The Real Estate Fast Track
THE
REAL ESTATE
FAST TRACK
HOW TO CREATE A
$5,000TO $50,000MONTH
REAL ESTATE CASH FLOW
David Finkel
John Wiley & Sons, Inc.
PER
CREATING CASH FLOW SERIES
THE
REAL ESTATE
FAST TRACK
THE
REAL ESTATE
FAST TRACK
HOW TO CREATE A
$5,000TO $50,000MONTH
REAL ESTATE CASH FLOW
David Finkel
John Wiley & Sons, Inc.
PER
CREATING CASH FLOW SERIES
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Copyright © 2006 by David Finkel. All rights reserved.
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Library of Congress Cataloging-in-Publication Data:
Finkel, David.
The Real Estate Fast Track : How to Create a $5,000 to $50,000 Per Month Real Estate Cash Flow /
David Finkel.
p. cm.
ISBN-13: 978-0-471-72830-6 (pbk.)
ISBN-10: 0-471-72830-6 (pbk.)
1. Real estate investment. 2. Real estate business. 3. Cash flow. I. Title.
HD1382.5.F565 2006
332.63’24—dc22
2005031914
Printed in the United States of America.
10987654321
To my lifelong partner, love, and best friend—Heather.
You are my forever.
CONTENTS
FOREWORD How Two Escapees from Corporate America Built
a Highly Profitable Real Estate Business
(and How You Can, Too!) Stephen Wilklow xi
ACKNOWLEDGMENTS xiii
INTRODUCTION 1
The Eight Major Business Success Factors 3
The Three Investor Levels—Your Proven Pathway to Real
Estate Success 8
Quick Overview of the Creating Cash Flow Series 16
The 16 Key Concepts from Buying Real Estate without Cash or Credit 17
An Overview of What You’ll Learn from Reading The Real Estate
Fast Track 27
PART ONE
The Advanced Investor Workshop
Section I: E
ARLY STAGE LEVEL TWO INVESTING—
DEVELOPING THE FIVE CORE INVESTOR SKILLS
CHAPTER ONE The Big Picture of Taking Your Investing Business
to the Next Level 34
The Seven Keys to Working Smarter, Not Harder 45
CHAPTER TWO Your Fast-Track Map™ to Real Estate Riches 51
The Three Biggest Pitfalls for Early Stage Level Two Investors 55
CHAPTER THREE Core Investor Skill One: Creating a Deal
Finding Machine 59
The Seven Clues to a Seller’s Real Motivation 62
The Two Clues to Great Financing 63
vii
The Eight Clues to a Great Property and Location 64
Seven More Techniques to Find Great Deals 66
Leveraged Strategies and Systems for Finding Motivated Sellers 68
The Mechanics of Tracking Your Marketing 71
CHAPTER FOUR Core Investor Skill Two: Structuring Highly
Profitable Win-Win Deals 75
The Three Most Important Terms Deal Acquisition Strategies 79
The Deal Structuring Wizard™—Two Simple Steps to Determine the
Right Way to Structure the Deal 82
21 Advanced Deal Structuring Strategies to Unstick Even the
Toughest of Deals 88
CHAPTER FIVE Core Investor Skill Three: Negotiating Magic—
Getting the Other Side to Say Yes 101
The Instant Offer System: A Simple Five-Step System for
Closing Deals 102
The Three Foundational Negotiating Strategies Every Investor
Must Know 103
14 Advanced Negotiating Secrets 110
Five Questions Your Real Estate Agent Will Ask That You Should
Never Answer 125
Three Questions to Ask Every Lender or Mortgage Broker You
Work With 129
CHAPTER SIX Core Investor Skill Four: Running the Numbers—
How to Know You’ve Got the Right Deal—Fast! 131
The Deal Evaluation Wizard ™ 135
The Ten Deadly Deal Analysis Disasters 140
CHAPTER SEVEN Core Investor Skill Five: Writing Up the Deal—
Understanding the Language of Real Estate 143
The Seven Essential Contract Basics 144
Protecting Yourself with Corporations and LLCs 149
viii CONTENTS
The Eight Key Contract Clauses When Buying an
Investment Property 151
The Ten Paperwork Pitfalls 157
Section II: MIDDLE STAGE LEVEL TWO INVESTING—
FINE-TUNING SKILLS AND LEVERAGING YOUR TIME
CHAPTER EIGHT First Steps to Building a Profitable
Investing Business 166
The Four Biggest Pitfalls for Middle Stage Level Two Investors 168
CHAPTER NINE How to Leverage Your Time as an Investor for
Maximum Profit 171
Leveraging Your Time as an Investor for Maximum Profit 174
23 Advanced Techniques to Leverage Yourself as an Investor 175
Section III: ADVANCED STAGE LEVEL TWO INVESTING—
BUILDING A PROFITABLE REAL ESTATE INVESTING BUSINESS
CHAPTER TEN The Key Perspective Shift That Will Make
You Wealthy 178
The Three Pitfalls of Advanced Stage Level Two Investors 180
What Stops Most Investors from Putting Their Investing Profits
on Autopilot 182
CHAPTER ELEVEN How to Build Business Systems That Work So
You Don’t Have To 187
The Seven Steps to Building Business Systems 189
The Five Key Areas of Your Investing Business 191
Taking Your Investing Business to the Next Level 196
Three More Core Investor Skills of Advanced Stage
Level Two Investors 197
CHAPTER TWELVE The Final Session of the Advanced Training 199
Contents ix
PART TWO
The Real World—12 Months
Building Your Investing Business
CHAPTER THIRTEEN Month 2—Tim Tests a Leveraged Deal
Finding Strategy 205
The Four Bottom Lines to Networking with Real Estate Offices 209
CHAPTER FOURTEEN Month 3—Vicki Feels the Pressure 211
The Three Keys to Protecting Yourself from a High-Pressure Closing 215
CHAPTER FIFTEEN Month 5—Mark Gets Coaching on How Best to
Leverage His Time 219
CHAPTER SIXTEEN Month 8—Leon and Mary Learn Tenant
Management Systems and Secrets 223
How to Make Sure You Get Paid Your Rent Each Month—On Time! 225
CHAPTER SEVENTEEN Month 12—Final Mastermind Meeting
on Their One-Year Investing Anniversary 229
PART THREE
Your Turn—Turning This Book into Cash Flow
CHAPTER EIGHTEEN Six Success Stories to Light Your Path 237
CHAPTER NINETEEN Creating Your Wealth Learning Map™ 243
CHAPTER TWENTY Closing Thoughts on Your Wealth Building 253
APPENDIX A The Investor Fast Track Program™—
Your FREE $2,495 Gift from the Author 257
APPENDIX B The Creating Cash Flow Series! 265
INDEX 267
ABOUT THE AUTHOR 273
x CONTENTS
FOREWORD
How Two Escapees from
Corporate America Built a Highly
Profitable Real Estate Business
(and How You Can, Too!)
Ican’t begin to tell you how proud and
excited I was when David asked me to share my story as the Foreword to this book.
You see, over the past five years David has been a very important friend and men-
tor to me and my wife Susan. In fact, David has been one of the most important
wealth mentors we’ve had and we’re living proof that the ideas and strategies con-
tained in the pages of this book work. They worked for my wife and me, and I
know that they will work for you, too.
When we first met David and Peter at a real estate workshop almost five years
ago, my wife Susan and I were trapped in the rat race of corporate America. Susan
was a CPA and I was a sales executive for a large corporation. Don’t get me
wrong—we were grateful for the comfortable living we were earning; but we felt
trapped all the same.
You see, Susan had always dreamed of balancing her career with the flexibil-
ity and freedom to be fully engaged and raise our kids. She wanted to volunteer at
the school, watch all the soccer games, and be home when they got home from
xi
school. And I—well, let’s just say I dreamed of having the time to be there to watch
my kids grow up, instead of being off working long hours for a large company.
So there we were, both working more than we wanted, and at the same time
wishing that we could spend more time at home, focused on our growing family.
That’s when we made the decision that for things to be different, we need to
make them different. So we took the plunge and joined David and Peter’s Mentor-
ship Program. And what a ride it has been!
The first year of our investing we completed 18 deals. While we made a
healthy profit from those deals, by far the greatest payoff was the learning we ac-
cumulated. By the end of our second year we had established profitable referral re-
lationships with several of the local banks, which to this day still continue to send
deals our way on bank-owned real estate that they want to sell quickly.
Over time our business developed into three areas. First, there is the foreclo-
sure business that we have created. This business is almost entirely systematized
right now, just like David teaches you how to do in this book. It generates an aver-
age of two to three houses a month that we buy and then fix up or flip. Our second
business is our rental portfolio of houses and small to medium-sized apartment
buildings. This is our freedom fund that generates a six-figure rental cash flow for
our family. And finally, there is the real estate development business that we have,
doing small to medium-sized developments in two states.
How did we accomplish all this in less than five years? Simple. We listened to
the best. And make no mistake about it, David is one of the best I’ve ever worked
with. When you master the strategies and techniques he has laid out in the pages
of this book you’ll literally propel your investing business to the next level. Over the
years I’ve read every book he has written and attended every course he has taught;
they have made me millions of dollars, and he can help you do the same thing.
But there is a catch here. You’re going to have to be the one putting in the
work turning the ideas in this book into cash in your bank account. No one can do
the work for you. All I can say is that I am so thankful that I listened and took ac-
tion. And I urge you to do the same. Read this book cover to cover. Devour it! Then
get out there and get to work. You can and will succeed, if you listen to the ideas
David so clearly lays out in the pages of this book.
S
TEPHEN WILKLOW
Past Mentorship Graduate and
Current Mentorship Coach
xii FOREWORD
ACKNOWLEDGMENTS
Creating real wealth is never a solo
job; it always requires the combined efforts of many people. I want to thank the
people who have made my life richer and fuller, and without whom the Creating
Cash Flow series would never have come to be.
First, I want to thank those people in my business life who have been instru-
mental in helping me to fulfill my mission to help generations of investors become
massively wealthy and to use that wealth to bless the world.
To the entire team at John Wiley & Sons, Inc. and Cape Cod Compositors—
you are great to work with, balancing your professional skill with a deep commit-
ment to produce meaningful projects that touch people’s lives. I am proud to be
associated with you.
To my Maui Mastermind friends and team: Diane, Scott, Amy, Monica, Gabe,
Meagan, Morgan, Aaron, Elizabeth, Michael, Beverly, Blake, the other Michael,
Stephen, Susan, and the very special Maui participants. You inspire me to be more
of who I truly am. Thank you.
Thank you to my friends at Mentor Financial Group (MFG): Peter, Paige,
Amy, Gayla, Beth, Dennis, Marilyn, Angela, Jeff, Christina, Kim, Laura, Alex,
Brian, Thomas, the other Thomas, Elizabeth, Deb, Bob, Lourdes, Larry, Aubrey,
Michelle, Stephen, Cheryl, Scott, John, Rob, Emily, and Nate. You will always be
family to me. My deepest appreciation also to all the clients and students of
MFG—past, present, and future. You have let me into your lives, and while you
may never know this, you have given me more than I can ever repay by taking ac-
tion and living the ideas in this book.
Thank you also to the other business friends who have contributed so much
over the years: Lee, Robert, J.P., Terry, Chris, the other Lee, Clay, Bill, Ann, the
other Bill, and Todd.
Finally, to those people who have made me truly wealthy—my friends and
xiii
family—thank you for your presence in my life: Heather, Alex, Laurie, Stacey,
Mom and Bill, Dad and Karen, my grandparents—Morey and Gerry, Arthur and
Jillian, Daniel, Miranda, Gail, Mark and Trish, Darcy, Eric and Luz, Karimjeet,
Jean and Phillip, Daryl and Dara, Margie, Martin, Jonathon and Kirsten, Gratia
and Bill, Lydia, Jillian, Ethan and Jen, Edson, Sharon, Grant and Jana, Nancy and
Ysa, Madeleine and Claira, Ted, and the list goes on.
xiv ACKNOWLEDGMENTS
INTRODUCTION
What if there was a way for you to cre-
ate $5,000 to $50,000 per month of real estate cash flow? And what if, instead of
having to work 40, 60, 80 hours each week to earn this money you could build your
investing business so that in five to seven years you could go passive in your invest-
ing and enjoy the cash flow without the day-to-day work? And finally, what if you
could do it in a way that would make your cash flow secure—so that no matter
what some bigwig at some large corporation decided, your income streams still
flowed to you month after month, year after year?
That probably seems impossible, or maybe too good to be true. But just for a
brief moment, imagine it were truly available to you.
How would it feel to know that you have the freedom to do what you want,
when you want, with whom you want, the way you want? Imagine you are in total
control of your financial life with a myriad of choices laid out before you each and
every day. The freedom can make you light-headed, giddy, perhaps a little dizzy!
Welcome, my friend, to the world of real estate investing. When done the
right way, investing in real estate can create for you an inflation-proof cash flow
that will take care of you and your family forever.
Before I begin, I want to make one thing abundantly clear—this is going to
take work. If you think you can just get started with your investing and wake up to-
morrow morning a multimillionaire, you need to think again. Using the ideas I am
going to share with you, working part-time, it may take you as long as 10 years to
build your real estate cash flow to the point where you can retire and live comfort-
ably on that cash flow for the rest of your life. If you are a full-time investor, it may
take you five to seven years to achieve this degree of financial freedom. But wouldn’t
it be worth it to work hard and smart for five to seven years and at the end of that
time be in a position to comfortably retire with your income stream secure? Think
about it. Most people spend 40-plus years working to build other people’s busi-
nesses, and in the end over 95 percent of them end up either dead or dead broke,
1
depending on the government or other people for their financial survival. These
aren’t my numbers, they’re the federal government’s! Does spending 40 years of
your life for a 5 percent chance of success seem like a good bet to you? It’s probably
clear to you where I stand on the matter!
Instead I suggest that you take a fraction of that same energy and effort and
redirect it into yourself—building your own investing business so that you can take
care of yourself and your family the way that, in your heart of hearts, you know
you deserve. The road will be harder than you ever imagined, but the rewards will
be sweeter than you could ever have anticipated. And the best thing of all is that
once you build your profitable investing business the right way, it’s a straightfor-
ward process to turn that business into a hands-off moneymaker for you.
That’s the real power of real estate—it’s a business in which an average person
can earn extraordinary income because of the nature of the business.
My Story
Indulge me for a moment, if you will, as I give you a quick snapshot of how I got
started with my investing and what I’ve been able to accomplish. You deserve to
know more about the person who will be mentoring you in building your investing
business. In fact, later in the book I talk about why you should never listen to
someone’s advice unless that person has what you want in the area of life that he or
she is talking about.
I started out as an athlete, training to play in the Olympics. My sport was field
hockey and I played on the United States National Team for about seven years. As I
was gearing up to play in the Olympics, I started having severe back pain and nerve
problems in my left leg. By the time the doctors and I finally figured out what was
going on over a year later, it was too late for me to play in the Olympics. (It turned
out that I had a small tumor—benign—in my hip, growing on my sciatic nerve.
The surgeon removed the tumor and I am fully healed, although too late to play in
the Olympics.)
As you can imagine, I was deeply saddened by that lost opportunity. But
out of the darkest of events equivalent or greater good fortune comes. In my
case it was in the form of my real estate mentor and business partner for many
years—Peter Conti.
2 THE REAL ESTATE FAST TRACK
When we met at a wealth workshop we were both attending, we hit it off
from the start. Peter had been very successful investing in Colorado, and he
wanted to start teaching investing to others. The problem was that while he was a
savvy investor, he wasn’t much for teaching. I, on the other hand, had supported
myself through my playing career by teaching and coaching. He had the real es-
tate know-how, and I had the ability to break skills down and teach them in a way
that transferred that knowledge fast. Within 12 months of working together I had
put together dozens of deals and was on my way to building a sizable real estate
portfolio of my own.
Over the years, I’ve built investing businesses that invested in single family
houses, condos, and apartment buildings. I’ve bought everything from small, one-
bedroom condos to huge apartment complexes.
But by far the biggest thing I have learned is exactly how to help new and sea-
soned investors alike make a ton more money with less time and effort. Over the
past decade, my clients have literally bought and sold over a billion dollars of real
estate. Again, I’m not sharing this to impress you, but rather to impress upon you
how doable real estate really is. I started out as a 26-year-old athlete, with no real
business experience and no knowledge of real estate, and within six years I was a
multimillionaire. If I can do it, you can too. In fact, it’s my belief that there is no
better vehicle for creating and enjoying your wealth than real estate. It is just such
a simple, yet powerful wealth-creating force that the average person can become
incredibly successful investing.
The Eight Major Business Success Factors
Real estate lets you automatically harness the eight biggest business success fac-
tors in a way to consistently produce big cash profits. Let’s look at all eight now.
Business Success Factor One: Leverage
Real estate lets you leverage yourself into the property using other people’s money.
Over the years that I have mentored several thousand students in launching their
investing businesses, my students typically have less than 5 percent of the value of
the property in the deal as their cash and over 95 percent of the funding coming
Introduction 3
from outside sources. That means they have a leverage multiplier of over twenty-
fold! The best part of real estate leverage is that you can use what’s called upside
leverage to get the benefits of the magnifying return of leverage without the down-
side risk that’s normally associated with it.
Business Success Factor Two: Appreciation
In very few businesses do the assets of that business appreciate in value year after
year. In fact, in most businesses, the capital assets depreciate every year—that is, go
down in value. Real estate is one of the few capital assets that a business can own
that goes up in value over time. What this means is that at the same time your real
estate business is generating cash flow month in and month out, the underlying as-
sets, the real estate itself, are going up in value and adding to your net worth.
Business Success Factor Three: Tax Savings
In almost no other business are your profits so potentially shielded from the
wealth-diminishing effects of taxes as they are when investing in real estate. The
government wants investors to provide housing and commercial real estate, and it
incentivizes them with powerful tax advantages that even the smallest of investors
can tap into.
Business Success Factor Four: Simple to Sell or Rent
The biggest challenge for most businesses is to find their customers. In fact, for
many businesses this is the single greatest challenge they’ll ever face—to establish
the customer base to generate the cash flow to support their business.
But with real estate, this is much easier. Take the case of an average rental
house that rents for $1,500 per month. When you find one renter for that house
who lives there for a year, your real estate business will generate $18,000 of gross
income from the rents that year. And what if you are able to keep that tenant hap-
pily living in that property for three years? That means that one tenant will gener-
ate $54,000 of gross income for your business. All that income from leasing out
one property!
Now multiply that by 10 houses and you have a simple part-time rental busi-
4 THE REAL ESTATE FAST TRACK
ness that generates $180,000 per year of gross income, or over $1.8 million of gross
income over 10 years. In very few other business can the average person generate
that type of sales volume without an expensive and highly skilled sales team. But
with real estate it’s a simple and straightforward process. Why? Because there is al-
ways a ready market for quality real estate. And this is true whether your goal is to
rent out a property, sell it to a retail buyer, or put a tenant buyer in your property
on a rent-to-own basis.
Or, if you prefer the route of buying low and selling high, in what other busi-
ness can you so easily make a $400,000 sale like selling a house? Or have highly
skilled sales agents fighting to get the rights to sell your house for you for such a
small sales commission? I think you get the idea.
Business Success Factor Five: Inflation-Proofed
By its very definition, inflation means that the purchasing power of a dollar is di-
minished because the cost for staples like food, shelter, and clothing has increased.
Built into the very formula by which inflation is measured is the assumption that
as the cost of living increases, with it goes the cost, whether it be sales price or
rental amount, of real estate. This means that as you build your cash flow–generat-
ing investing business, your profits are inflation hedged because your real estate
will rise with the tide of inflation. While over the short term this may not seem to
matter, over 20 to 30 years it will make a huge difference to your quality of life be-
cause your cash flow will have more than doubled as it keeps pace with inflation.
Plus, the underlying equity you have, which is a large component of your net
worth, will have also gone dramatically higher.
Business Success Factor Six: Forced Appreciation
One of the best things about real estate is that it exists in an imperfect market-
place. There is no absolute determiner of value because personal circumstances,
market conditions, and individual skill and expertise have a dramatic influence
on the price and terms with which you can acquire a property. This means you
can buy a $400,000 property for 30 to 40 percent below value, and the very mo-
ment you buy the property, because your circumstances are different, that prop-
erty is instantly worth $120,000 to $160,000 more! Remember, value does not
Introduction 5
exist independently of the owner’s context. This makes real estate one of the
fastest pathways to building great wealth.
When I look at all the ways my students have literally made hundreds of
millions of dollars, the simple truth is that forced appreciation was the single
most important profit generator for them in the early years of their investing.
Over time, the appreciation and cash flow from their portfolios outpaced forced
appreciation in importance, but never underestimate the power of personal cir-
cumstances and the specialized skills and knowledge you are acquiring to help you
make hundreds of thousands of dollars in the early years of your investing.
Business Success Factor Seven: Easy to Autopilot
Real estate is one of the easiest businesses to put on autopilot. By building your in-
vesting business the right way, you are able to transition out of the day-to-day over-
sight of your investing company, and into the passive role of a hands-off investor
who works a few hours a day or less overseeing his or her investing business.
Business Success Factor Eight: Cash Flow
By far the biggest benefit that the typical investor craves from real estate is the
cash flow it can generate because this cash flow means freedom. Freedom from
working for a boss or company that doesn’t value you. Freedom to be in control of
your own life.
There are essentially four types of real estate cash flow. First, there is the
monthly cash flow that is derived from the spread between the monthly income a
property generates and the monthly expense of owning it. This positive cash flow is
what most investors think of when they talk about real estate cash flow. But it is
only one of the four sources of income from a property.
Second, you have up-front cash flow that comes from the larger chunks of
up-front payments your buyers or tenant buyers pay you for the property. For ex-
ample, if you put a new tenant buyer in one of your homes on a rent-to-own basis*
6 THE REAL ESTATE FAST TRACK
*To gain immediate access to a FREE ebook on how to sell your property on a rent-to-own
basis, go to www.InvestorFasttrack.com.
and they give you a $10,000 nonrefundable option payment, this money in essence
is a form of up-front cash flow. In many ways this type of cash flow is even better
than monthly cash flow because you get it all up front instead of having to wait
every month for it. Another example of up-front cash flow is a student of mine who
found a motivated seller with a property he wanted to unload fast. My student
locked up the property using my standard “Agreement to Buy Real Estate” con-
tract, and within three weeks he had sold his contract (i.e., the right to buy that
property for such a discounted cash price) to another investor for $15,000 cash!
Not bad for a month’s work—part-time!
The third type of cash flow is re-fi cash flow, which comes when you refi-
nance a property that you own that has gone up in value, in order to tap into the
equity and pull out money from it. This type of cash flow is tax-free since it’s a
“loan” and not actual “profit”; still, it is spendable and investable. The key to intel-
ligently using this type of cash flow is to make sure the property still rents out com-
fortably for more than the real cost of maintaining it, which includes the new
mortgage payments from the refinance, so that you have a safety buffer built into
the deal in case the rental market cools. In my opinion, the very best reason to tap
into re-fi cash flow is to invest the money into another property. This way you get
the profits from two properties instead of only the one you had before!
And the final type of cash flow is the back-end cash flow that comes when
you resell a property. For example, I have many students who buy 6 to 12 new
properties every year, and sell 2 to 4 of their existing portfolio. They earn a few
thousand dollars a month or more from the monthly cash flow, but they earn an-
other $150,000 or more each year from the back-end cash flow they get from sell-
ing a few of their properties each year. One other benefit of this type of cash flow is
that this income is often taxed as long-term capital gain versus ordinary earned in-
come. This saves you about 60 percent on your tax bill! I strongly urge you to hang
on to all of your real estate that you can over the long term, but there is nothing
wrong with pruning your real estate portfolio and selling off some of your proper-
ties each year for cash flow, provided you are acquiring even more properties than
you are selling each year. In a way, this lets you upgrade your portfolio as you sell
off the trouble properties and keep the very best of the best over time.
If the other seven Business Success Factors form a solid foundation upon
which you can build your real estate fortune, then factor eight—cash flow—is the
fuel that you’ll need to reach your destination. Ultimately you will want your real
Introduction 7
estate business to generate all four types of real estate cash flow to fuel your jour-
ney on the Real Estate Fast Track.
The Three Investor Levels—
Your Proven Pathway to Real Estate Success
Over the years of working with thousands of investors I created a model to explain
the progression every investor must make on his or her path from launching an in-
vesting business to becoming financially free. I call this powerful model the Three
Investor Levels.
Level One
Level One investing is about belief. It’s about proving to yourself that not only
does real estate work for other people, but it works for you! How do you prove
this to yourself? By doing a few deals and making a significant profit. As a Level
One investor you have the certainty that real estate will be your proven path to fi-
nancial success. Yes, you know you still have a lot to learn, but you’ve seen for
yourself how lucrative and possible it really is. The key for Level One is getting
yourself into action.
Level Two
Level Two is all about mastering the five core skills of real estate investing and
building an investing business to support your real estate portfolio. At first Level
Two is about building your knowledge base of investing strategies, tools, and tech-
niques, but later it’s about building a real estate investing business.
Why is this so important for you? Because ultimately, if you don’t learn
how to leverage yourself through building a strong business infrastructure of
systems and people, you will be limited in two critical ways. First, you will be
limited in the scale of projects and profits you can earn. You just can’t do big
deals without the infrastructure there to make the deal stand. Second, unless
you build an investing business, you’ll be limited in your potential to create the
8 THE REAL ESTATE FAST TRACK
time and freedom you truly want. That’s why it’s so important to learn to build
an investing business.
In the end, it’s this investing business that will help you step into Level Three
investing and enjoy a Level Three lifestyle. While Level Two investors create
healthy cash flows for themselves and increase their net worth significantly every
year, they are still actively tied to their investing business. They are the heart and
engine that drives that investing business forward. Without them, their investing
businesses will fizzle and die.
Level Three
Level Three is about mastering the art of building an investing business that works
so you don’t have to. If Level Two investors are the heart, pumping the business
forward, Level Three investors are the brain, directing the big picture of the busi-
ness and enjoying the consistent profits from that business, without getting caught
up in any of the day-to-day activities for the business. Imagine having built your
real estate mini empire in such a way that you earn massive income without hav-
ing to be involved in the day-to-day oversight of the business. Level Three investors
earn at least as much as Level Two investors, but they do it passively. This means
Level Three investors work less than 10 hours per month. Their property portfolio
and real estate business works without them needing to be there to run things.
Level Three investors know how to do big real estate deals on commercial real
estate, how to convert excess cash into passive streams of income through joint
venturing and lending, and how to build a stand-alone business to support their
real estate empire in a way that creates time freedom.
The bottom line is that Level Three investors have learned to put their in-
vesting on autopilot so they don’t just make money, but they create passive
streams of income.
In the beginning, you’ll have to front-load your effort as you develop as an in-
vestor. It will take you hundreds of units of effort to succeed as a Level One in-
vestor and get your first few paydays. Later, as a Level Two investor, it will take you
10 to 20 units of effort to get your paydays. And finally, as a Level Three investor, it
may only take one or two units of effort to enjoy a lifetime of paydays. But you’ve
got to pay your dues at the start.
Introduction 9
The Unvarnished Truth about Creating a $5,000
to $50,000 per Month Real Estate Cash Flow
Imagine what it would mean for you if you were able to build your investing busi-
ness to the point where it generated $5,000 to $50,000 per month, every month.
Now take it one step further. What if it only took you 20 hours or less per week to
run your investing business? How would it impact your family now that you have
this freedom and control over your time? What would you be able to do with your
time now that you have the security of knowing that each month $5,000 to $50,000
of cash flow will be streaming into your bank account—month after month, year
after year, decade after decade?
Let’s be candid here, the average investor never reaches this degree of free-
dom. The average real estate investor gets wealthy very slowly, and over 30 or 40
years creates a large net worth. They do this by buying 5 or 10 rental properties
that they care for and nurture over their lifetime, and in the end these rental prop-
erties are their retirement security. This is a solid plan, and it works for hundreds
of thousands of mom-and-pop investors around the world.
But what if you don’t want to wait 30 years or longer? What if you want it to
happen faster?
