Building Wealth Ideas For Entrepreneurs

IDEAS ENTREPRENEURS
for
Do You Have What It Takes?
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Notice This publication and the accompanying materials are designed to provide accurate and authoritative information in regard to the subject matter covered in it. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional opinions. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Reproduction or translation of any part of the information contained herein, in any form or by any means, without the written permission of the owner is unlawful. For more information, please view or call: Our UK division: www.buildingwealth.co.uk (+44) 020 8996 6700 Our Australian division: www.buildingwealth.com.au (+61) 0295138838

Todays successful entrepreneurs are a study in contradictions. They may hate details, but they tend to be very organised. They love their independence and freedom, but they recognise that, to a large extent, their success depends upon teamwork and the loyalty and efforts of others. They want to run the show, but as they become successful, their businesses, in turn, become more and more controlled by the managerial teams they have appointed. They love to roll up their sleeves, get involved, and do everything themselves. However, they must eventually learn to delegate responsibilities in order to get everything done. The entrepreneurial personality is comprised of an intriguing blend of ingredients. Most successful entrepreneurs have a touch of introspection, a dash of showmanship, and healthy doses of drive, adaptability, and love of adventure. These ingredients exist either in combination within a person or between individuals who team up as partners in a new enterprise.
Entrepreneurial Personality Test

How many of the entrepreneurial personality characteristics do you have? Take the following test and discover the traits within yourself that can work for or against you if you start your own business. For each statement, circle the number that best represents you, with the rating of 6 being most like you and 0 being least like you.
INDEPENDENCE
1. 2. 3. 4. 5. 6. 7. 8. 9. I usually do things my own way. I tend to rebel against authority. I have a reputation for sometimes being stubborn. I like to take the initiative. I often enjoy being alone. I gravitate toward positions of leadership. I like responsibility. I tend to stand on my own rather than ask for help. I like to be in control. 6 5 4 3 2 1 0
6 5 4 3 2 1 0 6 5 4 4 3 3 2 2 1 1 0 0
6 5
6 5 4 3 2 1 0 6 5 4 3 2 1 0
6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 5 4 3 2 1 0
Entrepreneur Start-Up Kit
10. Personal freedom is very important to me. Your score for Independence ___________
SELF-DISCIPLINE
11. Im persistent. 12. I finish projects even if they involve a lot of work. 13. Ill work as long as it takes to finish a project. 14. When Im interested in a project, I need less sleep. 15. If something needs doing, Ill do it even if unpleasant. 16. I have good concentration. 17. When I want something, I clearly see the end results. 18. I keep New Years or other resolutions I make. 19. I analyze my mistakes to learn from them. 20. I have a strong personal drive and need to achieve. Your score for Self-Discipline __________ 6 5 4 3 2 1 0
6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 5 4 3 2 1 0
6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 6 5 5 4 4 3 3 2 2 1 1 0 0
6 5 4 3 2 1 0
CREATIVITY
21. Its easy for me to find solutions to problems. 22. I see problems as challenges. 23. I have innovative ideas. 24. I am adaptable. 25. I am curious. 26. I tend to be very intuitive. 27. I can think of original ideas for common objects. 28. Im receptive to new ideas. 29. I have a good imagination. 6 5 4 3 2 1 0 6 5 4 3 2 1 0
6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 6 6 6 6 5 5 5 5 5 4 4 4 4 4 3 3 3 3 3 2 2 2 2 2 1 1 1 1 1 0 0 0 0 0
30. I experiment with new ways to do things. Your score for Creativity __________
DRIVE AND DESIRE

31. Once I make up my mind, nothing stops me. 32. If something cant be done, I find a way to do it. 33. Im willing to sacrifice to attain long-term gain. 34. I would describe myself as gutsy. 35. I would describe myself as determined. 36. I would describe myself as motivated. 37. I would describe myself as persistent. 38. I would describe myself as positive. 39. I would describe myself as committed. 40. I would describe myself as ambitious. Your score for Drive and Desire __________ 6 5 4 3 2 1 0
6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 6 6 5 5 5 4 4 4 3 3 3 2 2 2 1 1 1 0 0 0
6 5 4 3 2 1 0 6 6 5 5 4 4 3 3 2 2 1 1 0 0
RISK-TAKING
41. I feel if I dont take risks, Ill get stuck in a rut. 42. I enjoy discovering new and unusual things to do. 43. I have a high need for adventure. 44. I live life to the fullest. 45. I take chances. 46. I think people who take chances are more successful. 47. Ill stick out my neck even if I dont believe in it. 48. Ill gamble on a good idea. 49. Ill face failure in order to expand my horizons. 6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 6 5 5 4 4 3 3 2 2 1 1 0 0
6 5 4 3 2 1 0
50. Ill delve into unknown subjects to learn them. Your score for Risk-Taking __________
CONFIDENCE
51. I have a healthy self-esteem. 52. I am emotionally resilient. 53. I am a self-assured person. 54. I can handle any situation. 55. I feel like a winner. 56. I believe in myself. 57. Im on top of things, no matter what happens. 58. I can accept a compliment. 59. I accept challenges. 60. I have unlimited potential. Your score for Confidence __________ 6 5 4 3 2 1 0
6 5 4 3 2 1 0 6 6 5 5 4 4 3 3 2 2 1 1 0 0
6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 5 4 3 2 1 0
6 5 4 3 2 1 0 6 5 4 3 2 1 0 6 5 4 3 2 1 0
Your TOTAL Entrepreneurial Personality Test score __________ (Compare your score to the following personality descriptions.)
Entrepreneurial Personality Test Scoring

320-360 Youre an independent, high-energy person with the drive and discipline that it takes to be an entrepreneur. When you make up your mind to do something, you get the job done. If you decide to be self-employed, youve got the personality traits to be successful. 280-319 You show good promise to succeed in your own business, but not if you immediately quit your job because of a high test score. Those destined to succeed will use this test to gain greater insight as they venture forth into their new entrepreneurial endeavors.
210-279 You have some potential. Take time to develop yourself. Read extensively, take classes, and talk to successful entrepreneurs to discover what theyre doing right. 120-209 Proceed with caution. Youll need a lot more drive, self-discipline, and confidence to make it in your own business at this stage. Think of your low test score as a challenge to strengthen important personality traits that youll need to be successfully self-employed. 10-119 Until you develop your creativity, risk-taking ability, and confidence, and get your drive and self-discipline into high gear, youll probably be better off working for someone else at this time. 0-10 Chances are you lead a dull but manageable life and probably prefer it that way.
Knowledge Is Power
Want to become an entrepreneur and take control of your financial future? Want to ensure you do it the right way? Entrepreneurs know knowledge is one of the most effective risk-limiters and one of the fastest paths to profits. The more you know, the more youll succeed as an entrepreneur.
Getting Your Business Started
Notice This publication and the accompanying materials are designed to provide accurate and authoritative information in regard to the subject matter covered in it. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional opinions. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Reproduction or translation of any part of the information contained herein, in any form or by any means, without the written permission of the owner is unlawful.
INTRODUCTION
There are many ways to establish your personal path for financial success, but perhaps none so rewarding as choosing to operate your own business. The independence to take action how and when you want, the ability to finance your future and provide security for yourself and loved ones, and the power that comes from being able to choose how you spend your time are just some of the benefits of having your own business. To help you get started toward the goal of operating your own business, we offer some general guidelines for choosing the right business to fit your personality and goals and for starting your business off on the right foot. Plus, we provide helpful tips on business essentials like accounting and customer service as well as strategies for financing your business and marketing it effectively.
PART 1: CHOOSING YOUR BUSINESS What Business Suits You?

The first step to starting your own business is choosing the type of business youd like to be in. You have a host of possibilities available to you, including: Starting a part-time business Starting a full-time business Purchasing an existing business o Service o Retail o Wholesale o Manufacture o Invent/manufacture Buying a franchise
Obviously, each of the choices available to you has different advantages and disadvantages associated with it and there is really no best choice that would be good for everybody. Because we are all individuals with different backgrounds, personality traits, circumstances (e.g., financial, personal, educational), and goals, you must first carefully and honestly examine your own strengths and weaknesses to get a good feel for what type of business opportunity fits best with your individual needs and talents. Start by asking yourself questions such as: Do I have business experience? Do I have capital to finance my endeavor, project or business? Am I aggressive? Do I have good communication skills? What is my educational background? Am I creative? What are the strengths and weaknesses of my personality? Is my family supportive of my goals? Am I persistent?
Continue with this exercise by listing all the strengths and weaknesses you can think of that would help or hinder your efforts in starting your own business. Use the Business Evaluation Worksheet on the following page for your list.
Business Evaluation Worksheet

STRENGTHS WEAKNESSES
It is believed that the exercise you just went through is derived from one of the most famous Americans in history: Ben Franklin. It has been said that when Ben had a tough decision to make or was entering into a new endeavor, he would take a notebook and draw a line down the middle of the page. Then he would list not only his strengths and weaknesses, but also all the reasons why he should make a positive (YES) decision on one side and all the reasons why he should not move forward (NO) on the other side. So lets continue our exercise by acknowledging the reasons we should or should not be in business for ourselves. The following provides an example of how you might list your answers.
SHOULD I BE IN MY OWN BUSINESS? IF SO, WHY?

REASONS WHY I SHOULD
1. I want financial independence 2. I want more control of my own time 3. More freedom 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
REASONS WHY I SHOULDNT

1. I lack self-confidence 2. Im undercapitalised 3. Not sure what type of business to start 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
These two exercises should at least get your mind working in a positive direction. You should start to get in touch with yourself to begin choosing alternatives and to examine your motivations for getting into business. Once you understand your strengths and weaknesses, you can then evaluate the advantages and disadvantages associated with the variety of business opportunities available to you. Keep in mind, of course, that if your resources are limited, your choices will be as well.
Next, to help you evaluate your options, we will examine some of the different business opportunities available and some of the advantages and disadvantages of each.
Franchises
The franchise industry has caused a major boom in new business startups in recent years. Why have franchises aided in allowing an entire new realm of people to enter into their own businesses?
Advantages
1. Most franchises have a tested, proven product. Therefore, you dont have to pioneer the business. Someone has already gone through the trial-and-error process for you. 2. Most franchises have a tested, proven marketing plan. Generally the franchiser will have statistics on location, quality, traffic counts and growth potential. With a good franchiser, you can project, to a certain degree, the gross dollars that can be earned based on past research and franchise history. 3. Most good franchisers give help, support, and consultation to new franchisees. This could be a big help for someone who has never been in business before. Just be sure that it is a reputable franchise with solid financial banking and a verifiable track record of performance that has franchise support.
Disadvantages
1. Usually there is a pretty big up-front investment required. You can spend anywhere from $25,000 up to hundreds of thousands of dollars just in front money. This means you are paying just for the name because many of these franchises dont include the cost of the location or the equipment in that up-front charge. They generally must disclose to you exactly what is and isnt included in the up-front dollars, but you should be very careful to make sure you are getting all the information you need. 2. There are many stories of conflict resulting in greater regulation in the franchise industry, but still, when making a big dollar investment, you should do it with scrutiny. Make sure you read all of the fine print and know exactly what you are signing. Also, since these are big dollar commitments, you should have an accountant and an attorney review the documentation. That doesnt mean you let them decide whether its good for you or not. Just have them point out the
positives and negatives so you can make an evaluation based on the facts presented. 3. It may be important for you to note that although there is some history to a good franchise, and in many cases some very convincing statistics, there are no guarantees of success. It many cases it is not necessarily the franchisers fault. Thats right. The franchised business may work fine, but it was the person who bought the franchise that either didnt work out or didnt work. 4. A franchise can also be very limiting for you if you are the creative type. If they already have prescribed methods of operation, you may have to adhere to those policies. Even if you think you have a great new advertising idea, that doesnt mean the franchise will use it. Furthermore, you may be in violation of your agreement if you do not clear your idea with the franchiser. Again, review your agreements in advance to be sure you understand your limitations as well as your freedoms. 5. The main concern with a franchise is the limitation on the dollar earning potential. You have to weigh the amount of hours you put into the business against the amount of personal dollars you can put out each year. When you own a franchise, you are obviously limited as far as expansion. The only way you can build to bigger dollars is if you can add multiple franchises or use the money you earn from the business to open other businesses. The other alternative is to invest your monies wisely and get them compounding for you, but that would take a good deal of cash flow to grow to that level of ROI (return on investment). The lesson here is this: Suppose you are creative? Suppose you are ambitious? Maybe youre the one who should start a franchise and get all the franchisees paying you royalties. Now, are you seeing the limitations or the possibilities? No one ever said a franchise (or any small business for that matter) couldnt be used as just a stepping stone. There is nothing written that says you cant learn and then move on to bigger and better things.
Your Own Small Independent Business

One difference and potential benefit to starting your own independent business is you have no royalties to pay. Who says you dont have a better idea than Subway or Pizza Hut? If you have the idea and create revenue from it, maybe you should consider starting your own business from scratch. One way to ease into this type of business is to watch someone else who is doing what you want to do so you can evaluate the strategies that work and dont work for them.
Watch their advertising, business hours, effective employee count, etc. You might even take a job at such a business to get as much information and experience as possible. Learn all the ins and outs of the business and use this information to your benefit. Last, but certainly not least, is the consideration of royalties. With your own business you dont have to pay a royalty to anyone. But in a franchise you pay a royalty (usually a percentage of your profits) that is generally calculated on your gross profits. Notice here that we said gross profits. This means the franchise gets its money regardless of whether you make any money at all. Even if you lose money, you will still have paid a royalty in almost every case. That money could have been extremely valuable to you if it was your own business. In fact, those dollars could mean the difference between failure and success. Go back and evaluate your strengths and weaknesses. Then start your informationgathering and decision-making process going. Continue to take notes and highlight key thoughts as you review the rest of this material.
Buy an Existing Business

Several benefits of buying an existing business are obvious. For example, the immediate benefit of owning an existing business is its track record. If the business is producing revenue, customers, goodwill, etc., you have some of the tested, proven benefits of a franchise but without the ongoing royalties. Therefore, you are basically buying cash flow. One option to consider is to look for a business that is being mismanaged or one that is rundown. If there is room for improvement, you can benefit by applying good management skills to increase the cash flow even further. Next, you might scrutinise the business thoroughly to see where you could reduce expenses and thus maximise cash flow even further. If you really are interested in this business of business, then consider the following as food for thought: Why not make a business of seeking out and finding mismanaged, undervalued small businesses? Buy them, turn them around and sell them at a profit. You could also be enjoying the cash flow they generate right up to the point of sale. The possibilities are limitless once you really start digging, looking and listening.
More Business Ideas

