one of the first steps one would take to start using those contracts.
Once they have been edited, polished, and approved to use by your local real estate attorney, you’re ready to go and free to use them. You can rest assured that they are legal as well as legitimate to use because you had your attorney (and sometimes several attorneys) reviewe it. And if you have a dispute with these contracts, your attorney can get involved and defend it (and sometimes negotiate the deal for you).
Strategically, our contracts are very specific for their particular use and we have purchase contracts for wholesale deals, Short Sales, retail deals, Subject To’s, Lease Purchases, Options, and many other different purchase techniques. Therefore, our contracts have clauses and contingencies related to each type of strategy to protect our interests in the transaction and it allows us to get what we want to accomplish.
For example:
In our Purchase contracts for properties that need rehab/repair, we have a clause that states:
“Buyer is allowed to rehab/repair said property before settlement.”
This may be a bold statement/clause to ask the Seller, but we use this all the time. We have seen that if the Seller is ‘flexible’ in working with us, they have no quorums with allowing us access to fix up the property and market it before settlement. This clause allows us to fix the property before settlement while allowing us to maximize our valuable time/money. Thus, instead of settling on the property in the traditional sense to then fix and then to market it for a buyer, we can fix and market a property to have a retail buyer before settlement. With this technique, we can get access to a property to start the project and not have to get financing to buy the property. The financing will come from our ‘end buyer’ or ‘retail buyer.’ By having this clause in there, we can maximize our investing dollars and time to do more projects.
You may run into objections while using this with Sellers, but it’s worth having this clause in your Turnkey contracts because most properties that need a lot of work are vacant when we purchase it and if the Seller is flexible in working with you they will often allow you to do this. Many Sellers don’t care and if you negotiate well they will allow you to do it.
No matter which method you use to make an offer, you still need to decide how much of a good-faith deposit to include. That is, how much money are you going to put down as an initial deposit on the property? Laws differ from state to state and some state laws say you do not need to include a deposit at all, but the idea of a good-faith deposit has evolved into an integral part of the offer process.
The deposit serves two functions: psychologically, it plays into the old adage, “Put your money where your mouth is.” If you want the property, putting your money on the line makes a powerful statement to the Seller. Second, it puts some money at risk after the due diligence is completed. We usually put down a minimum of $1,000.00 for our purchases because anything less than that would seem suspicious. For example, there are gurus out there telling you to put down $10.00 and it’s okay to do but there just seems to be something ‘funny’ about that amount. If you were the Seller, wouldn’t it cause you to ask yourself, ‘Boy, that’s really very Mickey Mouse and ridiculous. What is this buyer trying to pull here????’ It also shows them the level of commitment you have to the deal, thus if you don’t want to buy then they get a $10.00 for lunch money. This is not something that may make someone feel good about letting you purchase their property and I do not recommend any dollar amounts that would raise ‘red flags’ in the eyes of the Seller (and sometimes their agent/attorney).
Once you put up a deposit, the issue becomes who will hold the money. Unless you specify otherwise in your offer, the check usually becomes the property of the Seller. As you can imagine, this might cause some problems if the deal goes sour and you want your money back. And now that I have advised you to put at least a thousand dollars earnest money deposit on your purchases and if you are making a lot of offers that can really add up quickly. This can even cause a ‘Cashflow’ crunch for you with so many properties you are bidding on. Therefore, you must always address this issue when you write your offers on the property. There most likely will be a custom in your area that addresses this issue, but here are a couple of general guidelines to keep in mind:
You NEVER give the check made out directly to the Seller. If they absolutely have to hold the money, then place it with a third party attorney or realtor and you have clauses in your contracts that protect that money. Many states have escrow companies and title companies that assist in closings and will hold the funds in their trust accounts.
Try to ALWAYS get your attorney or realtor to hold the money. Your purpose in doing this is to protect your money until the transaction closes.
Our Turnkey contracts address this issue by allowing our attorneys to hold the monies in escrow and it is written in our contracts. Thus, if something goes wrong or you don’t want to buy the property, then you can get your money back quite easily.
If you sense any potential need for a review of the contracts by an attorney, you will need to have a contingency in your original offer. It should look something like this:
“This offer is contingent upon review and approval of the final agreement by the buyer’s attorney.”
This clause puts the Seller on notice that, even though you have come to agreeable terms, the agreement will still need to be reviewed and approved by your attorney. We usually include this type of clause in all of our offers including bigger and more complicated properties we buy because if we ever wanted ‘out’ of a deal, we make our attorney the ‘bad’ guy and tell the Seller that our attorney did not approve of the purchase. Even if we do not plan on having our attorney look at the purchase contract we STILL have this clause in our Turnkey contracts to protect us in the transaction in the event we choose not to buy the property.
