Financial Freedom Group Blog

Creating Your Vision for the Future

To achieve or obtain anything in life first you need a vision. 

As the good book says, "Where there is no vision, the people perish".

We all have a vision of how much money we will have, how our health will be, what our relationships will look like, etc.  Whether we are aware of it or not we have a vision for our financial situation.  Everything that you achieve or get into your possession starts with a vision.  It can't be any other way. 

If we don't take an active role in shaping our vision it will be formed for us through a number of factors.  First we will look at where our parents are financially when we are growing up and this will be our benchmark.  We will typically say one of three things.  One, "My parents do well and what is good for them is good for me" (this is most common).  Two, "My parents are poor and there is no way I am going to live like this".  Three, "I don't get along with my parents and I don't like anything they stand for and they have money so I am going to sabotage my financial future".  These visions are set in our subconscious and we don't intentionally set them.  Then through growing up and going to school we have people tell us to stop dreaming and come back to reality which also continues to shape our vision.

Our visions guide us to set our goals which influence our actions which give us our results.  If you don't like the results that you are getting reset your vision.  Become aware of what your vision is by setting it to something that you want to be.  If you are looking to improve your financial future create a new vision.  Write down your vision and describe it exactly as you would like to see yourself in the future.  Make sure that you create the vision vividly in your mind.  See it in full color and with motion like a movie.  It will be much more powerful as a movie as compared to a photograph.  Review it in the morning and then again before you go to bed.  This vision will begin to guide you toward a new reality.  You can also use this for different areas of your life as well.  If you want to make improvements in your health, create a vision of where you want to be and start moving toward that vision.

Take some time right now and write down where you want to be in different areas of your life.  Become aware of your vision and it will guide you to where you want to be. 

Road Trip

This week Julie and I are going to be driving across Iowa, Nebraska, Colorado and into Arizona with my parents.  On our journey we are going to get to go whitewater rafting down the Royal Gorge and then travel on and see the Grand Canyon. 

I am typing this in the car and we are nearly across Iowa.  I am going to try to keep up with my posting but I may be disconnected for a few days.

Collect Rent On Time and Make More Money

There is a payment option that we implemented when we turned around a property management company that ended up working very well.  We named it Easy Pay.  With Easy Pay you will collect more money and it will be easier to collect than the old fashion payments.

With Easy Pay we allow the tenant to have flexibility with their payments.  Most people get paid every two weeks so we set up a system so that we can help them pay their bills on time.  We allow people to pay 1/2 of their rent every two weeks when they get paid.  We give them the choice of paying on the first, the old fashion methode (and that is what we call it because who wants to do anything old fashioned) or every two weeks with Easy Pay corresponding to when they get paid.  There are two benefits to Easy Pay for us.  First, the tenant has the money when rent is due.  Second you get 26 payments which is equal to 13 months of rent.

Now the tenant does not have to budget their money for the big one time payment and they don't have to worry about late fees, eviction, etc, because they have the money and they pay it to you. 

The down side is that you are literally collecting rent every week.  You need to make sure you have your systems in place to keep track of all of the money. 

We let the tenants know that Easy Pay costs more but nearly everyone that was paid every two weeks (that was the only way you could qualify for this program) signed up because they saw the benefits to that option. 

Here is a real life example of payment plan working well.  One of our mentorship students was having trouble collecting rent from a tenant they were always paying late.  I mentioned that she should offer them Easy Pay  because the tenant got paid every two weeks.  She told the tenant of the details and how Easy Pay worked and the next thing she knew she was getting a hug from an ecstatic tenant!  Her rent has been on time every time since she implemented this awesome payment option.

America loves financing terms.  If you can finance someone for a few weeks and allow them to pay on their schedule it will pay off for you with great cash flow, satisfied tenants, and on time payments.

Finding Great Tenants.

Now, how do we find great tenants to maximize our profit? 

First off we do a lot of advertising.  You want to get as many people there at one time as you can.  Our best source for tenant buyers has been 18X24 inch plastic signs that say "Rent to Own" in big letters and then under that "Nice Home" much smaller and then our 1800 number that leads into a voice mail system.  Believe me you don't want to take all of those calls on your cell phone.  I have had over 100 calls in 2 days after putting out a bunch of signs.  You want to put out at least 25 signs every week.  You can get signs from www.witnessdesigns.com.  They are the cheapest that we have found.  Let the voice mail screen those for you.  We use a service called GotVMail (Disclaimer: I am an affiliate of this site but only because I think it is the best service out there).  We also run ads on www.craigslist.com and www.rentclicks.com.  News papers are getting less and less effective.  Test it out in your area to see what works.