Accelerating the Process—Building Wealth
So just how fast can you make it happen? How long will it take you to reach your
real estate dreams? Well, years back when Peter first got started with his investing
he didn’t know anything about real estate. In fact, he started out as an auto me-
chanic because that’s what he had always been good at. He came from a family of
seven kids, and he was the one who was expected to struggle all his life. For many
years he lived up to this expectation. Yet even during those times there was a part
of him that hungered for something more.
All the time he was working for five dollars an hour as a mechanic, he paid
close attention and studied what wealthy people were doing. Again and again he
watched how so many of those who had started out with nothing had been able to
create great wealth investing in real estate.
Sometimes you need to hit rock bottom before you decide to make a change.
Fast
10 THE REAL ESTATE FAST TRACK
For Peter this day came when he was working in an auto repair shop. It was win-
tertime and the owner was trying to save money by turning off the heat in the
garage. It was so cold that his fingers were turning numb as he worked on the cars
lined up around him.
He saw the shop owner walk out of the heated office with a steaming mug of
coffee. It looked so good he rummaged through his tool box for his mug and went
into the office to pour himself a cup, more to wrap his hands around for warmth
than anything really.
Just as he was walking out of the office to go back to work, the owner stopped
him and said, “Peter! That coffee is for customers only!” As you can imagine, Peter
felt about two inches tall as he turned and went back to work. It was at that mo-
ment, right then, that he made the decision that he would take the leap and start
his investing. He vowed that never again would he or his family be financially de-
pendent on anyone else. He would create the financial freedom to take care of his
family and live the life he always knew waited for him.
I wish I could tell you that it was easy, that he made his millions overnight.
But he didn’t. It was plain hard work. Back when Peter got started, there weren’t
any structured Mentorship Programs he could join to take him by the hand and
show him exactly how to do his investing. He had to figure most of it out by him-
self. He did invest heavily on home study courses and real estate workshops—to
the tune of over $20,000 his first few years in the business—but he said that since
he never went to college, he just called that “tuition” for his “Real Estate Degree.”
And after all, he did earn it all back in his very first year of investing, on his first
two real estate deals. Isn’t that the way all education should be, paying for itself in
12 months or less?
His next real hurdle came as his real estate portfolio grew so big that he was
completely wrapped up in managing it. In fact, at its peak he was so busy dealing
with tenants and toilets that he went for a two-year stretch without picking up
even one more property. You see, he hadn’t learned the difference between being a
real estate investor and building a real estate investing business. He was stuck at
that point in his life in the landlord trap of tenants and toilets, struggling to keep
his head above water. Yes, he was making a lot of money, but he had to work long
hours to keep the properties going.
In the end it took Peter close to 10 years to figure out how to build a real es-
tate investing business that worked hard so he didn’t have to, which allowed him to
Introduction 11
enjoy Level Three success. It’s pretty remarkable that he was able to do it at all,
since no one knew how to teach him this progression. Sure, there were plenty of
people teaching techniques for structuring deals or finding motivated sellers, but
no one who could show him how to structure his investing business so it worked
better without him in it. He had to figure this out all on his own.
Now I on the other hand had it much easier. Not because I was smarter or
had a background in real estate, neither of which was the case. Remember, I was
the ex-jock who had to give up on my dreams of playing in the Olympics because of
a serious injury. I started with no money, no credit, and no business experience of
any real kind. Heck, when I met Peter I was living in the attic of a converted garage
because that was all I could afford!
But I did have one powerful factor in my favor. When I first started learning
how to invest, I had Peter as my personal mentor. In essence, I was Peter’s first
Mentorship student and I got the benefit of Peter’s years of experience. It only took
me five years to reach Level Three success with my investing. What was the differ-
ence? I had Peter as my mentor and reached Level Three 100 percent faster!
Over the past decade of mentoring new investors to succeed building a prof-
itable real estate business, we’ve gotten better and better with every generation of
students we trained. We’ve had students blaze through the program and reach
Level Three success in less than three years (the current record is 22 months), al-
though the average time it takes for most Level Three students to get there is closer
to five to seven years.
So how long will it take you? The answer depends on you. Are you going to
listen and follow my instructions? Are you going to get yourself to work consis-
tently to build your investing business, even when you hit moments of frustration
where you just want to throw in the towel? Then I think you can do it in five years
or less. I believe this is truly possible for you. But let’s get real here. What if it took
you twice as long? Wouldn’t it be worth investing 10 years to create financial free-
dom for yourself and your family for the rest of your lives? Most people work at
jobs for over 40 years and never reach financial freedom. I’ve never had a student
who stayed the course who didn’t succeed in a quarter of that time! And most did it
much faster than that.
That’s exactly what this book is going to help you do—to get on the Real Es-
tate Fast Track to building a profitable investing business so that you can create a
$5,000 to $50,000 per month real estate cash flow, and do it in five years or less.
12 THE REAL ESTATE FAST TRACK
The road won’t always be easy. If it was, then it would be congested and you’d
get stuck in the traffic jam of the scared and lazy masses. At times it will seem like
the slope is just too steep and the surface just too rocky. But if you persevere, and
listen to the coaching and guidance of those who have traveled that road already, I
guarantee you can make it to the end. And I know the end is completely worth it
for you. Remember, I’ve made the journey myself and have helped thousands of
clients do it too.
In fact, for the first time ever I’ll be sharing my advanced real estate business
building system with the masses. Normally clients pay me tens of thousands of dol-
lars for this information, and they consistently tell me it was worth every penny. And
why not? They’ve turned the information I’m about to share with you in this book
into a cash flow–creating investing business that yields them and their families hun-
dreds of thousands of dollars every year! And you can do the same thing yourself.
This means you won’t have the guesswork and months of wasted effort of
struggling to figure out the big picture of how to build your investing business.
You’ll be empowered with technique after technique, strategy after strategy, short-
cut after shortcut, to help you build your real estate cash flow as fast as possible.
In essence, the Real Estate Fast Track will allow you to tap into the two most
powerful wealth-creation forces on this planet—OPE and OPS.
Tapping into the Power of OPE—
Other People’s Experiences
OPE stands for “other people’s experiences.” I want to be clear here that the experi-
ences that matter most to you are those of people who have built what you want to
build and who enjoy what you want to enjoy. You need to make sure that the peo-
ple you listen to concerning real estate investing have done it themselves.
The simple test is to ask yourself, has this person successfully done what I
want to do in the area they are advising me in? If they have, then and only then do
they have something of value to share with you.
And when you find these people—hang on their every word! Their wisdom is
more precious than gold because it will save you years of effort and struggle. Re-
member how I was able to succeed in my investing in half the time that Peter did,
because he was my mentor? That’s the power of tapping into OPE.
Introduction 13
Leveraging OPS—Other People’s Systems
The second great wealth accelerator is OPS—other people’s systems. A system is
simply an organized process that you can apply to generate consistent results in a
specific area of your investing business. Build the right systems for your investing
business, and not only will you make a fortune, but you’ll be able to free yourself
from the day-to-day operation of your investing business. Learn the right systems
from other people, and you’ll save years of effort and struggle.
In this book you’ll learn all kinds of real estate systems to successfully build
your profitable investing business from the start. In addition, you’ll learn the mas-
ter system of building business systems that autopilot specific parts of your invest-
ing business so that they consistently generate excellent results. In truth, you are
leveraging your investing by letting me hand you all these powerful business sys-
tems upon which to build your profitable investing business. That’s how you’ll be
able to build your investing business to generate a $5,000 to $50,000 real estate
cash flow so quickly.
By tapping into OPE and OPS, you will quickly earn the financial freedom
and security you’ve always dreamed of having. What’s more, right from the start
you’ll know that you’re on the right track—the fast track—to creating wealth.
So what exactly is this “Real Estate Fast Track” we keep talking about?
The Real Estate Fast Track is the proven path that leads new investors
from their beginning at the start of Level One, and takes them all the way to
Level Three success. It’s what I’ve been helping investors do for years, and now
it’s your turn. Are you ready to make this journey?
I’ll be giving you a detailed road map of where your investing business will
need to go, both in the beginning and as you grow it, so that you have a clear and
accurate picture of the end towards which you are working, and the milestones
and markers along the way.
Not only will you get the Fast Track Map™, but you’ll also get to watch six
“Early Stage Level Two” investors work to follow that map in the real world as they
apply the very same strategies, techniques, and lessons you’ll be learning in this
book to reach Level Three success.
You’ll see where they get stuck so you can safely sidestep those pitfalls. And
you’ll learn how they troubleshoot problems as they come up, to make your profits
and success assured.
14 THE REAL ESTATE FAST TRACK
The Series
This book is the second in the three-book Creating Cash Flow series. This series is de-
signed to teach you everything you need to know, not just to make money investing in
real estate—that part is easy—but to put your investing business on autopilot and cre-
ate passive cash flow so that you can enjoy the freedom and lifestyle of a truly wealthy
investor. This progression of residualizing your real estate income is one that most in-
vestors miss. They never learn how to take themselves out of the “doing” and, as a
consequence, they are always working hard to care for and manage their real estate
portfolio. Hence they either fall into the landlord trap of tenants and toilets, or they
are constantly scrambling to find their next great deal so that they can sell it for a fast
profit. Or they give up all together, saying real estate takes just too much work.
What they don’t know, in fact aren’t even aware is possible, is that there’s a
better way. There is a way to invest in real estate so that over the course of several
years you build your investing business into an independent entity that can not
only look after itself but, better still, can produce consistent cash flow and equity
buildup—month after month, year after year. That’s what the Creating Cash Flow
series will be teaching you. This three-book series will take you through each of the
three levels of investing success.
In the first book of the Creating Cash Flow series, Buying Real Estate without
Cash or Credit, you learned everything you needed to know to get started investing
and do your first deal in 90 days or less.
Here in book two, you’ll learn how to build a $5,000 to $50,000 per month
cash flow as you succeed as a Level Two investor. You’ll learn how to master the
five core investor skills:
1. Marketing—Finding great deals in any market.
2. Structuring—How to structure win-win real estate deals.
3. Negotiation—How to get the other party to say yes to the deal you want.
4. Analysis—How to determine if a deal is good in five minutes or less.
5. Contracts—How to write up moneymaking real estate deals.
Plus you’ll learn how to build a profitable investing business that consistently
grows your profits and free time.
Creating Cash Flow
Introduction 15
Read the Series in Any Order—Each Book Stands Alone
Now you may be wondering whether you need to read the series in order. You
don’t. Each of these books has been carefully designed to stand on its own. I do
recommend that you ultimately read all three books because the strategies and
techniques they share complement each other, but you can do it in any order.
Quick Overview of the Creating Cash Flow Series
Book One: Buying Real Estate without Cash or Credit
Focus: On giving beginning investors the critical information they
need to get started making money investing in real estate in the next 60 to 90
days. The book takes you by the hand and shows you step-by-step, action-by-
action, strategy-by-strategy the fastest way for you to successfully get started
with your investing.
Investor Level: Primarily for Level One investors who are just getting started
with their investing, it’s also designed for Level Two and Three investors who
want to cherry-pick powerful investing strategies and techniques to
immediately put to work in their investing businesses.
Book Two: The Real Estate Fast Track: How to Create a $5,000 to $50,000
per Month Real Estate Cash Flow
Focus: On giving you a clear, proven pathway from where you are to Level
Three success as an investor. You’ll learn the five core investor skills and how
to leverage yourself to make more money with your investing with less time
and effort. You’ll also learn about the difference between merely being a real
estate investor and building a successful real estate investing business. You’ll
also get the clear action steps you need to take to build your own profitable
investing business.
Investor Level: Designed for all three investor levels. Level One investors will
learn more strategies and techniques to help them get started with their
investing. Level Two investors will get the all important Fast Track Map™ to
follow to enjoy the real success they are after. And finally, Level Three
investors will again get powerful concepts and techniques that they can pick
and choose from to immediately upgrade their already thriving investing
businesses.
16 THE REAL ESTATE FAST TRACK
(continued)
S
U
M
M
A
R
Y
Quick Overview of the Creating Cash Flow Series (continued)
Book Three: Advance Secrets to Building Your Real Estate Cash Flow
Focus: To show you how to put your investing business on autopilot and create
passive cash flow so that you can enjoy the freedom and lifestyle of a truly
wealthy investor. This book is designed to help you take that final step up into
Level Three success where you transition yourself out of the day-to-day
operation of your real estate business so that you can truly enjoy the freedom
and security you have worked so hard to earn. The book will focus on how you
can take your new time and freedom and invest it in larger deals on
commercial real estate, and how to take the profits your real estate is
generating and convert them into passive streams of income.
Investor Level: While Level Two and Level Three investors will get the most
from the solid how-to part of the book, Level One investors may get even more
from the book as it inspires them with exactly what is possible and clearly lays
out the end toward which they are working, in vivid and totally practical detail.
A Brief Review of
For those of you who have already read Buying Real Estate without Cash or Credit,
use the following review to remind yourself of some of the key lessons of that book.
For those of you who are starting the Creating Cash Flow series with this book, The
Real Estate Fast Track, you can use this review as a summary of the critical lessons
you will learn later when you eventually read it.
The 16 Key Concepts from
Key Concept 1: The Paradox of Playing It Safe
In today’s world of a globalized economy and rapidly changing business environ-
ment, the most dangerous thing you can do is to “play it safe.” Playing it safe is
tantamount to choosing known failure. Instead, if you want things to be different
or Credit
Buying Real Estate without Cash
Estate without Cash or Credit
Buying Real
Introduction 17
Buying Real
for you and your family, you are the one who is going to have to make it different.
The days of depending on a benign corporation or government to take care of you
are over. That’s why real estate investing is so exciting. It gives you a simple vehicle
to build financial security and freedom for yourself. But to take advantage of this
financial vehicle, you’ve got to take some calculated risks. Considering that your al-
ternative is known failure, the odds when you take that leap are considerably in
your favor!
The thing that scares most people back into playing it safe is information
overload. When people get confused they tend to freeze, just like a deer in the
headlights of an 18-wheeler! That’s why Buying Real Estate without Cash or Credit
was all about cutting through the blizzard of data and leaving you with the essen-
tial core you needed to know to get started with your investing and successfully
complete your first deal in 90 days or less.
Key Concept 2: The Foundation of All Winning Real Estate Deals
Every profitable real estate deal has as its foundation a motivated seller. One of the
best parts of real estate is that it exists in an imperfect market where personal cir-
cumstances dramatically affect the value of any piece of property at any given mo-
ment. One owner with a specific circumstance may value a property at $400,000;
another owner with that same property but a different set of circumstances may
value it at $500,000.
This is important to you because as a real estate investor you are getting paid
to bring value to the table, and one of the biggest ways you create value is by solv-
ing a motivated seller’s real estate problems. You build value into the deal on your
side by helping the seller deal with challenging times, and you earn a fair and
healthy profit to the degree you are able to accomplish this. The key is that all
great real estate deals start with a motivated seller. Which brings us to the next
key concept.
Key Concept 3: The Winning Deal Formula
The general wisdom that real estate is all about location, location, location is flat
out wrong. In the real world of investing, real estate is first and foremost about the
motivation of the seller; secondly, it’s about the price and terms with which you
can acquire a property; and then and only then about the location of the property.
18 THE REAL ESTATE FAST TRACK
In fact, the Winning Deal Formula goes on to define the exact proportion of these
three key ingredients for all winning real estate deals.
■ Sixty percent of the deal is dependent on the seller’s motivation.
■ Thirty percent of the deal is dependent on the financing.
■ Ten percent of the deal is dependent on the location and property itself.
When you really let this key lesson sink in it changes the way you structure
your investing business. No longer do you look for the perfect property in the per-
fect location. Instead, you focus your early efforts on finding motivated sellers, the
more the better—which brings us to the next key concept.
Key Concept 4: How to Find Motivated Sellers Over the Phone in Two Minutes
or Less
Once you understand how every profitable deal starts with finding a motivated
seller, the next critical lesson is how exactly to find and qualify sellers over the tele-
phone. This is where the “Quick Check Scripts” came into play. These simple
scripts showed you exactly what to say and, more importantly, how to say it, so
that you could easily qualify any seller over the telephone in two minutes or less.
You also learned about how to preempt the two most common objections
when talking with sellers over the phone, and how to avoid the three most com-
mon mistakes new investors make when dialing for deals.
The bottom line is that, used properly, the telephone is one of your most pow-
erful deal-finding tools available. And since nearly every method you have to gener-
ate leads will ultimately require you to talk with the seller over the phone, to
qualify them as to their motivation and situation, the faster you can get fluent with
this critical investor skill the better.
Key Concept 5: The Five Fastest Ways to Find Your First (or Next) Deal
While there are literally over 100 different marketing techniques to find motivated
sellers and profitable real estate deals, there are five that are the most important
for you to test out first.
1. Do your dials. Outbound calls you make to “for sale” and “for rent”
classified ads in your local paper are the first and most important early
Introduction 19
technique for finding motivated sellers. Not only is this the fastest way
to get lots of practice talking with owners of properties, but it is also
one of the cheapest ways!
2. Place your “I Buy Houses” classified ad. Getting sellers to call you who
are more strongly motivated is one of the keys to a sustainable, successful
real estate investing business. Classified advertising in papers that sellers
are likely to look at works wonders. This is a way to leverage the money
for the ad to save you time finding deals. With one phone call you can have
your ad out there 24/7, finding you deals.
3. Put out your “I Buy Houses” signs. Dollar for dollar, your tacky, ugly “I
Buy Houses” signs are one of the best lead sources you can get working for
you. Make sure you check with local ordinances in your area regulating
their use, but seriously consider adding them to your marketing mix. I
suggest a minimum of 50 signs per week on a regular and consistent basis.
4. Test direct mail. Once you’ve had some practice talking with sellers on
the phone and have met with at least 10 sellers, test two simple direct mail
campaigns to generate leads of motivated sellers. The first is a postcard
campaign to out-of-town owners. The second is a postcard campaign to
landlords.
5. Spread the word that you have started to invest in real estate and
generate referral business. The easiest form of leverage to find great
deals is to get other people who you know or meet to help you find deals.
Your referral network is a critical piece of your long-term investment suc-
cess. I have found my best deals from referrals. The only question is
whether you will have the courage and discipline to consistently build
your referral network.
Key Concept 6: The Big Picture of Structuring Real Estate Deals—
The Winning Deal Decision Tree
There are two main ways to buy a property and make a conservative profit. Either
you buy the property for cash at a deeply discounted price, or you buy the property
with attractive terms of financing that allow you to make your profit due to the
great financing with which you acquired the property.
20 THE REAL ESTATE FAST TRACK
Key Concept 7: The Cash Price Formula
When you are buying for cash, the reason for the big discount is that as an investor
your cash is a valuable commodity—one that most sellers want. It is also a limited
commodity. Once it’s committed by being invested in real estate, you lose out on
the ability to quickly access it to purchase your next screaming good deal. Because
of this, you need to always value your cash highly and use it to maximum effect.
This means if a seller requires an all-cash purchase, you require a deep cash dis-
count to move ahead with the deal.
When you are buying for cash, never pay more than 70 percent of the as-is
value, and you’ll be taking one of the most important steps to guarantee yourself a
profit in your real estate deals. This is known as the Cash Price Formula.
So if you have a house that, if it were in great showing condition, would sell
for $450,000 but conservatively needs about $50,000 of repairs to get it in that con-
dition, then the as-is value of that house is $400,000. As long as the maximum you
pay for that property is $280,000, with less being your goal, you’ll conservatively
come out of the deal with a fair profit.
Key Concept 8: The Three Most Important Terms Acquisition Strategies
In Buying Real Estate without Cash or Credit, you learned about all three of the
most important Terms Acquisition Strategies: lease options, buying subject to the
existing financing, and using owner-carry financing.
A lease option is when you lease out a motivated seller’s property with a set
purchase price at which you have the option of buying during the term of your
lease agreement. Typically, the longer the period you lock in your option to pur-
chase the property, the more money you’ll end up making when you eventually re-
sell or refinance the property.
Buying a property subject to the existing financing means you buy the
property and leave the old seller’s loan in place, secured as a mortgage against the
property. You own the property, but your ownership claim is “subject to” the exist-
ing loan(s) in place. Since you are not formally assuming the underlying financing
you technically have no liability on the loan, but as an ethical investor you are re-
sponsible to make sure that the mortgage payment gets paid each month. You usu-
ally accomplish this by renting the property (as a simple rental or a rent-to-own)
for an amount greater than your monthly costs to maintain the property.
Introduction 21
Owner-carry financing means that the seller you are buying from takes
a significant portion of the money you owe in back in the form of a seller
loan. You can structure this seller carryback with monthly interest payments, or
with all the interest accruing for you to pay as a lump-sum payment due down
the road.
Key Concept 9: The Six Best Sources to Fund Your Deals
1. The Seller. Any terms deal that you negotiate with the seller, whether it be
a lease option, a subject-to deal, or an owner-carry deal, is in essence the
seller funding part or all of the deal. The seller can lend you some or all of
his equity, or the seller can let you tap into the existing financing against
the property by accepting monthly payments from you. Either way, it is
still really the seller funding your deal.
2. The Buyer. There are two main types of buyers who can help fund your
deal. The first is a retail buyer—someone who wants to buy the property
so that he or she can move in and live there. A retail buyer can fund the
deal using their cash in the form of a down payment or option payment,
their credit in the form of a new bank loan, or a combination of the two.
The second type of buyer who can help fund your deal is another in-
vestor—also known as a wholesale buyer. You can quickly “flip”—that is,
sell—your deal to another investor for a fast cash profit, and let this other
investor use his or her money to fund the deal.
3. Private Money. After you have gotten a bit more experienced with your
deals, you’ll start to meet people who are willing to lend you money for
your deals as long as they can have the loan secured by a first mortgage
on the property. Often these private lenders are average people who pre-
fer to earn market interest rates for a first mortgage versus the poor earn-
ings of a CD at their local bank. The key for a private lender is that the
loan be safe.
4. Your Cash or Credit. While I don’t recommend you use your money to
buy a property unless the first three sources of funds don’t work for you, if
the deal is a good one, and if you have the money, or if you have the credit
to get easy access to conventional financing, then funding a deal yourself
makes good sense.
22 THE REAL ESTATE FAST TRACK
5. Hard Money. Hard money comes from a third party lender, but whereas a
private money lender only wants market rates, a hard money lender is an
experienced investor who is willing to lend to you not based on your cred-
itworthiness or character, but based on the security of the loan. The main
difference between a hard money lender and a private money lender is in
the rate of interest and fees charged.
6. Equity Money Partner. Sometimes you turn to a private party to provide
the funding to make a deal work. When this person requires a share of the
deal rather than a rate of return, you have an equity partner. An equity
partner can put her own money into the deal, or she can agree to get a
conventional loan in her name to fund the deal.
Key Concept 10: The Five Most Important Exit Strategies
Once you’ve bought the property, what is it you plan to do with it to make a profit?
There are five main Exit Strategies you can tap into.
1. “Retail” the property. This means that you will sell the property for the
highest price you can on the retail market. This is how most homes are
sold, whether they are listed with a real estate agent or sold for sale by
owner. When you retail a property, your buyer borrows from a conven-
tional lender and almost always moves into the property to live there.
2. “Flip” the deal.* This is a fast-cash exit strategy where you lock up a
property under contract and then sell your contract to another buyer, typ-
ically another investor, who will pay you a cash fee to assign your con-
tract to them. The biggest benefit of flipping a deal is that it generates
instant cash.
3. Lease the property to a traditional renter. This is perhaps one of the
most common exit strategies of average investors. They buy a house and
put a traditional renter in it. This renter leases the property either on a
month-by-month rental agreement or a longer-term lease (typically for
one year).
Introduction 23
*To download the FREE ebook, Three Simple Steps to Flip a Deal for Fast Cash Profits, go to
www.InvestorFasttrack.com.
4. Offer the property on a “rent-to-own” basis. The rent-to-own exit strat-
egy comes extremely close to doing the impossible—it gives you all the
benefits of a traditional rental property, while minimizing the three major
downsides. The way this strategy works is that you find a tenant buyer
who wants to rent-to-own your property. This tenant buyer will lease your
property on a two- or three-year lease with a separate option agreement
that gives them a locked-in price at which they can buy the home at any
point over that two- or three-year term. As part of agreeing to give them
this fixed “option to purchase” price, your tenant buyer will pay you a non-
refundable option payment of 3 to 5 percent of the price of the property. In
many cases your tenant buyer will also be paying slightly higher than the
market rent because they aren’t just renting the property, they are renting
to own. This increased rent, when added to the option payment you collect
up front, really boosts your cash flow on the property. The best thing
about a tenant buyer isn’t this increased cash flow, in my opinion. To me,
the best part is that since you have an occupant with an owner mentality,
not a renter mentality, your tenant buyer will treat the property with much
more care and attention. I even get my tenant buyers to take care of all the
day-to-day maintenance and upkeep of the property!*
5. Sell with owner financing. This means that as a seller you take back some
or all of the purchase price as a loan that your buyer will pay you over time.
Key Concept 11: A Simple Five-Step System to Negotiate Any Real Estate Deal
This is where you learned the negotiating system called the Instant Offer Sys-
tem, which gave you the structure and scripting to effectively negotiate any real
estate deal.
Key Concept 12: The Three Investor Levels
This breakthrough model outlined the road all investors must travel to be success-
ful. In Buying Real Estate without Cash or Credit, I focused on how this unique in-
vestor map impacts Level One—beginning—investors.
24 THE REAL ESTATE FAST TRACK
*To download the FREE ebook, Seven Simple Steps to Sell Your Property on a Rent to Own
Basis, go to www.InvestorFasttrack.com.
Key Concept 13: How to Mastermind with Other Investors to Guarantee Success
Over time, investors who have the whole-hearted support and encouragement of a
core group of other investors will succeed at levels that far outpace the average in-
vestor. In the book you got to watch six beginning investors run two of their mas-
termind meetings, and you also got a step-by-step action plan for how you can use
the same idea in your investor circle to tap into the skills, contacts, and resources
of other investors.
Key Concept 14: The Real Difference between Speculators and Investors
Speculators are people who buy real estate at close to or even at full price as part
of a cash deal, and then they hope-pray-gamble that the market will rapidly appre-
ciate so they can resell the property at a profit. They are totally dependent on out-
side market conditions to produce a profit.
For example, a speculator might buy a $500,000 house as a cash deal for
$475,000 in a hot market, hoping that if the market stays hot the house will rapidly
appreciate and in one year he’ll be able to resell the house for $600,000 or more.
But what if the market cools off? The speculator always runs the risk of getting
stuck with a property that is a dog.
Investors are smarter than that. When they buy a property they do so know-
ing that they are guaranteed to make a profit because of the way they purchased it.
Either they have gotten great terms that make the property cash flow well, or they
have negotiated a discounted cash price that ensures a profit when they resell. The
key distinction is that speculators gamble on outside forces to create a profit
for themselves, while investors negotiate the price or terms they need to
build their profit in from day one—no matter what the market does in the
short run.
Key Concept 15: How to Successfully Launch Your Investing Business in the
Real World
It’s one thing to learn all the fancy ideas in books and at workshops, but it’s quite
another to actually take the ideas and put them into practice in the real world.
Many times the situations in the seminar seem to be unrecognizable when you
work to implement the ideas in the real world. That’s why the entire second half of
the book was focused on the efforts of six beginning investors who were struggling
Introduction 25
to apply exactly what you learned in the first half of the book in the real world of
their day-to-day investing. Sometimes the most important thing is not so much the
raw technique or information, but rather the exact way you are supposed to trans-
late that information into the world of your investing. Which leads us to the final
key lesson from Buying Real Estate without Cash or Credit.
Key Concept 16: Your 90-Day Action Plan
It’s not enough to just sit back and read. You need a game plan to turn that infor-
mation into tangible profit in your bank account! That’s why I shared with you the
detailed eight-step action plan to launch your investing business in 90 days.
1. Log onto the powerful online business planning tool. We offered this
valuable bonus to all readers of Buying Real Estate without Cash or Credit
to help them translate the ideas in the book into cash in their pockets.
2. Connect with your “burning why.” What are your driving motives to
make your investing work no matter what?
3. Clarify your dreams and goals. This was the simple three-step process to
gain total clarity about your investing goals.
4. Take stock of your starting point. This was the 19-question survey that
was strategically designed to help you identify your real estate strengths to
build from, and to uncover your real estate weaknesses so that you can
overcome them. This way you know exactly where to focus your energy
for maximum success.