If any of the above opportunities interest you, start looking for opportunities. Read books or listen to CDs on the subject of business and learn all you can about the opportunity and the business behind it. Then go to work and try one. Start with the most minimal outlay of cash. Just get some experience and then increase the dollar amount to something bigger. Over time, youll be surprised how much fear will be alleviated by the experience you gain. If you are still unsure of what type of business you want to start, the following list should help you narrow your focus to a few businesses you may be interested in. This list is certainly not all-inclusive, but it should give you an idea of the unlimited possibilities that are out there waiting for you! Following this list, well discuss the start-up plans of your chosen business.
Possible Businesses
A Accounting Services Advertising Air-Conditioning/Heating Installation, Repair, Service Animal Boarding, Care, Grooming, Sitting, Training Answering Service Antique Dealer Appliance Sales and Service Art Gallery or Teacher Athletic Trainer Automobile Detailing, Paint & Body, Rentals, Repairs, Sales, Upholstering B Baby-Sitting Services Bakery, Cake Decorator Barber or Beautician Bed and Breakfast Beverage Sales Bicycle Sales and Repair Boat Charter, Excursions, Rentals, Sales, Storage Bookkeeping Services Builder, Improvements, Inspection, Repair Business Broker, Coach Business Machine Sales and Service
C Cabinet Maker Camera and Radio Repair Candle Sales Candy Store Canoe Charter, Excursions, Rental Car Wash Carpenter Carpet Installer, Cleaner Catering Services Ceramic Sales, Supplies, Instructor Chauffeur Service Child Care Service (Day Care Center) Cleaning (Dry Cleaner) Cleaning (House, Office, etc.) Services Clothing Sales (New or Used) Computer Consultant, Maintenance, Repair, Sales, Training Contractor Copying Services Cosmetics Sales Counselor Courier Service Craft Instruction, Sales and Supplies D Dance Instructor Delivery Service Desktop Publishing Services Detective Agency Diaper Service Discount Notes and Mortgages Drafting Services Dressmaker E Editor Educational Products and Services Electronic Repair Services Employment Services Equipment Rental, Sales, Maintenance, or Repairs F Fence Sales and Installation Financial Planning, Services
Fitness Services Florist Food Cart (e.g., Hot Dog Stand), Market, Specialty Furniture Sales, Refinishing Services G Gift Shop Golf Instructor, Equipment, Sales, Services Graphic Designer H Handyman Services Hardware Store, Repair, Sales Health Club Hobby Shop Home Health Care Services Horse Boarding, Breeder, Trainer I Ice Cream Parlor Inspector Insurance Agent Interior Designer, Decorator Internet Developer, Services J Janitorial Services Jewelry Store Journalist K Karate Instructor Kennel Services L Land Clearing Services Landscaping Services, Maintenance, Mowing, Spraying, Equipment Repair Laundry Services, Laundromat Limousine Service Locksmiths M Maid and Personal Services Mail Box Services
Mailing List Services Manicurist Marketing Research Services Martial Arts Instructor Massage Therapist Medical Billing Services Medical Supply Services Merchandiser Message Service Mobile Home Repair, Washing Mortgage Broker Moving & Storage Services Musical Instrument Instructor, Sales, Repair N Nanny Natural (Health) Foods Distributor, Sales Newspaper Distributor Nursing Home O Office Cleaning Services Office Equipment, Furniture, and Supplies Sales, Maintenance, Repair Online Auctions Online Research Optical Aids and Services Outdoor Furniture Sales, Cleaning, Repair P Package Preparation, Supplies, Shipping Painter Paralegal Services Party Planner Pawnbroker Payroll Services Pest Control Services Pet Sales and Supplies, Store Photography Physical Therapist Picture Framing Pizza Restaurant Plant Nursery Plumber Printer
Proofreader Property Management, Maintenance Public Relations Services Public Speaker Q Quality Control Consultant Quilt Maker R Real Estate Broker, Investor, Salesperson Recreational Services Relocation Services Rental Business Restaurant Resume Services Retail Stores, Services S Sandwich Shop Screen Printing Secretarial Services Security Sales, Services Sign Maker, Sales Software Developer Sport Goods Sales, Maintenance, Repair Sprinkler System Installer, Maintenance, Repair, Sales Storage Services Swimming Pool Installation, Maintenance, Repair, Sales T Tailor Talent Agent Tanning Salon Tax Services Taxidermist Telecommunication Services Telemarketing Sales Tennis Instructor, Maintenance, Repair, Sales Transcription Services Translation Service Travel Agent Tee Shirt Sales Towing Services
Trucker Tutoring Services Tuxedo Services, Rental, Cleaning U Upholsterer V Vending Machine Sales, Maintenance, Repair Video and DVD Rentals and Sales Voice Mail Services W Web Site Designer, Developer Wedding Consultant, Planner Window Coverings, Cleaning, Tinting Word Processing Services Writer X X-ray Services Y Yoga Instructor Yogurt Shop
PART 2: STARTING YOUR BUSINESS

Once you have chosen the type of business youd like to own, the next step involves planning for and preparing that business, including start-up procedures (zoning, licensing, registering, etc.), and developing a business plan for sustained growth.
Legal Checklist
There may be times when you will need the services of an attorney during your business start-up process. Referral from another small business owner is the best method for finding an attorney to suit your needs and the second best method is checking with your states Bar Association. You should always hire an attorney who specialises in, or at the very least is very knowledgeable in, business matters. You can handle many legal issues such as completing simple forms, and getting licenses, copyright and trademarks without an attorney. However, you must determine your comfort level in completing such forms before ruling out the use of an attorney. The checklist below addresses local, state, and federal issues you or your attorney will need to research for your business. Two additional checklists follow that will also help you in starting your business.
Local
1. Zoning, Licenses, and Permits Since new businesses will need a local business license in most communities, you should check your communitys requirements. Also, if you plan to work from home, you should check into local zoning requirements for any special permits or additional licenses. Date Research Completed_____________________________________________ 2. Registering A Business Name If you operate a sole proprietorship, you will need to register your business name. In some states you may be required to file a Fictitious Name Affidavit with the Secretary of State. You may also be required to file a notice in a local newspaper. Date Research Completed_____________________________________________
3. Local Earnings Tax If your community has a local earnings tax, you should check on the filing requirements with the appropriate agency. Date Research Completed_____________________________________________
State
1. Registration Partnerships, Limited Liability Companies, and Corporations are required to register at the state level. Contact your Department of State for requirements. Date Research Completed_____________________________________________ 2. State Taxes State taxes may include sales and use, intangible and corporate income taxes. Check with your states Department of Revenue. Date Research Completed_____________________________________________
Federal
1. Federal Licenses Your business will most likely not require a federal license unless you operate a business the federal government regulates. The federal government regulates such businesses as investment counseling, interstate transportation, food, drug, tobacco, and firearms. However, if you are in doubt about needing a federal license, call the Federal information number in your area. Date Research Completed_____________________________________________ 2. Federal Taxes You will need an Employers Identification Number for your business. To obtain this number, youll be required to complete a Form SS-4. This form and instructions for completing it are available from the Internal Revenue Service by phone at 1-800-TAX-FORM (1-800-829-3676) or by computer at the IRS website at www.irs.gov. You can also call 1-800-829-1040 for information about IRSsponsored small business workshops. Date Research Completed_____________________________________________
Start-Up Checklist
The following start-up checklist can be used to ensure you have completed the necessary steps when starting your business. 1. Set aside space in your home for your business, or locate retail space if needed for your type of business. Date Completed_____________________ 2. Check zoning regulations in your community for any special permits or additional licenses. Date Completed_____________________ 3. Determine the entity of your business: sole proprietorship, partnership, limited liability company, or corporation. Date Completed_____________________ 4. Select and register your business name as required by the business entity. Date Completed_____________________ 5. Obtain and file any needed licenses, permits, and registrations. Date Completed_____________________ 6. Design and print your logo, business cards, and stationery. Date Completed_____________________ 7. Develop your business plan. Date Completed_____________________ 8. Establish a bank account for your checking and credit needs. Date Completed_____________________ 9. Set up your bookkeeping and accounting system. Date Completed_____________________
10. Purchase any needed equipment and supplies such as stationery, business cards, equipment, and office supplies. Date Completed_____________________ 11. Set up your telephone and mail services. Date Completed_____________________ 12. Obtain the proper insurance. Date Completed_____________________ 13. Other _____________________________ Date Completed_____________________ 14. Other _____________________________ Date Completed_____________________ 15. Other _____________________________ Date Completed_____________________
Expense Checklist
When starting a business, you should factor in the expenses youll incur to get the business up and running. The following checklist gives you some basic expenses as well as space to add any expenses unique to your particular business. 1. Stationery and Business Cards: Envelopes _________________________ Letterhead _________________________ Second Sheets _________________________ Business Cards _________________________ Other ( ) _________________________ 2. Business Registration: Sole Proprietorship; Partnership; Limited Liability Company; or Corporation _________________________ Other ( ) _________________________ 3. Permits, Licenses: Required Permits _________________________ Occupational License _________________________ Other ( ) _________________________
4. Equipment and Supplies: Equipment _________________________ Office Furniture _________________________ Office Supplies _________________________ Remodeling Costs _________________________ Other ( ) _________________________ 5. Other Expenses: Insurance _________________________ Legal Fees _________________________ Telephone _________________________ Postage _________________________ Advertising _________________________ Printing _________________________ Shipping _________________________ Travel _________________________ Other ( ) _________________________ 6. Total Expenses: _________________________
PART 3: LOCATING YOUR BUSINESS

Another part of starting your business will be choosing its location. The following provides considerations for locating your business effectively.
Determining Your Business Location

For businesses that provide services at the customers location (lawn services, air conditioning maintenance and repair, etc.), the main concerns about the physical location of the business will be cost and zoning issues. Retail businesses, on the other hand, need to take into consideration the following in addition to cost and zoning issues: the locations compatibility with the business; the locations traffic patterns; and the locations proximity to its target customers, as well as its competitors.
Cost
Operating your business out of your home is the least expensive location choice since the expenses generally fall under the categories of furniture, office equipment, and supplies. However, if your business is not suitable for being based out of your home, the next step will be to research location costs in your area. Will you rent or buy? Most business start-ups rent space in the beginning because they dont have the funds to start the business and buy real estate at the same time. Therefore, you need to know market rent in your area. Once you have determined the average rent, the next step will be to determine what the rent includes for locations you are considering. For example, is the location only wired for standard phone usage or does it have additional wiring for computers, fax machines, etc.? Is electricity included in the rent or will you be responsible for a separate bill? What deposits are due and how much are they? Once you have found the ideal location (home, office, or retail), dont forget to research zoning and permitting requirements.
Zoning Issues
Regardless of your location, you will have to consider zoning issues. Every city and/or county in the country has a zoning and/or planning office so be sure to check out local regulations before committing to a particular location.
Remember certain types of business may not be allowed in some areas. For example, a manufacturing or industrial business may not be allowed in an area designed for offices or retail space.
Unique Issues to Your Business

Issues unique to your business should be outlined in your marketing plan and considered when choosing a location for your business. For example, your marketing plan should identify the product or service your business offers, the benefits of your product or service, the price you will charge, how you will distribute it, how you will promote your product or service, who your consumer is, what your cost of doing business is, who your competition is, and the most efficient distribution channel. This information should help narrow the choices of locations for your business, since it identifies all the elements needed for determining how important the location of your business will be to its success.
Real Estate Contracts

If you are considering buying a location for your business or any real estate, you should call our consultants or visit us online to find a real estate training academy near you. Training classes are taught by our national instructors and will enhance your communication and negotiation skills, and provide training in how to work with bankers, brokers, and real estate agents. The training takes you step-by-step through the mechanics of a real estate transaction. It covers everything from writing a contract that protects your interests and limits your liabilities to creative financing strategies and much, much more. At a minimum, you should review any contract for sale and purchase in its entirety and make sure it includes all of the following information. Property Description The description of the property should include the legal description, street address, and any fixtures and/or personal property that go with the property. Purchase Price The purchase price must be listed on the agreement. In addition, the deposit amount, any additional deposits, mortgage money (if applicable), and the balance of funds to close should be listed on the agreement.
Date of Acceptance The date of acceptance is the date given for all parties to accept, execute and deliver the agreement in order for it to be a legal and binding agreement. Financing Contingencies For example, if you include a financing contingency, you can then withdraw from the offer if you cant obtain a loan to make the purchase.
PART 4: FINANCING YOUR BUSINESS

Of course, at some point in the life of your business, you will have to arrange financing. And when you do, youll find that banks play by some pretty conservative rules because they have to cope with both federal and state banking regulations as well as traditional lending standards. To overcome these obstacles, you need to put together a proposal that fits into one of the conventional categories the banking world uses to describe most loans.
Loan Types for Entrepreneurs

Understanding the type of loan your business needs gives you the advantage when putting together your business proposal for the bank, so we will first discuss some of the more common business loan types.
Accounts Receivable Loan

Small companies often turn to this type of financing to free up their working capital. Banks usually require that a business has a good credit rating, and they only loan a percentage of the amounts due on accounts less than 60 days past due. The loan funds are then repayable as customer checks come in to the business.
Asset-Based Loan
This is a loan where assets of a company, including receivables, raw materials, inventory, machinery, and equipment, are used as collateral in exchange for funds to use as working capital. This type of loan is also used when a targeted company is being acquired by a larger company and the buying company uses the targeted companys assets to finance the purchase.
Business Loan
A business loan requires equal monthly payments and principal and interest is calculated over the life of the loan. This type of loan is often beneficial to small companies that cannot make large payments in the first year, as required by some term loans.
Commercial Loan
A commercial loan requires no installment payments and is repaid in a lump sum at the end of the term. Commercial loans are most often used to finance inventory, but they may also be used for other purposes approved by the bank.
Commercial Mortgage
A commercial mortgage is used to finance a business location. Generally the loan is a 5 to 10 year loan, amortised over 15 to 20 years, with a balloon payment due at the end of the term of the loan.
Factoring
Factoring is a variation of an accounts receivable loan where the bank or factoring company buys a companys accounts receivables outright. Since the bank or factoring company takes on the credit risk and collection responsibility, they usually require that the receivables meet strict criteria. The discount or amount charged is often higher compared to other forms of financing.
Inventory Loan
This is a short-term loan where the bank takes an interest in the companys inventory as collateral. This type of loan is often referred to as floor planning for big-ticket retailers such as automobile dealerships.
Line of Credit
A line of credit is a loan that allows a company to take funds either at specific intervals or as needed. A line of credit can be established for a term of days, months, or years, and interest and fees vary from bank to bank.
Personal Loan
The principal of a business can use his or her personal assets to secure a loan for the business. A personal loan may be easier to negotiate than a business loan since personal property such as stocks, bonds, savings accounts, certificates of deposit, etc. are used to secure the loan.
Small Business Loan

Under the Small Business Administration loan guaranty program, the SBA will guarantee up to 85% of a small business loan. The lender forwards your loan application and a credit analysis to the nearest SBA District Office, which analyzes the entire application, and then makes its decision. This process may take up to 10 days to complete and upon SBA approval, the lending institution closes the loan and disburses the funds.
Preparing a Loan Proposal

Now that you understand some of the more common business loan types, lets discuss putting your loan proposal together. You can use your business plan as a blueprint for preparing a loan proposal. The loan proposal can even follow the same outline as the business plan by substituting the executive summary with a loan request summary. However, remember that the loan proposal should be written from the perspective that your loan request is low risk to the lender, and your proposal supports that fact. The following reflects how you might outline your loan proposal.
I. Loan Request Summary

