This is Chris Goff, co-founder of the REI Pro software, andin this training session, I want to go over the different types of investingstrategies, along with the pros and cons of each one.
Alright, let's get started!
The first thing I want to talk to you about before we goover how to invest with each strategy is how we actually acquire theseproperties. I'm shocked that other experts don't teach you this. Knowledge about the three financing techniquesis essential, prior to even learning a strategy.
*The first one iswhat called ‘All Cash’. Any time I refer to paying cash for a property, I'm nottalking about pulling the total sales price in cash out of your wallet or evenyour personal bank account. All this means is that we're going pay the sellerin one lump sum. Keep in mind here that when paying ‘All-Cash’, you need to getit at a discount (below CURRENT appraisal), otherwise you would have paid fullprice and that’s harder to turn into profit.
*The second is called ‘Terms’. This is made up of apercentage of the total price paid up front, aka ‘down payment’, a set paymentmade every month, and the determined length of time payments should be madebefore payoff. Now, this is probably a familiar structure because you are mostlikely already doing it if you have financed a car or a home through a bank.You provide a down payment and make monthly payments for a certain amount oftime until it’s paid off.
*The third and most ideal way to buy property is ‘Discountand Terms’. As it sounds, this is purchasing property at a discounted salesprice and paying with set terms.
These the three financing techniques are interchangeable,making it possible to structure financing tailor fit for each situation.
Now, on to strategies. There are Five. No matter if you puta fancy name on them and dress them up, there are just five. Yes, that’s it.I’ll explain… if you purchased a property for investment purposes, how couldyou make money after buying it? The first thing you could do is rent theproperty out. You can fix up the property and sell it. You could lease optionthe property. You could seller finance it, and my question to you is, what elsecan you do with this property besides living in it or burning it down? Thereare no other possible solutions and that's why I want to cover these fivestrategies with you.
The Quick-Turn business of locating properties (usuallyneeding repairs) at bargain prices and quickly passing them toinvestors/landlords at prices well below retail.
The Quick-Turn business of locating and rehabbing houses inneed of repairs. The homes are then sold to new qualified buyers at retailprices.
The Quick-Turn business of creating financing to purchaseproperties. This allows you to sell acting as the bank, receiving monthlypayments, without the use of any lending institution involved in thetransaction.
The Quick-Turn business of controlling properties with nocash, credit, or a license. A lease-option buyer leases a property and has theright or “option” to purchase the property on or before the end of thelease-purchase agreement.
An “option” is simply the right to purchase a property underspecific terms within a certain time frame.
So, how do you decide which of these to use in varyingsituations? This Real Estate Strategy Chart is a simple way to determine‘which’ and ‘when’, also showing likely investment payout for each.
The next decision you have to make is what strategy(ies) youshould be focusing on. If you're in a position where you can get financing oryou have cash, maybe retailing a fix and flip or a seller finance setup mightbe where you would like to start. Many folks dream of rehabbing a property forprofit, and both of these strategies have traditionally high return rates. Ifyou prefer to start off a little slower, any of the others are a great way to‘get your feet wet’, so to speak. If you fall in the category of the vastmajority, you have little or no money to start with. Maybe you have money butbad credit and you can’t get traditional financing. In these cases, startingoff with the wholesaling or lease option strategies will be a great way to earnextra cash, establish a reputation in your local REI world, and set you on thepath leading to larger scale investing. I think it helps to break down anddecide which strategies you would start with but at the end of the day, as you buildyour career in this business, I want you to be great at all of these strategies.I want you to be comfortable and knowledgeable enough that you can get in frontof a seller and no matter what problem they present, you have a solution. That'sreally the key to successful real estate investing and a very rewarding feelingto be able to help others in difficult situations.
I hope this training was insightful and helped answer a fewimportant questions. As always, thank you for being a part of the REIPro family.You are at the heart of building this community and changing the face of realestate investing. Knowing how to invest the right way and having the best toolsfor the job are the keys to achieving this and reaching your goals, so atREIPro we work hard to put the best software tools in your hands and providethe knowledge to use them.
I recommend becoming as familiar as possible with thesethree financing techniques and five strategies by reviewing the information aboveand printing a hard copy of the strategy chart for easy reference. I lookforward to seeing you attend the next training session… until then, good luckin your real estate investing career!