5. Identify the specific obstacles standing in your way. You learned
which of the six investor obstacles were most impacting your investing
success.
6. Create and commit to your action plan. This is the key step to trans-
late intangible goals into a concrete game plan to help you achieve your
dreams. We ended this step with the three key action commitments all
successful real estate investors must make when they are first getting
started.
7. Take consistent action with regular feedback. Daily action, with con-
sistent feedback on what went well and what you would do differently the
26 THE REAL ESTATE FAST TRACK
next time you are faced with the same situation, is crucial for you to de-
velop and succeed as an investor.
8. Perform your 90-day review. There is something crucial about stopping
to reflect and evaluate your investing business launch at the 90-day mark.
That’s why we gave you the outline of how to complete this powerful
check-in.
An Overview of What You’ll Learn from
Reading
By now you realize just how much useful investor information was packed into
book one, Buying Real Estate without Cash or Credit.
This book is all about what happens next. What happens after you get your
first few deals? How do you make sure that you aren’t just doing a random deal or
two, but rather building a real estate investing business that will consistently gen-
erate a $5,000 to $50,000 per month real estate cash flow for you—month after
month, year after year?
You’ll learn the key strategies you need to succeed and how to actually
apply that knowledge in the real world to make you successful, including the
often-overlooked link of how to adjust to individual circumstances as the best-
laid plans get knocked off kilter by a variety of real-world realities.
Part One: The Advanced Investor Workshop
Part One takes place at the Advanced Investor Workshop held only once each year.
This workshop has been carefully crafted to help investors just like you succeed as
quickly as possible with their investing.
In Chapters 1 and 2 you’ll get a clear overview of the big picture of how to
earn $5,000 to $50,000 per month real estate cash flow. You’ll also learn how to fol-
low the Fast Track Map™ to become a Level Three Investor, financially free for the
rest of your life.
In Chapters 3 through 7 you’ll learn to master the five core investor skills that
you need to succeed as a fully competent and self-reliant real estate investor.
The Real Estate Fast Track
Introduction 27
In Chapters 8 and 9 you’ll learn how to leverage your time as an investor for
maximum profit. You’ll also discover how to begin the process of building a suc-
cessful investing business so that you can begin to make even more money.
In Chapters 10 and 11 you’ll get a clear action plan to build a strong, indepen-
dent real estate business that works even better when you’re not working for the
business. These key chapters lay out the three biggest barriers to going passive
with your investing, and how you can break through to Level Three success. You
also learn the “Master System”—the system to build investor business systems.
Part Two: The Real World—12 Months Building Your
Investing Business
In Part Two of this book you’ll learn exactly what it takes to transform the ideas
and strategies from Part One into cash in your bank account. It takes place over
the 12 months following the Advanced Investor Workshop, as these six Mentorship
students apply the lessons they learned from the workshop to the real world.
Part Three: Your Turn—Turning This Book into Cash Flow
Now I’ll turn the spotlight on you and your investing business as you create an in-
dividualized action plan to get immediate results growing your investing business.
The most important component to Part Three is the FREE online mentorship
tool I’ve created for readers like you to tap into. It’s called the Investor Fast Track
Program™ and for a limited time it’s free for readers like yourself.
The way the program works is you’ll go online to www.InvestorFasttrack
.com to register using the password listed in this book (See Appendix A for de-
tails). Next you’ll take the Fast Track Intro Class that will share with you exactly
how you can use the Investor Fast Track Program™ to grow your real estate invest-
ing business. It will give you the specific steps to take to use the program to lever-
age your investing efforts so that you immediately begin to grow your real estate
cash flow. Then you’ll just follow the 90-day action plan the program lays out, in-
cluding taking the 10 FREE online investor workshops.
You’ll literally get access to the same insider secrets and advanced investor
strategies that I used to charge tens of thousands of dollars to share! This program
is my gift to you for stepping up and reading this life-changing book.
28 THE REAL ESTATE FAST TRACK
The Investor Fast Track Program™ is literally jammed with powerful investor
tools and resources to help you successfully launch your investing business. And
best of all, for a limited time, it’s FREE for readers like you. For complete details
go to Appendix A. And for immediate access go to www.InvestorFasttrack.com.
Now let’s get to work! Just turn the page and join me at the Advanced Investor
Workshop.
Introduction 29
PART ONE
THE ADVANCED
INVESTOR WORKSHOP
SECTION I
EARLY STAGE LEVEL TWO
INVESTING—DEVELOPING THE
FIVE CORE INVESTMENT SKILLS
CHAPTER ONE
The Big Picture of Taking
Your Investing Business
to the Next Level
As Vicki walked into the workshop on
Saturday morning, she recognized several people who had attended the Intensive
Training Workshop with her three months earlier. And while Vicki wasn’t as scared
now as she was three months ago when she did that first Level One workshop, she
felt more than a little anxious this morning. The night before, when she met with
her mastermind team of fellow investors, she shared a big decision she had
reached about her investing, and the implications of that decision were starting to
scare her.
“Vicki!” A bright, warm voice to her left called out.
Vicki turned and saw the wonderfully reassuring smile of Mary. “It’s great to
see you this morning Mary.”
Mary cocked her head and asked, “You’re not nervous at this one, are you?
Why, after all you told us last night at our mastermind meeting, you should be
strutting in here like you own the place.” Mary laughed easily as she said this.
“That’s what’s got me so nervous. I’m having second thoughts about the deci-
sion I shared with you all last night,” Vicki confided.
Mary touched her arm affectionately. “Don’t worry Vicki. Didn’t I say you’d be
34
great at this investing when we first met at the Intensive Training?” Mary’s laughter
was infectious, and Vicki felt her anxiety ease a bit.
“Let’s get a good seat,” Vicki suggested.
They found a seat right up front, making sure to save a seat for Mary’s hus-
band and business partner, Leon. Looking around the room, Vicki waved to Mark,
Nancy, and Tim, who along with Mary and Leon were members of her master-
mind group. As Vicki was getting settled in, music started playing over the speak-
ers. Vicki and the others instantly recognized the song as the words floated out
over the room.
“We are the champions, my friend . . .”
Just then, the room burst into applause as a tall, athletic man in his mid 30s
stepped out onto the stage.
“Welcome everybody!” David said with a warm smile as the applause and mu-
sic faded into an expectant silence. “Are you ready for three days to revolutionize
how you look at your real estate investing? Are you ready to take home with you a
whole new game plan for taking your investing business to the next level?”
“Good,” David continued. “But as we start here today, I want you all to realize
that you are already champions. You are already among the elite of real estate in-
vestors. I know this to be true. After working with literally hundreds of thousands
of wannabe investors I can tell you, the gap between them and you is huge. You
want to know what the biggest difference between the wannabes and you is?”
David waited a moment as everyone sat forward expectantly.
“The difference is that you showed up! I don’t just mean that you showed up
to this Level Two workshop. I mean that you show up each day in your investing
too. The thing that stops the wannabes is their long list of excuses and rationaliza-
tions that they hide behind.
“They say things like,” David switched to a whiney voice now, “ ‘I can’t come to
the workshop because I can’t afford it.’ Or, ‘I don’t have time to do my investing.’ Or,
‘That real estate stuff won’t work for me, in my area, for people who have negative
friends and relatives like I have . . .’ I think you get the idea here. The reason you are
so special is that you showed up. You made no excuses. You took full responsibility
for your life. Somehow you found the money to travel here. Somehow you
arranged your life to make the time to be here. Somehow you sold your family on
the idea of supporting you to be here. And because you did all that—because you
showed up—I know that you also show up every day in your investing.
The Big Picture of Taking Your Investing Business to the Next Level 35
“Here’s the key point to this.” David turned and wrote on the board:
The way you do anything
Is the way you do everything!
“I know that you are able to consistently move forward with your investing
because you are someone who doesn’t give in to the little voice inside your head
that whispers from the shadows. You have dealt with those excuses and rational-
izations and blown right past them. In fact, from our work together in the Mentor-
ship Program and reading your pre-attendance surveys, I know that each one of
you has an inspirational story of how you earned the success that you are enjoying
and that will be coming to you in the future.
“For example, I know that a third of you who are here are just on the front
edges of your investing. You’ve either done a few deals or maybe you’re still looking
for your first one. The reason you’re here is because you want to boost your confi-
dence so that when you’re out there in the real world doing your investing you move
with assurance and certainty. Plus, you recognize that the best way to succeed is to
start with the end in mind, and you want to get all the insight you can as to exactly
what a successful real estate business looks like, smells like, and breathes like.
“Another third of you are solid Level Two investors. You’ve done five or ten or
fifteen deals in the last year or two and are making good money with your investing.
You’re here because you recognize that up until now you’ve been winging it, flying
by the seat of your pants. You don’t want to just be an investor anymore. You’re here
to learn exactly how to build a successful investing business so that you can secure
your income streams and earn more money with less of your time and effort.
“And the final third of you are seasoned pros who are on the verge of going
passive with your investing and transitioning into Level Three. You’re here because
you want to learn strategies to solidify your investing business so that you can put
it on autopilot.”
David paused for a moment. “How many of you in this room realized that
there are several investors here who already earn over a million dollars a year with
their investing? Some of you might ask why in the world someone earning a seven-
figure income would take a full three days out of their lives to be here this week-
36 THE REAL ESTATE FAST TRACK
end. However, here’s an even better question for you to ask. How do you think
these investors built their investing businesses up to the point where they generate
over a million dollars a year in profit? By making time to attend workshops and
learn from their peers. I learned this lesson a long time ago when I attended a
workshop like this—and yes, I want to make it very clear, I still attend at least two
workshops a year to upgrade my knowledge base and sharpen my skills. I believe
that to be truly wealthy you have got to be green and growing, and this means be-
ing open to learning new ideas and gaining new insights.
“So now we know why we’re all here. In just a moment I’ll give you an overview
of what you’re going to learn over the next three days. But before we do that, let’s get
three or four of you up on stage to briefly share your story. You’re going to learn and
benefit so much from the people you network with here so let’s start getting to know
each other.” David quickly rounded up four volunteers to come share their stories.
“Okay,” David said, when all four volunteers were up on the stage. “Who is
willing to share your story first? I want you to tell us who you are and the two-
minute version of your investing story.”
A handsome man in his early 40s stepped forward and volunteered to go first:
“My name is Mark and I’m a pilot with United Airlines. I joined the Mentorship
Program about five months ago after reading David and Peter’s first book. For me,
things in my investing have just happened so quickly, it’s almost overwhelming.
Since the Intensive Training three months ago I have done five deals. Three houses
that I purchased subject to the existing financing and one house that I picked up
on a four-year lease option all have tenant buyers in them. These four properties
generate about $800 per month of positive cash flow at this point, they netted me
$12,000 in option payments from my tenant buyers, and I have over $90,000 of
back-end profits waiting for me. The fifth deal was a duplex that I put under con-
tract and flipped to another investor for an $18,000 profit.
“My biggest challenge has been time. Originally I had planned to transition
into investing full-time over twenty-four months, but with all that’s happened and
the growth I’ve experienced as part of the Mentorship Program I’ve decided to make
that transition over the next three months. I think this has been my biggest lesson,
that in order for me to really grow as an investor I am going to have to make the
leap of faith into doing my investing full-time. That’s one of the reasons I am so ex-
cited about the Advanced Investor Workshop this weekend, because it will help me
make the transition into being a Level Two investor much easier and faster.”
The Big Picture of Taking Your Investing Business to the Next Level 37
“Thank you, Mark,” David said. “Who wants to go next?” A tall, well-dressed
man raised his hand.
“Hi, my name is Tim. My wife Nancy and I have worked in corporate America
for the past twenty years. Nancy works as an IT manager for a Fortune 500 com-
pany, and I worked for the last fifteen years in technology sales. At least I did up un-
til about six months ago when my company was bought by a larger company. I was
laid off with about a hundred other people in my division. It was really a blow to my
ego and self-esteem at first. But after joining the Mentorship Program a few months
ago I realized that this was the push I needed to get out there and pursue my invest-
ing dreams. I was just way too comfortable with my old life and I needed that kick
in the pants to get moving. It’s been hard going for Nancy and me. We really strug-
gled for the first month or two, with our biggest obstacle being ourselves. For me, it
was all my old sales habits working against me when I was negotiating with sellers.
“For the first two months Nancy and I would argue over whether this would re-
ally work in our area. But even while we argued we kept at it. Every week I kept up
my marketing efforts and made sure I met with at least two new sellers about buying
their properties, no matter what. Even when we finally signed our first deal but had to
give it back to the seller after we couldn’t find a tenant buyer for the property, we still
kept at it. We were scared about whether we could do this, but we knew this was the
best chance we were ever going to get, and I did not want to have to go back to work
for someone else again! Nancy and I had lots of long talks about what we wanted to
do, and we came to the decision that no matter what, we are going to make this
work—if it takes us another three months or three years, it doesn’t matter. We are to-
tally committed and know that this will happen for us. I feel like even though we
haven’t done a deal yet, we are already into the beginning stages of Level Two invest-
ing because we know this will work for us. It’s just going to take a little more time.”
David looked out at the room and asked, “Is there any question in your minds
that Tim and Nancy are going to succeed with a commitment like that? Tim,”
David said, turning back to face him, “I admire your willingness to get yourself to
show up week in and week out. All I can say is that when the door opens, success is
going to come pouring out for you and Nancy because you’re planting the seeds
that can’t help but yield fruit.”
Tim handed the mic back to David, and Vicki stepped forward to share her story.
“My name is Vicki. For the past ten years I’ve been a full-time nurse. I’m also
a single mom who is raising my two kids the best I can. It was really hard for me
38 THE REAL ESTATE FAST TRACK
finding time to do my investing. I work three or four twelve-hour shifts at the hos-
pital each week and my kids, who are seven and nine, take a lot of energy and at-
tention to raise. The reason I got started with the Mentorship Program is because I
want to be able to provide for my kids and to be there when they get home from
school. When I look back, I realize that the biggest thing holding me back was my
fear. But with the support of the coaches and my mastermind team who I met at
the Intensive Training, I just kept taking action in spite of my fears. They encour-
aged me even when I felt overwhelmed taking care of my kids, working at the hos-
pital, and then fitting in my investing around both those things.
“About six weeks ago I met with a motivated seller who was going through a di-
vorce. I guess she and I had a lot in common because I’m divorced too. She agreed to
sell me two houses at about 65 to 70 percent of their as-is value. The first week I had
those houses under contract I felt paralyzed trying to find another investor to flip the
deals to. I was scared that I wouldn’t be able to do it, and I was even more scared of
what it would mean if I was able to do it. It would mean that all the excuses I’ve
made throughout my life were just that—excuses. And that the only one responsible
was me.” Vicki looked around the room and saw the caring looks she was getting.
“Well, four weeks ago I actually flipped one of the two contracts to another in-
vestor who paid me a $12,000 assignment fee!” Everyone was stunned. They could
only imagine what this money meant to Vicki, who was struggling to raise her fam-
ily on her nurse’s salary. “I guess getting that $12,000 cashier’s check in my hand
gave me the boost of courage I needed to know I could do this. I approached my
sister, who is an attorney in Chicago. I explained to her about my two deals and
how I had just sold one contract to another investor and that I had one more house
left but that I needed to cash the seller out in four more weeks. To make a long
story short, she agreed to be my money partner on that deal. We actually closed on
the house three weeks ago and immediately did all the cosmetic fix-up work and
put the house back up on the market. We decided to sell it ourselves at a discount,
and nine days ago we found our buyer! The escrow is set to close in three more
weeks and when all is said and done, my sister and I will split a check for $58,000!”
Everyone cheered Vicki.
“I’ve also just made a decision that I told my mastermind team about last
night when we met here at the hotel. It’s really scary, but it’s also exciting too. I’ve
decided that when I get my half of that $58,000 I will take a leave of absence from
the hospital and do my investing full-time. That means I’ll have more time to do
The Big Picture of Taking Your Investing Business to the Next Level 39
deals and, because I can arrange most of my investing around my schedule, I’ll
have more time with my kids.”
Again the room applauded as Vicki handed the mic to the last volunteer
on stage.
“Hi, my name is Carl. I’m an ex–truck driver who got my start investing about
six years ago. I bought my first few houses the old-fashioned way, with 20 percent
down payments and bank financing. They were dinky little three-bedroom rental
houses that I fixed up and rented. About three years ago I met David at an investor
conference he was speaking at. After listening to how organized and simple he
made his investing ideas, I joined the Mentorship Program. At that point I had al-
ready done fourteen deals, but I knew that I needed to learn how to make my busi-
ness more organized because I was running around like crazy, driving a local route
and doing my investing at night and on weekends.
“That was three years ago. Since that time I’ve quite driving my truck, and
built my foreclosure business. I now have two rehab crews working for me with a
full-time rehab manager. I buy about fifteen to twenty houses a year, mostly from
sellers in foreclosure or pre-foreclosure, and I rehab and sell them. Some I sell to
cash buyers, others I sell with owner financing or on a rent-to-own basis. Last year
I made over $250,000 from my investing business, and this year I’m on pace to
make over $300,000. I still pinch myself to see when I’m going to have to wake up
and find this is all just a dream. I can’t wait to learn this weekend how to get myself
out of the day-to-day operation of my investing business. I’m not complaining, but
right now it feels like it all revolves around me. I want it to work without me need-
ing to drive it every day.”
The room applauded all four of the students as the volunteers took their
seats again.
David now put them to work networking. “Turn to someone you haven’t met
before and introduce yourself. Listen to their story and share yours with them.
You’ve got four minutes—go!”
The room went into a frenzy as people scrambled to find a stranger to partner
up with. After letting it go for a few minutes, David got everyone’s attention back to
the front as he continued, “So let’s talk about this weekend. Once you’ve reached the
place that you know real estate works for you, either by doing a deal or by collecting
all the powerful experiences and references of other investors who’ve done it, it’s time
for you to begin the process of building a successful investing business. Remember,
40 THE REAL ESTATE FAST TRACK
just being an investor isn’t enough to make you financially free. To be a Level Three
investor you need to build an investing business that works so you don’t have to.
“You’ll accomplish this in three stages. Stage one is called Early Stage Level
Two. This is where you develop your investor skills and become a fluent and com-
petent investor in your own right. Middle Stage Level Two is where you refine these
skills and competencies and begin your first tentative steps to leverage yourself and
your business. The final stage—Advanced Stage Level Two—is where you aggres-
sively work to build your investing business to perform better when you’re not in-
volved in the day-to-day operation of the business.
“Most investors never reach this place where they can walk away from the
daily operation of their real estate business, and as a consequence they are always
tied to the business. Sure, they may be making a lot of money with their investing,
but they are still limited. The real goal of your investing should be to create time
and freedom so that your passive real estate cash flow pays for your desired
lifestyle and at the same time your business, cash flow, and net worth grow—year
in and year out.
“I urge you to raise your sights from just making money with your investing to
building a profitable business that makes you money so you can have the freedom
you’ve always dreamed about having. It’s not easy, but what’s worthwhile that is easy?
“I want to be clear here. This is not about getting rich overnight and never
working again. This is about getting the specialized knowledge you need to secure
your future over the next few years so that you have the freedom to enjoy the
lifestyle you and your family deserve. You’ll know that you can make this happen
because you’ll have the know-how to make it happen.
David asked the class, “So what are the qualities of those investors who make
it big compared to those investors who only make it small-time? What are the top
five things investors who earn $500,000 to $1 million per year have in common
that enable them to earn big money investing in real estate? What skills, expertise,
understanding, and qualities?”
Vicki raised her hand and answered, “I think that the really successful in-
vestors have the ability to make great decisions. They don’t get stuck in analysis
paralysis because of their fear. They trust their gut and also train their brain to ac-
curately analyze deals.”
Mark raised his hand and added, “The best investors also know how to ask
the right questions so that while they can’t know everything, they can get the key
The Big Picture of Taking Your Investing Business to the Next Level 41
information they need laid out in a systematic way that supports them in making a
decision.”
Nancy nodded her head and said, “Yes, and the best investors know how to
leverage themselves through other people, whether employees of their investing
business or through their referral network of contacts.”
David listened intently to their ideas, then said, “This is a great start. So
what I’m really hearing you say is that the best investors are willing to make de-
cisions, and the best investors are skilled at making decisions. By the way,” David
looked around at the whole class, “how do you think you develop the skill of
making decisions?”
“By making them,” two students shouted at the same time.
“Exactly! You become a savvy decision maker by making a ton of decisions
and reflecting on them afterwards. This allows you to match up the decision, the
process you used to reach that decision, and your intuition’s message as you made
that decision, with the actual outcomes of your decisions. This is how you train
your intuition. Remember, your intuition is really just the accumulated total of
your life experiences that you tap into in an instantaneous, holistic way instead of
the linear, verbal process most people use to make decisions. It’s the gut feel or
flash insight or inner voice that you have learned to trust.
“Interestingly enough, a key part of this idea—the willingness to act, to de-
cide, even when you’re scared—is encompassed by the first of the five key qualities
of successful investors that I have on my list.”
David smiled as he said this, letting the anticipation build. “So just what is
my list of the five most important investor qualities? In a moment I’ll share my list
with you, but before I do, it’s important that you understand that great investors
are made, not born. All five of the qualities I am about to share with you are learn-
able skills. This means that with the proper plan and coaching you can cultivate all
five of these critical qualities so that you too can be a world-class investor.
“The first quality is in many ways the most important because without it, you
won’t be able to develop the other four. But if you are willing to work to foster this
quality, the world of investing is yours. I call this quality personal power. The very
best investors have learned to discipline themselves to consistently take action and
do the things that they know will make the difference, even when they don’t feel
like doing them or are afraid of doing them. Basically, this is the quality that gets
you to show up each day for your investing, no matter what.
42 THE REAL ESTATE FAST TRACK
“One of the best examples of this quality is Patty, a Mentorship graduate.
When she first got started investing she was terrified. She was quiet and shy and
scared to death to go out and meet with sellers. She had no background in invest-
ing and was intimidated by the contracts and negotiating. But she had personal
power, and even when she was scared and her mind made up all kinds of excuses
about how she could avoid doing those things that scared her, she got herself into
constructive action anyway.
“As a direct result of her willingness to act in the presence of her fears,
Patty made over $200,000 cash plus $300,000 of equity with her investing in just
twenty-four months. You can too, if you are willing to do the things you are
scared to do.
“Make no mistake about it, the biggest differentiator between wealthy in-
vestors and poor ones is that wealthy investors have a much higher tolerance for
coping with their fears and taking constructive action in their presence.
“If personal power is the fuel that propels an investor forward even in the face
of their own doubts or fears, then this second quality is the foundation that all
great investing success is built upon. All great investors have developed a strong
affinity for and with other people. Affinity simply means having a connection or
attraction to and with other people. The most successful investors have both a
deep understanding of how people work and a sincere enjoyment of connecting
with other people.
“With the sincere enjoyment of people, you’ll find that most of your interac-
tions with people will flow smoother and produce better results. For example,
many of you have worked with Emily, one of the coaches for the Mentorship Pro-
gram. One of the reasons that Emily is so good with sellers and buyers is that she
genuinely cares about other people. All the negotiating techniques in the world
won’t cover up for the person who is only out for themselves and has no ability to
relate and connect with other people. All successful investors can quickly connect
with other people, and the very best investors can connect at a very deep level. Peo-
ple intuitively trust them because these investors truly do care about and listen to
the people they are working with.
The third quality of the world’s best investors is that they have all devel-
oped outstanding negotiation skills. Notice, however, I didn’t say they were
outstanding negotiators, but rather that they had developed outstanding negoti-
ation skills. Many people mistakenly think you are either born a top negotiator
The Big Picture of Taking Your Investing Business to the Next Level 43
or not. This is total bunk. If I’ve learned one thing over the past decade mentor-
ing so many thousands of new investors it’s that negotiation is a skill and, like
any skill, it can be learned. In fact, it’s a skill that anyone can learn, provided it’s
taught the right way and provided it’s practiced frequently enough so that you
can develop fluency.
“In real estate, just like anything else in life, you don’t get what you want, you
get what you negotiate. Negotiation skills are what allow the highest earners to
translate their people skills into tangible profits.
“I remember one Mentorship student I worked with who came from a sales
background. He was engaging as a person, but he was incredibly pushy when it
came time to negotiate with sellers. And to make matters worse, when he negoti-
tated, he got nervous and began talking a thousand miles per hour and rarely lis-
tened to the other party’s side of things. But over twelve months of working
together, we got him to learn the mechanics of negotiating, which for him includ-
ing coping mechanisms like forcing himself to breathe slowly at certain key points
in the negotiation, slowing down, and repeating certain key language patterns that
literally forced him to listen to the other party. By the end of that first year he had
fifteen deals completed, and over the next twelve months he went on to buy over
forty-five more houses!
“So no matter where you are starting off on the negotiating skill spectrum,
don’t worry, we can help you develop into a great negotiator if you just listen to our
coaching and go out and practice what we teach you.
“The fourth quality of the top investors is that they have a wide spectrum of
deal structuring tools to match to different seller and buyer needs. Remember,
the more options you have, the easier it is for you to mix and match and find cre-
ative ways to structure a deal in which everyone wins. The highest earners in real
estate consistently invest more time, energy, and money into increasing their
knowledge base of investing tools than average investors do.
“The final quality of the most successful investors is their unwavering com-
mitment to leveraging their every action in their investing business. Leverage
simply means a way of magnifying the power of a specific action to create a bigger
result with less effort. We all have limited time, money, and skills. The best in-
vestors leverage all three through systems, outsourcing, and modeling proven win-
ners. They have a drive to consistently hone themselves and their investing
business to produce bigger and bigger results with less and less energy.
44 THE REAL ESTATE FAST TRACK
The Seven Keys to Working Smarter, Not Harder
1. Systems
The first key to working smarter is to use powerful systems to help
you get the results you want with less work and effort. A system is an
organized process or tool that helps you and your team consistently produce
an excellent result in an area of your business.
A system can be a script of what to say, a checklist to follow laying out a
procedure, a sample document, a spreadsheet of key information, or a
worksheet to fill out. A system is a shortcut to help any person you have on
your team, with very little training, succeed in getting a desired result in a
specific area.
Ultimately, to take your investing business as far as you want it to go, your
investing business will need to be systems driven, not people dependent. You
never know when a key person will leave your business. The key is to capture
all the most important knowledge about how to successfully run your business
into clear, simple systems that guarantee your business healthy profits, year
after year after year.
One very important final point about systems is that the best systems
empower your team to produce exceptional results. Systems are not about
control, but rather freedom. The right systems free up your team from
worrying about the details so that they can keep the bigger perspective in
focus and spot unique opportunities to generate greater profits for your
business.
2. Specialized Knowledge
The second way you can work smarter is to gain the specialized knowledge you
need to more ably get results with your investing. What do you think makes the
most skilled investors able to structure a hugely profitable deal while a
beginning investor struggles with what he could even do with that seller? It is
one thing and one thing only. The highly skilled investor has a stockpile of
powerful experiences from which to draw on.
In today’s complicated world, it’s the investor with the access to the most
varied and powerful storehouse of specialized investor knowledge that has the
greatest ability to make big money investing in real estate. The key word here
is access. You don’t need to learn it all by trial and error. The biggest shortcut
is to gather the best information on investing from the experience of other
successful investors.
The Big Picture of Taking Your Investing Business to the Next Level 45
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The Seven Keys to Working Smarter, Not Harder (continued)
While we learn from our successes, it’s when we fail that we tend to really
search for the core lessons from our painful experiences. In fact, it’s been
said that pain is the greatest teacher of all. If this is true, the key question is,
whose pain would you prefer to learn from—your own or someone else’s?
That’s the power of specialized knowledge. It can easily be borrowed from other
successful investors without having to directly experience the pain yourself.*
3. Cohesive Action Plan
One of the most costly myths in the world of investing is that the best
investors fly by the seat of their pants and go purely on intuition. The opposite
is true. The best investors all have clear action plans that tie together all their
investing activities. One of the best benefits of having this cohesive action
plan is that it allows you to intelligently decide whether to step off of the plan
to take advantage of an unexpected opportunity when you see it. The best
investors all understand the power of quickly seizing an unplanned opportunity,
and they have the ability to improvise to leverage this opportunity for maximum
gain with minimum work and risk. But they will quickly modify their action plan
to accommodate this new opportunity and tie it into the larger goals of their
investing business.