Loan purpose: Indicate specifically how you will use the loan proceeds. For example, instead of stating that you need the money for working capital, state that you will use the money to buy inventory to increase sales, make improvements to production, etc. Loan amount requested: State the specific amount of money needed. If the funds are needed for more than one item, give a detailed listing of the individual expenditures and the total amount. Repayment plan desired: Give two realistic repayment plans. For example, the loan will be repaid from the sale of products/services at a projected amount (give an exact amount) on a monthly, quarterly, annual basis. If the sale of the products/services does not generate enough income to cover the repayment plan, then the business will reduce operating costs (give an exact amount) and/or sell an asset to make the payment (specify what asset and its market value). Collateral (if any): Most loans to new businesses will require collateral as security for the loan. Therefore, the asset used as collateral must have enough value to cover the percentage required by the lender. For example, they may only lend up to 70% of the value of the asset.
II. Your Business

History of your business: State when your business started, who owns it, where it is located, and a brief summary of what it has accomplished. Ownership structure: Identify the type of business entity (sole proprietorship, partnership, limited liability company, or corporation).
Products and services: List your products and/or services. Accreditations and licenses: Include any accreditations and licenses your business has.
III. Market Analysis and Strategy

Overall market and direct competitors: List the national trends in your market along with your direct competitors. Explain why your product and/or service is superior. Product and/or service: List what you sell and how you distribute your product and/or services. Selling strategy: Describe your distribution methods and how you will adapt to market changes.
IV. Management Team

Key individuals: Identify the management team of your business and include their background and experience.
V. Financial Data
Pro-forma financial statement: List revenues, expenses, and net income or net loss for the previous year and the current year. Project the anticipated revenues and expenses for three years into the future. Balance Sheet: List the business assets, liabilities, and owners equity as of a certain date. Federal Tax Returns: Include copies of the last three years. Personal Financial Statement: Include your personal financial statement.
VI. Appendix
Include any supporting documentation including, but not limited to, licenses, personal resumes of your management team, credit reports, reference letters, contracts, legal documents, loan applications, advertising materials, and articles about your business.
PART 5: BUSINESS ESSENTIALS

The following section offers tips on setting up and implementing several business practices and plans that will be essential to your success.
Bookkeeping Basics
Bookkeeping involves collecting financial information needed to track profit and losses and prepare appropriate tax returns. Basically, this process involves keeping invoices and receipts/records to document income and expenses and creating financial reports to reflect the results of these records. Accurate financial records are essential to the success of your business. They show you, the business owner, if and where income and expenses are out of balance and where improvement is needed. They also provide bankers and other sources of capital a financial snapshot of your business and help them determine whether or not to lend money to or invest in your business. Accurate records also make preparing your tax return much easier as well as more accurate so you avoid over- or under-paying taxes.
Cash or Accrual Method

When setting up your financial records you will have to choose between the cash or the accrual accounting method. The cash method simply records income and expenses as they come in and go out of the business. The accrual method allows the business to deposit money in the same accounting period that expenses will occur for a sale or service performed.
Chart of Accounts
The next step is to set up a chart of accounts. Basically, all charts of accounts include a numbering system to identify different categories of accounts: assets, liabilities, income, direct expenses, indirect expenses, and non-operating accounts. Within each category of account are more specific types of accounts. Most software systems have a chart of accounts that you can customise for your business. Also, the Small Business Administration website at www.sba.gov has a sample chart of accounts that you can download to your computer to help you get started.
Financial Statements
Your financial statements will include your profit and loss statement, balance sheet, and cash flow projections. The profit and loss statement will show you how much money your business made or lost during a designated period of time (month, quarter, year). Your assets, liabilities, and equity are listed on your balance sheet for a specific date to show the financial health of the business as of a specific date. The cash flow projections for many small businesses are completed on a monthly basis to show how the money is coming in and going out of the business, based on the previous months history.
Customer Service
One of the most important areas that will determine your business success is customer satisfaction. The reality is if your customers are NOT satisfied, your business will cease to exist. Keep in touch with them by sending out surveys, thank-you cards, and periodic updates about any new products and/or services (with their permission, of course). Repeat business is certainly easier and less expensive to cultivate than new business and could eventually make up to 80 percent of your business. Therefore, always keep customer service at the forefront of your business. If you get negative feedback from surveys, analyze the situation and adjust accordingly. On the other hand, if you receive positive feedback, dont get complacent.
Employee Relations
Employees often have incredible insight into the business so meet with them frequently to get their feedback about customer satisfaction as well as their own satisfaction with the business. The suggestion box has been used for years at many businesses. When monetary reward, recognition, and/or time off are part of the suggestion box procedure, it gives the employee an incentive to provide feedback to the business.
A Business Plan
Your business plan should include goals in writing that are broken down into specific steps with specific deadlines. For example, you may have the following goals as part of your five-year plan:
Year #1 $100,000 Sales; $10,000 Net Profit Year #2 $200,000 Sales; $20,000 Net Profit Year #3 $300,000 Sales; $30,000 Net Profit Year #4 $400,000 Sales; $40,000 Net Profit Year #5 $500,000 Sales; $50,000 Net Profit To obtain these goals you need to have your plan broken down into specific steps with deadlines for completing each step. The following example shows how you can organise these steps so that on a weekly and monthly basis, you continue to move forward toward the annual goal. Month #1 Set up the business Week #1 Establish a business entity Calculate start-up expenses Address all legal issues including licensing Week #2 Write a business plan Week #3 Establish a business identity Determine a location Week #4 Set up your books Meet with your accountant Month #2 Advertise the business and follow-up Week #1 Attend industry-related, chamber of commerce, etc. meetings to network. Follow-up on all leads generated from networking. Week #2 Start implementing your advertising methodology. Will you design print pieces or hire someone? Will you focus on direct mail or newspaper?
Week #3 Test your distribution methods with sales obtained to date. Week #4 Follow-up on any items not completed during month #1.
Setting Specific Goals

Since growth is essential to the survival of your business, periodically revisit your business plan and look at your goals and the strategies and timeframe to obtain them. Are your business goals specific and written down? It is a well-known fact that specific, written goals are achieved most of the time and generalised, unwritten goals are almost never attained. Do the goals include deadlines for obtaining each one? If you do not set deadlines for the goals, you may not take the methodical steps necessary to obtain the goals. Are you prepared to make changes to the goals as circumstances change? The goals for growing your business cannot be set in stone or they might fail at the first roadblock or change. Your goals must be flexible enough to adapt to changes in the market, in your customer base, in the economy, etc.
A Marketing Plan
Does your marketing plan include growth strategies? These strategies should include the methodology you plan to use such as product development, advertising campaigns, delivery methods, etc. Will you expand the products and/or services you currently offer? You may decide to add similar or complementary products and/or services to the ones you currently offer. Or, you may decide to add a totally different line. Do you plan to expand your customer base? Growth for your business may demand an expanded customer base. Does your plan include methods for getting more customers? Are you going to diversify your business? Perhaps your growth strategies include plans to enter into a field outside your current business. Have you completed the research necessary to enter the new field?
You may not know the answers to these questions in the beginning, but as your business becomes successful, these issues will need to be addressed.
Management
Jack Welch, former CEO of General Electric, once told Business Week Magazine, Most small companies are simple, informal, and grow on good ideas. Think small. We would have to agree that when you are small, you could keep things simple and informal. It is also true that in that environment good ideas and creativity thrive. However, as the business grows, you need to be prepared to step out of the daily functions of operating the business and be prepared to take on the role of CEO and strategist.
Business Life Preservers

Most entrepreneurs would agree that sudden growth can be just as scary as starting the business. You have to be able to adjust to change and adapt new strategies quickly. To help, we offer three life preservers when your business is growing rapidly. 1. Ask for help. Find a mentor, business associate, the Small Business Administration, SCORE, etc. who will share their experience and insight with you. 2. Delegate. One of the hardest things youll have to do is give up control of the business. However, it is critical to the success of your business and to you individually. YOU CANNOT DO IT ALL! 3. Never give up! It is a well-known fact that the majority of businesses fail. Did you know that most entrepreneurs have failed at least once, usually several times, before success came?
Be Prepared
Knowing how to adapt to changes in the market, overcome obstacles, finance your business, protect your assets, and manage your business will be crucial to your success.
Get the training you need from the experts who know the ins and outs of financial planning, real estate investing, asset protection, business building, and more.
PART 6: MARKETING YOUR BUSINESS

In order for your business to be as successful as it can be, youll want to start marketing yourself early and effectively. Youll want to develop a professional business image that stands out from the crowd and leaves a positive, lasting impression on the people you come in contact with. And youll want that professional image and any promotion of your business to be consistent since you never know where the next great real estate deal is going to come from. To give you the professional edge in your promotional endeavors and to help you attract business, here are some tips on developing a positive image and maintaining a consistent, professional presence in your community.
First Impressions
Advertising and promotions are not the only ways to make an impression on your customers. You must remember that every piece of business correspondence will leave a subtle but lasting impression on the people who see it. That is why the look of your business cards, letterhead, stationery, fax cover sheets, and other business correspondence is so important. When considering such printed items, make sure they give the impression you want your business to portray professional, reliable, quality, coordinated, etc. Its all part of the image customers will develop about you and your business. Dont skimp here, especially not on your business cards. And remember to seek help in creating your business image and correspondence if you need it. Not everyone has an artistic eye for logos or can create business cards and letterhead themselves. If you need help, hire a graphics designer or call the head of the graphics department at your local college and ask if they would recommend a qualified student to help you design your materials.
Networking
Networking is a reciprocal process where you share ideas, information and leads with other business people. Its a give and take relationship and it takes on various forms. It can be a dinner with a business partner, a ballgame with a customer, or an extravagant
party hosted by a VIP. No matter which activity it is, you are given a chance to get to know others who can possibly benefit your business. Think about the contacts you need to establish to grow your business or the people you need to come in contact with to help you finance your investments. Which businesses or professionals in your community will be of assistance to you (for real estate, think mortgage brokers, real estate agents, bankers, etc.)? What events do they attend? What organizations do they belong to? Your presence in the same circles can result in lasting friendships, potential partnerships, and a great referral database. Build a good rapport and maintain open lines of communication with anyone who might be able to refer business to you (by the way, thats just about everyone). When someone does send you a referral, remember to reciprocate. Whenever possible, send business their way as well they are bound to remember you! And always follow up when you make new contacts (send them a personal note, making sure to touch on some aspect of your conversation) or when someone has helped you in some way (send them a personal thank-you note). One more important point: Leave positive impressions when networking. What do you say about your business to others? How do you present yourself? Do you want potential customers to think of you as a sourpuss or as a competent professional with a pleasant disposition? The ability to smile while you speak clearly shows you love what youre doing and are focused on your business. Adding inflection in your voice and speaking above your normal voice level shows you are excited about your business and will attract the interest of new customers. The key element here is the confidence-building aspect of the relationship. If you are sincere about your venture and really believe in your product or service, people will notice this. Your energy and excitement can be contagious.
Participate In Industry Events

Industry events are often sponsored by large corporations and non-profit organizations. Or, you, too, can host an event that allows other business owners to network with each other. These events are usually in the form of a large gathering, such as a party, where people go to meet others. Under the guise of a social event, you can meet competitors, as well as pick up on any tips and tricks to improve your business from the power-people in your industry. Many different trades will have industry events throughout the year. Consult trade journals to find where they are being held; research the journals and newspaper to stay in-the-know, stock up on business cards, and go!
While at an event, work your way around the room talking to as many people as you can. And keep in mind this important note: Let other people do the talking. Learn what they are all about. People have a tendency to remember a good listener. Above all else, remember to follow up. After every networking event, pull out your lead list from that event. Send every person on that list a letter stating how it was a pleasure to meet you. Let them know you enjoyed your conversation with them and look forward to seeing them at the next function. If they requested more information from you while at the event, send this additional information along with the letter. This is a great way of opening up the lines of communication with other industry leaders who, in turn, may be able to send more business your way!
The All-Important Business Card

A dynamic business card is your most important marketing tool. Always keep several handy in your wallet or briefcase and hand them out to everyone you come in contact with while promoting your business. Get in the habit of always leaving your business card with your dentist, doctor and your car mechanic. Put them on bulletin boards in libraries, supermarkets, laundromats, health clubs, schools or anywhere else you can think of. If your business specialises in a unique service such as cash flow real estate investment, you may even want to include your business card in your monthly bills. You never know when the person processing your payment will need your services! And dont forget to give your cards to your family and friends to pass out for you. The cards are absolutely useless unless you get them out there to your contacts in the community.
Additional Marketing Tips and Strategies