Once an agreement is negotiated, the due diligence, or “free-look,” period begins. This period of time allows you to do an interior inspection and a thorough analysis of the property and any other contingencies without risking any of your deposit. Another contingency that we put into our contracts is:
“The purchase of said property is contingent upon a suitable inspection.”
We love this contingency because we can get out of bad deals because we can tell our Seller that we found something in my inspection that we did not like and was not aware of when we initially looked to purchase the property. If the Seller balks at that, then we usually spend a couple of hundred dollars to get a formal home inspection done and point out the things we did not like on the home inspection report to justify why we do not want to buy. This could also be your one last chance to get another discount as opposed to totally walking away from the deal.
If you decide not to buy after the free-look period has expired, most contracts are written so that you will forfeit your deposit. This is one reason why Sellers usually want large deposits. They want it to be big enough that you feel committed to the deal. It could cost them a lot of time and money if you back out at the last second because you find something that looks better down the street.
It is smart to use the contingencies I mentioned because you can get out of most deals with those two contingencies and if you use your attorney to hold the escrow you can get your earnest money deposit back. It is what we call our ‘Home Team Advantage’ and when you are making lots of offers to buy properties and with a lot of these properties need rehab/repair and you may encounter surprises with the property that may jeopardize your pre-calculated profits. Thus, not giving away earnest money to Sellers for every deal that did not come through due to unforeseen circumstances (and sometimes related to the Seller), it is a great way to ‘recycle’ your money. So make sure your contracts have the contingencies to protect you and that you are using your attorney to hold the earnest money.
Our closing ratio is very high. And it is so because the key to our success has been that we ‘LISTEN’ to Sellers and find out what they want and need. Then we tailor a solution/strategy that fits that need. So by asking the right questions, for the most part Sellers will tell us exactly how to structure a deal and they will even tell us what price they want for the house. It’s like a Poker game where they show us ALL THEIR CARDS and the strange thing is if you do it right, you see their cards every time. Simply asking the right questions and letting them talk while you are diligently LISTENING will allow you to close more deals than you can imagine.
One technique that we use often is by giving the Sellers a ‘signing bonus’ for signing on the spot or within 24-48 hours of presenting the contract. Here’s an example; let’s say their asking price is $120,000.00 and you know you can do that because you know it’s worth $180,000.00 once you fix it up, then you can offer a signing bonus to lock in that deal. You’ll simply offer them an extra $1,000-$2,000 as a signing bonus for signing right then and there. Or you can state that the $122,000.00 purchase price is ‘good until close of business 2 days from now.’ A lot of times, you see the Sellers jump at this because they want the bonus. A great idea is to leave a self-addressed envelope with the Seller so if they don’t have a fax machine, they can still commit to the deal and mail it to you. They already know how much they want and if they are a little hesitant, this strategy works every time.
So when presenting contracts to purchase properties, if you just remember techniques/tools I mentioned, you’ll see that most of your offers if done correctly will get accepted and you’ll be protected in the deal while building a huge real estate empire. Good investing to you.
By Minh Pham, Author/Mentor/Investor www.GuaranteeProfits.com
Telephone prospecting can be one of the most dreaded and boring aspects of a real estate investor’s career. However, if you implement these five simple steps, they will transform you into a telephone sales success. Implementing them will increase your telephone effectiveness and result in your obtaining a high contact-to-appointment ratio critical to the success of your investing business.
When calling a prospect, it is important to understand that by nature, they will be guarded or “armed.” You must have a system in place to immediately disarm the prospects and engage them in meaningful conversation. The following 5 steps will transform the way calls are made and lead the way to 5 “yes” responses in less than 60 seconds when on the telephone.
The first step to disarming prospects and engaging them in meaningful conversation is to elicit a “yes” response. A script is designed to keep you in control by doing all the talking. Prospects are much more sophisticated today and are quickly turned off by what appear to be scripts. In contrast, this 5-step system engages them and promotes communication.
In Step One, your objective is to get a “yes” response from the prospect. A “yes” is proven to put prospects into a positive state of mind and increase your odds of getting more. Try this simple opening technique: “Hi Jerry, this is Minh calling…” (then pause). You cannot move to Step 2 until a response is obtained. Ninety-nine percent of the time, they will respond by saying, “yes?” This immediately gets them involved in the conversation and instantly builds curiosity. When people are curious, you also have their attention, and when you have their attention that means they are listening.
The second step, disarming, will elicit 2 more yes responses from your prospect. In this step you state a fact or recall an event, prompting them to say ‘yes’. For example, if calling on a referral, you might say, “I understand you’re a good friend of Eva Mills…” Your prospect would then respond with a yes. You will get a yes response 100 percent of the time in this step so long as your information is correct. To obtain your second “yes” simply ask for permission to talk. Most people will respect you for seeking their permission before moving forward and will in turn say yes. The added bonus is you have already received ‘yes’ responses prior to asking this question. Mentally, your prospect is in a positive mindset and has formed a relationship with you. The added bonus to implementing this phone system is that you learn to use controlled responses.