4. Open Mind to New Ideas
The world of investing is constantly changing. New lending programs and
legislative changes come at an ever accelerating pace. Breakthrough investor
technologies are invented for you to harness to make your investing business
grow faster. In order to work smarter you need to constantly be on the lookout
and open to new ideas that you can tap into, whether they be directly from the
field of real estate or from some totally unconnected field.
I can remember how when I redesigned my investing business to make it a
passive enterprise, I took the technology infrastructure from another business
I had and used that as the technology backbone. The result was a 1,000
percent savings in time! Great ideas to use in your investing business can
come from anyone, at any time. Always be open to evaluating these ideas and
ask the key question, “How can I use this?”
46 THE REAL ESTATE FAST TRACK
*As a reader of this book, you get FREE access to a special online program
called the Investor Fast Track Program™ (Value: $2,497). For details on how to
register see Appendix A, or go to www.InvestorFasttrack.com.
(continued)
The Seven Keys to Working Smarter, Not Harder (continued)
So if openness to new ideas is so important, why do so many investors
struggle with it? The sad truth is that far too many investors are locked into
archaic and habitual patterns of running their investing business, even if these
practices are inefficient and far too costly.
In any time of great change, one of the most important tools for you to
cultivate is that of a powerful eraser. It’s not always what we know that gets
us into trouble, but sometimes it’s all the things we know that just aren’t so
that causes us so much aggravation. To work smarter, constantly look for
places to prune and delete old practices and outmoded ideas to leave room
for fresh ideas and strategies to thrive.
5. Integration of New Information
With all the change and explosion of information you have at your fingertips,
as an investor, one of the keys to working smarter is to systematically develop
your skill of integrating and putting new information to productive use.
Remember, it’s only the ideas that you profitably harness that actually matter.
If you can’t use the information and integrate it into your existing knowledge
base, then all the new ideas are just fancy diversions. Information becomes
power only at the point of application.
Here are five techniques to help you quickly integrate and apply
new information:
■ Technique One: Fail Fast. To make sense of new information usually involves
trying it out. Average investors let fear of failure slow them down, but
remember, the very best learning comes out of learning from what doesn’t
work. Look for ways that you can quickly do minitrials with the new information
to get some real-world experience with which to make sense of the information
(e.g., try out a negotiating language pattern the next time you are shopping at
the mall; brainstorm three creative deal structuring techniques the next time
you are structuring an offer before meeting with a seller).
■ Technique Two: Chunk It Down. Don’t try to learn it all in one large chunk;
instead, break the new information into smaller, more manageable chunks.
There is a reason why Mentorship students take weekly classes on investor
skills in addition to the real-world help the coaches provide them on the
deals they are putting together. We’ve learned that there is a practical limit
on how much new information a Mentorship student can take in at one
time. That’s why we created the structured curriculum that layers in the
investor knowledge chunk by chunk.
The Big Picture of Taking Your Investing Business to the Next Level 47
(continued)
The Seven Keys to Working Smarter, Not Harder (continued)
■ Technique Three: Layer It. Just like a coat of paint covers best when
applied in layers, so too does information work best when it’s applied one
layer at a time.
■ Technique Four: Daydream. It’s a powerful tool to visualize and use your
imagination to see yourself using the new information that you are learning.
It allows you to integrate the new knowledge at deep levels in an
accelerated fashion.
■ Technique Five: Consistent Feedback. The faster and more regularly you
can get feedback in the real world by trying out a new technique or strategy,
the faster you will begin to own the new ideas. After each trial of the new
idea, ask yourself what you did that went really well, and what one or two
things you will do differently next time as a result of what you learned this
time.
6. Leverage
Leverage is when an effort produces a magnified result. In real estate,
leverage is the greatest key to working smarter. It’s what has allowed top
Mentorship students to generate large and growing monthly cash flows while
working fewer and fewer hours.
The Six Leverage Points:
■ Network Leverage. Who do you know, or who do you know who knows
someone, that can help you create a breakthrough in your investing? Do
you know someone who can refer you deal after deal? Do you know
someone who can connect you with a source of private funding?
Leveraging your contacts is one of the critical steps to super-sizing your
investing success.
■ Time Leverage. How can you get more from your time? What activities give
you the greatest return for the time and energy you spend on them? How
can you leverage other people’s time—either team members you hire or
business contacts you tap into?
■ Information Leverage. The right information can save you from going down
the wrong path. The right information can give you a huge edge in your
investing. Consistently ask yourself how you can leverage any new piece of
information to create a magnified return in your investing business.
48 THE REAL ESTATE FAST TRACK
(continued)
The Seven Keys to Working Smarter, Not Harder (continued)
■ Skills Leverage. Certain key investor skills you’ll be learning about can be
leveraged to produce amazing results. For example, take the skill of
negotiation. Since you’ll be involved in thousands of negotiations over your
investing lifetime, one unit of effort invested to improve your negotiating
skill will literally produce a thousandfold return.
■ Money Leverage. One of the best features of real estate is the ease with
which you can leverage your own money and other people’s money. Whether
it be by financing 90 percent of a new purchase with outside funding, or
investing some of your money in a proven marketing campaign to find
motivated sellers, intelligently leveraging money will make you a fortune.
■ Creativity Leverage. This is perhaps the most overlooked form of leverage.
Creative ideas are more valuable than just about any other resource you
have as an investor, yet far too often new investors and rigid old pros forget
this. One of the reasons I think all investors should learn to buy without
cash or credit is because it forces these investors to get creative. We tend
to grow in direct proportion to the demands we put on ourselves.
7. The Discipline to Let Go of the “Good” Things
“The biggest enemy of the best is the good.”
As you blaze your way into Level Two success with your investing, you’ll find that
your biggest challenge won’t be finding enough opportunity, but rather having too
much opportunity to choose from. At any moment in time you are faced with
choices of how to use your time. To work smarter you need to cultivate the “best
and highest use” mind-set. Constantly ask yourself the question, “What’s the
best and highest use of my time here?” Then develop the capacity and discipline
to do the best things and let go of the lower-order possibilities. This takes
courage and a clear understanding of the end toward which you are working.
For example, as I’ve enjoyed success with my real estate investments, many
investors now bring deals to me to either joint venture on with them or to lend
them money to complete. I’ve learned certain rules that are now disciplines that I
will not violate, because the cost in terms of wasted time is too great. For
example, I won’t even discuss partnering on a deal for more than two minutes if
the person who brings the deal to my attention hasn’t faxed me a copy of his or
her signed contract. And I have learned that I simply won’t lend money for a deal
unless it’s on an apartment building or single family house. Why? Because I’ve
streamlined and systematized my business enough that I can safely and
accurately lend on houses and apartment buildings quickly and easily. This
means a higher return for the time and energy I invest. This is a form of leverage.
The Big Picture of Taking Your Investing Business to the Next Level 49
(continued)
The Seven Keys to Working Smarter, Not Harder (continued)
Time is your most precious resource. You need to start valuing it by investing
it like your cash—with care and respect. Value your time like your cash, and
value your cash like you would if you didn’t have any. Then you’ll learn to
maximize your opportunities.
There is a key concept called “opportunity cost,” which is the cost of the time
and money you have to put into a specific opportunity. Every opportunity has a
potential reward, and it also has with it a specific expense—time cost, financial
cost, emotional cost. The final key to working smarter is to remember to
choose carefully to maximize your finite resources. The real risk of an average
deal is not the money you have in the deal. The real risk is the potentially lost
profit because you put your focus on this deal rather than on a great deal.
David continued, “This weekend is about taking your investing to the next level.
You’ve already learned how to take the first step and get started investing in real es-
tate. You learned what stops most people and how you can find and close your first
deal in 90 days or less. Now you’ll learn how to take your investing to the next level
and build an investing business that leverages your efforts to give you maximum re-
sults. You’ll learn how to build an investing business that magnifies your returns so
that you earn more and work less. Make no mistake about it, ultimately your wealth
building is not about working harder, it’s about working smarter. It’s about only doing
those things that bring you closer to your end goal of being a Level Three investor.
“So it’s time to get started learning to build a Level Two investing business.
The first step is for you to develop your investing skills so that you have gained flu-
ency in the five core investor skills. Then in the Middle Stage Level Two investing,
you’ll work to fine-tune these key skills while you also begin your first tentative
branching out to build your investing business. Finally, in Advanced Stage Level
Two investing, you’ll build in earnest your profitable investing business.
“Ultimately, the only way to use real estate to become financially free is for
your business to prosper without you there to run it day-to-day. This is the road to
real freedom—cash flow that flows to you while you are not there working, in such
a way that both the business and your net worth are growing day by day, month by
month, and year by year.
“Tall order? Yes, but infinitely worthwhile. So let’s roll up our sleeves and get
to work.”
50 THE REAL ESTATE FAST TRACK
CHAPTER TWO
Your Fast Track Map™
to Real Estate Riches
You are all familiar with the Three In-
vestor Levels,” David continued. “This model of how to look at your investing is an
important key to clearly identifying what you want to achieve and build with your
investing business. But it’s not enough to just know the Three Investor Levels—you
need to have a clearly charted pathway to follow as you progress from where you
are to Level Three. This pathway puts you on the real estate fast track.
“What I’d like to do now is clearly lay out your Fast Track Map™ so that you
have a precise picture of the steps you’ll take and the key focus you’ll have as you
accelerate your progression to becoming a Level Three investor.”
David turned and drew a diagram on the board.
“Level One investors focus on the need to get into action. The key for them is
belief. They are working to prove to themselves that real estate works, and that it
works for them. We won’t be spending much time on this level since you’re all al-
ready past it.*
51
“
*For any readers who are just getting started, I urge you to get a copy of Buying Real Estate
without Cash or Credit right away and read it cover to cover. It covers exactly how a Level
One investor can get started today so that you can do your first deal in 90 days or less! To
download two free chapters of this book just go to www.InvestorFasttrack.com.
52 THE REAL ESTATE FAST TRACK
Advanced Stage Level Two:
Building a Successful Investing Business
• Team
• Systems
• Outsourced Solutions
Middle Stage Level Two:
Refining Your Skills and
Leveraging Yourself
Early Stage Level Two:
Mastering the Five Core Investor Skills
Level One:
Proving to Yourself That Real Estate Works
The Fast Track™ Map
Level Three:
Passive Streams of Income!
“Our focus here this weekend is going to be on this middle area, on Level Two
investing. As you can see, Level Two investing is broken down on the Fast Track
Map™ into three distinct stages. Each of these stages has a different developmen-
tal focus for you, the investor. Here’s a quick snapshot of each of these stages. We’ll
go into great detail on each one throughout this weekend.
“First there is Early Stage Level Two. The focus of this stage is on skill devel-
opment. Early Stage Level Two investors are learning to master the five core
skills of successful investors: finding deals, structuring deals, negotiating
deals, analyzing deals, and contracting on deals.
“It usually takes an Early Stage Level Two investor 12 months to learn the
core skills and gain the confidence and composure to use those skills in the real
world. This leads them to the next stage—Middle Stage Level Two investing.
“Middle Stage Level Two investing is about refining your investor skills
and learning to leverage yourself so that you produce more for your investing
business. At this point in your investing, you are the central hub around which
your investing business revolves. You’re like a doctor whose whole office is orga-
nized to keep her as efficient as possible. As a Middle Stage Level Two investor you
leverage your time every way you can by building the team and systems around
you to keep you producing for your business.
“But ultimately there is a limit to what you are able to produce through your
own efforts. This is why it’s so important to progress to Advanced Stage Level Two
investing.
“Advanced Stage Level Two is about building the systems, teams, and
outsourced solutions your business needs to consistently generate profits in-
dependent of you and your efforts. When you’ve accomplished this you are able
to transition into Level Three investing, where you are financially free and able to
focus your time wherever you want. Many Level Three investors start to do big
deals on commercial real estate because they have the experience, skills, and busi-
ness infrastructure to do this in a Level Three way. This means they can buy an
apartment complex and not get swallowed up by the project. In fact, they are able
to take on a big project with less work and effort than they used to spend on deals
as a Level Two investor.
“That is the overview of the Fast Track Map™. Right now we are going to
start off with Early Stage Level Two investing.”
Your Fast Track Map to Real Estate Riches 53
Early Stage Level Two Investing
“Most people hit Early Stage Level Two investing fresh from the excitement of their
first or second deal,” David continued. “For some, it’s the moment when they get
that first cashier’s check in hand from the option payment from a tenant buyer. Or
maybe it’s the moment when they sign up their first cash deal. Or when they walk
out of a closing having sold their first property for a $35,000 net profit. Whenever it
happens, they have come to the key moment where they know that real estate
works, and more importantly they know it will work for them. This is their master
key giving them entry to Level Two investing.
“When I meet a new Early Stage Level Two investor I can see the hope in their
eyes. They start to dream again and believe that maybe, just maybe, their future can be
what they used to dream it could be. How many of you can remember the moment
when you reached Early Stage Level Two investing and hope blossomed in your heart?
“There is something else that I observe in Early Stage Level Two investors—
relief! They tell themselves that no matter what happens next, at least I can tell
all those naysayers in my life that I did it, I made some money at it!” Through-
out the room students laughed and several nudged their partners with an “I told
you so” look.
“Of course, for most Early Stage Level Two investors, there is still quite a bit
of fear present. With your success you raise your expectations, and now you won-
der if you can really meet these new expectations. What if, you ask yourself. What
if you don’t find more deals? What if these first ones were flukes? What if you wake
up tomorrow and it was all really just a dream and never happened? And, gulp . . .
what if you really do succeed in a massive way? Sometimes the only thing scarier
than failure is success.
“But even with these fears, which are perfectly normal feelings, the biggest
thing you feel is excitement. With the flush of your success comes the excitement
for a future that is dramatically better than your old gray vision of just getting by.
You awaken dreams long dormant, and these dreams begin to take on color and
depth and become real. And they are a compelling pull for you to keep working on
your investing.
“Early Stage Level Two investors often have a quiet determination about
them to keep going after their investing—day by day and deal by deal.
54 THE REAL ESTATE FAST TRACK
“While most Early Stage Level Two investors are still only part-time, working
around 15 to 20 hours a week on their investing, roughly 10 percent of them volun-
tarily take the leap to go into their investing full-time, with another 10 percent
pushed into investing full-time because their jobs up and quit on them!
“Almost all of them work out of their homes, keeping their business overhead
to an absolute minimum. They get on with the business of generating leads, nego-
tiating with sellers, arranging necessary financing for deals, and looking after the
properties they have added to their portfolios. Early Stage Level Two investors are
at the steepest part of their learning curve, soaking up new information and focus-
ing on mastering the five core investor skills.
“In fact, that’s exactly what we are going to spend the rest of today and a good
chunk of tomorrow covering—the five core investor skills. But you’ve all earned a
quick break first.”
The Three Biggest Pitfalls for Early Stage Level Two Investors
One: Letting Your Comfort Zone Drag You Down
When you start succeeding with your investing, there is a temptation
to relax and to stop doing the behaviors that brought you that success. There
is a part of you that says, “Hey, you’ve done it. Now take it easy and enjoy
yourself. You deserve it.” Of course you can listen to this voice, but if you do
you’ll soon find yourself back where you started. This voice isn’t the best
part of you, it’s the scared place trying an end-run to get you to go back to
what feels comfortable.
There is a part of you that is focused on mere survival, and success can make
this part of you feel uncomfortable. When this happens, this part of you
pushes you to turn back to the life you used to live. You must fight this urge no
matter what it takes.
When you have your early real estate success, that is not the time to relax.
Rather, it is the time for you to step it up, build on the momentum, and push
your investing business two more steps ahead as quickly as possible. It’s like
a sports team that is on a roll. This is the time to push your lead to make sure
you win.
Your Fast Track Map to Real Estate Riches 55
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The Three Biggest Pitfalls for Early Stage Level Two Investors
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Two: Thinking You’ve Arrived
The ancient Greeks called it “hubris”; in today’s world we call it getting cocky
and letting your head swell. Remember that your early success is just that—
early success. It is not a guarantee that you’ve arrived, nor is it a sign that
you’ve won the game. You still need to keep your focus and quietly get on with
the business of investing.
Until you’ve had at least one major failure in your investing it’s hard to
recognize that we all make mistakes when buying real estate from time to
time. Smart investors build in allowances for the fact that they may be wrong
in their assessment of a deal. This can mean getting an outside pair of eyes to
unemotionally give you their opinion on a deal, or it can mean creating a safety
cushion in your deals in case your prediction of local market conditions is
wrong.
The best investors are the ones who have learned that they are fallible and,
because of this, learned to entertain the possibility that they may be wrong.
Far from slowing you down, this humbling realization will help you accelerate
your investing success because you aren’t bogged down by the need to be
right all the time. When you make a mistake the world doesn’t come crashing
down. You simply brush it off, learn your lessons, and get on with your
investing. This was one of the toughest lessons for me to learn, and one of
the most important.
Three: Delaying Investing in Your Real Estate Education Until You’ve “Made
More Money”
It never ceases to amaze us the number of new investors who say they will
wait to invest in their real estate education until after they have made a lot of
money with their investing. That makes about as much sense as standing in
front of an empty fireplace and saying that as soon as the fireplace gives them
heat then they’ll be willing to put in wood!
Let’s get one thing absolutely clear—one way or another, everyone pays for
their education. You either pay by learning the slow, painful route of “self-
education,” also known as trial and error, or you get on the fast track and
learn from experienced mentors who have done what you want to do and who
can save you years of wasted effort and help you reclaim thousands of dollars
in profits that you would have otherwise missed out on.
56 THE REAL ESTATE FAST TRACK
(continued)
The Three Biggest Pitfalls for Early Stage Level Two Investors
(continued)
It is not a sign of weakness to get someone to help you learn and succeed
faster in your investing, it is a sign of strength. Intelligent investors know that
learning from other people’s experiences is one of the best short cuts to
success available to them. Look for people who you can model to accelerate
your success in investing. While it’s important to look for people from whom
you can learn techniques and specific strategies, as an Early Stage Level Two
investor it is even more important that you look for a successful investing
model upon which to build your fledgling investing business.
In order for you to reach the levels of success you really want, make sure that
whatever investor model you base your investing business on is one that is
laid out all the way through the finish line you’ve set for yourself, and not just
to the finish line. I’ve seen too many investors who only had a model that took
them to the finish line and, as a result, they are stuck, still actively working
their real estate business. Granted, they make a great living, but they’re still
not passive Level Three investors enjoying real financial freedom. If they stop
working, in fairly short order their investing machine will come to a grinding
halt. Make sure your model takes you to Level Three success, where your real
estate business runs better without you there in it day to day. Remember,
passive cash flow is the ultimate goal of your investing business.
Your Fast Track Map to Real Estate Riches 57
CHAPTER THREE
Core Investor Skill One:
Creating a Deal Finding Machine
David then posed the following sce-
nario: “Imagine walking into your office each day and having two highly motivated
sellers waiting to talk with you about your buying their properties. Do you think if
you talked with two motivated sellers a day, five days a week you’d be able to close
on some highly profitable real estate deals? Let’s think through the numbers: two
motivated sellers a day, multiplied by five days a week, multiplied by 40 weeks each
year—I think you should take 12 weeks of vacation a year, I hope that’s okay with
you,” David smiled. “That equals a total of 400 potential deals each year for you to
choose from. How many of those deals do you think you could handle? When you
let the math add up, the potential for your investing business is huge. But there are
two looming challenges to all this.
“First, the average investor is not able to handle even a fraction of this volume
of lead flow because he has no business infrastructure to lean on and leverage. This
is why I’ve stressed so heavily so far, and will continue to press, the urgency and re-
wards of building an investing business rather than just being an investor.
“Second, as you can probably imagine, the single greatest bottleneck to your
business initially is your ability to create deal finding systems that consistently
churn out quality leads—one after another after another. When you are building
a profitable investing business it’s not enough to just be able to find one deal. To
59
really take it to the next level you’ve got to create marketing systems that consis-
tently produce deal after deal.
“This is a tall order. In fact, in the beginning a great deal of your energy is go-
ing to be tied up in creating this deal pipeline. But once you’ve built it, it only takes
a fraction of the time to maintain it. Is it worth the weeks and months of effort to
build this kind of real estate deal factory? You better believe it!
“Just look at someone like Stephen. I know that many of you have worked
with him on the Mentorship Program coaching sessions. It took him and his wife
Susan over 18 months to really establish their deal finding systems. That’s a lot of
time and energy they had to put in to build this infrastructure. But they now enjoy
a foreclosure business that generates over a dozen profitable deals each year. Plus
their commercial investing part of the business generates several highly lucrative
big projects each year. If you invest the energy over the next 12 months, you can
enjoy the same success as Stephen and Susan.
“So let’s start with the foundation and work from there. The foundation of all
winning real estate deals is the Winning Deal Formula. I am hoping that you all re-
member this formula from the Intensive Training you attended at the start of the
Mentorship Program.”*
David clicked an image up onto the screen.
60 THE REAL ESTATE FAST TRACK
*Would you like to get an insider’s seat at the Intensive Training? Then grab a copy of Buy-
ing Real Estate without Cash or Credit. The first half of the book is just that, a step-by-step
workshop on exactly how to start your investing business in 90 days or less. To download
two free chapters, go to www.InvestorFasttrack.com.
Winning Deal Formula
30% Financing (price and terms)
60% MOTIVATION
10% Property and Location
“As you can see, the foundation that great real estate deals are built on is not lo-
cation, but motivation. The first concern when you are looking at a deal is why the
seller is selling the property. This is the first key ingredient of a great deal—find-
ing a seller who has a strong motivation to sell. It’s the seller’s compelling reason
to sell, with a perceived time crunch within which to do it, more than any other fac-
tor, that helps you get a great real estate deal. Remember this and say it to yourself
over and over again—the foundation of all winning real estate deals is the seller’s mo-
tivation to sell. It’s almost as if what the seller initially tells you is his reason for selling
is the tip of an iceberg. The real reason is the hidden 90 percent that is below the sur-
face. And it’s this hidden 90 percent which is the key ingredient for a winning deal.
“The second level of a winning deal is the financing—the price and terms.
To make money on a deal you need to either purchase the property for cash at a steep
cash discount, or you need to get great terms of financing. If you buy for cash at a dis-
count, your low cash price guarantees you a profit. If you buy on flexible terms where
you are making the seller payments over time, then the financing lets you hold on to
the property over time with positive cash flow and make even more money on the
back end when you eventually resell or refinance the property to tap into your accu-
mulated equity. For any deal to be a winner the numbers must make sense.
“Now third in line in importance are the location and physical structure
and condition of the property. Over the long haul the location does matter. The
right location will appreciate in value significantly more than the wrong location.
But, and this is a big but, the only way you can safely know you’ll be able to hold
on to the property over the long haul is for the first two ingredients—motivation
and financing—to be in plentiful supply.
“Any property at the right price and terms is a great deal. But the only way you’ll
ever find a seller who is willing to give you the best price and terms is if that seller is a
motivated seller. That’s why a strongly motivated seller is so important. As I’ve just
mentioned, the right price and terms—the financing—guarantees you a profit.
“The location and the physical condition of the property are important for
two reasons. First, they matter because they significantly impact what the right
price and terms for a property are. After all, if the property needs a huge amount of
fixing up, then that needs to be factored into the price. Or if the property is in an
area with zero appreciation, then the numbers you agree on for the price and
terms need to be such that you build a profit into the deal from day one. Second,
the location and physical structure impact your exit strategy on the property. If the
Core Investor Skill One: Creating a Deal Finding Machine 61
house you are buying is in a great area, you may be much more likely to hold on to
the property over the long term. This may mean that you structure the deal in such
a way that you trade the seller a higher price in exchange for you getting great
long-term financing to enable you to profitably hold on to the property over time.
Or if the building is in a war zone, perhaps you want to negotiate a very low cash
price with the plan to immediately resell the property to another investor who spe-
cializes in lower income housing in that neighborhood.
“So I hope you see that location matters, but only after the first two levels of
the Winning Deal Formula are factored in. This is a major shift from how most
people think about investing in real estate. This shift—from real estate being
about location, location, location, to real estate being about motivation first,
price and terms second, and then as a distant third about location—greatly
impacts how you structure your real estate business.
The Seven Clues to a Seller’s Real Motivation
So what are the key clues that let you know you are on the trail of a
motivated seller? What things should you be looking for when you are
talking with property owners or people in your referral network that will let you
know you have found a motivated seller?
Here are the seven key clues to determining if you have found a motivated
seller, along with the scripted questions you’ll need to ask the seller, either
over the phone or when you meet with them in person, to uncover the seller’s
real motivation.
Clue One: They have a compelling reason to sell!
Key Question to Ask: “This sounds like a wonderful property, why in the world
would you ever consider selling it?”
Clue Two: They are under a perceived time crunch to sell.
Key Question to Ask: “When did you want the property handled? Six months, or
twelve months? You tell me, when did you ideally want the property handled?
Clue Three: The property is vacant.
Key Question to Ask: “Who’s living in the property now? Is there a renter that
we’re going to have to deal with (using a negative tone), or is the property
hopefully empty right now (using a brighter tone)?”
62 THE REAL ESTATE FAST TRACK
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The Seven Clues to a Seller’s Real Motivation (continued)
Clue Four: If it’s a rental property, they’ve had a bad renter experience.
Key Question to Ask: “You’ve probably never had a bad renter here, huh?”
Clue Five: The property hasn’t been properly advertised so buyers are scarce.
Key Question to Ask: “You’ve probably been flooded with people coming
through the house, huh? May I ask why you haven’t accepted any of the
written offers you’ve gotten so far?”
Clue Six: The seller perceives the local real estate market is slow.
Key Question to Ask: “I’m sure you’re really up to speed on the local real
estate market. What’s your take on the stage in the real estate cycle we’re in
right now?”
Clue Seven: The property is an emotional anchor to strong negative feelings
for the seller.
Key Question to Ask: “I’m sorry, I’m still just a little confused. Can you tell me
again why it is you’d even want to sell such a lovely home?”
The Two Clues to Great Financing
“Once you’ve determined a seller is truly motivated to sell, next you’ll need to ex-
plore the financing potential of the deal. Remember, to be a winning deal, the seller
either has to have enough equity to discount the price of the property so that a
cash sale makes sense, or the seller has to be willing to significantly participate in
the financing to allow a terms deal to work.
“There are two key questions to ask when looking for clues to great fi-
nancing. The first is, how much equity does the seller have in the property?
Having more equity means the seller could either discount the price of the prop-
erty for a fast cash sale, or carry back more of the financing in some form of seller
financing.
“The second key question is, what is the market rent in comparison to
the total payments on the underlying financing? This question tells you if the
property will cash flow as a terms deal. To make a terms deal work, your total
monthly payment for the property must be no higher than the market rent. In fact,
I recommend that you always build a cash flow cushion into all your terms deals.
Core Investor Skill One: Creating a Deal Finding Machine 63
This means that ideally the total property monthly payment needs to be no more
than 85 to 90 percent of the market rent.”
“But David,” Nancy asked, “ I live in an expensive area with home values that
just seem so out of line with the market rents. How am I supposed to make a deal
cash flow in my market?”
“That’s a great question. In fact, probably about a third of you here are in very
strong real estate markets right now where home prices are quite high in relation to
the market rents, making it harder to buy an investment property conventionally and
have it cash flow for the first several years. The key word though is conventionally. If
you are going to buy using conventional financing to fund the deal, then you’re right,
it will be almost impossible to get the property to cash flow. But you’re not limited to
buying conventionally. You’re also able to buy creatively. Now if you buy for a deep
cash discount the property will often cash flow based on the fact that you are buying
it for 60 to 70 percent of value. But one of my favorite ways to buy is on terms.
“For example, I picked up one upper-end home in California during the
height of the market rush in San Diego where the only reason it cash flowed from
the start was that the owner was motivated enough to carry back the financing at a
very low interest rate. Remember, when you are buying from a motivated seller,
you can often structure a deal that takes care of the seller’s most pressing need and
at the same time allows you to get a monthly payment that is lower than the mar-
ket rents. Later today we’ll discuss techniques like graduated payments, equity
splits, and owner-carry notes and I’ll give you the details you need to structure
these deals. But the bottom line for now is to realize that, regardless of the market,
you can always find profitable deals. You can buy cheaply for cash, or you can buy
at a higher price but with attractive financing from the seller. Both will allow you
to get at least a breakeven, if not a positive cash flow from your properties.”