Here are more ways to get your name out there and to establish positive, beneficial relationships: Make the most out of memberships Remember that many organizations have bulletin boards where you can post a flyer, business card or brochure. Does the organization print a monthly newsletter? Do they allow advertising? Can you
support a worthy cause while getting your name out? Most organizations publish some type of newsletter, and they rely on small, relatively inexpensive display ads to cover the cost of the publication. These small publications are a great way to get your business name, product and service recognised. Get it in print Other publications that offer good exposure include things like high school sports programs (the printed programs handed out at sports events) and high school yearbooks. These publications offer a great way to advertise your small business in your community. Youre not only targeting your community, but you are donating money to it as well. Perhaps you have a child, niece, or nephew who participates in a band or choir, has a dance recital, or is involved in a debate club, etc., and there is a program you can advertise in. Or maybe you enjoy community arts offerings and want to participate in your local community theatres calendar or playbill. And dont forget Sunday church bulletins! Church bulletins are another inexpensive way to get exposure for your business. Members of church congregations usually take the bulletin home with them and may be inclined to utilise the services of one of its advertisers. Consider alternative advertising When advertising, remember to consider alternative forms of media, not just the traditional newspaper, television or radio ad. Consider advertising on the Internet, using direct mail campaigns, placing outdoor advertising, using car magnets, placing poster-size ads inside buses or in bus shelters or terminals, etc. And look for alternative sources for your advertising. For example, your local newspaper is not your only newspaper advertising option. Consider placing ads in the local shopper or penny-saver publication as a cost-effective choice, or in community publications as mentioned above. Get online If you work well with computers, consider creating a website for your business. You can set up your own website or hire a proficient college student or small graphics firm to do it for you. Your homepage should get straight to the point about what you can do for the visitor to your site (e.g., I buy houses, cash or terms, or Stop your foreclosure now!). Remember to list your website address on your business cards and all correspondence. Use public relations opportunities to build your business Submit press releases or editorials to the newspaper, participate in industry-related events, offer to speak at events or in front of civic groups, etc. Magnets, pens, and other promo items You can invest a small amount of money in promotional items that can easily be passed out to individuals who show an interest in your business, to people you meet in line at the grocery store or at parties or events, and to bankers and other industry players you come in contact with.
Always make a good first impression Greet people with a warm and friendly smile and a hearty handshake. Answer telephone calls excitedly and respond to inquiries quickly, making sure to answer every question or request the first time. Be a good listener! By listening to customers (and potential customers), you can gauge whether or not they have a problem your business can solve. On top of this, people like to feel as though they are really being heard and will remember this positive attribute. Go for the coordinated look All your business correspondence materials serve as vehicles for first impressions. In order to portray a positive image, all of your materials should be coordinated. They should contain the same logo and graphics and be printed on quality paper to maintain a professional image. Also, they should provide a consistent message that is simple and straightforward. And while, to some, it may not seem like it should matter so much, poor grammar or typographical errors indicate shoddiness and people can translate that poor approach to correspondence to how you might approach your business dealings. Keep things cost-effective If you are just starting out and do not have enough money to produce lavish forms of correspondence, dont worry! It is possible to do all of your printing needs from home. Basic computer programs like Microsoft Word can help you design letterhead, cover sheets, and envelopes. And you can buy paper supplies from your local office supply store or order them in bulk via the Internet. However, if your budget allows, you may want to use a copy service to print your correspondence to maintain superior quality unless your home printer is top quality. Keep it simple Its easy to get carried away with messages on business cards, but you need to refrain from going overboard. Your card should contain your pertinent contact information and tell the customer, in simple to read language and in a quick fashion, what you can do for them. Demand quality The business card is one area where you should demand quality work for the money you spend. All local print shops and most office supply chains sell customised business cards in quantities of 500 to 1,000 per order. They also have special departments that will help you design your business card and assorted matching stationery. Ask the sales associates to show you paper and typeface samples when you are ready to place your order. Use heavy card stock, preferably textured, and avoid using the printers standard format. The key phrase to remember here is class, not clutter.
Go for inexpensive and effective! Flyers are one of the most inexpensive marketing tools you can produce to get the word out about your business. A flyer is generally an 8-1/2 by 11 inch sheet of either white or pastel colored paper. You can buy 20 lb. white paper in reams of 500 sheets and have them duplicated at a local copy center for pennies per sheet or you can spend a fraction more for pastel colored paper stock. Most home computers can be equipped with software to create and print flyers at a comparable cost. You can buy relatively inexpensive publishing programs at your local supply store to help you create your flyers. Mail it! Direct mail is one of the most effective marketing tools for targeting specific customer demographics and for attracting new clients. The two main parts of a direct mail campaign are the letter and the list. The effectiveness of direct mail is linked to the quality of your mailing list. You need to target people who would have a use for your product or service. For example, you wouldnt want to send information on high-end investments to college students, nor would you want to send mortgage reduction program mailers to apartment tenants. You can buy a list or rent one from a capable list broker. And you can build your own mailing list by doing research at the county courthouse (e.g., finding foreclosures and sending mailings indicating your ability to help to those contacts). Go to the movies An advertising opportunity growing in popularity is advertising on the screen at local movie theaters. Before a movie starts, the theater rolls trivia questions, announcements and advertising slides. Your business can place its ad on the big screen to reach a large, captivated audience, targeted geographically. You can also advertise in several other areas of the theater such as the concession stand, schedule books and kiosks. Why advertise in the cinema? The atmosphere in a theater is highly conducive to keeping the audience focused on the screen. The darkness within the theater makes the screen more prevalent, highlighting the images that appear on it. And theres the enormous size of the screen itself to add to the impression. Perhaps best of all, advertisements on the screen do not have to compete with other advertisements at the same time. For a few seconds, your ad is the only ad up there. Promote a positive image Networking at industry events, speaking engagements, volunteering your time, and contributing to newspaper columns, talk radio and cable access programming are surefire ways that help promote a positive image. Advertising your business via these tactics is not only effective, but often FREE! These tools of the trade will also give you something of great importance to any public relations campaign: Credibility. People tend to believe what they read in newspapers and see on TV. A column written by you or about you in a newspaper can make your business more credible than your average advertisement.
Last, But Certainly Not Least

Stay within your budget. Its tempting to advertise or to participate in every opportunity, but dont go beyond your means. Set a limit for how much you will spend promoting your business and how much time youll devote to networking and stick to the limits youve set. Although marketing your service is key to your success, so is maintaining cash flow, following the guidelines youve set for your expenses, and finding time for yourself and those you care about.
PART 7: GENERAL BUSINESS TERMS

To familiarise you with some of the general business terms you will likely come across as you build your business, we offer the following glossary.
A
Accounting Recording and bookkeeping financial transactions in terms of money and numbers. Accounting Period Financial statements are calculated for a specific period of time, either a month, quarter, or year. Accounts Payable What your business owes to creditors and suppliers for goods and services received. Accounts Receivable The amount of monies due to you by customers for goods delivered or services rendered. Accrual Accounting An accounting system where income is realised when earned, not when received; expenses are recorded when incurred, not when paid. Assumptions Assuming responsibility for anothers obligations or debts. Auction A public sale where goods are sold to the highest bidder. Audit A verification of financial and accounting records conducted by an accountant or the Internal Revenue Service (IRS). Automatic Data Processing Processing data by computer and electronic accounting machines.
B
Balance Sheet A financial statement that displays your assets and liabilities at a point in time. Bankruptcy The voluntary condition where a business or insolvent person cannot pay the debts owed to creditors and therefore petitions for bankruptcy or is put in bankruptcy by creditors. A trustee (a.k.a., a third person) then takes over the debts. A person who declares bankruptcy will usually have special legal rights taken away such as the right to practice law or be a judge. Also, he/she may be refused credit for a certain period of time
after the petition. However, many debts will be erased even after the petitioner sells his/her assets. Bond A promise by a third party to repay a principal and interest if another party does not make payment. Break-Even Point The point at which the volume of sales equals the total cost. This is also the point at which your business can start making a profit because there is no profit or loss. Business Plan A document from a companys management that details a comprehensive plan that clearly describes a proposed businesss past, present, and future objectives. It is usually used to gain investments from the outside business world by use of data and facts.
C
Canceled Loan The retraction of an approved loan before the money is given to you. Capital Goods used to make income. Also, a businesss assets minus its liabilities (or net worth). Capital Asset Property and equipment held for long periods of time that cannot easily be turned into cash. Cash Accounting An accounting system where income is realised when collected, not when earned; expenses are recorded when paid, not when incurred. Cash Discount An incentive or discount offered to a buyer if he/she pays the debt early or within a certain amount of time. Cash Flow The amount of money left over after all your expenses and finances are paid for a certain period of time (month, year, etc.). Caveat Emptor Meaning, Let the buyer beware. Charge-Off Also known as a write off. An uncollectible accounts receivable balance. Charged Off Loan A principal loan amount plus its interest that is uncollected and moved off the accounts receivable list. Closed Loan A loan that has had its first or complete disbursement after the closing.
Closing The time or situation when title or real estate is conveyed from seller to the buyer; full payment is paid by the buyer to the seller; appropriate documents are transferred, and prorating of expenses occur. Collateral Property of value offered to support a loan. Subject to seizure if you default on the loan. Collateral Document A legal document stating what you are offering as collateral. Compound Interest Interest that is added to the principal amount and the original interest accumulated. Compromise When the full amount of a loan cannot be collected by the government after attempting enforced collection, a compromise is installed allowing for only a partial amount to be paid. Consolidation When two or more companies are combined into one under a new name. Note: Not to be confused with merger; a merger occurs when two or more companies are combined under the name of one of the companies and no new entities are formed. Consortium A group of organizations or companies that invest a large capital amount in activities that an individual member could not fund by his/herself. Contingent Liability A liability that depends on a future event that may or may not occur. Contract A written agreement between parties where each agrees to certain terms. Make sure you have an attorney review any contracts before you sign them. The contract may not be binding if drawn up incorrectly. Corporation A business organization granted a state charter that separates the entity from its owners. Characteristics include limited liability and the use of shareholders. Costs The expenditure of resources necessary to bring a good or product into existence. Credit Rating A profile of a customer used as a determinant as to his/her potential for prompt payment of debts. Credit Report A history of repayments on past liabilities.
D
Debenture An unsecured debt that is NOT backed by collateral. It allows the holder to receive the principal and interest installments based on the integrity of the borrower. Debt Financing This is where you or your business receives a long-term loan (by selling bonds or notes) that must be paid back according to a predetermined schedule and interest rate. Deed of Trust The title of a property is given to a trustee as collateral. Default Failure to repay a loan or otherwise meet the terms of your credit agreement or lease. Deferred Loan A postponed repayment of a loan until a later, specified date. Depreciation A decline in the value of equipment and property due to physical deterioration, time, or the advancement of new products. Disbursement (a) The payment of loan money to the borrower usually at or following the closing; (b) Funds paid. Divestiture Sale of a company or change of control to another group. Drop Shipment A shipment to the consumer directly from the supplier.
E
Earning Power The ability of a company to turn a profit. Good earning power is essential when applying for a loan. Easement A right-of-way that one person has on anothers property for specific reasons. Employer Identification Number (EIN) A new business must file for an identification number with the IRS. Enterprise Another word for a business or a collection of establishments owned by one company. Entrepreneur A person responsible for starting and managing a business who assumes the financial risks.
Equity Measure of ownership in a business. Equity Financing Selling a portion of your company in the form of common or preferred stock to outside investors, thus giving the investor the right to share in the companys profits without the obligation of repaying the funds. Equity Partnership A limited partnership that provides start-up capital to businesses. Escrow Two parties decide to have money deposited and held by a third party until specific conditions have been reached. Employee Stock Ownership Plan (ESOP) Stock in a company that is allocated to its employees over time. Establishment One unit of a business, located separately from its parent enterprise or as a stand-alone. Exact Interest Interest based on 365 days a year.
F
Factoring The selling of accounts receivable to another firm at a discounted rate. Fiduciary A company that holds the assets of another party and invests them on behalf of the party. Financial Reports Reports such as income statements, cash flows, and balance sheets that are used when documenting the financial aspects of your business. Financing New capital given to a business, usually via a loan. Fiscal Year An accounting period consisting of 12 months. Fixed Cost A cost that does not vary with the volume of sales or production. Flow Chart A graph using symbols to chart the analysis of a problem. Foreclosure The owners interest in a property is sold due to his/her inability to pay the mortgage. Franchise A business entered into that has a predetermined plan and product line.
Free on Board (FOB) The suppliers obligations to pay the shipping costs are fulfilled once the product reaches a certain destination.
G
Grace Period The period from the time a payment is due to the point at which a creditor will take legal action. Guarantee A third party agrees to repay a loan if the entity responsible for the loan cannot. Guaranteed Loan A loan that the government or Guarantor agrees to pay if the borrower cannot pay the interest and principal. Guarantor A person or business who guarantees a loan.
H
Hardware The equipment used in a data processing system. Hazard Insurance Insurance that covers risks on secured loans.
I
Incubator A facility that houses several new businesses and encourages entrepreneurship. They share common services such as meeting rooms, phone systems and accountants, and are usually in a technology-related field. Indemnity An obligation to compensate another party for losses and damages that have occurred or may occur. Independent and Qualified Public Accountants An accountant is independent when he/she has no personal interest in the clients business. They are considered qualified when they hold a license to practice or have worked as a public accountant for five or more years and are accepted by the Small Business Association. Industrial Revenue Bond (IRB) A bond issued by the government to a private user to finance the construction of commercial facilities that serve the public. Innovation The creation of a new idea, product, or service.
Insolvency A borrower is considered to be insolvent when he/she cannot pay a financial debt currently. Interest Additional amounts paid by the borrower to the lender based upon a percentage of the loan principal. Inverse Order of Maturity When a borrower pays more than the scheduled amount of money due on a loan payment, the money left over is deducted from the principal amount. This reduces the maturity of the loan. Also known as partial prepayment. Investment Banking An institution that purchases and sells securities and issues funding for businesses, but does not accept deposits. Invitation for Bids Soliciting offers following government rules and regulations but not restricting any bidders by asking for specific requirements.
J
Job Description A detailed listing of the tasks performed for a certain job including duties, training, and any physical demands. Job Sharing Where two people share the tasks and hours of one job instead of two individual positions. Judgment A decision by a court on any liabilities. Judgment by Confession In lieu of going to court, defendants can allow themselves to be ruled against for a certain awarded sum. Junk Bond A source of high-risk, high-yield corporate funding with a low credit rating.
L
Lease A document signed to get temporary use of a property. Legal Rate of Interest The legal amount a lender can charge a borrower on a loan. This varies from state to state. Lending Institution An institution, such as a bank, that issues loans.
Leveraged Buy-Out To purchase a company using mostly borrowed money. Lien When securing a loan, an encumbrance can be placed on an asset until the property is sold or paid for. Liquidation Selling of company assets to pay off creditors, debt and shareholders. Liquidation Value The estimated proceeds, net of liabilities, that would result from either a normal or forced sale of an asset(s) if sold without being part of the business of which it was originally a part. Litigation When a dispute reaches a court of law. Loan Agreement The arrangement of payments, conditions and restrictions signed by the borrower of a loan. Loan Payoff Amount The total amount of money needed to pay off a loan. Loss Rate The ratio of the total amount of loans disbursed to the total amount of loans charged off. Loss Reserve Adjustment Rate The ratio of charge-offs minus recoveries to the average of outstanding loans for the past five years.
M
Markup The difference between the cost to retailers and what they actually charge the consumer. Marginal Cost The cost associated with the production of one more additional unit. Maturity The date when payment of principal on a debt is due. Maturity Extensions An extension beyond the date when the debt is due. Merger When two or more companies are combined under the name of one of the companies. No new entities are formed. Note: Not to be confused with consolidation; a consolidation is when two or more companies combine into one under a new name. Mortgage A loan giving legal rights to own real estate. A preset schedule of payments and interest rates are calculated when receiving a mortgage.
Multi-Level Marketing (MLM) Offering commission to distributors who sell your goods or services.
N
Negotiation A compromise on issues between two disputing parties usually ending with a written legal agreement. Negotiation Dispute The point at which both parties cannot come to a compromise. Negotiated Grievance Procedure The process used by employers and their employees when filing grievances or disputes. Net Worth Assets minus total liabilities and debts. Notes and Accounts Receivable Money owed to a company for goods purchased by credit, often involving liquidation.
O
Obligations Any debts requiring present or future payment. Ordinary Interest Interest based on 360 days a year. Outlays Cash payments for loans and costs pertaining to them. Overhead The continuing expenses of a business not directly related to production such as rent and insurance.
P
Partnership Two or more people who manage an unincorporated business. They share profits, losses, assets, and liabilities. Patent The right to exclusive use of an invention you created. You must file with the United States Patent and Trademark Office (USPTO). Power of Attorney Gives a person the right to act on behalf of another person.
Preferred Lenders The SBA allows a bank (preferred lender) to grant a loan without first approving it with the SBA. Prime Rate The interest rate that lenders charge their highest credit rating borrowers. Procurement Automated Source System (PASS) A central referral system managed by the SBA that tells the government you are interested in selling to them. Product Liability A type of liability that applies to sellers and manufacturers of goods. Professional and Trade Associations Non-profit or voluntary companies that promote help with common interests. Profit and Loss Statement (P&L) An income statement that shows earnings, expenses, and net profit. Protest A statement in writing of a payment disagreement by a bidder.
R
Ratio Relationship of one item divided by another item within financial statements. Request for Proposal Solicitations by companies to bidders for a proposed plan of action to solve a specific problem. Return on Investment (ROI) The income that an investment returns. Profit based on the funds spent to reach it.
S
Secondary Market An investor who purchases the interest from another lender. Simple Interest Interest that is paid on the loan principal. Sole Proprietorship A single entity consisting of an owner and his/her company who are 100% liable. The most common type of business today. Standard Industrial Classification Code (SIC) A 4-digit number used to identify a business and its activities. The 4-digit code identifies the sector specific industry that a company is a member of. The first two digits identify the broad industrial sector (such as
SIC code 37, Transportation Equipment) and the last two digits identify the companys specialty within this broad sector (such as 3716, Motor Homes). Surety Bonds A pledge used to back a company if a firm does not complete a contract. Sweat Equity The investment a companys executives make and will continue to make with no compensation.
T
Tax Number A number used by a business so that it does not have to pay sales tax on goods and products bought at wholesale. Turnover The ratio of annual sales to average inventory of goods per fiscal year. If you have a high turnover rate, your business is running efficiently.
U
Undelivered Orders The amount of goods that have been purchased or have an agreement to purchase that have not been given to the consumer as of yet. Usury An illegal, high interest rate charged to a buyer.
V
Variable Cost Costs that do not stay consistent based on the output level of production of goods and services. Venture Capital Money given to a new, extremely promising business with growth potential.
The Entrepreneur as Real Estate Investor