A controlled response means that you know what your prospects will say before they do! You are using a system designed to elicit key responses. Fear comes from the unknown, and in this 5-step process there are no unknowns. You know exactly what your prospects will say before they say it. This process not only increases the success of your calls; it also eliminates any call reluctance or fear of the telephone that you experience.
The third step, the reason, is designed to obtain an appointment or an objection from your prospect. Most investors are trained to overcome objections with planned responses. In contrast to popular belief, I have proven that overcoming objections is not nearly as effective as revealing the specific needs of your prospect. In this step, tell them the company you are with and state the reason for your call. “There is an enhanced benefit that is being made available to home owners possibly looking to sell their house or may need some financial assistance.” Be sure to keep your reason simple and to the point. If this is a positive response, always ask to go over a brief questionnaire so that you can determine if this can possibly be a deal, then if they agree, start asking questions and filling out the ‘Seller Info Sheet,’ (we let our students use this document to collect critical information from a seller to determine if we have a deal.)
You will find out from the information they give you (along with running some basic comps of the property), if this would be worth pursuing. If it looks like a deal, then you should immediately go for the close. GET THE APPOINTMENT. In this step your prospect will either object or say yes to the appointment. If they do schedule an appointment at this time, there is no need to go on to the fourth and fifth step. If, however, they object, you must go on.
Notice that between each step, it is critical to wait for the prospect to speak. Picture a bridge connecting each step and in order to go from one step to the next you must get a response from the prospect. In this step, if the prospect gives you an objection, say, “I understand. While I have you on the telephone, may I ask you one quick question?” Do not attempt to overcome the objection. If you do, their guard will go back up and your efforts will have been in vain. “Are you still at the same address?” Again, 99 percent of the time, your prospect will respond with a ‘yes’ to this question. Not only are they relieved that you did not try to overcome their objection, they are extremely curious as to what you want to ask them!
It is also good to know some basic objections that sellers may ask you. These answers must be readily available from you like it’s your own name. You must know it cold and say with professionalism and pose. The confidence you portray will assure comfort to seller’s ears and this will give you more creditability. Practice if you have to, but you must know the basic objections sellers ask. Such as
‘How can you help me?’
‘How do you buy houses?’
‘What’s this program all about?’
‘How long have you been in business?’
‘Where did you get my phone number?’
‘How quick can you close?’
‘What do you think my house is worth and how much can you give me for it?’
‘How fast can I get my money?’
‘Do you lend money?’
‘Are you a realtor? And how are you different?’
‘Do you have any information I can read first?’
After you have answered some common questions, it’s time to move on to Step Four.
In the fourth step, the ‘Needs Analysis’ Questions, your objective is to reveal your prospect’s highest need in regards to the service you are trying to offer. For example, if calling for foreclosure purposes/services, you might say, “What is most important to you from the situation that you are in?” Or, for tired landlords, you might say, “If you could not take care of the property anymore or pay the mortgage on the rental because your tenant failed to pay the rent, what impact would that have on your family?” Your goal in this step is to identify your prospect’s highest need and to really care and most importantly, listen. After the need is revealed move on to the final step.
The fifth step, the Appointment Close, helps your prospect see the value in meeting with you. Oftentimes sellers will easily give you an appointment because you can say that you can’t give them a written offer unless you get to inspect the house. For the most part, houses need at least cosmetic work (cleaning, new carpet and paint) and prospects see every reason to meeting you and letting you see their home. In addition, once a need has been revealed, a value has suddenly been created. Now there is something in this meeting for them, and they will freely give you their time. In this step, it is important to state your experience in dealing with the prospect’s specific concerns and to relate to them and their needs specifically. Be sure to repeat their identified needs or motivations; this is the key to scheduling an appointment. You might say something like “Greg, this is one of the reasons I was hoping to visit with you, to share how I have helped others with the same concerns, especially when it comes to saving your house or finding a solution that best suits your needs. I would like to get together with you. What might work best: weekdays or weeknights?” The Appointment Close moves your prospect to take action based on his or her own needs in hopes of finding a solution. This is where your fifth yes is obtained.
The 5-step phone system will transform the way you make calls and close appointments. Investors using this system can anticipate scheduling one appointment out of every third contact or better, increasing appointment-holding ratios and cutting the duration of calls in half. Of course, the list of who your prospects are is critical. A list of pre-foreclosures versus just a list of divorces may have two entirely different success ratios.
Confidence will rise and all reluctance will fall. The best way to utilize this system is to put the 5 steps on one cheat sheet. Be sure to role-play with other investors in order to get comfortable with the system prior to implementation. This system will not only improve your telephone skills but your communication skills will also be greatly enhanced. You will begin to focus more on needs and on helping prospects to understand the importance of your services. I wish you happy investing and much success to you by using this technique.
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