After you have cranked up your marketing you want to make sure that you are returning phone calls and e-mails to set up a time for people to meet at the property.  I call people back and ask them these questions:

Hello (Insert name), I am returning your call our our rent to own property in (city name).  Is this a good time?  Great, I have a lot of names to get through so I just have a few quick questions for you. 

• Where do you currently live?
• How much is your payment there?
• How many people will be living with you in the property?
• How much money do you have to work with for a down payment (I ask this even though my voice mail script asks them for it because the number might get bigger)
• Great, I have some time on Thursday at 5:30 or Saturday at 1 PM to meet you at the property.  Which would work best for you?

You want to control the conversation.  If they start asking you questions, just tell them that you have a large list of people to call through and you would be happy to answer any questions that they might have at the property when they have seen and like the house.

Then you repeat this process and get as many people at the property at one time.  Competition is a very powerful thing.  It shows other people that the house is desirable (social proof) and that if they don't make a decision today they are going to lose the property.  The fear of loss is one of our most compelling fears that we have.  We will work harder to keep someone from taking $1000 from us than we will to make $1000.  The same is true of the house.  If it looks like someone else is going to take the deal we will do just about anything to make it work. 

At the showing take as many applications as you can get along with the fees.  Then after you get the applications immediately ask the potential tenant if they would like to put a deposit down to hold the property.  These deposits are non refundable if they back out.  If you decide not to choose the tenant then you return the money immediately.  Get as many deposits as you can and choose the person that is most financially able to keep you secure in the deal.  Don't skip running the background checks on people.  You can avoid some major problems by using proper systems to screen people.

Using these ideas you should have an abundance of people at your property to choose from to maximize your profit.

I will share our new system for renting out a property in 5 days next week.  JB, one of our students tried out the idea, and we have been tweaking it with great results.  If you have questions or comments please feel free to leave a comment.    

Getting Things Done

I am going to be studying the book by David Allen called Getting Things Done The Art of Stress-Free Productivity also known as GTD. 

I am not as productive as I would like to be so I am going to be reading this book and implementing what he is teaching.  I have a list of things that I would like to get done and I am not getting to them. 

Here is my to do list that keeps getting pushed off.

• Complete Questions from accountant to finish taxes
• Complete tutorials for all areas of the Mentorship Program
• Set up and create a podcast focused on real estate investing
• Create a home study course a month for Financial Freedom Group (FFG)
• Create blog posts and visit real estate investing forums daily
• Help Julie (my wife) acquire more multi unit properties
• Create more leveraged systems to allow me to be more productive and spend less time in my businesses
• Creating a website for FFG

I am going to be posting my progress in implementing GTD.

It Would Be My Pleasure...

...to pray for you.  Prayer has been an incredibly powerful force in my life.  It is amazing what happens when you ask.  Send me a prayer request and I would be happy to add it to my prayer log.  I only ask that when your prayer is answered that you send me an e-mail and let me know. 

You can also hit me up for my free offer from last week.

My Present to You

Since it is my birthday and you are all fulfilling my birthday request it has gotten me into the giving spirit. 

Here is a loan calculator to calculate the payments for just about any loan you want. 

Enjoy!

Download ffg_loan_calculator.xls

Happy Birthday to Me!

Today is my birthday.  I am 27 years old.

Here is what I want for my birthday.  I want you to go out and give something away.  It could be as little as a compliment that is unexpected, or money to a charity, or to share your feelings with someone that you love.  Don't wait until later, do it now.  Then let me know the results in the comments or e-mail them to me.

Thanks.

How to Make Big Money with Rent to Own

One of my favorite techniques for managing a property and profiting off of it is to offer it on a rent to own basis.

There are many advantages to using rent to own as an exit strategy.  First you get non refundable option money from the tenant buyer.  I have gotten up to $15,000.00 on two different occasions from tenant buyers.   Let me repeat, it is non refundable.  Compare that to a month's rent for a security deposit.  Second I can get an aggressive price for my property.  I find the highest comparable properties that have sold in my area, then I take the average appreciation for that area and use that to calculate my price (more on that in a minute).  The third factor is that I get the person to treat the property as their own.  I treat them like a homeowner so my lease says that they are responsible for all maintenance issues.  I live 6 hours away from most of my single family home properties and I don't worry about them and I don't get phone calls.  We are finally starting to get more aggressive rents.  It was tough when anyone with a pulse could get a loan.  We are now finding people that can not get qualified for a loan because lenders are tightening guidelines (the borrower was expecting to pay $1900 for a property) and we are renting the property to them for $1550 when we were struggling to get $1395.  The tenant feels like they are getting a great deal.