PART 1: THINKING LIKE AN ENTREPRENEUR

Websters defines an entrepreneur as a person who assumes risk for the sake of profit. But if entrepreneurs are said to be risk takers, its a characterization that isnt quite complete. Thats because most entrepreneurs are calculated risk takers who view risk, money they could potentially lose, and reward, money they could potentially gain, differently from the average crowd. To put it simply: While entrepreneurs have a healthy respect for risk, they typically dont fear it, especially when the potential rewards are great. They believe its better to take risks than it is to look back and ask, What if? They know how to evaluate an opportunity to see if the reward outweighs the risk. And when they find such an opportunity, they are not afraid to act. Additionally, when entrepreneurs act on an opportunity, they look for every way possible to maximise profits while minimizing expenses. They adopt the philosophy that to be truly successful, they will have to be profit-oriented. And in real estate, that means being adept at negotiations, knowing how to secure properties at bargain prices and then wholesale them to other investors, and spending as little as possible to bring properties to move-in condition and then sell them or rent them as quickly as possible. Its also being able to recognise the potential of a property, not just its current condition or use, and being willing to take action quickly to make the most of every investment. For example, if your strategy is to hold a property and rent it, your willingness to do cosmetic improvements to increase its value and appeal to renters, your commitment to providing safe and clean housing and managing the property well, and your ability to find qualified tenants, are all profit-oriented approaches that will be key factors in your success. Being profit-oriented is also about learning how to use other peoples money (leverage) to make exceptional deals with minimal or no money out of your own pocket, or being aggressive in finding creative financing. And its about acquiring the appropriate knowledge so you are as prepared as possible at every turn. When you think like an entrepreneur and combine that determination and focus with the profit potential of an exciting business opportunity like real estate, theres virtually no limit to what you can do for yourself and your future.
PART 2: WHY REAL ESTATE?

Real estate investing as a business is far less risky in comparison to most other business ventures. One reason is the market (group of potential customers) for residential real estate is huge. After all, everyone needs a place to live, helping you avoid a major problem many other entrepreneurs face: a limited market for a product or service. Additionally, its one of the few businesses that can be started with minimal capital and still generate substantial revenue, perhaps a million dollars or more. And with other types of businesses, there exists the possibility of losing everything if things go awry. While real property may decrease in value, which is the exception rather than the norm, you are pretty much assured that the underlying asset (land and any improvements to the land) will always be there. Insurance will even help protect your investments against loss, an option not available on many other investments. These are just some of the reasons why real estate investing has been called the ideal business. And in this case, ideal isnt just a suitable adjective; its also a helpful acronym, which stands for Income, Depreciation, Equity, Appreciation, and Leverage. These five fundamental aspects of real estate investing make it an entrepreneurs dream business. Income Real estate can generate a steady stream of income when you rent your properties. Most of the time, rental rates exceed the monthly fees associated with keeping the property, such as mortgage payments, insurance, taxes, maintenance fees, etc. Thats cash flow each month that you can use to build more wealth. Depreciation An added benefit of real estate investing is tax reduction through depreciation and the ability to write off certain business expenses. Consult with a professional tax advisor to learn more. Equity As the value of a property increases (through inflation, appreciation, and compounding) and the mortgage debt decreases (mortgage payments are made), equity builds. Thats pure profit. Appreciation Generally, real estate appreciates around 4% to 5% annually, and sometimes 20% or more, depending on location. And smart investors look for ways to force appreciation on a property with cosmetic improvements that increase its value instantly, such as painting, carpeting, cleanup, minor repairs, new appliances, lawn work, etc. (what is termed as sweat equity). Leverage Leverage, or the use of other peoples money (OPM), allows you to control large assets with little or no money out of your own pocket. With the wise use of leverage, your money will work ten times harder than you can.
Now that we have covered why real estate is the ideal business, lets discuss real estate investing opportunities in more detail.
PART 3: UNDERSTANDING REAL ESTATE INVESTING Evaluating a Property

Something that often scares newcomers to real estate investing is how to tell when a property needs too much fixing up to make it a good investment. We have bought and sold hundreds of properties, and we rarely come across any in such bad shape that they are beyond repair. The reason is simple: If the property is in really bad shape, the owner may be motivated to sell way below the market value of a similar property that is in good condition. If you are dealing with an extremely low sale price because the property needs repairs, you have more borrowing power for your repair or rehab loan. That means a greater opportunity for profits. However, you have to train your eye to know the difference between cosmetic distress and serious problems. A building might be so neglected that youre afraid its going to fall down around you. But, in reality, a few trips to the dump, a fresh coat of paint, and some cleaner and disinfectant may revive the property to fair market value. Here are a few things to watch out for.
Structural Damage
Outside, look for a dramatic lean in any direction. Inside, look for floors slanted toward a corner of the house. These are indications of a possible foundation problem. Before you reject the property, call in several contractors and get free estimates on repairs, then use that information to negotiate a better price.
Termite Damage
Termite damage usually scares off investors, but termites can take up to 10 or 15 years before they do irreparable damage. An investor once bought a house that had severe termite damage in the supporting beams in the basement. The property had been on the market a long time and was bargain priced. Obviously the termite damage had scared off many other potential buyers. After the investor bought the property, he had a contractor replace the beams, using mobile jacks as support; it wasnt particularly complicated or expensive. He pulled money out of the property up front with the rehab, and then made $15,000 a few years later when he sold it. You can make good deals on termite-infested properties. Just figure the cost of replacing the bad wood and exterminating the termites. If you can do that and still make money, its a deal you should consider.
Roof Damage
Always examine the roof. You might also ask several roofers to do it for you. Pick their brains until you become proficient enough to do your own evaluations. Roofers make money by selling you a roof, so keep that in mind as you consider their recommendations. If it looks as if the roof will need replacing in the near future, calculate that into your offer. Set enough money aside from your home improvement loan and let it accumulate interest until the roof starts leaking; then replace it.
Major Plumbing
When you are evaluating a property, turn on all the faucets, flush all the toilets, and make sure all the drains run freely. The most common way plumbing can become a problem is in older buildings with galvanised and/or cast-iron plumbing. After years of use, this type of pipe collects sediment that builds up and causes a loss of water pressure and stoppedup drains. We have found a product called Drain Snake, available in many plumbingsupply stores, which seems to remedy the problem. (When using this or any other chemical product, always use caution and follow the directions on the label to avoid personal injury or property damage.)
Furnaces
In larger multi-unit buildings, you may have one furnace that heats the entire building. Be sure it operates efficiently or that the cash flow will support the bill. Get a heating and air-conditioning contractor you trust to do the evaluation for you. These are the areas in which you could have a major expense if there is a problem. In most cases, roofs and plumbing and heating units need major repairs or replacement only every 20 to 25 years, so problems with them are the exception, not the rule; but its always good to check. When you do see a major problem, dont automatically rule out the property. If you can cover the repairs and still make money, the property is a good investment. If you cant, it isnt. The whole process is just that simple. You might want to hire a professional inspector in the beginning to confirm your opinion, but eventually youll get to the point where you can accurately evaluate a property on your own.
Calculating Returns
There is only one hard, fast rule about when to buy and when not to buy: If you will lose money, dont buy. And you can figure out just how profitable a property might be with
basic, elementary school arithmetic. To evaluate a propertys profitability, you need to look at four areas.
Net Profit
The easiest to see and most simple to calculate, net profit is the amount of money you have left over after all your expenses are paid.
Appreciation
This is the amount your property increases in value. There are two types of appreciation: natural, which is the amount the market goes up; and forced, which is adding value with improvements for a higher and better use. During periods of moderate growth, natural appreciation usually ranges between 4 to 5 percent and sometimes 10 percent annually; in high-growth cycles, it could be well over 10 percent, and sometimes as much as 20 percent; in low- or no-growth cycles, the value may remain the same or increase only by 1 or 2 percent. To find out the current rate of natural market appreciation, call a couple of real estate agents. Its their job to know these things, but its also always wise to check with more than one to be sure youre getting an accurate picture. Forced appreciation is the area through which the bigger and more short-term profits in real estate are usually made. Most real estate will appreciate naturally to a small degree if you do absolutely nothing; but if you put a little money and effort into the right property, you can make significant gains.
Equity Buildup
A portion of each mortgage payment you make (which the tenants actually pay) is applied to reducing the principal balance of the mortgage. When rents are paying the mortgage, you can consider the equity buildup as part of your overall profit.
Tax Shelter
Real estate investing is a business, and you are therefore entitled to take a variety of business-related deductions on your income tax (consult with a professional tax advisor or accountant). These deductions will often offset income earned from another source and reduce your overall tax liability. The deductions you can take by owning investment property include depreciation, interest (the interest portion of your mortgage payments), maintenance, and any other expenses related to managing your property, such as gas or car expenses for driving to and from the property, cleaning supplies, bookkeeping supplies, forms, and other administrative materials.
Though we know that real estate typically goes up in value, the IRS will allow you to take a tax deduction for depreciation based on wear and tear on the building (not the land). The formula for calculating investment property depreciation can change with changes in the tax laws, so check with your accountant.
Return On Investment
Now, lets look at how you use these areas of profitability to determine the return on your investment (ROI). Calculate your ROI by dividing your profit by the amount of cash it took you to achieve that profit. To illustrate ROI, well use a four-unit building an investor bought for $75,000. The owner was willing to hold the mortgage and take a 10 percent down payment, or $7,500. By arranging to close on the third day of the month (after collection of that months rent, of which he would get a prorated share), the buyer was able to purchase the building for $3,700 cash out of pocket. The building was fully occupied, and each unit rented for $500 a month. The following details show you how the numbers worked. To Determine Net Profit Add up the gross rents. Add up all the expenses (taxes, insurance, maintenance, utilities, vacancy allowance, and so on) and debt service (mortgage). In our example, were using 5 percent for the vacancy allowance, which is the amount of time each year we can expect the units not to have tenants. To determine the vacancy rate for your area, contact a real estate agent or property management company. You can ask the seller for documentation on the other expenses. Then subtract the expenses from the rents. That will be the net profit (or loss) for the first year. Calculating Net Profit Monthly gross rents (4 units at $500 each = $2,000) Annual gross rents (12 x $2,000) Monthly expenses = $800 Annual expenses (12 x $800) Gross annual operating profits Debt service (12 x $596.75, monthly mortgage payment) Net overall operating profit
$24,000 - $9,600 $14,400 - $7,161 $ 7,239
Your first-year ROI is the net profit divided by the cash out of pocket it took for you to buy the property, which is $7,239 divided by $3,700, or 196 percent return on investment.
Appreciation If you know your market, you will be able to estimate how much specific improvements will increase the value of your property. Appreciation turns into a cash profit when you sell or refinance. For example: Original purchase price of property Cost of improvements Revised appraised value of property Forced appreciation $75,000 $1,300 $130,000 $55,000
Appreciation ROI on this property was 1,486 percent (the amount of appreciation divided by the investment, or $55,000 divided by $3,700). In this example, we used forced appreciation only; that is, we forced the value of the property up by improving it. When adding in natural market appreciation, contact a real estate agent for the figure that applies in your area. Equity Buildup As rents pay down the mortgage balance, the equity increase is considered profit. It is a paper profit until you sell or refinance, but it is there for you to use when you need it. Initial loan amount Amount applied to principal New principal balance Equity buildup $68,000 $500 $67,500 $500
Equity buildup ROI is 14 percent (the amount of equity divided by the investment, or $500 divided by $3,700). Tax Shelter With an investment in real estate, your expenses will often offset most, if not all, of your income for tax purposes. You will make additional income gains by deducting depreciation and letting that offset the taxes on income from other sources. How much of a tax shelter you will receive depends on your tax bracket and sources of income. Generally, you can count on a 5 to 15 percent ROI from a tax shelter (consult with a professional tax advisor or your accountant).
Now lets go back and total up the first-year ROI from the $3,700 we used to buy this building: Return on cash invested Appreciation Equity buildup Tax shelter Total ROI * Average estimate And this doesnt even consider the money the investor made later by refinancing the building on the increased appraised value. Is it any wonder so many great fortunes have been built through real estate? On any investment, we look at the first-year anticipated net profit, and if that doesnt give us at least a 20 to 30 percent return on our investment, we usually dont go any further. The exception would be if there were a tremendous upside to the building something we know would give us a greater return in the future. It might be that the building has a lot of vacancies we know we can fill, or that nearby property-use trends are changing and we can benefit from that. Dont put anything in concrete; be flexible and use logic and reason to make a good deal. 196% 1,486% 14% *10% 1,706%
PART 4: FINANCING YOUR REAL ESTATE INVESTMENTS

Now lets discuss that all-important topic of financing your real estate investments, particularly when you need to first improve your credit before applying for a more traditional loan.
Obtaining Financing
As you can imagine, financing is one of the most intricate and important parts of successful investing. It is both an ongoing and ever changing facet of business. Most of the real estate deals we make today are prospected, located, negotiated, signed on both ends and then held up because of financing. So it is important for you to have an arsenal of creative financing strategies that can help you facilitate your deals faster, build credit as you grow your business, and put you in a position to tap cash when you need it. Here are just a few:
Cash/Passbook Signature Loan

An investor used this technique to build his line of credit when he was 20. He had no local banking relationships at all, other than his checking account, so he deposited $1,000 in a local community bank, and then asked for a short-term loan, using that money as collateral. He took the loan money, deposited it in a second bank, and took out another loan to repay the first loan early. Then he went back to the first banker and asked for another loan to pay off the second loan also early. Using this process, he established himself with local bankers as trustworthy and reliable so they would feel comfortable with him when he applied for a larger loan to buy real estate. If you have $2,500, $5,000, or $10,000 in the bank, you can build tens of thousands of dollars in accessible seed cash very quickly. Lets assume you have $10,000. Take $5,000 to one bank and start your signature loan line of credit. Then take the other $5,000 to another bank and do the same thing. Expand to five banks each, using the same strategy, and you should have $50,000 in cash at your disposal, relatively quickly, any time you need it. From there, the sky is the limit with the right cash-generating vehicle.
Community Banks
Stay away from the largest banks, as they tend to be impersonal and inflexible in their loan policies, especially when dealing with smaller depositors. Community banks are almost always more aggressive in trying to acquire customers, and they offer more personalised service. This is an important step even if you have credit, and especially if you dont. If your credit rating is good, chances are its focused on the consumer side (i.e., bank credit cards, store charge accounts, personal home mortgage, etc.) and not the commercial side. You need to build a relationship with several bankers as a commercial borrower. If you dont have credit, or if you have poor credit, this will help you overcome that disadvantage. There is an abundance of ways to start setting yourself up with some seed capital. Lets assume youre dead broke. You can use your charge card to get a $1,000 cash advance, or you may be able to borrow $1,000 from your mom, dad, or whomever. Just get the $1,000 and put it in a local community bank.
Establishing a Banking Relationship