The Eight Clues to a Great Property and Location
Once you know you have a motivated seller, and you know that the
financing of the deal makes sense, next you need to factor in the
physical condition and the location of the property. When you’re looking for a
great deal, here are the eight clues to look for that let you know you have a
great property and location.
64 THE REAL ESTATE FAST TRACK
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(continued)
The Eight Clues to a Great Property and Location (continued)
Clue One: The property has a cosmetic problem that makes it show poorly.
I love houses that have cosmetic defects that are cheap and easy to cure, but
hurt the short-term value of the property. Why? Because once you fix them,
the house is instantly more valuable.
For example, I bought a three-bedroom, two-bath house several years ago
which was in dire need of new paint and carpet. The sellers had left the old,
dated wallpaper and dingy carpet in the house while they were trying to sell it,
and most buyers were turned off. I ended up getting a great deal on the
house, and it only took me $4,000 to repaint and recarpet it. Once I did, it
was easy to find a great tenant buyer who rented to own the property from me
for $30,000 more than I paid for the property. This is a simple example of
“forced” appreciation.
Clue Two: The property was well built.
This matters most if you plan on holding on to the property over time, either as
a rental property or a rent-to-own property.
Clue Three: The area is well established and consistently in demand.
Clue Four: The area is close to the jobs and amenities that the potential
buyers or renters for that level of home want.
Clue Five: The area has easy access to the main roads that will take
residents to jobs, shopping, and schools.
Clue Six: The area has low perceived crime.
Clue Seven: The area has highly desirable schools.
Clue Eight: The property has four walls and a roof.
All kidding aside, I listed this one to remind you not to get too carried away
with the house or area. Any house at the right price and on the right terms is a
great buy. Don’t lose yourself in the imagined possibilities of the house from
the perspective of the occupant. Instead, keep focused on what the
possibilities are from the perspective of an intelligent investor looking to make
a conservative profit.
Core Investor Skill One: Creating a Deal Finding Machine 65
Seven More Techniques to Find Great Deals
I just couldn’t resist sharing with you even more ways to find
motivated sellers. Here we go!*
Technique One: Referrals from Real Estate Agents
As an investor, one of your most important relationships for you to establish is
with the real estate agent community. I suggest that as a Level Two investor
you network with at least two new agents each month. Invite them to lunch
and get to know them. Find out how you can source and serve them. Share
with them your buying criteria and how they can profit by helping you
consistently find great deals. (See Chapter 13 for details.)
Technique Two: Establish a Farm Area
A farm area is simply a section of town where you focus a definite portion of
your efforts. It’s almost impossible to be an expert on the trends and hidden
opportunities in an area that is too large. It’s by creating one or two smaller
farm areas that you are able to narrow your focus and find those hidden deals.
You want to know before houses come up for sale, and you want to know when
a landlord is dealing with a nasty eviction. To be privy to this type of insider
information it’s going to take effort to develop the network of contacts who will
call you when they hear of new developments. Also, you will become the
investor who people turn to in that area when they need a fast and fair
solution.
Technique Three: Door Hangers and Flyers
One of the disadvantages of direct mail is that the postage is so expensive
(not to mention that you are competing with all the other mail the
homeowner receives for his or her attention). Did you know that you can hire
someone to put out “I Buy Houses” door hangers or flyers in your farm area
for about half the cost of a direct mail postcard and about a third of the
cost of a direct mail letter? I had one student use this idea to find two
houses from a seller who was literally a few weeks away from moving
overseas. Our student bought both houses with attractive owner financing
for less than $3,000 down!
66 THE REAL ESTATE FAST TRACK
*For a complete online workshop on finding great investment deals go to
www.InvestorFasttrack.com. (See Appendix A for details.)
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Seven More Techniques to Find Great Deals (continued)
Technique Four: Call Expired Listings
A listing is simply the term for a house that a seller has agreed to allow a
real estate agent to sell for them. If for some reason that house doesn’t
sell during the listing period, which is usually three to six months, then we
call that house an expired listing. For every expired listing you generally
have a much more motivated seller. Contact one of the real estate agents
you have networked with and ask them to pull a list of expired listings for
you to call through. It’s easy for them to do on their computer and should
take them less than 10 minutes tops to do this and e-mail the list over to
you. They pull the list together and you agree that if you need an agent in
the transaction, you’ll use them as your buyer’s agent. Plus, if any of the
homeowners you talk with aren’t motivated enough for you to make a deal
work as an investor, then you’ll refer these sellers over to your real estate
agent friend so they have a good shot at getting a new listing. It’s a total
win-win for you and the agent.
Technique Five: Billboards and Bench Ads
If you can’t afford it on your own, co-op with a group of fellow investors and
rent some concentrated outdoor advertising in key, high-traffic areas. Make
sure you diligently track your marketing to make sure the return is there for
you, and just split the leads. I know of one group of five investors who
collectively buy space on 30 bus benches and generate a sizable lead flow for
themselves from this source.
Technique Six: Bird Dogs
Empower other people who are around houses every day to sniff out motivated
sellers for you. Talk with landscapers, contractors, delivery people, postal
workers, anyone who is regularly in contact with homes and homeowners in
the course of their day and who can turn you on to potential leads. You just
pay them a $250 to $1,000 finder’s fee for every lead they share with you that
you close on.
Technique Seven: Online FSBO Web Sites
There is a growing trend for homeowners to sell their own homes online
through various “For Sale By Owner” (FSBO) web sites. For a list of links for
powerful FSBO sites, just log onto www.InvestorFasttrack.com and click on
the “Investor Resources” button.
Core Investor Skill One: Creating a Deal Finding Machine 67
Leveraged Strategies and Systems
for Finding Motivated Sellers
“As Level Two investors who are looking to progress further in your investing, it is
critical that you begin to make the shift away from ‘looking for a deal’ and instead
focus more and more of your efforts on building leveraged deal finding systems
that will yield your investing business deal after deal. It’s the difference between
being a hunter-gatherer scratching for a deal here or there, and being a sophisti-
cated farmer who invests in the agricultural infrastructure so that each season you
are able to harvest field after field of deals.
“This isn’t an easy shift to make, and in the beginning you’ll have to balance
your need to keep deals coming into your business with taking the time to step out
of the activity of your business and work on your business’s deal finding systems.
The best advice I can give you is to shift your thinking so that every time you im-
plement a marketing strategy to find motivated sellers, you ask yourself three key
questions.
“First, ask yourself how you can leverage your efforts. How can you take
the energy you are putting into a marketing channel and magnify your return?
I suggest you go back to the six forms of leverage we talked about earlier in the work-
shop and brainstorm ways you can take your efforts and get more from less. I call
this ‘super-sizing’ an idea. You take it and make it bigger and better than ever.”
Vicki raised her hand and asked, “David, can you give us an example of this?”
“Sure. Let’s super-size the idea of networking with real estate agents by lever-
aging your time. How is it that most investors network with real estate agents?”
Vicki thought for a moment and then answered, “They randomly meet an
agent here or there and then they follow up to establish a professional relationship.
Sometimes they even get a referral to talk with a specific agent from another con-
tact they have in common.”
“Exactly! Now if it was me, I’d like to speed up this process and connect with
more agents with less time and effort. To do this we need to leverage our efforts.
One way would be to actually go to one real estate office each month and give a
quick 10- to 15-minute talk at their regular office meetings about how these agents
can generate a lot of repeat volume business by aligning themselves with local in-
vestors. This is your opportunity to share with 20 or 30 agents in one shot exactly
what your buying criteria are and how you can help them generate more sales vol-
68 THE REAL ESTATE FAST TRACK
ume fast for any of their hard-to-sell listings, or anytime they come across a listing
that the seller needs to sell fast. Can you see the leverage in talking with so many
agents at one time versus one by one?”
David continued, “Now that’s just one form of leverage—leveraging your
time. Another way to leverage yourself is to leverage your money. For example, hire
someone to put out your ‘I Buy Houses’ signs for you each week rather than spend-
ing the four or five hours yourself. For $10 to $12 an hour you can leverage this
third party’s labor to find you deals.
“Another example would be to leverage your network of contacts. Let’s say
you know a few local business owners. Ask them to let you put up your ‘I Buy
Houses’ flyers at their businesses. I know one investor who found a deal that netted
him over $85,000 from a lead that came from a contact who let him advertise in
her place of business. Another example I heard about from reading the Mentorship
student discussion board was how one of our students enlisted the help of a friend
who worked at Target. Normally the store gets its employees to park at the back of
the lot. Our student paid his friend five bucks a week to put a special ‘I Buy Houses’
magnetic car sign on his car and park right near the entrance to the store parking
lot. Our student used a separate extension on the sign to track the calls and agreed
to give his friend $500 for any deal he signed up as a result of the signs. He re-
ported on the discussion board that he got four leads the first weekend his friend
had the signs on his car! I hope you are getting the idea.
“The key is to start consistently asking yourself how you can leverage a specific
deal finding strategy so that you find more deals with less of your energy and effort.
“The second question to ask yourself when you are implementing a mar-
keting strategy is how you can systematize it so that this marketing stream
goes on autopilot. How can you make this marketing strategy work without
you needing to focus your mental energy on running it?
“Let’s look at the example of creating a mailing campaign to find motivated
sellers. The average mom or pop investor just ‘does a mailing.’ They give no
thought to how to make this an automatic, repeatable process; they just do it on a
one-shot basis. This is just too expensive a way to run your marketing, with all that
wasted energy ramping up your mailing campaign each time you consciously
choose to do another mailing. Instead, let’s sketch out a sample system that you
can build for your investing business so that your business, not you, regularly gen-
erates leads of motivated sellers.
Core Investor Skill One: Creating a Deal Finding Machine 69
“The first step is for you to find a secure source of homeowners for you to
mail to. For our example we’ll use a mailing campaign to out-of-town owners.
These are people who own a property in your farm area, but who live at least one
hour’s drive away. The average investor just calls up a title company and asks for
the list from them. You, however, will create a script for calling up the title com-
pany and asking for the mailing list. You’ll systematize how your title company
will get you updates of this mailing list via e-mail once a quarter. This way you
don’t have to be the one calling to get the updated list from the title company
each quarter—you can have a staff member do it. You’ll also checklist out your
Master Mailing Calendar that includes a timeline of when you’ll need to get the
mailing pieces printed, when you’ll be dropping your letters or postcards into the
mail, and your schedule for follow-up mailings.* You’ll create a step-by-step in-
struction sheet for your marketing assistant to follow to execute on this master
mailing calendar.
“I think you get the idea. I know this is a lot more work than just ‘doing the
mailing,’ but the payoff is that you’ll get a much better, consistent result for your
business. Plus you’ll be able to hand off responsibility for this marketing channel
to someone else in your business, thus freeing yourself up to invest your time on
higher-value activities. Ultimately, if you want to be a Level Three investor en-
joying a Level Three lifestyle, you’ll need to have your business systems dri-
ven, not people dependent.
“The third and final question you need to ask yourself with your market-
ing to massively grow your investing profits is how you can optimize your
marketing results. How can you optimize all your marketing efforts to maxi-
mize your net profits in the simplest, stablest way?
“The key component to this step-by-step optimization of your marketing ef-
forts is the disciplined and effective tracking of your marketing activities.”
David got a little playful with the group and said, “Everyone raise your right
hand and repeat after me: ‘I hereby affirm and declare . . . that I will never . . .
ever . . . engage in a marketing activity . . . unless I have a reliable mechanism in
place . . . to track the results of the marketing effort . . . so that I will know how
70 THE REAL ESTATE FAST TRACK
*Would you like to see a sample “Master Mailing Calendar” and get your hands on my
script to get your out-of-town owner mailing list for free? Just log onto www.Investor
Fasttrack.com and click on the “Free Offers” button.
much money and time I put in . . . and what tangible benefit I got out . . . and
over time I will test . . . and test . . . and test . . . to find the optimum mixture and
methods . . . to get the most for the least. So help me God.’” By this point the
class was hamming it up as much as David, but the point went home—they were
just having a blast while they were learning it.
“If you don’t track all your marketing efforts then you are shooting in the
dark. I used to fool myself into thinking that I could get a gut sense of which of my
marketing efforts was most effective, but sadly I’ve come to realize that my gut was
wrong much of the time. It was only when I had hard numbers to look at that I
started to make the right marketing decisions and was really able to optimize my
marketing efforts and dollars.”
The Mechanics of Tracking Your Marketing
One of the key lessons of successful investing businesses is that a
successful investing business always gets paid for every dollar or hour
it spends on a marketing campaign. And so should you.
Every campaign you run should either make you money by finding you great
real estate deals, or it should profit you by expanding your learning of
what works or doesn’t work with your marketing efforts. Ideally you will
get “paid” both ways—in profitable deals and in valuable marketing
insights.
You need to track what goes into the campaign in terms of time and money,
and what you get out of the campaign in terms of leads, lead quality, and the
ultimate results. This way you will be able to refine and optimize all your
marketing activities.
How do you track your marketing? Simply have every ad, every mailing piece,
every campaign send responses to a voice mail system that uses a specific
extension or voice mail box for each marketing channel. So, for example,
responses to your classified “I Buy Houses” ad go to extension 31; to your
signs, extension 32; to your first postcard to landlords, extension 33; and so
forth. Then you just tally up your responses weekly in a simple spreadsheet or
worksheet to track your results.
Core Investor Skill One: Creating a Deal Finding Machine 71
B
R
I
G
H
T
I
D
E
A
(continued)
The Mechanics of Tracking Your Marketing (continued)
It’s essential to be able to track the specific, demonstrable results of all your
marketing campaigns. I recommend that you use a toll-free voice mail system
to point all your marketing efforts toward, because of the ability these
systems have to help you track your marketing results. The system that
Mentorship students use lets them track up to 90 marketing campaigns
concurrently by the use of specific extensions placed in the advertising. The
system has all the outgoing messages pre-scripted and installed with
professional voice recordings. In fact, the system is set up and ready to use
right from day one to save students time and effort.*
Also, since it’s a toll-free system, you’ll capture the phone number of every
caller, regardless of whether they leave you a message or not. What this means
is that you can actually increase your marketing results by 50 to 200 percent!
How? I’ve found that for every 10 messages from sellers your marketing
generates, on average another 5 to 20 sellers have called into your voice mail in
response to your marketing, but they hung up without leaving you a message.
Most investors think that particular marketing effort only produced 10 calls, but
in reality it produced 15 to 30 calls. The power in a toll-free voice mail system
like the one that Mentorship students use is that it lets you generate a “call
detail report” that lists the phone numbers of every caller—including the ones
who didn’t leave a message! You can then call back all your leads to follow up.
“Here’s an example of a worksheet to track your marketing.” David clicked an
image up onto the screen.
72 THE REAL ESTATE FAST TRACK
*For a limited time, readers can sign up for the same investor voice mail
system that Mentorship students use, for a small monthly fee. To find out
more and to quickly get your toll-free voice mail system operational, log onto
www.InvestorFasttrack.com and click on the “Investor Resources” button.
Lead Tracking Worksheet
Week of June 15th, 2010
Voice Mail Cost/ # of # of # of Results
Lead Source Extension Week Leads Appointments Deals $ of Deals
Classified Ad (
Tribune
) 33 $158 4 2 1 Estimate: $38,000
Calling System N/A $450 5 1 0 0
Out-of-Town Postcard 34 $345 3 1 0 0
“I Buy Houses” Signs 35 $125 5 3 1 Estimate: $55,000
“To use this worksheet, you just keep a running tally of each of your cam-
paigns as they are running, and each week you fill out the form.”
“David,” Mary asked. “What’s the difference between a ‘lead’ and an ‘ap-
pointment’?”
“Great question. A lead is simply anyone who responded. Let’s face it, plenty
of the people who respond to your marketing won’t be worth meeting with. The
difference is that an appointment is a qualified lead that you determine is actually
worth sitting down and meeting with, even if they are long distance and you hold
that meeting over the phone.
“Also note that you won’t know the actual profits in a deal until down the
road, so make sure you make your best guesstimate, but come back later to enter
in the actual number so that when you do your quarterly marketing overhaul you
have real numbers to look at, not just estimates.
“Now let’s go to the next worksheet, which is the Marketing Analysis Work-
sheet.” David clicked a new image up onto the screen.
Marketing Analysis Worksheet
Month of June 2010
Profit Return
from on
# of # of # of Cost/ Cost/ Cost/ Cost/ Lead Marketing
Lead Source Leads Appointments Deals Month Lead Appointment Deal Source $(Profit/Cost)
Classified Ads 12 5 1 $ 632 $ 52.67 $126.40 $638 $38,000 6,012%
Calling System N/A 18 2 $1,800 N/A $ 100 $900 $72,000 4,000%
Out-of-Town Postcard 9 4 0 $1,380 $153.33 $ 345 N/A N/A N/A
“I Buy Houses” Signs 22 8 2 $ 500 $ 22.73 $ 62.50 $250 $65,000 13,000%
Core Investor Skill One: Creating a Deal Finding Machine 73
“I recommend you sit down monthly, quarterly, and annually, review your
marketing systems, and see which systems are yielding the best results. Invest the
bulk of your marketing resources in these proven winners, but invest 5 to 10 per-
cent of your marketing energy and dollars and test new versions to see which pulls
best. The key is to keep all the variables you can constant and test one element at a
time. Change the headline on your postcard. Try out a new paper to run your clas-
sified ad in. Try a new color on your ‘I Buy Houses’ signs. As long as you track
things, over time you’ll come up with the hard numbers, which will make your
marketing decisions easy and fast.
“Okay, you’ve all been so good you’ve earned a short break. When we come
back we’ll get into the second Core Investor Skill: structuring deals.”
74 THE REAL ESTATE FAST TRACK
CHAPTER FOUR
Core Investor Skill Two:
Structuring Highly Profitable
Win-Win Deals
After the break, David jumped right
in: “At the most basic level there are three steps to any deal. Step one is to find a
motivated seller who has the right motivation and situation. Remember that
you bring value to the deal by helping a seller solve a pressing real estate problem.
If they’re not motivated, then there is no way for you to bring enough value to the
table to make it a win-win deal. This is why it’s essential that the seller you work
with have a compelling reason to sell.
“Step two is to meet with this seller and find a way to structure a deal
that meets the seller’s most important needs while building a conservative
profit in there for you. Once you have created this win-win solution with the
seller, you need to make sure that agreement is in writing and signed by both you
and the seller. We call this ‘putting the property under contract.’
“Step three is to execute your exit strategy for the property. This almost
always means you must find your end user for the property. This end user might be
a retail buyer who is purchasing the property from you if you’ve decided that your
exit strategy is to immediately resell the property. Or your end user could be a
renter if your exit strategy is to lease out the property for a period of time. Or your
75
76 THE REAL ESTATE FAST TRACK
end user could be a tenant buyer if your exit strategy is to sell the property on a
rent-to-own basis.
“As you can imagine, the seller’s needs and situation are going to determine
to a large degree how you structure the deal, as is your plan for dealing with
the property once you’ve acquired it. The key to structuring a winning deal is
to plan both your way into and out of any deal. Your way into a deal is called
your ‘acquisition strategy.’ This is how you structure your purchase of the
property.
“Intelligent investors know that they make their money when they buy, not
when they sell. This requires them to make sure that any deal they do has a built-in
profit at the time of acquisition.
“Your way out of the deal is called your ‘exit strategy.’ This is when you har-
vest the profit you have created from the deal. Notice you don’t make the profit
when you sell—you make your profit when you buy. You merely harvest your profit
when you sell. The key lesson here is that you will never enter into any deal that
you do not have a clearly laid out strategy for gracefully exiting.
“There are two main ways to buy a property and make a conservative profit.
Either you buy the property for cash at a deeply discounted price, or you buy the
property with attractive terms of financing that allow you to make your profit due
to the great financing with which you acquired the property. Picture this as a deci-
sion tree. At the first juncture you have your first real decision to make as you
structure the deal—will it be a cash deal or a terms deal?”
David drew a diagram on the board:
Winning Deal Decision Tree
Potential Deal
Cash Deal
Cash Price Formula:
No more than
70% of “As Is” value.
Lease Option
Subject To
Owner Carry
Property must
pay for itself
AND have
conservative
profit built in
from day one.
$
Terms Deal
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 77
“Depending on which way you go, there are specific formulas and techniques
for how you’ll structure the deal. When you are buying for cash you’ll need a price
that is at least 70 percent or less than the ‘as is’ value of the property. We call this
formula the ‘Cash Price Formula.’ Here’s what it looks like.” David clicked a new
image onto the screen.
“One very important distinction when you are doing a cash deal is that the
cash you are using doesn’t have to be your money. It could be yours, or it could be
money you borrowed from some third party like a bank or private lender. The crit-
ical distinction in a cash sale is that the seller is getting all of her money up front
from you and not waiting for payments over time. Once you’ve purchased a prop-
erty for cash, you can either hold on to the property over time or move to sell it
right away for more than you paid.
“When you are buying for cash, the reason for the big discount is that as an
investor your cash is a valuable commodity—one that most sellers want. It is also a
limited commodity. Once it’s committed by being invested into real estate, you lose
the ability to quickly access it to purchase your next screaming good deal. Because
Cash Price Formula
Highest “All Cash” Price You Can Pay = 70% of the "As Is” value of the property
(Go for less!)
“As Is” Value
= The after-repair value of the property less the CONSERVATIVE
cost of getting the house in the condition so that it will
SELL in 90 days or less.
of this, you need to always value your cash highly and use it to maximum effect.
This means that if a seller requires an all-cash purchase, you require a ‘deep cash
discount’ to move ahead with the deal. Remember, anytime you get cash to a seller,
you need to get something of equal value in return—like a deep cash discount.
When you buy for cash, you typically take on more risk than if you enter into a
terms deal—having more money in the deal means you potentially have more to
lose—and risk always needs to be rewarded. If your risk isn’t being adequately re-
warded in a deal, then why take it? In a cash deal the way you get rewarded is by
getting a deep cash discount.
“Let’s do a brief review of buying on terms. This means you structure the
deal so that the seller is not getting all her money up front but instead is going to
get paid at some future date. With a terms deal you use the excellent financing
that the seller participates in to make your profit. Usually on a terms deal you
make sure that the property can afford to pay for itself long enough for it to go up
in value to resell at a profit. Or you make a deal in which the financing is so valu-
able that you are able to use it to make your money regardless of whether the
property goes up in value.
“Now all of you remember the Intensive Training you went through as part of
the Mentorship Program where you learned some of the creative financing strate-
gies we teach, such as lease options, buying subject to the existing financing, and
using owner-carry financing.* We’ll be building on these main acquisition strate-
gies in just a moment.”
78 THE REAL ESTATE FAST TRACK
*For more information on these basic terms deal structuring strategies, check out Appendix
A for the list of FREE Online Investor Workshops you get when you register for the Investor
Fast Track Program™ at www.InvestorFasttrack.com.
The Three Most Important Terms Deal Acquisition Strategies*
Terms Deal Acquisition Strategy #1: Lease Option
Long-term lease + agreed upon option price.
The first and perhaps the most common way to structure a terms deal is to
negotiate a long-term lease on the property along with an option to purchase
the property. What this means is the seller agrees to let you take possession
of the property (i.e., lease) and the seller has agreed to give you a fixed price
at which you can buy the property at any point over your lease period (i.e.,
option). The lease portion of the deal lets you control possession of the
property, including allowing you to sublease the property to a tenant. The
option portion of the deal gives you control over the sale of the property and
any future appreciation by locking in a price at which you have the exclusive
right to buy for the specific period of the lease term.
Case Study: Two Mentorship students, Mark and Trish, found a seller who was
making double payments on two properties after a recent move, who wanted
to just get out from under the second payment. They agreed to step in and do
a three-year lease option on the property for a price of $235,000. They sold
the property on a two-year lease option for $295,000 and netted over a
$65,000 profit for their efforts.
Terms Deal Acquisition Strategy #2: Buying Subject To
the Existing Financing
Seller deeds you the house and you make payments every month on the
existing loan(s).
On most properties you buy, the seller doesn’t own the property free and
clear. She has a loan against the property for some amount. Now how did the
seller get that loan in place? She applied with a mortgage lender who required
her to show three things to qualify for the loan: her credit score, the financial
resources to pay for the loan, and often a cash down payment, Of course the
lender didn’t do the loan for free; it charged the borrower application fees,
appraisal fees, origination fees, and points on the loan. And the lender
required the borrower to personally guarantee the loan.
*For more details on all three terms deal acquisition strategies, go to
www.InvestorFasttrack.com and download a FREE ebook titled Five Fun,
Easy Ways to Structure Terms Deals to Generate Over $100,000 in Profits
This Year.
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 79
A
C
Q
U
I
S
I
T
I
O
N
$
(continued)
The Three Most Important Terms Deal Acquisition Strategies
(continued)
With subject-to financing, you get all the benefit of the loan that’s already in
place with none of the risk, with none of the cost, in fact with virtually none of
the downsides of conventional financing. What you do is simply buy the
property and leave the existing financing in place. You own the property, the
seller owns the debt. Of course you agree to pay the payment each month on
the existing loan, because if the loan isn’t paid each month the lender’s claim
to the property comes before your claim to it. In fancy terms we’d say you own
the property “subject to the existing financing that exists against the property.”
Case Study: John, one of our Mentorship graduates, got a referral to meet
with a couple who were four months behind on their mortgage payment and
about to lose their home to foreclosure. After meeting with them he agreed
that he would make up the back payments, buy the property, and simply take
over making payments on the underlying loan. Here are what the numbers
looked like on the front half of the deal:
Value $180,000
Existing Mortgage ($155,000)
Back Payments (with late fees and attorney’s fees) ($9,000)
Money Given to the Seller ($1,000)
Closing Costs (title insurance, escrow cost) ($1,000)
Effective Purchase Price $166,000
Total Cash Needed for Deal $11,000
To make this deal work for him, John immediately found a tenant buyer for
the property who gave him $6,000 of option money plus the first month’s
rent of $1,600. In essence he recouped $7,600 of the $11,000 he needed
to do this deal within three weeks of buying it. Over the next five years he
had two different tenant buyers go through the property and choose not to
exercise their option to purchase (remember, his tenant buyers had the
option to purchase, not the obligation). During that time, these tenant buyers
paid him rent every month, took care of maintaining the property, and both
gave him sizable nonrefundable option payments. Five years later the
property had increased in value to $300,000. He ended up selling the
property to his third tenant buyer for $280,000. In the end he made
$110,000 from this one deal!
80 THE REAL ESTATE FAST TRACK
(continued)
The Three Most Important Terms Deal Acquisition Strategies
(continued)
Terms Deal Acquisition Strategy #3: Owner-Carry Financing
Seller accepts a promissory note for some or all of the money owed to her.
When you are doing your investing you will at times run across sellers who have a
very large chunk of equity in their properties, or perhaps even own the property
free and clear. In situations like this it is often possible to structure the deal with
the seller agreeing to finance your purchase of the property by “carrying back”
some or all of the purchase price as a mortgage that you will pay back over time.
Case Study: Peter and I called about a FSBO ad in the newspaper. The seller
owned a large five-bedroom house in an upscale section of San Diego. He not
only owned this property free and clear, but he had already purchased another
home near Palm Springs that he wanted to retire to.
After negotiating over three days we agreed on a purchase price of $595,000
with a down payment of 10 percent and the owner to carry back the balance as
a first mortgage at an interest rate that was about 2 percent lower than the best
rates conventional lenders would offer at that time. Why did the seller agree to
give us such attractive financing? Because he wanted a fast and easy sale. We
gave him a price that was fair and we told him not to worry about repainting the
interior of the house. We held on to the house for four years, put a little money
into sprucing it up cosmetically, and resold the property for $925,000.
Case Study: A Mentorship student in Virginia found an elderly couple who were
selling their home. Since the couple owned the property free and clear, our
student, an attorney in the area, talked with them to see if they would
participate in the financing.
After going back and forth, they agreed on a purchase price of $380,000, with
our student to bring in a new conventional first mortgage of $180,000 and the
sellers to carry back a second mortgage for the other $200,000. The sellers
got the $180,000 from the new conventional loan up front at the closing, and
our student was able to 100 percent finance the deal (roughly half from a
conventional first mortgage and half from the owner-carry second mortgage).