When structuring your rent to own deals you want to take into consideration your plan for the property.  If you are looking for a quick sale I would suggest setting up a one year rent to own and collecting a substantial amount of money down (around 5% or more of the purchase price).  The short term gets people working on getting approved quickly and they also don't want to lose out on that money that they put down.  If you don't really want to sell the property set it up on a 3 year rent to own and take less money down (3% of the purchase price).  In three years life happens to people.  They get divorced, break up, get a new job, have more children, etc., etc.  Also, if they don't have much money at stake they will forget about it and move on.  If you don't care if the tenant buys or not set it up as a 2 year rent to own and get as much money as you can.  Some tenants will work on getting financed and some won't.  We give them all the resources they need but what they say about leading a horse to water is true. 

When pricing a property I use the highest comps (comparable properties that have sold in the area) that I can find and then I appreciate the property as aggressively as I can with the market conditions.  I appreciate the property for the period of the rent to own agreement (1-3 years).  So for example if the property shows that it is worth $200,000 today, the market appreciation is 6%, and I am selling on a 2 year rent to own here is what the numbers would look like:

• Sale Price $200,000 x 6% = 224,720 (this number is compounded over 2 years)
• Monthly Rent: $1550 (we won't take into consideration the 6% bump in rent that we get after year 1)
• Down Payment: $6,000 (This number is subtracted from the equity of the sale price)

My purchase terms look like this:

• Purchase Price: $180,000
• Monthly Payment: $1300
• Down Payment: $0.00

Total Profit in the deal: $250 a month for 24 months $6000.00 in cash flow, $38,720 in back end profits and $6,000 in up front money for a total of $50,720.  That isn't bad for about 10-15 hours work. 

I would suggest not going any longer than 3 years on a rent to own.  If you do go longer the tenant may try to claim that they have an equity position in the property.  If they succeed in claiming an equity position I have to foreclose instead of evict.  Foreclosing is a much longer and more expensive process.

The paperwork for this transaction includes a lease document and an option document.  You want them to be separate documents so that if you ever end up in front of a judge there isn't an argument that they thought they were buying the house, not renting it.

There is a tremendous need for this type of service right now.  There are many people that are going through foreclosure and who can't get qualified for loans.  These people still want to live in a home and have the opportunity to own it.  The more people that you can serve the more money you can make.

On Monday there will be a post on how to fill your rent to own property quickly for top dollar.

Following the Financially Illiterate Herd

George S. Patton:
"If everyone is thinking alike, then somebody isn't thinking."

As human beings we take many cues from what the rest of society is doing to determine what we should do.  This is only natural.  If we had to figure everything out on our own from scratch we wouldn't get much done.  We should take a step back and look at the major decisions that we make in life and ask ourselves, "Is this the best for what I am trying to accomplish?"

When it comes to finances society is uninformed and doing what the rest of society does is not going to get you ahead in life.   Take a look at the graph below.  People that are 55+ only 19% have over $250,000 in savings for retirement.  Considering someone retires from a $60,000 a year job they will be able to live for about 4 years.  Take into consideration medical expenses and or insurance costs and the number of years you can live off those savings is reduced dramatically.

Age	All	25-34	35-44	45-54	55+
Less than $25,000	52%	70%	50%	41%	39%
$25,000	13%	12%	15%	14%	12%
$50,000	11%	9%	14%	13%	7%
$100,000	12%	5%	10%	17%	23%
$250,000 +	11%	4%	10%	16%	19%

Source: Here

The problem that society has is that we were never educated in how to handle our money.  So the trend has become to buy the most expensive house, cars and toys you can afford and worry about retirement later.

Unfortunately that puts people into a trap.  They have to keep working to support the lifestyle because they are living hand to mouth. 

The key take away is to live simply while you are acquiring assets.  Then your wealth explodes and you can afford to purchase the stuff your friends can only dream of. 

I like this saying and unfortunately I don't know who said it.  "If you do for 5 years what nobody else will do, you can do for the rest of your life what nobody else can do".  Live in an apartment and drive an old cars to keep your expenses down.  Then in 5 years after acquiring assets you will be able to purchase the 5,000 sq ft. house and the $100,000 Mercedes Benz while being financially free.  You counterparts that live the lifestyle that society teaches will never have the comfort or the freedom that you have. 

Simplify your live and acquire assets and you will be able to do what other can't.