About a week after your account has been set up, call and request an appointment with the branch manager. Bankers are very open to this type of meeting they like contact with the community. Just dont barge in unannounced and expect them to drop what theyre doing to chat with you. Go in as scheduled, in a businesslike manner, and ask about the different services the bank offers, what types of loans it makes, what types of customers its looking for, and even what the goals of the bank are. At the end of the meeting, ask for a short-term passbook loan of $1,000, which is, by happy coincidence, the amount of money you have on deposit with the bank. Since this is your first meeting and you dont have an established relationship with the bank, the banker will probably lend you the money but will want to put a lien on your savings account. This way the loan is 100 percent secured, which is a very safe loan. When you repay the loan, the lien will be released. By short-term, we mean a period of six months or a year, which is standard for a passbook/signature loan. You can pay it back sooner, of course, and, if you follow our plan, you probably will. Passbook loan is a generic term and different banks may have different names for this type of loan, but any experienced banker will understand what you mean. You wont make installment payments on this loan; youll make scheduled interest payments once or twice a year, and pay the amount of the loan in full at the end of the term.
Will the banker wonder why you dont just use your savings? Probably not, because borrowing against savings is a common and smart thing to do. If the subject comes up, point out that you want to keep your savings safely in the bank, earning interest, and that its a lot easier to repay a loan than it is to replace spent savings. Thats just a fact of human nature, and an experienced banker will understand and probably like your reasoning.
Loan Proceeds
Once youve received the proceeds of your passbook loan, take that $1,000 to another community bank, open another savings account with it, and go through the same procedure. Then use the money from the second loan to pay back your first passbook loan early. Give the first banker a call and tell him youve enjoyed doing business with him and youre looking forward to building a long-term relationship with him and his bank. Leave your initial deposit in the bank, and wait a few weeks. Then go back in, with an appointment, and ask for another loan. The second or third time you do this, the banker usually will not put a lien on your savings account. That means you have received a signature loan, which is an unsecured loan guaranteed only by your signature. But even though your savings account may not have a lien on it, leave the money where it is. Dont shake up the banker by pulling your money out. Use your loan money to pay back the passbook loan at the second bank. Then, as youve already done, call the second banker, thank him for the excellent service, wait a few weeks, and apply for a signature loan at that bank also.
Line of Credit
Now, though you have not bought a business or property or made any money, you have accomplished something significant. You have established a line of credit at two banks where you can sign for $1,000 (or more) at each, for a total of $2,000 any time you need it, without having to come up with collateral. After youve established a few $1,000 lines of credit, you can begin building them to $2,500, then $5,000, then $10,000, and on up. Its possible you may have to do several guaranteed loans before you get the signature loan, depending on your overall financial status and the banks policies. Thats okay, because the cost to you is a little bit of time and a very nominal amount of interest; the benefits are that youve begun laying the foundation of your wealth. After youve paid back both signature loans, take $500 from each savings account, go to a third bank, and repeat the entire procedure. When one investor did this the first time, he went to five different banks, deposited and then borrowed $1,000 from each of them. After he was finished, he had a $5,000 line of credit money available to him on his signature alone.
Unsecured Credit
If youre thinking that you couldnt get an unsecured signature loan, think again. Credit cards are essentially unsecured loans, and if you have one in your wallet, you have access to almost instant cash up to your credit limit. If you can get unsecured money from one source, why shouldnt you be able to get it from another? After the investor had successfully negotiated and paid back two or three passbook/signature loans, he began receiving offers for more lines of credit from other banks. Youve probably received plenty of these, too: a direct mail marketing promotion that tells you youve been pre-approved for a credit card, a loan, or a line of credit of $1,000, $5,000, or more, and all you have to do is sign the application to open your account. The investor received one that was a book of checks; when he wrote a check, he was actually writing himself a loan.
A Word of Caution on Unsolicited Credit

Some companies that market credit cards by mail ask for an up-front fee to establish your account. Dont pay it. Legitimate lenders dont need you to give them money before they can lend you money. You may not realise how valuable even small lines of signature credit can be. Most people see themselves spending their borrowed money on consumer items, thereby building debt, and they feel quite noble when they decline an offer for more credit. But as you start to change your relationship with money, youll see that you can use these borrowed monies to build wealth.
Secured Credit Cards

For example, lets say youve had a bankruptcy and bad credit, but you have a valid reason. Of course, the reason cant be that you just like to rip people off. But if youve had a divorce, loss of job, fallen on legitimate hard times, or have some other valid circumstance, there are lenders who will work with you and lend you money. Lets assume you have to start with a secured credit card. First of all, a secured credit card means you send the credit card company or bank $250 to $500. They issue you a credit card with that limit (its almost the same as the passbook/signature loan, just a different form of loan). As you use the card and make your payments on time, the credit card company or bank will report your successful payments to the credit bureau. This good credit will begin to show up on your credit report. This is the start to repairing your credit and building towards bigger credit lines. Lets say you build a little credit and use the funds to buy an inexpensive, fixer-upper property with
owner financing. Now when you do your financial statement, youll be able to show a credit card and a house that youve been paying on successfully. This is how you begin to build from nothing or less than nothing.
Equity Line of Credit

There are several conflicting theories on this. Well explain them and you use your own judgment. One of the easiest loans to get is an equity line of credit on your own home. Some financial advisors say you should not do this and that you should always try to pay your home off. We agree and disagree. If one is sitting on tens of thousands of dollars in equity and can tap this source for seed capital, they should consider it. The equity is not making you any money sitting in the house. Why not put it to use and leverage it into sound moneymaking investments that can catapult your net worth and cash flow? One investor and his wife used the equity in their first home to get started. Without that, they had little or no money to start with. Theyve used the equities in several of their homes over the years when needed. Once you are making some good money and have your assets building, you should consider paying the home down. That would be smart business and a good decision.
Life Insurance Policy Loan

If you have cash value built up in your insurance policy, chances are youre only getting a two to three percent return on your money. Some investors view whole life as one of the biggest rip-offs theyve ever seen. The insurance companies have you overpay on premiums for the promise of this cash savings plan for you, and pay you two percent to three percent while they have your money. Guess what they do with it. They buy real estate, and invest in mortgages and other securities and assets! Last time we looked, several of the biggest insurance companies (we wont mention names, but they are household names) had real estate portfolios averaging some 5.6 billion dollars each. The insurance companies are getting your money cheap. Then theyre investing it in real estate! This is what you should be doing! Dont get taken advantage of like the average consumer. Heres your chance to fight back, take control and win.
Discount Mortgage
If you own a home that has long-term seller financing, try approaching the seller for a discount. For example, lets assume you bought a house or rental property for $100,000. You put up a $10,000 down payment and the seller is carrying the financing for 25 years at 8 percent. If youve owned the property for a year or more, its possible (in many
cases) that the sellers circumstances have changed. When you first made the deal, the seller may have been motivated to sell and agreed to hold the financing for 25 years, but they now may want or would like to get the cash sooner. Lets say you owe the seller approximately $90,000. Youre making monthly payments now and for the next 25 years. The seller is locked into these terms. Suppose you approach the seller with this proposal: Mr. Seller, I owe you $90,000 and Ill be making the payments to you for the next 25 years. How would you like to get some or all of your cash within the next month or so, so you dont have to wait the 25 years to get it? Many times sellers will jump at this type of offer. Remember now, you are giving the seller a bonus by paying him off. Contractually, you dont have to do this; therefore, there should be some consideration to you for giving the seller this bonus. Customarily, your consideration would be a discount on what you owe. Typically, we would start at least 25 percent off whats owed. Sellers will obviously want to negotiate in some cases, so you must be prepared with the least amount of discount you can live with. If he goes with 25 percent, youd have $90,000 less 25 percent, or a $22,500 discount. If the seller agreed, youd have to come up with $67,500 and youd be paid in full. Just for having a little bit of knowledge, you could make $22,500 for a days work! Did you need an MBA for that? Did you need to be born wealthy or lucky? Of course not. You need some knowledge, some ideas, and a little action. Now, of course, your question is where do you get the $67,500 to pay the seller off. Simple you go to several of the banks youve established rapport with and ask for a $67,500 loan. The property is worth $100,000. Youre asking for a $67,500 loan, or only 67 percent loan to value. A banker will likely jump on that loan. Then consider, when youre explaining the need for the loan, that you are getting a $22,500 discount and reducing your debt from $90,000 to $67,500. The bank is going to think youre a genius, trust us. Weve negotiated up to 30% discounts, so it is a realistic technique that works.
Using the Rents

Once you have a few apartment units, you should go to your bank and ask for a line of credit for your rents. Heres the simple explanation, logic and reason: You tell the banker that your rents are due on the first of the month, as is your mortgage payment. However, your tenants sometimes dont pay until the 5th or 7th of the month. Tell him that you like to get all your payments made on the first and would like to get a $2,000 (whatever your rents are, plus add a little extra) line of credit. What youll do is cut the mortgage
payment checks on the first, using the line of credit. Then as your rents come in, youll pay the line of credit off each month. Your banker will love this sound business reason and logic for the loan. These are the types of loans banks love and the kinds of service theyre in business to provide. Dont be surprised if, when you ask for $2,000, the banker actually asks you if you think thats enough. If youre conservative with your request, theyll usually offer more. Surprise, surprise!
Partners
Dont overlook this hidden little gold mine. Short-term partners can help you grow much quicker. The concept for finding them and splitting the profits is simple. Youre the pro. You find the deals, you do all the work in finding, negotiating, buying and fixing (if necessary) the property. The partner puts up all the cash and you split the profits up to 50/50. When one investor was just getting started, he was having trouble getting loans from banks and he was low on cash. He found a six-unit building that was bargain priced. The seller was willing to take a pretty low down payment and he was willing to hold all the financing. This was a perfect scenario, especially since the property had a hefty positive, monthly cash flow. The only problem was the investor did not have enough cash to cover the down payment and the fix-up costs (fix-up was approximately $20,000). Also at this point, he could not borrow any more money from the bank. So there he was, stopped from proceeding any further toward his goal of financial independence. But this investor had learned, from reading books, listening to tapes, and filling his mind with as much positive information as he could, that there was always something that could be done to keep him going when he felt like he had nowhere else to turn. In other words, he may have been short on cash, but he was not short on ideas. Heres what he did: He approached the seller, since the seller was short on cash and didnt have any immediate buyers, and was totally truthful with him. He explained his goals to him and showed the seller his other properties. Then he found out the sellers needs. The sellers job was being transferred and he had to move. He didnt want to leave the property in the hands of a property manager he might not be able to count on; he wanted to sell. He was also an investor who had made money in real estate before, so he understood the game somewhat. Our investor told him he thought he could solve both of their problems. Why not become partners on the property? Our investor proposed the seller sell the property to a partnership that the two of them would form. They would buy at the sellers price and terms and split the down payment, each paying half (the seller just reduced the amount of the down payment by half, so he
actually came up with no cash himself). Their new partnership would then have a mortgage payable to the sellers wife and the payments would be made to her. The seller and investor together (with the sellers good credit) would go to the bank and borrow the fix-up money. Now the seller would be the stronger qualifier, but the investor would get credit as a borrower whos now qualifying for more loans, and paying them successfully. They agreed to borrow $25,000, even though the fix-up costs were only about $20,000, and each put $2,500 cash in their pockets. So our investor ended up with none of his money in the deal and now owned 50 percent of it. His end of the partnership was to oversee the entire fix-up, and handle the management of the property. He would be paid 10 percent of the gross rents off the top for managing ($240 per month). The partnership would then pay all of the building expenses from the rents and split the profits 50/50. This was a great deal for the investor and, boy, what a motivating catalyst. He solved his no-money problem, saw that this could continue to work, and it just made his confidence and belief in himself grow a hundred fold. It was a great deal for his new partner, too. He made some money by selling the building, and then made another profit as 50 percent owner of the new partnership when he sold. He was able to move with the peace of mind that the property was in good hands. Thats a great WIN-WIN deal.
How to Find Partners

Above is one example of how partners can be useful. It is also a good example of the creative use of a partner. Other ways to find partners might be through the use of simple, three-line classified ads in your local newspaper. For example, you might run an ad that says: Money partner wanted. Secured by real estate plus 50%. Call 951-8100. Weve used real estate agents as partners, too. Lets say you want to buy a property and a scrap real estate agent lists it. If its a $200,000 property, the commission to the real estate agent could be anywhere from $14,000 to $20,000. Remember, the seller is the one who pays the commission. Weve approached real estate agents many times on good deals and proposed that if we buy the property, they kick in their commission as the down payment and well give them up to a 50 percent ownership and split of the profits. Thats found money for them and us (or you). If the real estate agent doesnt sell the building, he makes nothing. Heres a chance for the real estate agent to get found money and turn it into long-term profits. We
may also (as part of the inducement) tell the real estate agent that, when we sell, well let him list the property, handle the sale, and let him get another commission on the re-sale. There are many creative ways to use partners. Keep an open mind and an open ear for any and all possibilities.
Calculate Your Net Worth

This article originally appeared in the Millionaire Mentor newsletter, our very own e-zine that serves as a powerful tool in helping entrepreneurs like you build and preserve wealth.
Do You Know How Much Youre Worth?