Why wasn’t this a “cash” deal since the owner got so much money up front?
Because the seller carried back a second mortgage for $200,000 with an
interest rate of just 2 percent! This allowed the property to have incredibly low
mortgage payments. In the end our student decided to move into the property
and live there for a few years before he resold it for a healthy profit.
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 81
The Deal Structuring Wizard™—
Two Simple Steps to Determine the
Right Way to Structure the Deal
“All of you understand the basic deal structuring techniques, but the real skill isn’t
just having enough tools in your investor toolbox. The real skill is being able to
quickly determine which tools are appropriate for which seller situations. Let’s
face it, if you try to force a terms deal on a seller who really is ready for an all-cash
offer, then you’re in for a lot of frustration. Or if you try to push a seller to discount
the price for a quick cash sale, but they don’t have the equity to discount the price
as much as you need, you can be the world’s best negotiator but you’re still not go-
ing to close the deal.
“What I would like to do right now is to cover a simple two-step process you
can go through to quickly determine which of the deal structuring strategies is
most appropriate for a given seller’s situation. When we’re done, you’ll be able to
meet with a seller and quickly diagnose, just like a doctor does, what solution best
cures their real estate ailment.
“Let’s start with Part One of the Deal Structuring Wizard™.” David drew a di-
agram on the board.
82 THE REAL ESTATE FAST TRACK
Deal Structuring Wizard
TM
(Part One)
Seller has Equity?
No
. . . Go to Part Two:
Terms Deal Track
TM
1.
Yes . . .
(continued)
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 83
Deal Structuring Wizard
TM
(Part One) (continued)
Cash NEEDED Up Front?
* Only exception is a possible short
sale if the seller is behind on payments
Willing to Discount Price?
T
e
r
m
s
De
a
l
T
r
a
c
k
™
N
o
.
.
.
N
o
D
e
a
l
*
C
a
s
h
O
f
f
e
r
O
p
t
i
o
n
s
N
e
w
1
s
t
,
S
e
ll
er
Ca
r
r
y
2
n
d
Maximum Purchase
Price < 70% of “As Is”
Value
2.
3.
= After-Repair Value
Less Conservative Repair Costs
M
a
x
i
m
u
m
O
p
t
io
n
s
!
Y
e
s
.
.
.
Yes . . .
C
a
s
h
D
e
a
l
Tr
ac
k
™
or
Go for less!
Y
e
s
.
.
.
N
o
.
.
.
“The first question you need to ask is, does the seller have a lot of equity? If
the answer is no, then chances are you’ll need to choose the Terms Deal Track™. If
the answer is yes, then you have maximum flexibility because either a terms deal
or a cash deal could work.
“Next you’ll ask yourself, does the seller absolutely need their equity in cash
up front? Now understand that almost every seller wants their cash up front, but
not every seller needs it up front. The single biggest reason why a seller would need
all of their equity out of a house up front is so that the seller can use it for a down
payment on their next property.
“Indirectly explore whether the seller needs his equity, or if he just wants it up
front. If he just wants it, and if he is truly a motivated seller, then many times a
terms deal could work for him. If he needs all his equity up front then your only
choice is the Cash Deal Track™. If he isn’t motivated enough for this route, then
you’ll have to walk from the deal.
“The final question to ask in Part One of the Deal Structuring Wizard™ is, if
the seller has a lot of equity, is she willing to give you a big discount in exchange
for an all-cash offer? If the answer is no, then your only option is the Terms Deal
Track™. If the seller isn’t willing to go that route, then you are going to have to
walk from the deal. If the seller is willing to take a big discount on the price, then
your best route is to choose the Cash Deal Track™ and go for a discounted cash
price for the property.
“And that take us to the end of Part One. At this point you know whether the
seller has a lot of equity or not. If he does have a lot of equity, you know whether he
needs it all up front or just wants it all up front. And finally, you know if he is will-
ing to give you a big discount in the price in exchange for an all-cash closing. In
essence, these three questions will help you determine which track to take. You’ll
either take the Cash Deal Track™ or the Terms Deal Track™.” David paused as stu-
dents let these ideas sink in.
“Let’s move on to Part Two of the Deal Structuring Wizard™. This is the
Terms Deal Track™ and it’s your chance to determine if a terms deal will work.
Here’s what it looks like.” David turned and drew on the board.
“The first question to ask is, what is the property’s current monthly fixed ex-
pense of mortgage payment, property taxes, and insurance in relationship to the
market rent for that property? This matters because if you are going to structure a
84 THE REAL ESTATE FAST TRACK
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 85
Deal Structuring Wizard
TM
(Part Two)
Terms Deal Track
TM
Total Payment vs. Market Rent?
Most Any Terms Deal Will Cash Flow!
P
o
s
s
i
b
i
l
i
t
y
On
e:
Tot
a
l
Payment <85% of Market Rent
Strong Candidate for Terms Deal
P
o
s
s
i
b
i
l
i
t
y
T
wo
:T
ot
a
l
P
ayment 85% to 100% of Market Rent
Need One Extra "Sweetener"
Great Price
Long Term
Strong Market
Low Payment
Caution! Potential Negative Cash Flow
P
o
s
s
i
b
i
l
i
t
y
T
h
r
ee
:
T
o
t
a
l Payment >100% of Market Rent
Need BIG "Sweetener" or No Deal
terms deal, then the property will need to be able to generate enough income from
rent to cover the monthly expense.
“There are three possibilities. First, the payment could be very low in rela-
tionship to the market rent, which I define as less than 85 percent of the market
rent. If this is the case then a terms deal would cash flow great. Now it’s just up to
you to negotiate it! Don’t worry, I’ll cover how to get the seller to agree to your cre-
ative terms deals later.
“Possibility two is that the monthly payment is 85 to 100 percent of the mar-
ket rent. If this is the case then you can still structure the deal, but you need at
least one other small sweetener to make the deal worthwhile. This could be that
you’re getting a great price in combination with the terms deal. Or it could be that
you’re getting a real long term on the financing of more than five years. Or it could
be that the property is in a strongly appreciating area, in which case it is almost
certainly worth doing the deal.
“The final possibility is for the monthly payment to be greater than the
market rent. This means if you took the deal you’ll probably have a negative cash
flow. This is a big warning flag. The only way you’ll take on a deal that has negative
cash flow is if you have some other big sweetener in the deal. This could be a great
price that guarantees you a conservative profit after you factor in the extra holding
costs of the negative cash flow. This could be a red-hot market and a long term that
will conservatively make you a lot of money on the back end. Or, in one deal I did
with Peter, we got a free lot of land with the sale of a house that had a small nega-
tive cash flow. We immediately sold the lot and made a nice profit, some of which
went to cover the negative cash flow for a few years until the property was sold.
“I think you get the idea. If you are going to buy on terms, then chances are
you are going to hold on to that property over time. And this means the property
needs to be able to pay its own way. If not, you need some other sweetener in the
deal to offset the cost of carrying the property.”
Advanced Secrets to Structuring Deals
“Once you master the basics—buying for cash and buying on terms—then you’ll
start to get more comfortable combining buying strategies to tailor a solution to
the seller’s situation, earning a healthy profit for yourself.
86 THE REAL ESTATE FAST TRACK
“For example, I remember a Mentorship student who found a motivated
seller with a $300,000 house that he locked up to buy at $180,000 cash. The
challenge was that this student didn’t have the money to close. So what he did
was get the seller to agree to let him buy the house subject to the existing
$100,000 mortgage, as long as he finished the rehab and cashed the seller out
within six months. The seller actually did ask for a down payment to make sure
the deal was for real, so our student agreed to put $20,000 down. But rather
than give that money to the seller, the investor got the seller to agree to allow
him to put the money into the rehab of the house. It took two months and
$23,000 to fix it up, at which point he put it on the market and sold it nine weeks
later for $285,000. The seller got his money at that point and the investor ended
up netting $55,000. The way the student was able to save the deal was simply by
combining the all-cash acquisition strategy with a short-term subject-to acquisi-
tion strategy.
“Another way you can combine strategies is to negotiate a cash price but
make the seller your partner by using an equity split, whereby you agree on the
price that you’ll pay the seller, and you also agree that the seller will get a percent-
age of the profit you make when you resell the house for more.
“Or you could even combine a subject to the existing financing purchase with
an owner-carry second. I did that on a pre-foreclosure property I bought several
years back. The owner was four mortgage payments behind and headed toward
foreclosure. The house was in great need of new carpet and paint, but other than
that it was structurally sound. I bought the place subject to an existing $65,000
first mortgage, and I gave the seller $15,000 in the form of a second mortgage on
the property with an annual interest-only payment and the balance due in full in
five years or less. The deal saved her from being foreclosed on and made her
$15,000 plus interest. I got a house that five years later was worth over $200,000
more than I paid for it.
“The point I’m trying to make here is that when you master these basics and
add a little creativity, the sky is the limit. You will need the nerve to ask the seller to
go along with your creative ideas, and the skill to negotiate the deal. Plus you’ll
need the fluency to write up the deal initially, and the business systems to follow
through and execute your exit strategy for the deal. But when you do, a whole new
world of opportunity will open up for you.
“The average investor only knows one way to buy an investment property—
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 87
for a discounted cash price. To grow a thriving investing business you need to mas-
ter more creative ways to buy so that you have more tools with which to structure
win-win deals with motivated sellers.”
21 Advanced Deal Structuring Strategies to Unstick Even the
Toughest of Deals
Advanced Strategy 1: Delay Your Down Payment
Is the seller flexible as to when you give them your down payment? Sometimes
it’s to your advantage to give a small earnest money deposit, with any down
payment coming later. Can you push the closing out 90 to 120 days? Often
this gives you the chance to put together your financing or to use Advanced
Strategies 2 or 3 (which you’ll read about in a moment). If you just need more
time, see if the seller will let you make a fair payment of principal to extend
the closing date by 30 to 60 days.
I’ve also seen deals structured where the down payment was used by the
investor buying the property to fix up the property. This let the seller know the
investor had something at stake, plus all that money went into improving the
property, which made the seller’s protection greater. For the investor, this
allowed them to significantly reduce the cash they needed to close on the
deal. Once they had the house fixed up they either sold the house or, six
months after they bought the house, they refinanced the property and cashed
the seller out at that time.
Advanced Strategy 2: Wholesale the Deal
Some new investors are scared to lock up a contract to buy a house for
cash because they mistakenly think they don’t have the money. Remember,
you don’t need to have the money. If the deal is right you will find the
money. One source of money is for you to sell your right to buy the property
to another investor. This is called wholesaling or “flipping” the deal. Start to
build your investor’s list of rehab investors and other cash investors in your
area who might want to buy one of your lucrative cash deals from you at a
wholesale price.
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Example: A Mentorship student in Phoenix found the owner of a beat-up, ugly
house and put the property under contract for a discounted cash price of
$14,500. Then a short while later the student found another investor who gutted
and rehabbed homes in that area, who paid the student $10,000 to buy the
contract to purchase the house. The Mentorship student made $10,000 cash for
assigning his contract to this new investor. The new investor used his money to
rehab the house and later resold it for an even larger profit. The buyer, who in
this case was the rehab investor, “funded” this deal by paying the student cash
for the right to buy this house at a deep discount, and also “funded” the deal by
using his own money to pay the original seller the $14,500 owed to him.*
Advanced Strategy 3: Presell the Property to a Retail Buyer
A retail buyer is someone who wants to buy the property so that he can move
in and live there. A retail buyer can fund your deal using his cash in the form of
a down payment or option payment, his credit in the form of a new bank loan,
or a combination of the two.
Example: A past Mentorship student in Washington, D.C., found a motivated
seller through the Internet. He negotiated over the phone and put the property
under contract to purchase at a discounted cash price. He aggressively
advertised and marketed the property and found a buyer who fell in love with
the home. The student was able to sell the property for a $45,000 profit to
this new buyer. He structured the sale to be what’s called a simultaneous
closing, which meant he did a double closing where he took his new buyer’s
money from the loan his new buyer secured, and gave most of it to the original
seller to pay the original discounted cash price, and in the process the
$45,000 spread in prices became the investor’s profit. The buyer “funded”
this deal by getting a conventional loan to pay for the property, with our
student using a large chunk of this cash to pay to the original seller.
Advanced Strategy 4: Joint Venture with the Seller
Imagine you came across a seller who is motivated to do a deal with you, but
not quite motivated enough to give up her existing equity or to give up all the
future appreciation of the property. The seller wants to do the deal, but you
need one last sweetener to spur the seller to do it. This is a perfect scenario
to try using an equity split.
*To download a FREE copy of the ebook 3 Simple Steps to Flip a Deal for
Quick Cash Profits, go to www.InvestorFasttrack.com.
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 89
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21 Advanced Deal Structuring Strategies to Unstick Even the
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An equity split is any deal where you, the investor, split part of your future
profit with the seller of a property. Typically this is used to give the seller an
extra bonus on top of the agreed-on purchase price for the property. For
example, you and the seller agree on a cash price of $350,000 and you also
agree that after you’re done fixing up the property and reselling it, you’ll split
part of your profits from the resale of the property with the seller. How much
should you give the seller when you resell? That is totally up to you to
negotiate. You can give the seller a percentage of your future profit, say 10 to
15 percent. Or you can give them an extra bonus of $5,000 to $25,000 when
you resell it for more than a specified amount.
Example: You find a seller who owns a rental house and is open to selling it to
you on a two-year lease option. But he’s just not motivated enough to give you
any longer on the term. You ask him, “Mr. Seller, if there was a way where we
could get you your asking price of $180,000 and even a small percentage of
the appreciation too, in exchange for a bit longer period of time, is this
something you’d even be open to, or probably not?”
The seller scratches his head and thinks for a moment. You negotiate back
and forth for a while and this is what you agree on: a six-year lease option for
a purchase price of $180,000 with a monthly rent to the seller of $1,200.
Plus you also agree on one more thing. You agree to give the seller 30 percent
of any amount over $180,000 that you get when you resell the property to
your tenant buyer. This is an equity split.
The seller gets all of the first $180,000 (which is your option price) and 30
percent of the difference between $180,000 and the amount you resell it for
to your tenant buyer. Imagine your tenant buyer buys it from you for $230,000.
The seller gets $180,000 plus 30 percent of the $50,000 profit you made, for
a total payment to the seller of $195,000. You make $35,000 from the resale
plus any cash flow from the spread between your tenant buyer’s rent and your
rent to the seller, and you also make any forfeited option payments from
earlier tenant buyers who didn’t end up buying.
Remember, there is no set rule that says you have to do a 50-50 equity split.
You can negotiate the deal any way you want. If you want to negotiate a 60-40
split or a 75-25 split, or even a 95-5 split, you can—whatever you and the
seller agree to.
90 THE REAL ESTATE FAST TRACK
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21 Advanced Deal Structuring Strategies to Unstick Even the
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Advanced Strategy 5: Use the “Hybrid Equity Split” to Make an Extra
$25,000 or More on Every Equity Split Deal You Do
Peter and I developed a smarter way to do an equity split several years ago
where you the investor will make an extra $25,000 or more on every equity
split you do, with zero extra work or effort! It’s call a hybrid equity split. I think
you’ll like this simple yet highly profitable technique and want to add it to your
toolbox of investing ideas.
In essence, a hybrid equity split is taking a normal equity split and adding in a
minimum “base profit” that you the investor need to earn before the equity split
kicks in.
Example: Several years ago I met with the owners of a two-bedroom, two-bath
condo. The sellers were motivated because the husband had been transferred.
When I met with them we talked through doing a five-year lease option on the
property. Right at the very end they started to balk, so I introduced the idea of
adding an equity split. In fact, by adding in this extra incentive to the seller, it
was almost like they were my partners. The more money I made, the more
money they made. They even agreed to extend my term with them to eight
years!
Watch this part very carefully. I told them that as a conservative investor,
obviously I would need to build in a base profit for myself of $25,000. But if I
sold it for any amount above that, they would get all the purchase price we had
agreed to, plus they would get 10 percent of the amount I sold it for above the
base profit. We went back and forth a little and I let them negotiate me all the
way up to 12 percent. Here is what the final details of the lease option turned
out to be: a term of eight years and a purchase price of $102,000. The up-
front option consideration I paid was $1. I also agreed to an equity split on
anything I resold the property for above $127,000. In other words, the first
$25,000 in profit would be mine alone and I would only do the equity split on
any amount above that.
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 91
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Advanced Strategy 6: Use Hard Money
A hard money lender is an experienced investor who is willing to lend you
money to purchase a property, based not on your creditworthiness or character,
but based on the security of the loan. The security in this case is the property
itself and not the borrower’s creditworthiness or other assets. Since most
conventional lenders will only lend you money based on the appraised value or
purchase price, whichever is less, it’s often impossible to 100 percent finance
a cash purchase through a conventional lender, even if you have the price at 50
cents on the dollar. A hard money lender, however, will lend you money based
solely on the appraised value of the property. This means that you can easily
finance a cash sale through a hard money lender as long as your price is right.
In fact, you can often borrow all the money you need to fix up the property too.
What’s the catch? The hard money lender is going to make you pay a whole lot
more for the money. Hard money lenders typically require five to eight
percentage points higher in the loan interest rate than conventional lenders
charge. Plus, hard money lenders will usually charge you three to eight
“points” on the loan. A point is prepaid interest, with each point equal to
prepaid interest of 1 percent of the value of the loan. While this sounds like
and is a lot to pay for your money, if the deal is a good one, and you only need
the money short term, a hard money loan may very well be the way to go.
Two easy places to find a hard money lender are, first, the “Money to Lend”
section of your local newspaper. Second, go to your local real estate investors
association.* Usually there are several hard money lenders who are members
solely for the purpose of finding new investors to lend money to.
Example: One Mentorship student put a four-bedroom house under contract
for a discounted cash price of $130,000. The property was conservatively
valued at $220,000. The student borrowed $150,000 from a local hard
money lender. The money was used as follows:
Purchase Price $130,000
5 “Points” the hard money lender charged $ 6,500
Closing Costs $ 2,000
Fix-Up Costs: $ 11,500
Total Loan $150,000
*For a complete state-by-state listing of 200 local real estate investor
associations go to www.InvestorFasttrack.com.
92 THE REAL ESTATE FAST TRACK
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21 Advanced Deal Structuring Strategies to Unstick Even the
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It took the student four months to fix up and resell the property. During that
time she had to pay the hard money lender 12 percent interest payments on
the loan. But because she only needed the money for a short time, when she
resold the property for $220,000 she ended up netting $40,000.
Advanced Strategy 7: Use Private Money
Once you have a track record of proven results, you should start to
establish sources of private money. Private money comes from people who
are willing to lend you money secured by a mortgage on a property, but at a
substantially lower cost than a sophisticated hard money lender would
charge you.
Example: Two investor friends of mine recently bought a mobile home park.
They borrowed roughly $300,000 from a person they knew who wanted to get
a good rate of return on his money without much risk or effort. My friends got
the money for 10 percent simple interest with no loan fees or credit checks,
and the lender was able to have his loan secured with a first mortgage with
over $500,000 of equity protecting the loan. A win-win.
Advanced Strategy 8: Use Graduated Payments to Protect Your
Cash Flow in the Early Years
See if the seller will accept lower interest payments in the early years with
built-in increases in the interest payments in the later years of the note.
For example, “Mr. Seller, what if we were able to pay you $300 per month
for the first 24 months, and then for the next 24 months we’d pay you $400
per month, and then for the final 24 months you’d get $600 per month?”
There are no rules governing this, so be creative. The key is to protect your
cash flow in the early years. Who knows, you just may sell or refinance the
property before the interest or payment bumps up too high!
Advanced Strategy 9: Use Graduated Prices to Get a
Longer Term
Imagine you are working to negotiate a terms deal with a motivated seller.
The seller is only willing to give you a three-year term before you have to
fully repay the $365,000 owner-carry note. Try this with the seller:
“Mr. Seller, I know that this may seem crazy for me to even suggest it, and
you’ll probably hate the idea anyway, but what if we did it exactly like you
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 93
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21 Advanced Deal Structuring Strategies to Unstick Even the
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wanted with a three-year term, and then if for some reason we needed more
time, we’d have up to another 24 to 36 months, but the price we’d be paying
you would jump all the way up to $375,000. Is that something we should even
talk about, or probably not?” Is it worth it to pay an extra $10,000 for two or
three years added onto the term of the note? Who knows? But remember, you
don’t have to use the extension, but you’ll be awfully glad you have it
prenegotiated if you end up needing it.
Advanced Strategy 10: Use a Reverse Credit to Incentivize the Seller
to Carry the Negative Cash Flow
A reverse credit is when you increase your purchase price each month. It’s
similar to a reverse amortizing loan. It is useful when you want to keep your
payment to a seller low enough to have a property cash flow, and you need the
seller to be willing to cover the negative cash flow.
Example: You are negotiating a five-year lease option on a three-bedroom
house. You agree on a price of $350,000, which is $30,000 below market
value. The sticking point is that the seller wants you to cover his full monthly
mortgage payment (which includes the property taxes and insurance) of
$2,200 per month. You, on the other hand, know that the most the house will
rent for is $2,000 per month, so the most you want to pay is $1,900 per
month to the seller. But this leaves a negative cash flow of $300 per month
for the seller. Being the well-trained investor you are, you pull the “reverse
credit” advanced strategy out of your tool box and say to the seller, “Look,
what if I could get my partner to go along with adding that $300 that you are
covering onto the purchase price each month. What this would mean is that
each month you cover that money, it will get added into the purchase price.” In
essence, your purchase price will increase by $3,600 per year with the seller
taking on the risk and burden of the negative cash flow. And just in case you
need one more kicker to make this work, you can always offer to pay the seller
an interest rate of 5 to 12 percent on that money, to be added into the
purchase price, so at least he feels like he’s getting paid something extra for
tying up the money covering the negative cash flow. (Remember, though, this
interest rate is only on the $300 per month as it’s paid and not on the full
amount you owe him.)
94 THE REAL ESTATE FAST TRACK
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Advanced Strategy 11: Turn the Seller into Your Bank
My favorite source of funding a deal is the seller I am buying from. Whether
the seller actually carries back a mortgage as part of your purchase, or
whether you buy the property subject to the seller’s loan (both strategies were
discussed earlier in this chapter), the seller is making your purchase of the
property possible.
The following is an example of how you can put together a deal with owner
financing. In the next several advanced strategies I’ll build on this strategy to
give you even more insider options.
Example: A Mentorship student called on a “For Sale” ad in her local paper.
She talked to a nice man on the phone and set up an appointment to see this
midpriced home in a quiet suburb. When she met him at the property she
found out that he wasn’t actually the seller, he was the attorney for a seller
who lived out of state. They sat down and talked the purchase over and agreed
on our student buying the house with $2,500 down with the owner carrying
back a 30-year first mortgage at 8 percent interest. (Originally the attorney told
the investor she would have to put $10,000 down, but she used the
negotiating techniques you’ll be learning later in this book to talk him down to
just a $2,500 down payment.) The best part about loans like these is that the
investor didn’t have to pay points or loan origination fees or appraisal fees or
any of a number of loan costs you’ll have if you finance a property with
traditional sources. The investor later sold the house on a two-year rent to own
for roughly $15,000 more than she bought it for. (And the funny thing was that
she liked working with this attorney so much that she later hired him to be her
family’s attorney!)
Advanced Technique 12: Combine Subject-To and Owner-Carry Financing
Better by far is to combine the subject-to financing strategy you learned about
earlier with owner financing. What I mean is that you buy the property subject
to the existing financing and the owner carries back a note for her equity. This
is much lower risk to you the investor, plus it will save you money not having to
pay to assume the existing loan.
Example: Two Mentorship graduates got a call from a motivated seller in
response to the “I Buy Houses” ad they were running in the paper.
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 95
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The seller had bought a new house but hadn’t been able to sell his first house
and was feeling the pressure of the double payments. While they didn’t sign
the deal on the spot, the investors followed up every few weeks and
eventually, six months later, the seller sold them the house. By this point the
seller had refinanced out much of his equity with a new first mortgage of
$280,000. The investors gave the seller $100 down and bought the house for
a price of $350,000. They agreed to take over the payments on the existing
$280,000 mortgage of $2,300 with the seller to carry back a $70,000
second mortgage with no interest and no payments, due in full as a lump-sum
payment within 60 months of closing.
Next the investors sold the house on a two-year rent to own for $400,000.
They collected a $24,000 option payment and got $3,300 a month in rent! All
totaled, this deal netted the investors $65,000!
Advanced Strategy 13: Write Up a Zero Interest, Zero Payments Loan
Can you really do this, you ask? Yes! The simplest way to do this is to
negotiate to pay off the mortgage the seller carries back as a “lump-sum
payment due in full” down the road. This is the prettier way of saying zero
interest, zero payment loan.
Here’s the fancy way to say this in your purchase contract:
“The Seller shall carry back a second purchase money mortgage in the
amount of $150,000 to be paid as a lump-sum payment due in full within 60
months of closing of escrow.”
Advanced Strategy 14: If You Have to Make Payments, Pay Pure Principal
Obviously as an investor you would prefer a loan without payments and without
interest. That’s why, whenever possible, you’ll use the language of paying your
seller a “lump-sum” payment due down the road. But if you have to pay them
as you go, pay them principal, not interest. Principal is money that goes
towards the purchase price or loan amount.
Here’s the fancy way to say this in your purchase contract:
“Seller to carry back a second mortgage in the amount of $100,000 to be
paid by Buyer in 100 monthly payments of $1,000 including principal and
interest with the first payment of $1,000 due within 30 days of closing.”
96 THE REAL ESTATE FAST TRACK
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Advanced Strategy 15: Agree to Pay “Thank You Payments”
Many times the only way to make a highly leveraged purchase of a nice house
cash flow from the start is to get the seller to accept below-market interest
rates on the money they are carrying. One languaging tip that makes this more
palatable to a seller is to call these monthly or quarterly payments “thank you
payments” versus interest payments. Just by labeling the payment this way,
you deemphasize the seller’s need to get an interest rate and lower the
seller’s expectation as to the amount. Tell the seller, “Mr. Seller, I’m even
willing to give you a thank you payment of $300 every month as my way of
saying I appreciate you being a bit patient waiting to get cashed out and
getting that $100,000 check.”
Advanced Strategy 16: Let the Interest Accrue
As an investor you need to protect your cash flow. If you are negotiating with a
seller who insists on interest, see if you can get them to let the interest
accrue to be paid off down the road, ideally when you resell the property. This
works especially well for properties you are buying far enough below value that
you are going to have the margin to pay for this accumulating interest cost
when you resell it to your buyer. Use caution here to make sure there is
enough profit to make this possible.
If you use this strategy, your first choice is to pay simple interest versus
compound interest. To do this, simply label the interest rate with the words
“simple interest.”
Here’s the fancy way to say this in your purchase contract:
“The Seller shall carry back a second mortgage in the amount of $100,000
with simple interest of 7 percent which shall accrue. The entire balance of
principal and interest is due in full as a lump-sum payment within 72 months
of closing.”
Advanced Strategy 17: Ask for Interest-Only Payments
If you have to pay money each month, and it can’t be principal, then make the
owner-carry note “interest only.” In effect, this means you won’t be paying any
principal each month when you send the seller her check. This lowers your
monthly payment and protects your cash flow. Remember, you can always
voluntarily prepay principal anytime you want. Don’t obligate yourself to pay
principal if you can avoid it. This gives you more flexibility.
Core Investor Skill Two: Structuring Highly Profitable Win-Win Deals 97
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Advanced Strategy 18: Consider Adding Up Your Monthly
Payments into Quarterly, Semiannual, or Annual Payments
If the amount of your monthly payment to the seller doesn’t seem like much,
consider adding it up and offering a “larger” payment to your seller every
quarter, semiannually, or annually.
Example: If $300 per month doesn’t sound like much, why not add up the
payments and pay your seller annually. Say, “Mr. Seller, I’m even willing to pay
you $3,000 to $3,500 every year as a thank you payment for your willingness
to work with me to make this a win for both of us.”