So you want to be a millionaire thats a great goal, but how far do you have to go to get there and how will you know when youve made it? Regardless of what your goal is or how you intend to reach it, you should know your net worth, and you should calculate it at least once a year. Essentially, your net worth is your total assets minus your total liabilities. And if you are managing your finances and investing wisely, its entirely possible for you to have a higher net worth than someone living a far more luxurious lifestyle. For purposes of net worth calculation, you dont need to distinguish between types of assets and liabilities. However, for your own financial management and planning, you need to be aware of the difference between liquid and non-liquid assets, as well as immediate liabilities and long-term debt. Liquid assets are cash or something of significant value that can be sold or otherwise turned into cash quickly. Non-liquid assets are accounts or other items of significant value that cannot be sold quickly, or if they are, would be subject to penalty. Immediate liabilities are debts you must repay within two years, such as automobile loans and credit cards. Long-term debt is payable over a longer period and typically includes real estate and business loans. Use the worksheet on the following page to figure your net worth:
Date _____________ Assets Cash in personal bank accounts (checking, savings, money market) Certificates of deposit, bonds, money market mutual funds, etc. Stocks and stock market mutual funds Liquid Assets Personal real estate (home, vacation home) Real estate investments Business interests (company ownership or partial ownership) Retirement plan investments Cash value of life insurance Personal property (resale value) Other assets Non-liquid Assets Total Assets Liabilities Automobile loans Student loans Credit card balances Other short-term loans Current bills and obligations Immediate Liabilities Mortgages Other long-term debt Long-term Liabilities Total Liabilities
__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________
__________ __________ __________ __________ __________ __________ __________ __________ __________ __________
Net Worth (total assets minus total liabilities)
__________
Avoiding Roadblocks on the Road to Success
Avoiding Roadblocks
Avoiding Roadblocks on the Road to Entrepreneurial Success

This article appeared in the Millionaire Mentor newsletter, our very own e-zine that serves as a powerful tool in helping entrepreneurs like you build and preserve wealth.
Roadblock Busters: Whats stopping you from starting your own business and what can you do about it?
By Jacquelyn Lynn How often have you said it? Id like to start my own business, but ... and then listed one of a myriad of reasons why you just cant take that leap. There is no getting around the fact that the path to successful entrepreneurship is exciting, challenging and littered with roadblocks. So we went looking for roadblock busters solutions to the obstacles that are keeping you from realizing your dream of starting your own business.
Roadblock: Fear of Failure

Small businesses fail at an alarming rate; what makes you think yours will be different? If youve done your planning, youll be able to answer that question quickly and with certainty. A thorough, well-thought-out business plan will go a long way toward building your confidence. When you consider each element of your operation and how they will function alone and together, youll be starting on a more solid foundation. As part of this process, take advantage of the variety of resources available to start-ups, such as the various Small Business Administration programs, entrepreneurship programs offered through colleges and universities, and local and state economic development opportunities. Never confuse confidence with blind optimism. Come up with worst-case scenarios and figure out how youll deal with them while youre still in the planning stages. Beyond your own internal fears, you may also be dealing with negative attitudes from friends and family. Consider what might be motivating them. Do you have a boss who doesnt want to lose you? Friends who dont have the courage to do what youre doing? Relatives who have tried and failed? Consider who is saying what to you. If the person is
successful in business, listen. But if they live from paycheck to paycheck just doing a job, put their opinion in context.
Roadblock: Loss of Financial Security

Speaking of paychecks, yours may not be as much as youd like, but at least it comes in steadily. Of course, thats just one way of looking at it. Consider this: when youre working for someone else, theres always a chance that you can lose your job, and your income; being self-employed may mean your income fluctuates, but it also means you cant get fired. Another point to consider is that as an employee, youll likely always have a cap on your earnings; as a business owner, theres no limit to what you can earn or how big you can grow. If its going to take some time for your new venture to start generating revenue, you may be able to start your business on the side while keeping your job. Consider scaling down your lifestyle as much as possible well in advance of your start-up date. Economizing for at least several months before you open your doors accomplishes two important things: first, you get accustomed to living on less before you actually have to; and second, youll be saving money you can then use for your business.
Roadblock: Replacing Benefits

Insurance, a retirement plan, paid holidays and paid vacations are the primary benefits youre probably getting now that youll have to provide for yourself once youre on your own. And there may be other benefits, depending on how creative and generous your employer is, that youll have to either replace or do without when you resign. Begin by analyzing what benefits you actually need, and what benefits are a pleasant bonus. In most cases, youll be primarily concerned with health, life and disability insurance. Buying such coverage yourself may seem expensive, but its worth it when you weigh the cost against the risk. And if youre making more in business for yourself than you were as an employee, youll be able to afford to pay more for insurance. This is a condensation of an article that originally appeared in Entrepreneur magazine. Reprinted with permission of the author.
Mindfeed & How You Can Profit from It
Mindfeed
Mindfeed & How You Can Profit from It

Its often been said, knowledge is power, but its especially true when it comes to real estate investing. The more knowledge you have in real estate, the more you will increase your investing power. We call it "mindfeed." The more you feed your mind with the skills and strategies of successful real estate entrepreneurs, the closer you get to becoming one yourself. Start by reading everything you can on the subject of real estate, especially the materials written by proven leaders in the field. Collect both real estate books and magazines, and even compile a scrapbook of informative articles you come across in newspapers, newsletters, and online. And dont forget to include stories that motivate you and inspire you to keep moving forward, because motivation is part of your success, too. Additionally, the real estate investment market offers specialised courses that have been created to help entrepreneurs take full advantage of real estates potential. For example, if you find you enjoy the benefits of helping others with foreclosures, you can purchase books, courses, or audio/presentation programs specifically developed to teach you more about this one subject area. You can also find free seminars where you can learn more about real estate investing, as well as online resources where you can find tips and tricks of the trade. Even government sites have information to help you, like free information about what to look for in a home inspection. And there are online and traditional sources for finding legal and tax information, developing negotiation skills, working with bankers and creditors, etc. The important thing to remember is that knowledge truly is power. The more knowledge you have on hand, the more profitable you could become today.
Your Action Plan

Your Action Plan
Your Action Plan

As any successful entrepreneur knows, you should never put off today what could be making you money tomorrow. There is absolutely nothing about the people who made millions in real estate that is any different from you except that they took action! Now, its your turn!
What About Finding the Money to Invest?

Dont let lack of money stop you from moving forward. If you dont think you have enough money to start investing in real estate, think again. Any amount you can invest has the potential for returns. You just need to make the wisest choice with your investments based on your available funds and you need to understand and seek out the opportunities available to use creative financing techniques. Remember, weve already given you several tips for improving your current credit situation, establishing relationships with bankers, or even looking for partners to help you fund your investments. Additionally, we can show you a multitude of techniques that will help you secure properties with little or no money down. We can also teach you ways to work with investment partners, to use seller financing to your advantage, and to work in the foreclosure market where great deals that require minimal expense happen every day. But the important thing to realise immediately is that you can do this and you can start doing it today regardless of where you stand financially. Think about this: even if you have small sums to invest, you can start building cash now that you can use later to fund your investments. And every remarkable deal you put together and profit from gives you more cash to invest in real estate. But just to show you some quick ways to start putting aside money right now for your investments, here are several ideas you can start using now to find cash in your everyday expenses:
Find Money in Housing Expenses

Mortgages If you own your own home, probably the biggest debt you have each month is your mortgage payment. And likely, the biggest portion of your mortgage payment is the interest you pay each month. Therefore, refinancing your home could save you several thousand dollars each year.
Check your local newspaper for the current interest rates being offered by lenders in your area. Even a quick review of rates will show you the wide variety of rates available. If those rates are even 1-1/2% lower than your current interest rate, it may be worth refinancing. Begin by calling your current lender and discussing the possibility of refinancing with them. Then call several other lenders to compare rates. You also need to compare closing costs. The home mortgage market has become very competitive in the last several years. Because of the increased competition, closing costs have become very negotiable. With some time and effort, you may be able to secure new financing with little or no cost to you. Be aggressive in your negotiations with a potential lender. Remember the negotiations deal with your money and there is a large market out there of mortgage brokers who would love to have your business. If you cannot get the terms you want from the first broker, keep looking. Home Equity Loans Just like refinancing, the market for home equity loans has become very competitive, as evidenced by the many companies advertising on television today to attract new customers for home equity loans. Contact several lenders and determine the current interest rates available and the costs of establishing the loan. Keep in mind as you discuss options with lenders, that you want an interest rate that is lower than the earning you believe you will be able to safely get with your real estate investments. Again, we recommend that you be aggressive in your negotiations for both the costs of the loan and the interest rate. The amounts quoted by the lender when you first contact them may not be as low as they are willing to go in securing your business. For Renters Most people assume that if they do not own a house or property, they have no power in the housing market, but thats simply not true. The amount of rent paid to your landlord is your money and, as such, is always subject to negotiations. Spend some time with the classified section of your local newspaper and check out the rental rates for housing similar to your current situation. Over the last decade, there has been a rapid growth in families purchasing homes. This has resulted in a higher level of vacant rental properties in many areas of the country. If you live in one of those areas, you may discover that the cost of renting in your area varies widely. If the vacancy rate has increased in your area, you live in a buyers market and may have more power than you realise.
Your Action Plan
Once you have determined the rental rate for your area, contact your current landlord and ask to renegotiate your rental rate. Explain what you have learned about the comparable rates in the area and ask for a more favorable rate. Do not assume that what the landlord asks for is the only amount he or she would accept. There may be a great difference between what a landlord wants and what they are willing to take to keep the property occupied. Remember that having someone paying rent, even if it is less, is income for the landlord. If the property is vacant, there is no income. If your landlord is not willing to reconsider your rent, even though you have presented him with a number of comparable rental opportunities that would cost you less per month, you still have one more option: you can move. This may seem dramatic, but remember that we are talking about your financial future. That extra money your landlord wants should be going into your investments, not his. Additionally, if you are renting, a simple and quick way to reduce the cost of your rent every month is to share expenses with a roommate.
Find Money in Transportation Expenses

Next to housing costs, the average person spends the most money on transportation costs. These include things like car payments, car maintenance costs, car insurance, and so forth. But there are practical ways to reduce these costs. Although the savings in transportation expenses will likely be less than those you can find in lowering your housing expenses, it is important to recognise that we could still be talking about hundreds of dollars each year. Refinance Most people will shop carefully for a car, but then will accept a loan with little or no comparison-shopping. If you have had your car for more than six months, consider refinancing your auto loan. As has happened in the mortgage field, the number of lenders willing to refinance cars has increased dramatically over the last several years, creating a buyers market. Once you have established you are a good credit risk, lenders will compete for your business. Contact several banks and credit unions in your area for current interest rates and loan costs. Keep in mind that some lenders will quote a slightly higher rate than they are willing to accept. If you find a lender you would like to work with, but who does not have the lowest rate, make a counteroffer. Often, the lender will accept your offer. Remember that you have proven you will make your payments. You are what every lender wants as a customer.
Lower Your Maintenance Costs If you had kept track for the last year, you would probably be amazed by how much money you spent keeping your car running. This includes not only any major repairs, but also the daily costs like gas and oil. Spending time to find the best prices can put hundreds of dollars a year into your investment fund. Here are some suggestions for lowering your maintenance costs: Ask for rebuilt parts when repairs are necessary. Before agreeing to major repair work on your car, negotiate the cost of that repair. There are two areas where negotiation is possible. One is the type of part that will be used to replace the faulty one. Remanufactured or rebuilt parts that meet the manufacturers specifications are cheaper than new parts. They should also come with a warranty against failure. The other area is in the hourly shop rate. Many garages have a fixed rate for each type of repair. This is based on the projected time the repair will take. Often, these times are not accurate. Negotiate the labor charge for the repair before having the work done. If the garage is not willing to negotiate the labor charge, you should look for another garage. Shop for the best gas and oil prices. Look for the lowest gas prices when you are driving. If you see a good price, stop and get gas. Dont wait until the tank is empty and you are late for work, so you end up using the first gas station you come to. The nickels and dimes you save by shopping for the best prices quickly add up. Any auto expense over $100 is negotiable. Any time you spend money on your car, keep this concept in mind. Whether you are buying tires, putting in a new stereo, or tinting the windows, negotiate. Saving $20 that you can invest gets you that much closer to your goals.
Find Money in Daily Expenses

Most of us spend more money each day than we realise. Take a week and keep an accurate record of all the money you spend. Then visit several websites for ways to reduce that spending without depriving yourself, such as cutting back on eating out and making quick and simple dinners rather than purchasing pre-packaged foods. Visit www.cheapskatemonthly.com for tips and suggestions on living well for less money. And you can get suggestions for finding money in your current budget from the website www.armchairmillionaire.com.
Bottom Line
Your Action Plan
Remember that the most important thing about finding money to invest is to begin today. Small amounts become big amounts if you will only begin. Dont wait another day to start gaining control over your financial future!
Do I Have What It Takes?

To be successful in any field, you must acquire specialised knowledge. Successful real estate investors didnt become successful overnight. They first had to acquire the requisite knowledge and skills. They read materials like youre reading now. They attended classes to learn all they could about the business. They read books on the subject matter and they surrounded themselves with people in the business who could show them the way. Especially when it comes to investment strategies, it pays to never stop learning. Make a personal commitment to educate yourself every step along the way, not just as you begin your career in real estate investing. Take courses designed to give you advanced training in real estate practices and the types of properties and opportunities youre most interested in, read books and articles on real estate investing, continuously network with other professionals in the business, maintain your entrepreneurial spirit, and find mentoring or coaching resources that can motivate and inspire you.
Get Yourself Ready

One way to get started with real estate investing is to create an atmosphere where you can do your work productively. Perhaps you already have a have a fully equipped home office, but if you dont and youre ready to start investing in real estate, this is a good time to start thinking about setting one up. Youll want to consider a computer with Internet access and e-mail capability, real estate and contract preparation software (optional, but highly recommended), a printer, fax machine, and other items commonly found in most offices. While you can invest in real estate without using a computer, it makes investing much simpler. You can use it to: create professional looking correspondence, documents, and contracts; communicate easily with buyers and sellers; help you analyze cash flow and project profits; research and evaluate potential investment properties online; track and record your target properties and purchases; and more.
Next, in order to save money, time, and effort, you must be organised. This is where a day planner or electronic organiser can come in handy. There are also some really great software programs on the market that will help you get and stay organised, including those with matching software that can be downloaded to a personal digital assistant (PDA device), making both schedules and even documents mobile. Also, among items commonly found in most home offices, a simple two-drawer filing cabinet is one of the most useful. Make sure both the cabinet and the folders are able to handle legal size documents, as you will be dealing with legal size documents frequently. Here, you will keep legal forms, records of properties you have visited, rental studies, articles concerning real estate, receipts for expenses, etc. A fireproof container for your most important documents is another important consideration. Also, you should consider storing backup computer disks or CDs in a separate location. Additional items or services you will need include voice mail or an answering machine, a phone (preferably a cell phone as this will let you communicate quickly in the field), an area map so you can chart prospective communities to invest in and map routes to conduct research of properties, a camera (digital preferred, but a standard camera and film will do), and common office supplies, such as a stapler, pads of paper, and pens. Youll also want an amortization table or real estate calculator.
And Then Get Going!