Advanced Strategy 19: Prenegotiate an Extension or
Renewal of the Loan
The best time to arrange an extension or renewal of the seller carryback is
before you buy the property. The seller will never be as motivated, and you’ll
never be as unmotivated, as at that moment. You can always agree to pay the
seller a “renewal” payment to renew the loan term. (Just make sure that if you
do make a renewal or extension payment, you label it as principal and not
interest!)
Here’s the fancy way to say this in your purchase contract:
“Buyer may extend the Seller second mortgage by paying to Seller $5,000 of
principal to extend the Seller second mortgage by 24 months.”
Advanced Strategy 20: Offer to Cross Collateralize
Cross collateralize is a fancy name for you giving the seller a lien on another
asset you own, like another house, as extra security so that the seller is
more willing to carry back financing. Be careful not to offer this except as a
last resort, and even still, use it only when you are confident that you have
negotiated a really strong deal. If I agree to cross collateralize by giving the
seller a second mortgage on another property as security for the seller carry,
I also make sure to prenegotiate that the seller will release that mortgage
after I have a 12- to 24-month track record of making the seller on-time
mortgage payments. This gives the seller time to get to know how
upstanding I really am, but it also makes sure I don’t tie up my other
property recklessly.
98 THE REAL ESTATE FAST TRACK
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Advanced Strategy 21: Ask for Seller Subordination—Pay a Seller
with Borrowed Money
Have you ever run across a seller who owns a property free and clear, and
who has a strong motivation to sell, but who doesn’t want to do a lease
option or carry back all the financing? In other words, they are willing to carry
back some of the financing as long as they get a good-sized chunk of their
equity now.
In these situations, the Big Money Cash Close is a powerful buying strategy
to use. This technique means getting a new first mortgage secured against
the property to get the seller some cash at closing, and then the seller
simply carries back a second mortgage for the balance of his equity for a
period of time.
Example: Imagine a $100,000 house. Using this technique you would bring in
a new first mortgage of between $30,000 and $50,000 and have the seller
carry back the balance as a second mortgage. Because the bank you are
seeking the first mortgage from will have so much value protecting its money
(after all, what banker doesn’t like to lend at 30 to 50 percent loan-to-value),
this is a fairly easy mortgage to secure. This strategy is a way for you to get
the seller a large chunk of money at closing, but having that money be
borrowed rather than your own.
Using this strategy, it is important to note that the seller will need to be
willing to carry a second mortgage for the balance of their equity. This is
because you will be getting a new first mortgage to give the seller money at
closing. To do this you need the seller to agree to subordinate his mortgage
to second position behind the new financing you are bringing in from a
conventional lender.
Here is exactly how to word your offer: “Mr. Seller, what if I were to bring in
new financing and get you $30,000 or so cash at closing, and then you were
to carry back a small second for the balance. Obviously you wouldn’t want to
have to wait forever for the balance of your money, so we’d put a short-term
balloon note of five to seven years on it.”
Notice you use the term “bring in new financing,” not “put $30,000 down.”
Technically, if you say you are going to put money down that means you are
going to be using your money. That’s not what you want to do. You’ll be using
the bank’s money instead.
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Let’s be clear on one critical item: Of course the seller will need to be very
clear that their loan will be in second position. You are not trying to pull
anything over their eyes. The language you use is very important so that you
frame the offer in the seller’s mind the right way from the very beginning. You
need to make sure the idea creates a good first impression on the seller. Later
you can go back over it to make sure the seller is totally aware of all the
advantages and disadvantages of this type of deal.
Using this technique you are going to be 100 percent financing the property.
The critical question on any 100 percent financed property is, does it cash
flow? If you pay market interest rates for the second mortgage that the seller
is carrying back, it probably won’t. But when sellers carry back seconds they
don’t need high interest rates—at least, they don’t if they are motivated, and
if they’re not motivated what are you doing wasting your time talking with
them?
100 THE REAL ESTATE FAST TRACK
CHAPTER FIVE
Core Investor Skill Three:
Negotiating Magic—Getting
the Other Side to Say
David looked out across the room. “We
so often think about negotiation only in terms of buying a property and selling a
property, as if the only real negotiating going on in real estate happens when we buy
or sell. But the reality is that there are dozens of other situations that you’ll face as
an investor where your negotiation skills will mean the difference between hun-
dreds, thousands, or even hundreds of thousands of dollars in profits—or losses.”
David paused for a moment. “Remember this: Any one real estate deal can be
broken down into hundreds of smaller, ‘micro’ negotiations. Each of these micro
negotiations has a huge cumulative impact on the overall profitability of your in-
vesting business. That makes mastering the skill of negotiation a huge profit lever-
age point. The time and effort you invest to master this skill gets rewarded
hundreds of times in any deal, resulting in magnified profits. When you learn this
skill, it’s easy to increase your profits in a deal by $5,000 to $50,000 to $500,000 or
more! For example, I remember a Mentorship student of ours who used a simple
negotiating technique he had learned at the Advanced Negotiating Workshop dur-
ing a negotiation for a small apartment complex he was buying. That one tech-
nique got the seller to reduce the price by $85,000! And it took less than five
Yes
101
minutes to use the technique. I don’t know what that skill paid him on an hourly
basis, but I’m pretty sure it was a wealthy person’s wage!
“We are going to take the rest of the afternoon to focus on the core skill of ne-
gotiation. First I’ll go through the foundational negotiating techniques. Then we’ll
move on and cover the 14 Advanced Negotiating Secrets. Finally, you’ll get the
chance to ask your most challenging negotiating questions so that you’ll be able to
tie all this information together. In the end, it’s not about knowing techniques just
to impress your friends at parties. It’s about knowing how to apply all these lessons
so you will be more successful in your investing.
“So let’s start with the foundational negotiating skills. For most of you this
will be a review, but for some of you it will be new.”
The Instant Offer System: A Simple Five-Step System
for Closing Deals*
Step One: Build Rapport
One of the most important requirements in any negotiation is to build an
emotional connection with the other side. People like to do business with
people they like. And what’s more, when you’re working with a motivated seller,
you need to help them feel comfortable opening up and sharing their emotional
reasons for selling and their emotional needs for any solution you offer. This
means you need to build and maintain a high level of trust and rapport with the
seller. The time to do this is both at the start of your meeting with a seller, and
also throughout the entire duration of your negotiation. Look for common bonds
and build bridges of connection with the seller wherever you can.
Step Two: Set an Up-Front Agreement
An up-front agreement is simply an agreement between you and the seller
where you each agree to make a decision at the end of your time together. In
essence, you both agree that, in fairness to both of you, you will each clearly let
the other know where you stand so that you both know what, if any, next step is
most appropriate. Using the up-front agreement language pattern will save you
from hearing the seller tell you, “I’ll think about it and get back with you.”
*For more detailed training on the Instant Offer System, make sure to read
Buying Real Estate without Cash or Credit (pp. 93–116). Also, for more free
training on negotiating profitable deals, go to www.InvestorFasttrack.com!
102 THE REAL ESTATE FAST TRACK
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(continued)
The Instant Offer System: A Simple Five-Step System
for Closing Deals (continued)
Step Three: Build the Seller’s Motivation
As an investor, you create value in the deal by helping to solve a seller’s
problem. If you can’t get the seller to tell you about the real problems they are
facing, then this is almost impossible. That’s why uncovering a seller’s true
motivation and helping the seller to feel that motivation is the key step to
getting a great deal. Most motivated sellers live in denial. It’s your
responsibility to help them break through that denial and face the tough
choices they are going to have to make.
Step Four: Talk about the Money
After you have worked with the seller to build their motivation, it’s time for you
to talk through the money. What were they asking for the property? What did
they realistically think they would get? What are the details of the underlying
financing on the property? As an investor it’s critical that you master the
money step because it’s here that you prenegotiate the money in a deal so
that later, when you “officially” talk about money, you’ve already got some or
all of the discounts you need to make the deal work for you.
Step Five: Make Your “What If” Offer
I recommend that you never make a formal offer to a seller. When you make a
formal offer you are giving all the power over to the seller. They can either
accept or reject or, what’s worse, ignore your offer. Instead, make them a
“what if” offer and get them to accept it before you ever formally make that
offer. Say something like, “Here’s a crazy idea, Mr. Seller, but what if I were to
get you a chunk of cash up front, and then pay you the balance down the road.
Is that something we should even talk about, or probably not?” Only if the
seller says yes to your generalized “what if” offer should you move by degrees
to pin that general offer down in concrete terms and numbers. By doing it this
way you stay in control.
The Three Foundational Negotiating Strategies
Every Investor Must Know
Foundational Negotiating Strategy One: Negative Phrasing
“What do you think really drives people who are motivated sellers? Do you think
it’s the desire to make a profit? Or the fear of making a mistake and getting taken
advantage of?” David paused a moment and let the group determine their answer.
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 103
“In my experience it is almost always the latter. Motivated sellers, most sellers
really, are more motivated by the fear of making a mistake and getting taken ad-
vantage of than the desire to make a profit. How does this fundamental under-
standing help you when you are negotiating with a seller? Simple.
“When people are driven by a fear of making a mistake or being taken advan-
tage of, they will protect themselves as best they can by looking for what’s wrong in
a given situation. In a negotiation, when the other side is looking for what’s wrong
with something, they will usually mismatch anything you say, which is a term from
psychology that means they will say something contrary to you. For example, if
you tell the seller the price is too high, she’ll argue back that it’s too low. If you tell
her the house is run down, she’ll argue that it really is in fine condition and only
needs minor work.
“In any negotiation, whenever you are able to anticipate the pattern of how
the other side will interact with you, you can use this knowledge to shape a strat-
egy to harness that other side’s predictable behavior to your advantage. The way
you do this in a real estate negotiation is through something Peter and I developed
years ago called negative phrasing. Negative phrasing is a way to intentionally use
statements to allow the seller to mismatch themselves into agreement with what
you want.
“Here is an example of negative phrasing.” David asked Emily, one of the
Mentorship Program coaches, to come up front to help him in the role playing.
“Imagine you are an investor negotiating with a seller like Emily here. You
might say something like, ‘Emily, you mentioned you had listed the property with a
real estate agent for three months, and that worked out really well?’”
Emily answered, “No, it didn’t work out well at all.”
“Really? I’m sure your real estate agent must have had a ton of prospective
buyers out looking at the house for each of the open houses they held every week-
end. Why didn’t you like any of the written offers you got?”
“We didn’t get any offers! In fact, the agent only did two open houses all
that time.”
David continued, “Oh, but what about all the advertising your agent was pay-
ing for? That must have generated a lot of traffic to see the house, right?”
“What advertising? As far as I can tell he just put it into the MLS and sat on
the listing.”
“I think you all get the idea now. Negative phrasing makes it easy for the
104 THE REAL ESTATE FAST TRACK
seller to verbally take the position in the negotiation that you want them to take.
There are two keys to using negative phrasing. First, understand that often the
point of negative phrasing isn’t to elicit information so much as it is to get the
seller themselves to voice an emotional reality that they may have been hiding from
previously. In the role play Emily and I just did, had you simply said to Emily that
the agent she hired did a lousy job, Emily would have gotten very defensive and ar-
gued with you. But using negative phrasing made it comfortable and natural for
Emily to argue for exactly what you wanted her to see. In a sense, you let the seller
comfortably back into the very position you wanted her to occupy to begin with.
“The second key with using negative phrasing is to make sure you avoid
sounding sarcastic or patronizing. Instead, cultivate the ability to be genuinely
confused or optimistic. The best way to way to do this is to master two facial
expressions.
“The first expression is called ‘scrunchy face,’ which is produced by furrowing
your brow, creating tension on the inside corners of your cheeks underneath your
eyes, and cocking your head slightly to one side. This is the expression to use any-
time you want to be ‘confused’ and draw out more information or clarification
from the seller.
“Whenever you use scrunchy face, make sure you drop your voice tone and
volume lower and give the seller time to respond. This will literally draw out the
seller in the conversation to fill the intimate space you have created.
“The second expression is called ‘big eyes,’ and you make it by opening your
eyes wide in your best Forrest Gump naiveté and softening your voice. You use big
eyes when you ask a question of the seller using negative phrasing.
“You can even use negative phrasing to get a seller to be more open-minded
about an offer you want to make them. For example, you might precede a ‘what if’
offer you are about to make with a statement like, ‘You’ll probably hate this idea,
but what if . . .’ Or you could use the negative phrasing at the end of your what if
like, ‘What if we were to pay you $450,000 for the house? Is that something we
should even spend any time talking about, or probably not?’ By adding that short
negative phrasing tag to the end of your ‘what if’ offer, you are increasing the odds
that the seller will actually be willing to talk about your offer rather than merely
dismiss it out of hat.”
David got each of the students to turn to a partner and practice using this
powerful language pattern.
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 105
Foundational Negotiating Strategy Two: Being a Reluctant Buyer
Bringing the group back together, David continued, “In every negotiation, you
want to be perceived as someone who is willing to walk away from the deal if it is
not a fit, without any hard feelings. In fact, you always want the other side to per-
ceive you as being in the deal more reluctantly than they are. I call this dynamic
‘being a reluctant buyer.’ The reluctant buyer dynamic works whether you are the
seller, the buyer, the borrower, the lender, the landlord, or the tenant. It just means
that you are perceived to be almost doing the deal against your better judgment or
with a great deal of internal struggle.
“Now while it is common knowledge that you should be a reluctant buyer in
any negotiation, it’s a little known art how to actually behave like a reluctant buyer.
What you are about to learn is that reluctant buyers use specific language patterns
over and over, and that just by your adopting these language patterns you can in-
stantly transform yourself, in the eyes of the other side, into the most reluctant of
buyers, even if inside your heart is screaming at you to take the deal.
“The single biggest pattern that reluctant buyers use is how they consistently
qualify everything they say with dampening statements like, ‘I don’t know if this will
even be a fit for me or not, but what if . . .’ Or, ‘I’m not sure if that much will really work
for me or not yet, but let’s assume it will for the moment . . .’ Or even, ‘My partner will
probably have a fit when she hears this, but what if I could get her to go along with . . .’
“You can even combine the reluctant buyer technique with negative phrasing
and say something like, ‘I’m not sure if I could get you the full $575,000 we’ve been talk-
ing about, but if I could somehow manage to pull it off, or at least get real close to it, is
that something we should even talk about, or you probably think it’s a crazy idea, huh?’
“The key is that as a negotiator you want to avoid making unqualified commit-
ments of what you can do until the very end of the negotiation when you are review-
ing the terms that you and the seller have agreed to.” David paused for a moment,
and then added, “Even then, it never hurts to shake your head a little and ask the
seller, using scrunchy face, ‘Tell me again why this is such a good deal for me?’
“The biggest benefit you’ll get out of mastering the art and science of being a
reluctant buyer is that instead of convincing sellers to sell to you, you’ll get sellers
selling you on buying their properties!
“Enough talk, time for you all to try it out.” With that, David matched them
into groups and had them do the role-playing exercise.
106 THE REAL ESTATE FAST TRACK
Foundational Negotiating Strategy Three: Building Motivation
David gathered everyone’s attention and then continued with the final foundational
technique. “Without question the single biggest negotiating mistake I see begin-
ning investors make is rushing in and talking about price and terms with the other
side before clearly establishing why it is that the other side wants to put together
the deal. To negotiate a great deal, whether you are buying or selling, it’s critical
that you get the other side to emotionally connect with their drive to get a deal
done. I call this process ‘building motivation.’
“Probably the easiest way to really understand building motivation is to show
you. Scott,” David said, turning to one of the Mentorship Program coaches, “would
you be willing to help me out with this?”
“Sure David.”
Looking back out at the class, David continued, “I’ll do a few examples—one
with a motivated seller whose house I want to buy, the second with a buyer I’m try-
ing to sell a rent-to-own house to. I want you to pay attention to how I use both
negative phrasing and the reluctant buyer techniques to get the other side hungrier
to do a deal.
“All right Scott, let’s get into it. In our first example you’ll be a seller of a prop-
erty and I’ll be the investor working to buy your house.”
Getting into the role-play, David asked, “So what else have you tried to sell
your house, Scott?”
“I had the house listed for a while, and then I tried selling it for sale by owner.”
“You mentioned you had the house listed for a while with an agent, and
that worked really well?” As David used this negative phrasing technique he
used big eyes to make sure his tonality and nonverbal expression reinforced the
effect he wanted.
Scott shook his head, “No, it didn’t work out too well. The agent just sat on
the listing and didn’t do much to advertise or market the property.”
“Hmm, had you thought about just giving this agent a second chance?”
David said with his most innocent of big eye expressions. “I’m sure that if you ex-
plained what you really expected of them they’d do a much better job the second
time around?”
Scott’s replied forcefully, “No way! I’m not going to list the property with that
agent, or any other agent again.”
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 107
David stepped out of the role-play and said to the group, “I think you all get
the idea here. If this were you in a real negotiation with Scott, you would spend the
next 20 or 30 minutes or longer building Scott’s motivation to sell fast and be done
with things. Let’s try another situation. This time I’ll role-play an investor looking
to sell one of my houses to a tenant buyer on a rent-to-own basis. Scott will be the
prospective buyer at the showing for the house. Imagine Scott has just gone
through the house and is now coming back to talk with me about price and terms.
Go ahead and start us off, Scott.”
“Well, how much is it?” Scott asked.
“Actually, before we get into the numbers, it’s really important to me that I
choose a future buyer who loves this house, because that way I know they’ll not
only care for the house, but that they’ll also be happy here. This probably seems
crazy to you—negative phrasing—but it’s really important to me. So may I ask you,
did you love the house when you walked through it?”
Scott replied, “I thought it was very nice. So how much is it?”
“Did you just think it was nice or did you love it, because if you just thought it
was nice I don’t think this house is going to be for you,” David said using the reluc-
tant seller technique.
Scott answered, “I loved it.”
“Great! What specifically about the house did you love, Scott?”
”I thought the kitchen layout was great. It had a great view out into the yard.”
“What about the kitchen layout was so important to you?” At this point
David stepped out of the role-play and turned to the group. “Did you all notice
that even when my buyer wanted to jump ahead and talk about price, I resisted
this and instead focused the conversation on Scott’s reasons for wanting this spe-
cific house. By doing this I make it much harder for Scott to come back later and
try to negotiate a lower price because he’s already verbally committed not only
that he loves the house, but what specifically he loves, and why that was so impor-
tant to him. In fact, if there is one thing to remember in any negotiation that will
do the most to help you negotiate the best deal, it is this.” David turned to the
board and wrote:
Always build motivation BEFORE ever getting into the money!
108 THE REAL ESTATE FAST TRACK
“Always, always, always spend time on the other side’s emotional reasons for
doing a deal with you before you talk about the money. This is true whether you
are buying or selling. In fact, this is critical in any real estate negotiation. Any
questions so far?”
“Yeah David,” Nancy raised her hand. “I can see how this works when you are
working with a seller or buyer, but how would it work with other situations? It just
seems that if you were dealing with a contractor, for example, they just wouldn’t
get why you were asking them all these questions, and it wouldn’t work.”
“That’s a fair comment Nancy. Let’s put it to the test.” David turned to Scott.
“Are you willing to do one more role-play with me?” Scott nodded yes.
“Let’s say Scott is a roofer you are negotiating with to replace a roof on one of
your rental properties. Now the average investor asks straight out what the roof is
going to cost. If you do this without building the roofer’s motivation to get the job,
you lose your biggest advantage to getting the best price and service possible.
Here’s how I would handle it if I were you.” David turned to Scott. “Let’s pretend
that you’ve already gone up on the roof and done your calculations and now you’ve
come to me with your bid.”
Scott hiked up his pants, getting into the role-play. “Well Mr. Finkel, let’s talk
about the pricing options for your new roof.”
“Scott, please call me David. You say ‘Mr. Finkel’ and I start looking around
for my dad! Actually, before we talk about the money part, I’m a bit hesitant to
even bother going through pricing with you. I get a sense that you won’t even have
time to really focus on this project.” As David used this reluctant buyer technique
he combined it with scrunchy face. “You’re probably so busy right now with other
jobs that there is no way you could even squeeze in this job, huh?” David said this
last part with the negative phrasing with big eyes.
“No, I have time to do this job. In fact, now’s a slow time for me and I can fo-
cus on this roof and get it done fast.”
David used scrunchy face. “Now’s a slow time for you?”
“Yeah, for some reason we are having a bit of a lull right now.”
David used big eyes, “Yeah, but you probably still have your guys spread over
two or three jobs right now, huh? I mean there is no way you could get to my roof
right away, is there?”
Scott replied, “I could get to it right away. My guys are sitting at home waiting
for me to give them a call that I have a job for them to come in for.”
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 109
David turned to Nancy and asked, “What do you think, Nancy? Do you think
Scott is more likely to give you, the investor, a better price and better service on
this roof because you spent the extra few minutes building his motivation, or prob-
ably not?”
Nancy answered, “I can totally see that now that Scott’s told you about how
he needs the job you’ll get a much better price and he’ll do the work faster. You
make it look so easy though.”
“It will become easy and natural for you too, if you just work on using these
techniques over the next three to six months until they are internalized. Then you’ll
find yourself using them without even trying to. It will just happen. All right, on to
the advanced negotiation techniques!”
14 Advanced Negotiating Secrets*
Advanced Negotiating Secret 1: Bilateral Negotiation—
Dancing with Both Halves of the Other Party’s Brains
In any decision-making process there is both an emotional and a rational
element. It’s critical in your negotiations that you understand this need and
feed it accordingly. It is a deadly mistake to think that we negotiate with our
rational brains. Usually most people will make the real decision emotionally,
and then rationalize their decision with the “thinking” half of their brain. When
you understand this, you can focus first on the emotional level of the
negotiation. What needs are you satisfying? What fears are you either tapping
into or helping the other side avoid? To touch the other side’s emotional brain,
speak in the language of pain and pleasure, of desire and fear. When speaking
to their rational brain, understand that it’s not actually driven by logic so much
as by the need to look good and avoid embarrassment. So feed the rational
brain sincere compliments about its thinking process and the questions it
asks. Remember, the rational brain is actually driven by emotion too, the
emotions of vanity and insecurity.
Advanced Negotiating Secret 2: The Power of Labels
The labels that are used in a negotiation control the context of that
negotiation. The context of the negotiation controls both sides’ expectations.
The parties’ expectations control the course of the negotiation. Therefore, a
master negotiator must be a master labeler.
*See Appendix A for details on the FREE online negotiating workshop you get as
part of the Investor Fast Track Program™ at www.InvestorFasttrack.com.
110 THE REAL ESTATE FAST TRACK
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14 Advanced Negotiating Secrets (continued)
For example, imagine you are buying a $500,000 house with owner-carry
financing but the sticking point is that the seller wants a down payment. With
the proper use of labeling, you can shrink the amount of down payment you’ll
need to do the deal.
Investor: “I understand that you need some money up front [the labeling has
begun—notice you do not say “down payment” but rather have already
made the shift to “money up front”] so that you know I am serious [you just
labeled the reason why the seller needed that money up front, which further
sets the context within which you’ll negotiate this up-front payment] and that
you can feel secure in the deal [shift is occurring from money up front to
security, the real reason the seller would want that money up front]. Now if
you needed some huge amount of money up front [notice the label “huge”
here] like $20,000 or $30,000 it’s probably not going to be a fit for me. But
at the same time I want to respect your need to feel good about this too
[notice how you are again defining the seller’s needs in the deal with your
own label]. What’s the least amount of money [label] you need up front so
that, while it wasn’t perfect, at least you could feel whole about it?”
Advanced Negotiating Secret 3: The Most Powerful Shift to Guarantee
Positive Cash Flow Negotiating an Owner-Carry Deal
Imagine you are negotiating with a seller on an owner-carry deal when the
seller starts to ask you what interest rate you will pay them. Any discussion of
“interest rates” with the seller favors the seller. Use the following language
pattern to shift the context of the negotiation in such a way that it is a given
that the property must cash flow.
Example: Seller just asked you what interest you’ll pay them on the owner-
carry deal.
“Well, I’m not sure what the property can afford to pay.”
Notice the critical shift here is to talk not about what you are willing to pay
(which opens up several cans of worms) but about how much the property can
afford. The implied given is that of course the property will need to pay for
itself. After all, it’s an investment. This shift will make it much easier for you to
negotiate your payment amount with the seller to guarantee you get positive
cash flow from the deal.
Advanced Negotiating Secret 4: Create Competition in the Negotiation
The fear of loss is the single biggest driver to spark the other side to say yes.
Wherever you can in a negotiation, subtly and organically inject a little scarcity
and competition into the mix. It’s like baking powder and yeast, it causes your
profit margin to rise.
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 111
(continued)
14 Advanced Negotiating Secrets (continued)
Example One: When you are buying a property.
“Remind me again Mr. Seller, how many bedrooms does your house have?
I’ve been talking with so many home owners this week that sometimes all
these houses start to run together.”
Example Two: When you are hiring a contractor to do a repair.
“May I ask you a question? If you were me and were looking at all the
companies and contractors out there who are scrambling to get this job,
why would you choose you over all these other companies?”
Advanced Negotiating Secret 5: Getting the Deal to Stick—Why You Need
Friction to Close the Deal
Many investors mistakenly assume that any friction in their negotiation with a
seller will kill the deal. Nothing could be further from the truth. In fact, friction
is the traction that helps you close a deal. And it’s the sticking force that
keeps the deal closed once you do get it done.
You need the other side to struggle with some of your requests, and they need
to see you struggle and hem and haw at their requests so that they feel
satisfied with the deal they got. If there is no friction it’s like walking on ice, so
smooth that you’re likely to slip on your backside. So always help the other
side feel like they had to work for the deal you orchestrate, so that the deal
you close stays that way.
Advanced Negotiating Secret 6: The Principal of Momentum
Imagine a big funnel. At the top end it’s wide and open, with sloping sides that
get closer towards the bottom. In your negotiation your goal is to get early
agreement from the other party using broad, nonspecific language, and then
as you pick up some momentum guiding them down the funnel, you get more
and more definite in what you are agreeing to.
The key is to create motion in the direction you want, no matter how small.
Once you have that motion it is 10 times easier to direct the other side further
into your funnel. If you can get the other party headed in the direction you want,
you are much more likely to keep them going that way. The way that you apply
this theory is by getting agreement on the big picture first, and then and only
then narrowing down the conversation and dealing with the tougher issues.
For example, you could ask a seller:
“I don’t know if we could do this Mr. Seller, but what if we were able to get
you a chunk of money up front, and then pay you the rest as monthly
payments over time. Is that something we should even talk about, or
probably not?”
112 THE REAL ESTATE FAST TRACK
(continued)
14 Advanced Negotiating Secrets (continued)
Notice how broad that “what if” statement is. If the seller agrees you
should talk more about it, then gradually start to narrow down to the
specifics, slowly and incrementally. It’s like clamping down a vise one turn
at a time.
Example: Negotiating with a rent-to-own buyer.
Investor: Now tell me again about where you are living now?
Prospective Buyer: I’m renting over on Oak Avenue. It’s a small house
there.
Investor: Okay, and why is it you’re wanting to move out of such a nice
area? [scrunchy face]
Prospective Buyer: The owner I’m renting from is selling the house.
Investor: Would you share with me what it was about my property that had
you so excited to have me show it to you? [Notice how the questions are
building the buyer’s motivation to buy, which is one form of gathering
momentum into the negotiation.]
Advanced Negotiating Secret 7: Be Generous with Psychological Currency
In just about any negotiation there is one party who gets the financial payoff
and another party who gets the psychological payoff. You’ve already learned
the importance of slow and simple. One very important way you can let your
seller win is to give them all the psychological feel-good for being smarter,
brighter, more articulate, and more worldly than you are. Gosh, I guess you’ll
just have to settle for making a ton of money. I bet you’re probably
disappointed with that notion, huh? (You can inject some scrunchy faces and
big eyes where they belong in the preceding two sentences.)
Advanced Negotiating Secret 8: Don’t Outsmart Yourself—Slow and Simple
Gets Paid
Wouldn’t you agree that you’d much prefer to sell your property to someone
who you didn’t fear was smarter than you, so that you could relax and feel
that this person wouldn’t take advantage of you? Of course. Just about any
seller you ever work with will feel more at ease if you allow them to feel a bit
sharper and a bit faster than you are. And when a seller is at ease, he is a
thousand times more likely to give you a great deal on the property. So
remember not to have all the answers. Instead of persuasive and
sophisticated answers use simple questions and a little bit of old fashioned
naiveté, with a healthy dose of scrunchy face and big eyes, to get the results
you want.
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 113
(continued)
14 Advanced Negotiating Secrets (continued)
Advanced Negotiating Secret 9: Whenever You Give, Make Sure You Get
Never make a concession in a negotiation without getting something in return.
No matter how small the value you get in return, it’s critical to stop the other
side from continually asking you for more, and to clearly establish that every
time they ask you for something you are going to expect something in return.
This is your way of conditioning the other side to always expect that they will
have to give you something to get anything.
Example: You have negotiated a great price on a property, but the seller is
asking to close 30 days faster than you wanted. You’re willing to do this, but
you know you need to make sure to get something in return so that the
concession give-and-take is consistent.
Seller: I need you to close 30 days faster than that.
Investor: Hmm. That may be a problem . . . [pausing to create doubt and
friction]. I may be able to agree to that, but if I do, I’m going to ask that
you include the patio set as part of the sale, is that fair? [The patio set
isn’t critical for you to get, you just need to get something in return so that
the seller doesn’t keep asking for more and more.]
Advanced Negotiating Secret 10: Shrink Your Concessions over Time
A concession is just a fancy name for any time in a negotiation where you give
the other side something that they want that you did not previously include in
your offer or counteroffer. Think of making a concession like putting a poker
chip into the pot. That chip might be more money, a lower price, a longer
term, or lower interest, or any of an infinite number of possibilities. The
pattern with which you make concessions subconsciously trains the other
side as to what to expect if they hold out for more. This means that savvy
negotiators always shrink the units of concessions they make so that it feels
to the other party that if they hold out for more they are only going to get less
and less.
Example: You are negotiating an owner-carry deal with a seller and you are
working to reduce your down payment.
114 THE REAL ESTATE FAST TRACK
(continued)
14 Advanced Negotiating Secrets (continued)
Seller: I’d need at least $40,000 up front.
Investor: Whoa! That much! I may be able to get my partner to go along with
a payment up front of $10,000 or $15,000* [$5,000 unit of concession],
but $30,000 to $40,000 is a huge amount of money to put up front.
Seller: No way I’d take anything less than $30,000 up front.
Investor: I can understand that you want to know I’m serious, which is why
you want to get a huge chunk up front like $20,000 to $30,000, and who
knows, maybe that will be what kills this deal. Look, I want to be fair here,
but I’ve also got my partner to deal with. What if we gave you $16,000 or
$17,000 up front? [Notice how the units of concession went from $5,000
down to a $1,000 unit.]
Advanced Negotiating Secret 11: Hypnotic Negotiating Patterns™
You may already be aware that there are certain word combinations that, by
their very structure, work below conscious awareness to effect powerful
negotiation results. I call these combinations Hypnotic Negotiating Patterns™.
Here are some potent examples.
Example One: As you may have already been aware . . .
“Mr. Buyer, as you may have already been aware, this area has been
appreciating at 10 percent a year.”
This phrase makes it very likely that the other party will just accept your
statement that the area has been appreciating at 10 percent.
Example Two: At least you don’t have to be worried about . . .
“Well Mr. Seller, I know you are living two hours away from the house
now, but at least you don’t have to worry about vandalism or damage to
the empty house. I mean, with an area as nice as this, at least no one
would ever break into the place when no one’s there and cause major
damage.”
*I threw in the “Range Technique” in this example. For more details on this
powerful negotiating technique, see Buying Real Estate without Cash or
Credit (pp. 108–109), and go to the Investor Fast Track Program™ where
you’ll find a complete online training course on negotiating profitable deals.
Details in Appendix A or at www.InvestorFasttrack.com.
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 115
(continued)
14 Advanced Negotiating Secrets (continued)
This pattern directs the other party’s attention to think and worry about the
very thing you tell them they don’t have to worry about. It’s an advanced form
of negative phrasing.
Example Three: Obviously . . .
“Obviously, Mr. Contractor, we’ll need to establish what happens in the
event you don’t finish the work on time . . .”
This is one of my favorites. Whenever you hear the “O” word in a
negotiation, know that something that may not be obvious is coming
your way!
Advanced Negotiating Secret 12: Use the Power of Imagination to Instantly
Make Money!
In your next negotiation, think about how you can guide the other party’s
imagination to help make a better deal for you the investor. Here are two quick
examples of what I mean.
Example One: You are selling to a buyer.
“Imagine you found the perfect house. I mean it was exactly what you
were looking for. But it required a larger up-front payment. Should I
even bring the house to your attention [notice the funnel going on
here?] or should I go ahead and give your house [label] to someone
else?”
Example Two: You are working with a seller.
“A thought just occurs to me. If a realtor came to you and said they could
get the house sold for you in 30 days’ time, and you knew they could do
it—and heck, let’s say they could even get you your full $280,000 or so.
You’d probably turn that down, huh? Or maybe not . . .”
Advanced Negotiating Secret 13: Turn the Tables on Them—Getting the
Other Side to See the Deal from Your Perspective
Here is another tangible way to use the other party’s imagination to help you
close a deal. The Hypnotic Negotiating Pattern™ for this one is, “Imagine you
were me . . .”
Here are some examples of exactly how this works.
116 THE REAL ESTATE FAST TRACK
(continued)
14 Advanced Negotiating Secrets (continued)
Example One: With a seller.
“If you were an investor like me who was looking at several houses each
week to buy, what would you think would need to happen to make this a
deal you would even want to take over another one?”
Example Two: With a real estate agent.
“If you were an investor like me who was looking at several houses each
week to buy [see the embedded presupposition that you are in fact looking at
several houses each week], what would you think would need to happen to
make this a deal you would even want to take over another one?” (A bit of
competition thrown in to light the fear-of-loss fires in the realtor’s emotions.)
Example Three: With a buyer who is balking at giving you an up-front deposit to
hold the property.
“Imagine you were me and you met someone who said they loved the house
and that they really wanted it, but they hesitated for a moment before they
gave you a deposit to hold the property, what would you be thinking about
saving the house for this couple versus giving it to another family?”
Advanced Negotiating Secret 14: Using Negotiating Markers™
Negotiating Markers™ are a way of nonverbally influencing the other side. It’s
a way in which you link up a nonverbal cue with the words you are saying. You
can use a gesture or a tone of voice or an expression as a Negotiating
Marker™. The key is to practice a few key Negotiating Markers™ so that you
can do it effortlessly and naturally in the flow of your conversation with the
other party.
Example One: You use an auditory marker like lowering your voice to prompt
the seller to lower her price.
“Tell me Ms. Seller, what did you [voice dropping lower now] realistically
expect to get for the property?”
Example Two: You can use a gesture as a marker to subconsciously label
yourself as a “good” investor, and to label those other investors out there as
“bad.”
“Why Ms. Seller, it sure sounds like some of the investors you’ve talked
with [pointing away to the side] really weren’t too up front with you. But I’m
guessing that if you’re open to it, you’ll eventually find a buyer you can
trust and feel good about selling your property to [gesturing towards
yourself as you say this].
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 117
“Now that we’ve just spent the last few hours talking about the Advanced Ne-
gotiating Secrets, let’s shift and talk about how you can handle some of the other
most important negotiations as an investor.
“I’ll put it out to you as a group. What situations have you faced that are the
most challenging when you are negotiating? What can I share with you that you
feel would give you the greatest value about how to handle a specific negotiating
situation?” David asked.
Tim raised his hand. “For me, I love the Instant Offer System when I’m sitting
face-to-face with a seller, but what I’m struggling with is that many of the deals I’m
looking at are for properties listed with a real estate agent. How do I negotiate
through a real estate agent when I’m trying to buy a property they have listed?”
As David looked around the room he could see that many of the other stu-
dents were nodding their heads, showing that they too had felt stuck with how to
handle this. “I’ll give you two answers to your question Tim. And then I’ll role-play
how I’d do the negotiation through the real estate agent.
“The first answer is that if you are working with an agent of your own and
making a ton of offers on multiple properties and playing the numbers game, then
it’s not essential that you worry about negotiating using the Instant Offer System at
the start. You’ll simply have your agent make all your offers as quickly as she can
so that you get the law of large numbers working in your favor. Once one of your
offers has been accepted, however, at that point I think it makes sense for you to
meet the owner and agent together at the property you made the offer on. I’ll go
through exactly how to do that in just a minute. The key for now with my first an-
swer is that if your strategy is to flood the market with quick cash offers on multi-
ple properties, the real leverage point is the speed and accuracy with which your
buyer’s agent can find properties to put offers on, help you figure out the right price
to offer, and get the offer in fast to the listing agent. Does that make sense? When
you are playing a numbers game, it’s less about negotiating skill—initially—and
more about speed and volume.”
“Yeah,” Tim replied, “that makes sense to me.”
“Good. Now let me give you my second answer. This is for situations where
you are either looking at a handful of deals versus a bucketful, or you have one of
your initial ‘volume’ offers accepted and you are looking to go back and renegotiate
the deal. I think it’s critical that you get yourself face-to-face with the seller so that
you can transform the dialog from an intellectual conversation about price into an
118 THE REAL ESTATE FAST TRACK
emotional connection dealing with personal circumstances and real needs. If you
stay at arm’s length from the seller and the emotional and relational components
to the deal, then it’s very difficult to get the best deals. You still can make money
that way, but you’ll be forced to make a whole lot more offers until you get one ac-
cepted that way. Plus, if your only contact with the seller is through a written offer
handed to the seller by the agent, there is very little you can do to differentiate
yourself from the other investors out there. Now some of you may be thinking that
all a seller cares about is your offer. Well, if you do your job right and meet with the
seller, you can help expand the context of conversation so that the seller sees the
bigger picture in terms of their personal situation, you as a person and investor,
and finally the relief, rewards, and certain solutions you can give them. The key is
to get yourself face-to-face with the seller.”
“But David,” Tim blurted out, “How do I get past the agent?”
“What a great question. Rather than answer that, let’s look at what that ques-
tion reveals. ‘How do I get past the agent’ presupposes that the agent is some block-
ing factor that is in your way in the deal and who you need to find some way
around, either through sneaky back roads or through powerfully pushing past. But
what if instead you could convert the agent into your ally in getting the deal done?
What if you could actually ethically co-opt the agent to be on your team, working
to get the seller to say yes to your offer? Wouldn’t this make your job negotiating a
win-win deal that much easier?”
“That sounds great David, but how am I supposed to do that?” Tim asked.
“First you need to understand the three forces that drive a listing agent to
keep you at arm’s length from her client. The first and biggest force is fear. The list-
ing agent is afraid that you are going to try an end run to get past her and deal di-
rectly with her client in a way that will cut her out of her commission. The reason
why she is afraid of this is probably because she’s either had that happen or heard
of that happening to other agents in her office, or down deep she is afraid she isn’t
bringing enough value to the table and that if you and the seller met and dealt di-
rectly, she wouldn’t be bringing enough value to the table to warrant her earning
her commission.
“Stop for a moment and think. How does just identifying the listing agent’s
biggest fear help you as an investor?” David asked the class.
“It lets us know we need to reassure the agent,” Vicki answered.
“That’s right, but how do you go about doing that?”
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 119
“Can’t we just tell her that we won’t go around her and that we’re happy to
make sure she’ll get her commission?” Tim chimed in.
“You tell me. If you were the agent and an investor said to you, ‘Hey, trust me.
I’ll see to it that you’ll get your commission. I really am a man of my word,’ what
would you be thinking?” David asked.
Tim’s voice was soft as he said, “I’d be thinking that I better cover myself be-
cause this guy is going to try something on me.”
“Exactly! Rarely does it work to directly tell people you’re honest or that
you’re credible, because the very fact that you say that is a warning sign in their
mind that calls it into question. Instead you need to be more subtle about it, yet
still accomplish the same goal. I’ll role-play how to do this in just a moment.
“Let’s talk about the second force that pushes the agent to keep you at arm’s
length from the seller—the agent’s desire to save the seller’s time. Isn’t one of the
reasons a seller lists the property in the first place so that they can have the
agent do all the work? So it makes sense that the agent wants you to go through
her. Also, they’ve probably learned from experience that many so-called in-
vestors aren’t really credible or that they just want to make some lowball offer
on the property. The agent is afraid that if she lets an investor get direct access
to the seller, somehow the agent will be embarrassed or look unprofessional to
the seller.
“Which brings us to the final force that pushes an agent to keep you at arm’s
length from her seller—she’s afraid that it will end up damaging her reputation in
the community. One of the most valuable things any real estate agent has is his or
her reputation and goodwill in a particular community or area. They will guard
and protect this reputation from any perceived threats.
“Okay, now that we’ve identified the three forces that push the listing agent to
keep you away from the seller and only working through her as the conduit, let’s
role-play how I’d handle that situation. Tim, will you be my listing agent?”
“Sure,” Tim answered.
“To set the stage, imagine Tim is the listing agent on a four-bedroom house I
want to buy. From things the agent has said over the phone and from the listing in-
formation, I get the sense that the seller is a motivated seller. First I’ll call up the
agent and find a way to meet with the seller directly in such a way that I indirectly
reassure the agent that I won’t try an end run, and then I’ll role-play part of the ne-
gotiation with the seller and the agent together.”
120 THE REAL ESTATE FAST TRACK
David turned back to Tim. “So Tim, can you help me with the listing on
Granny Avenue?”
“Yes I can.”
“Great, my agent told me about that property and a few others in the subdivi-
sion and I am very interested in buying one or two of them. May I ask you some
questions about the property?” David asked.
“Sure.”
Stepping back from the role-play, David said to the class, “To put the agent at
ease, I ask a few harmless questions about the property. Then I tell him that I’ll
drive by it or have my agent check it out later that day and give him a call back.
Later that day I call him and continue my conversation.”
Now David stepped back into the role-play. “So Tim, my agent Pam did go
past the house and she said it fits my criteria. I’d like to set up a time to meet with
you and the owner so that if I’m comfortable I can make my offer to buy the prop-
erty. Now if for some reason you can’t make the time to be there then, to be frank,
I’m not interested in the house. I’ve learned through experience that as the listing
agent, you’ll have some key information that the seller and I will need to rely on to
find a win-win fit on the property, and if you can’t be there then it’s a waste of my
time too. What time later tonight or tomorrow would work for you and the seller to
meet me at the property?”
“Well,” Tim said, trying to make things tougher on David, “Why don’t you just
put together your offer and I’ll present it to my seller and we’ll let you know if we
want to accept it.”
“I could do that, Tim, but as old-fashioned as it sounds in today’s world, I’m
just not comfortable buying a property from an owner I haven’t been able to meet in
person. It’s important to me to shake their hand and get to know them a little bit so
that I can get a sense of what they are like as a person. I’m just not comfortable buy-
ing properties blindly without ever having met the previous owners and feeling that
they are good people. And I’ve found over the years that the properties I end up buy-
ing are the ones where the listing agent, the owner, and I sit down and go through
the property and the numbers to find a fair and reasonable fit. It probably seems
crazy to you that I’m such an old-fashioned person to actually want to meet with
the people I am doing business with, huh?” David asked, using negative phrasing.
“Wow!” Tim responded, who in his excitement forget his part in the role-play.
“Can you say that again so I can write it down word for word? I know I was the
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 121
agent, but all I could think when you asked me that last part was no, it wasn’t crazy
that you wanted to meet the people you are doing business with. I felt very com-
fortable with the idea when you put it that way.”
David repeated the scripting for the class, then continued. “Let’s move to the
actual face-to-face with the seller and the listing agent at the property. First, I don’t
think you should bring your buyer’s agent with you because chances are they’ll
butt in and say something that will hurt the flow of negotiation. But if you do want
to bring them with you, make sure you plan with them exactly what role you want
them to take. If it’s me, I’d let them know I want them to be totally quiet and maybe
later on in the deal, once the seller and seller’s agent can taste the deal going
through, your listing agent can play the ‘bad cop’ role—gently—of introducing a lit-
tle doubt into your negotiation to help you close the deal. But that’s just me. I feel
that I’m a much better negotiator for me than any agent ever could be. You have to
decide on how you want your buyer’s agent to play it. Just make sure you clarify
this with them before you meet with the seller and listing agent.
“Ready to get back into the role-play, Tim?” David asked. “We’ll need a seller
to do this too. Nancy, would you be our seller? Thanks.
“So imagine we’ve walked through the house, built rapport with both the
seller and the listing agent, and now we are ready to move into Step Two of the In-
stant Offer System—setting an up-front agreement.”
David stepped forward into the role-play, “So Nancy, you’re really lucky to
have found an agent as good as Tim to work with. Not only is he well respected in
the community, but I have to tell you, he’s really impressed me with his profession-
alism. Every time I had a question about the property, he was really quick to get
me the information I needed and always promptly got back to me. I have to tell
you, that hasn’t always been my experience with other agents. May I ask, how did
you first meet?”
David stepped out of the role-play and turned to the room. “Never underesti-
mate the power of a third-party compliment like this to help begin the process of
getting the listing agent on your side emotionally.
Nancy said, “I actually met Tim through my daughter’s soccer team.”
David stepped back and turned to the class. “I think you all spot the opportu-
nity to build on this personal connection by asking both the seller and the agent
about their daughters. I’ll jump ahead in the negotiation,” David said, turning back
to the role-play.
122 THE REAL ESTATE FAST TRACK
“Tim, Nancy, I don’t know if we’ll be able to find a fit or not. But I am going to
ask that if you think the ideas we talk through here are obviously not a fit for you,
would you both be willing to tell me that?”
Both Tim and Nancy nodded their agreement.
“Great, I appreciate that and promise you won’t be hurting my feelings. I’ve
been buying houses long enough to learn that sometimes it’s just not a good
match.” As David said the words “good match” he tapped the center of his chest.
“On the other hand, if what we talk through looks like a good fit for you, are you
both willing to let me know that here today too?”
Again both Tim and Nancy said yes.
“I appreciate that. I’ll be doing the same thing. If I don’t think I can buy the
property in a way that meets your needs and still makes me a conservative profit as
an investor, then I’ll let you know that today. On the other hand, if I think I can
meet your needs and feel good that I’ll be able to make a fair profit for my effort,
then I’ll let you know that too. Only if we both feel it’s a good fit will we take any
next step, okay?”
David stepped out of the role-play and said, “How many of you recognized
that the scripting of that up-front agreement was just a slightly modified version of
the one you have been using for a while now as part of the Instant Offer System?
The key difference is to involve the listing agent in the dialog as soon as possible.”
“But David,” Leon asked, “How in the world do you do the Motivation Step of
the Instant Offer System with the agent there?”*
“Good question. Let’s demo it here.” David turned to Tim and Nancy.
“Nancy, may I ask you a question? What was it that initially prompted you to
even want to sell your house?” The class instantly spotted that when David asked
this question he scrunched up his face to get that uncertain, questioning tonality
into his voice.
“Well, when I came to the decision to sell my house, I thought about the dif-
ferent agents I knew and decided to call Tim,” Nancy answered.
Nodding his head, David said, “That makes a lot of sense. I would hope that if
I were you I would have had the good sense to call an agent like Tim, too. May I ask
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 123
*For the exact languaging of the entire Instant Offer System, see Buying Real Estate without
Cash or Credit (pp. 93–116).
you,” David paused and his voice pitch and volume dropped, “why would you ever
decide to sell a beautiful home like this?”
“On just one income this home was just too big for me to support,” Nancy said.
“On just one income?” David asked, letting the question hang in the air, draw-
ing the seller forward to explain.
“My ex-husband and I lived here for almost five years. Last June, after he and
I split, I did my best to manage staying here on my own, but the property is just
unfeasible for me on my single income.”
“Oh, that makes sense. I think this makes it even more important for you to
work with a top-notch agent like Tim,” David said, nodding his head up and down.
Turning to Tim, David asked, “Tim, are you also then helping Nancy find a
smaller house to buy in the area?”
“Actually,” Tim answered, “We’ve already found her a beautiful two-bedroom
house near the park district.”
“Wow! That’s great,” David responded. “Congratulations on finding that next
house, it isn’t always so easy. May I ask, when is it you close on that other house?”
Nancy chimed in, “Oh, as soon as we find a buyer for this one.”
“As soon as you find a buyer for this one?” David asked using the scrunchy
face expression and looking at Tim.
“The sales contract on that house is contingent on Nancy selling this one,”
Tim explained.
“Oh, that makes sense.” The class now saw David’s eyes open wide and his face
take on the simplistic expression they had previously learned was called “big eyes.”
“So whenever this house sells, this month, or next month, or a few months down
the road, then at that point, in a month or in six months, you’ll just close on that
other house and move in.” When David said this last part he was looking at Nancy.
“No, we can’t wait that long. We need to have this one close so that my
lender on the next one will let us close in the next month, or I lose the house to
another buyer.”
“Oh, well that makes sense.” David turned to the class and stopped the role-
play. “I hope you all noticed how critical it is that you involve the listing agent in
the conversation on your side. How do you do this? You make sure to reinforce
your third-party compliments of the agent to the seller. After all, if you are compli-
menting the agent, there is a subtle pressure on the agent to agree with your ideas,
at least initially, since one of your ideas is that he is a great agent. Once the agent
124 THE REAL ESTATE FAST TRACK
starts down this road, the principle of consistency will keep him on it. Remember,
each time the agent shows himself to be agreeing with you or listening to you is an-
other small step carrying him and the seller down the road to being open to your
later offer, whether it be a cash offer or a terms offer. And that’s all you really can
ask for—for them to be open-minded and have a positive frame when you get to
the ‘what if’ step of the Instant Offer System.”
Five Questions Your Real Estate Agent Will Ask That You
Should Never Answer
Remember, your agent, while he wants to do his best for you, is
fundamentally incentivized to make sure the deal gets closed, any deal. Most
agents have learned that part of their job is managing their client to help them
complete the deal. I recommend that you never tell your agent anything you
wouldn’t want him to convey to the other side of the negotiation. While your
agent would never intentionally tell the other side confidential or costly
information, very often your agent will inadvertently give away a crucial piece
of data, either by directly saying something foolish, or indirectly through body
language or tone of voice. The key is to share information with your agent on a
need-to-know basis. If you don’t tell, neither can he!
Here are the five questions your real estate agent will probably ask you that
you should never answer, along with your scripted response to handle each
question.
One: Your buyer’s agent asks you, “How do you feel about the house?”
“I’m not really sure yet how I feel about this house. The most important thing
for me as an investor is to make sure the numbers work out so I am making a
smart business decision when I choose to buy. I won’t ever fall in love with a
property like other people you work with might. For me, it’s just a matter of will
I make a conservative profit if I buy the house or not.”
Two: Your listing agent asks you, “Why is it you wanted to sell your property?”
“I’m not totally convinced yet that I do want to sell it. I would like to see
what you can get me for the house in a reasonable period of time looking
for the right buyer. I guess I’m lucky because I don’t have to sell the house,
so if we don’t find someone who is willing to pay what we are asking for it,
then we can either keep it on the market longer, or maybe I’ll just take it off
the market.”
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 125
B
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T
I
D
E
A
(continued)
Five Questions Your Real Estate Agent Will Ask That You
Should Never Answer (continued)
Three: Your buyer’s agent asks you, “What’s the most you’d be willing to pay
for the house?”
“That’s a great question. I’m not really sure what would make sense as an
investment property. Rather than give you an amount to work with as the
most I’ll pay, I’d rather you take this offer we just wrote up to them and do
your best to get them to agree with it. I think it’s a real reasonable offer, and
if for some reason they feel they need it to be different, you do the best you
can do to get the lowest counteroffer you can. Then I’ll make a decision of
whether it’s even worth spending more time on it or not. If they accept our
offer like I am hoping, then we’ll close on the property right away because it’s
a fair deal all around.”
Four: Your listing agent asks you, “What’s the lowest offer you would
accept?”
“That’s a great question. Rather than even thinking about that right now, what
I’d prefer you do is to use all your skill and talent to get me the very best offers
you can, and I’ll talk with my partner and see if we’re willing to accept one of
them or if the buyer will have to do better before we’ll consider accepting.”
Five: Your listing agent asks you, “What concessions are you willing to give
to a buyer to make the house sell faster?”
“I’m not sure I’d be willing to make any concessions. Quite frankly, I don’t
think I’ll need to, considering how fairly we’ve priced the house. If you find a
serious buyer who asks you about this, get her specific request down in
writing, and also get very clear on what she is willing to give me in return for
these concessions, and I’ll certainly be willing to consider it.”
“What other situations do you find most challenging to negotiate?” David
asked the class.
“What if they ask me for references and I’ve never done a deal before?”
Nancy asked.
“Great question. I have a simple answer for you—just tell the truth. Which
in your case would sound something like, ‘This will be the first property I’ve
bought as an investment property. I’ve been working for the past 20 years doing
126 THE REAL ESTATE FAST TRACK
IT management. When I made the decision to start real estate investing six
months ago, I went out and did all my research to do it the right way. Since that
time I’ve taken the classes, been meeting with the sellers to find and identify the
right house for me to buy, and have been working with my mentor who’s been
doing this for years. I understand that you want to know people I’ve done busi-
ness with over time so that you can feel comfortable about my character and the
type of person that I am. I’d be happy to put that together for you if we find a
mutual fit here. That way anything we put together here will be subject to you
checking through my references, getting comfortable with me as a person, just
like from my end I’ll have to do my checking to make sure of things like you
have clear title to the property, and that there’s no big surprise with the house
when we buy it.’
“Then sign up the deal subject to their approval on your references, allowing
the seller to cancel in, say, 72 hours with written notice if she’s not happy with your
references. Understand that no one has references when they get started, and that
is okay.
“We have time for a few more questions before we need to take a break.”
“David, I do great negotiating with sellers,” Leon said. “But when it comes
time to talk with a lender about getting financing on my properties, I get nervous
and find myself feeling powerless. Can you help me find a way to be the one in con-
trol of that situation, just like the Instant Offer System puts me in control when I’m
negotiating with sellers?”
David nodded his head. “I can sure identify with that challenge. In fact, I bet
there aren’t many people here who have worked to get conventional financing who
haven’t found the process to be intimidating and mysterious. Let me share with
you the single most important shift to make in your negotiating frame when deal-
ing with lenders. If you can make this switch, it will instantly move the power in
the situation from your lender to you.
“Leon, imagine you are a lender who I want a loan from. Let’s role-play
this powerful technique I’m about to share with you. What I do is call you
up and say, ‘Hi, my name is David Finkel. I’m an investor who lives in the area
and I wanted to talk with the best person in your bank who can help answer
my questions about lending programs you have. Can you tell me who I should
talk with?’ ”
“That would be me,” Leon said.
Core Investor Skill Three: Negotiating Magic—Getting the Other Side to Say Ye s 127
“Oh, great. I’m sorry, I didn’t catch your name.”
“I’m Leon.”
“Nice to meet you, Leon. As I said, my name is David. I’m an investor in the
area who is considering financing several of my properties. What I’m in the process
of doing is interviewing several local lenders to see which one I’m most comfort-
able with to select to give my business to. May I ask you several questions about
what your bank offers investors like myself?”
David turned back to the class. “The key is to make the shift from you plead-
ing for a loan into forcing the lender to sell themselves to you in order to earn your
business.”
“David, that’s great!” Leon shouted. “I can already see how the problem was
that I had been looking at the situation like I needed them desperately, but what
you helped me see is that the lender is really like any other business. The lender
needs people like me to lend to if they want to stay in business.”
“It even gets better than that when you understand how the game is really
played,” said David. “Your lender is really several units in one. There is the ‘origi-
nator’ unit. These are the people who hunt up the business for the bank to lend
money too. Think of them as the sales and marketing division of the bank. Most
of the people are incentivized in some way, whether by commissions or by
bonuses or even by quarterly or annual evaluations, to get more loans originated.
So here is the key in all your dealings with these people.” David turned and wrote
on the board:
When dealing with loan “originators,” make
them
sell you on working with them.
“Anytime you have a lender or mortgage broker fighting to sell you on work-
ing with them, they are becoming more and more committed to having you choose
them. They will be much more likely to get you lower fees or better rates, or to tell
you about the ‘hidden’ programs they don’t tell everyone about. In a way, this is
just an extension of the reluctant buyer negotiating fundamental we’ve already
talked about.
128 THE REAL ESTATE FAST TRACK
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