Are you ready to take action? Great! Below, weve provided a list of activities that will get you up and running. As you take each action, you will learn what you know and what you dont know. Youll also find areas of this business that interest you more than others and youll want to learn more to fine-tune your skills in that particular area. Remember were here to help you. We can offer you the training you need and the tools to keep feeding your mind and growing your business. So dont be afraid to ask us! In the meantime, dedicate a specific amount of time each day or week for investing in real estate. You set the pace and your goals. If you start taking action and dedicate yourself to it, soon it will become habit and habit and experience will eventually pay off with the ideal property. Youll see. The following are 20 ways to get the ball rolling. 1. Start reviewing classified ads in the newspaper and circling ads containing motivated seller phrases. Remember, these are phrases like motivated seller, price reduced, must sell, sacrifice, TLC, transferred, below market
Your Action Plan
value, owner financing, assumable, non-qualifying, etc. Focus on For Sale By Owner (FSBO) properties. Reviewing the ads will give you a feel for the marketplace, and you will begin to see opportunities. 2. Pick up real estate magazines and FSBO publications to get a feel for prices and markets. 3. Drive through local neighborhoods. Look for FSBO signs, and take down phone numbers. Look for distressed and mismanaged properties. 4. Make phone calls to homeowners. See how much information you can get over the phone. There is no need to schedule an appointment if you are not interested in moving any further and/or if you are just getting a feel for how to talk to sellers right now. Dont worry if you dont say it right the first time or if you miss something. You will get it all in time. 5. Already called 10 to 20 homeowners? Make an appointment to see a property. Ask questions and take notes. Gain experience talking one-on-one with a seller. 6. Obtain contracts for the purchase of real estate. Check with an office supply company or the Board of Realtors. Also, make sure you have addendum forms. This is where real estate contract preparation software will come in very handy. You can contact us to order our comprehensive software program that not only automates much of the work youll be doing in real estate, but also provides the forms you need. 7. Grab a clipboard and a legal pad and pen and go out to look at properties. Dont attempt to negotiate if you dont feel ready to. Just get used to viewing and evaluating. Check out the property thoroughly; ask pertinent questions; and record your evaluation for your files. 8. Look for the opportunities in any properties you find appealing. Could you assign the right to purchase the property to another party? Structure a limited moneydown deal? Acquire the property through assumption of financing? Consider touching base with a professional and having the situation reviewed for opportunities. 9. Found the ideal property? Draft a contract. Have your lawyer double-check the figures and clauses. Submit the offer to the homeowner and see what happens. Will the owner ignore the offer and let the deadline expire? Will the owner submit a counteroffer? Time will tell. If they dont respond to your contract/offer, simply put their contact information in a database with a note to call back in 30, 60, or 90 days. Situations change over time.
10. Examine your credit reports and increase your available credit. 11. Drop by a title company or visit with a real estate attorney. Ask about their fees and services. Also ask about volume discounts and the process in general. 12. Invest in some letterhead and business cards to let people know you are a serious investor. 13. Contact local real estate brokers, brokers who seem willing to work with you, brokers who specialise in distressed property, etc. Establish solid contacts as they will come in handy. 14. Drop by the courthouse. Research a property (yours or a friends may be a good starting point). The clerks will help you the first time or two with your research or point you in the right direction. There is also information online for many counties. 15. Attend a real estate auction. Learn how the process goes. Network with attendees. 16. Tell associates, friends, and peers that you are looking for properties. 17. Start developing a database of buyers. Spread the word among your contacts. You may even post flyers or ads to acquire a buyers database. 18. Check out the Money Available section of the newspaper. A number of individuals offer cash to invest in real estate and may be a good source of capital, contacts, and properties. The same is true of the money for mortgages section (We buy mortgages). 19. Purchase some real estate investing books or materials and spend some time reading and researching the information that is out there. 20. Review your materials at regular intervals. Keep your goals in mind. Most of all, keep the commitment to spend a specific amount of time looking for ideal properties, studying investment strategies, and learning more about the industry. By taking these simple but important steps, you will be well on your way to a successful career buying and selling real estate. Again, the important thing is to learn as you go and to gain experience so you can recognise a prime opportunity when it comes and be able to act accordingly.
Time Management Forms

Have you ever lamented that there simply wasnt enough time in the day to do all the things youd like to do? Weve probably all felt that way at one time or another. But as anyone with an entrepreneurial spirit knows, when building your own business, youre more likely than ever to find yourself wishing for more time to accomplish your goals. So to help you avoid feeling challenged for time, consider using the time management forms weve included here and adhering to the tips below to make the most of the time you do have. Learn to say no and mean it. Remember your time is valuable, and you have the right to say no when too many activities are going to cut into the time you need to build your business. Certainly, you will need to find balance between your personal and business life, but when it comes to unnecessary meetings, avoidable distractions, too many phone calls, and far too much demand on your time, learn to say no. Get organised. Your personal organizational skills will come into play a great deal when managing your own business. A tidy desk, an atmosphere that promotes creativity, and a dedicated space where you make work the focus will be essential to your success. Keep contact information, important files, and the paperwork you use daily close at hand. Dont waste time searching for things that should be within reach. Dont let the small administrative details, like filing, get out of hand because youll only waste more time searching for the item later. Be assertive about sticking to your schedule. Tell people ahead of time you only have a few minutes to be on the phone or to sit for an appointment. Be courteous but be efficient. Schedule similar chores, activities, errands, or follow-up items at the same time. Grouping your efforts maximises time. For example, dont run to the Post Office twice in one day because you didnt plan ahead for two packages. If two appointments are near each other, schedule them during the same part of the day to avoid heading that direction twice. And consider proximity when choosing vendors. Is a good printer near a good mailing house? Is there an office supply store with later hours near your office? Use computers, software tools, personal digital assistants (PDAs), day planners, cell phones, and other technology and organizational tools to make the most of your time. Save time by conducting research online, use software tools that expedite billing and accounting tasks, keep track of your schedule and contacts with day planners or PDAs, use your cell phone to follow up with contacts while waiting in line, etc.
Delegate responsibility. Are you doing too much? Is a secretary necessary, or a bookkeeper? Do you have an assistant who could do more for you? Do you need an interns help? Is someone on your team not pulling their weight? Is a business partner not sharing in the responsibilities? Are there tasks someone else can be doing that are eating up your valuable time? Use spare time wisely. Every minute counts. Use travel time to listen to tapes that provide Mindfeed. Use time in line to read books about your business or magazines related to your industry. Keep the lines of communication open. Make sure others know your plans so they dont expect you when youre not available and they understand what is important to you. Figure out when you are most productive and make the most of that time. Are you most productive when the children are asleep, first thing in the morning, during the weekend when youve had time to relax, on certain nights when television programs dont matter to you or when loved ones are busy doing something else? Check yourself. Are you having trouble accomplishing what you need to accomplish in a day? Are you stretched too thin? Then keep a log of your daily activities and review them periodically to see where you might be going wrong. Were there appointments that didnt need to take place, phone calls you could have grouped into one timeframe, errands that could have been run at once, distractions that could have been avoided, etc.?
No matter how you use your time, if you dont accomplish everything you wanted to accomplish in a day, dont waste time worrying about what didnt get done. Get a good nights sleep and wake up tomorrow refreshed and ready to tackle the tasks at hand.
Glossary of Real Estate Terms
A
Accelerated Depreciation A method of cost write-off in accounting practice in which allowances for depreciation of a wasting asset are greater in early years and decline according to a formula. Accelerated Capital Cost and Recovery System (ACRS) The methods for determining depreciation allowances required by the Economic Recovery Tax Act of 1981. Acceleration Clause A condition in a loan contract or a mortgage note that permits the lender to require immediate repayment of the entire balance of the loan if the contract is breached or conditions for repayment occur. Accrual Accounting An accounting system where income is realised when earned, not when received, and expenses are recorded when incurred, not when paid. Adjustable Mortgage Loan (AML) A flexible mortgage instrument approved by the Federal Home Loan Bank Board for use by federal savings and loan associations which allows adjustment of the interest rate as often as monthly based upon changes on an interest rate index. Adjusted Basis The difference between the cost of the property and total depreciation claimed in prior years. Adjusted Net Operating Income Net operating income plus reserve for replacements. Adverse Action The refusal to grant credit more or less on terms requested by the applicant; or the refusal to increase the amount of credit available to an existing borrower, when the borrower has requested an increase in accordance with standard procedures. Affidavit A statement or declaration reduced to writing and sworn or affirmed to be before an officer who has authority to administer an oath or affirmation. Agency The business of one entrusted to another. Alias An assumed name; also known as (a.k.a.). From the Latin alias dictus, otherwise called. Alienation Clause A clause in a mortgage or charge of land that demands payment in full upon sale of property. Similar to an acceleration clause. Allotment An amount of money set aside by investors or institutions for future investment in mortgages.
Amortization The gradual reduction of a debt by means of periodic payments sufficient to pay principal and thereby liquidate a debt. Annual Loan Constant The total annual payments of principal and interest, annual debt service, on a mortgage with level-payment amortization schedule, expressed as a percentage of the initial principal amount of the loan. Annuity Capitalization A process of capitalization in which the income from a property is converted to a present value under the assumption that the income stream will consist of a finite number of equal payments. Appraisal A supported, defended, estimate of the value of property rights as of a given date. ASA The designation awarded by the American Society of Appraisers (ASA), to its senior members who appraise various types of personal property as well as real property. Assessed Valuation The valuation placed on real or personal property for the purposes of taxation. Assessment A charge made against a property by the state, county, city or other authorised district. Assignee The one to whom a mortgage and mortgagee note is transferred and assigned (the purchaser). Assignment A transfer of any current or future interest in property, real or personal. Assignor The one who is transferring and assigning a mortgage and mortgage note (the mortgagee). Assumption A method of selling real estate wherein the property purchaser agrees to take over the primary liability for payment of an existing mortgage. Assumption and Release Agreement A written agreement releasing the mortgagor from personal liability under the mortgage because a second party (the property purchaser) has agreed to meet the mortgagors obligations. Attachment A seizure of a defendants property as security for any judgment a plaintiff may recover in the pending action. Automated Clearinghouse (ACH) An electronic drafting system that debits a lenders authorised bank account and electronically transfers funds to a designated payee account.
B
Balloon Mortgage A mortgage that has level monthly payments that willfully amortise it over a stated term, but which provides for a balloon payment to be due at the end of an earlier specified term. Balloon Payment The remaining balance of a mortgage that must be paid in a lump sum at the end of a mortgage term. The amount may represent slightly more than a monthly payment or may be substantial. It occurs because the fixed installment did not fully amortise the mortgage, either accidentally or intentionally. Band of Investment Analysis A method of deriving an overall rate based on the relative proportion of debt and equity represented in similar transactions. Bankruptcy A proceeding in federal court in which a debtor, who owes more than his or her assets, can relieve the debts by transferring his or her assets to a trustee. This affects the borrowers personal liability for a mortgage debt, but not the lien of the mortgage. Basic (Export) Activity Exchange of goods produced locally for money earned outside the community or metropolitan area. Basis Point 1/100 of 1%. For example, 7-1/2 basis points equals 0.075% or 0.0075. Basket Clause A regulatory provision allowing financial institutions to make a certain proportion of loans or investments that would otherwise be illegal. Beneficiary The person designated to receive the income from a trust estate or trust deed. Biweekly Mortgage Payment A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are drafted from the borrowers bank account. Blanket Insurance Policy A single policy that covers more than one piece or property (or more than one person). Blanket Mortgage A development in which several properties are secured by one mortgage. Boot An asset or liability transferred as part of an exchange of realty. Broker One for whom a commission or fee brings parties together and assists in negotiating contracts between them. In real estate transactions, the broker usually brings together the buyer, the seller, and the mortgage lender.
Bundle of Rights The concept of property ownership which recognises ownership of property as consisting of a number of rights or benefits. Included are the rights of use, exclusion, and disposition. Also, the rights can be divided among a number of different legal estates, such as reversions, life estates and leaseholds.
C
Call Option A provision in the mortgage that gives the lender the right to call the mortgage due and payable at the end of a specified period for whatever reason. Capital Gain The amount by which the net proceeds from resale of a capital item to exceed the adjusted cost, or book value of the item. Capitalization The process of converting into present value a series of anticipated future installment of net income. Cash Basis Accounting An accounting system where income is realised when collected, not when earned, and expenses are recorded when paid, not when incurred. Cash Break-even Ratio Operating expenses plus debt service minus replacement reserves, divided by effective gross income. This ratio provides an investor with a measure of all cash charges against effective gross income. Cash Throw-off Net operating income less annual debt service; also known as before tax cash flow and gross spendable income. Certificate of Estoppel A statement of material facts or conditions upon which another person can rely. Closing The time or situation when title or real estate is conveyed from seller to the buyer; full payment is made by the buyer to the seller; appropriate documents are transferred, and prorationing of expenses occurs. Cloud On Title A proceeding or instrument such as a deed, deed of trust, or mortgage, or a tax or assessment, judgment, or decree, which, if valid, would impair the title to the land. Cognovit Clause Words in a mortgage note which authorise the lenders attorney to obtain adjustment lien against the debtors real property.
Coinsurance Clause A clause in an insurance policy contemplating that the policyholder will carry insurance to some named percentage of the value of the property covered. In return for this, the policyholder benefits through a reduction in rate. Collateral Stocks, bonds, evidence of deposit, and other marketable properties that a borrower pledges as security for a loan. In mortgage lending, the collateral is the specific real property that the borrower pledges as security. Commercial Banks Lending institutions that primarily make short-term loans to businesses and individuals. Banks create money through their affiliation with the Federal Reserve System. In addition to short-term commercial loans, they make many other types of loans, such as mortgage loans, and provide many financial services. Commitment A pledge or engagement; a contract involving financial responsibility or a contingent financial obligation to be performed in the future; a promise by a lender to make a specific loan to a prospective borrower. Comparable Sales Approach Method of appraising real estate by comparing sale prices of properties that have sold recently to account for value differences in a property. Conditional Sale Contract A contract for the sale of property, the property to be delivered to the buyer; the seller to retain, however, the title thereof until the conditions of the contract have been fulfilled. Condominium A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of limited common areas. Construction Loan A short-term loan made to a builder to finance the construction of a building. Contract of Deed or Land Contract An instrument by which a prospective buyer pays for a property in installments. Legal title is conveyed in the future after payment of the full price or an otherwise specified amount. Contract Rent The periodic payment for the use of a property specified in the lease. It may differ from the market rent and the rate that would be charged currently if the lease were to be negotiated in the open market. Contracts An agreement between two or more parties to do or not to do a particular thing. Conventional Mortgage A mortgage that is not insured or guaranteed by the federal government.
Convertible ARM A type of adjustable-rate mortgage that includes an option for the mortgagor to change to a fixed-rate mortgage on one of its early interest rate adjustment dates. Corporation A legal entity featuring ownership by means of transferable shares, the shares can be sold, of stock and limited liability. Cost The expenditure of resources necessary to bring a good or product into existence. Cost Depreciation Approach A method of appraising real estate by subtracting all elements of accrued depreciation from the cost of reproducing the improvements and adding to that result the value of the land as estimated separately. Cost of Funds Index An index that is used to determine interest rate changes for certain ARM plans. It represents the weighted-average cost of savings, borrowings and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. Covenant An agreement between two or more persons, entered into by deed, whereby one of the parties promises the performance or non-performance of certain acts, or that a given state of things does or shall, or does not or shall not exist. Credit Life Insurance A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force. Curable Defect (physical or functional) A deficiency in a building, the correction of which adds at least as much value as the cost to cure the defect.
D
Debt Service Coverage Ration The amount by which net operating income can decline and still be adequate to cover a mortgage payment. Declining Balance Depreciation A method of depreciating an asset by use of a fixed percentage applied to the successive balances remaining after previously computed amounts of depreciation have been deducted. Deed An instrument in writing under seal, duly executed and delivered, containing a transfer, a bargain, or contract, used in conveying the title to real property from one party to another. There are two general types of deed: the quitclaim and the warranty. Under the quitclaim deed, the seller conveys property to the purchaser, the title being only as good as the title held by the seller, who conveys all claim, interest or right to the property as far as his own title is concerned. Under a warranty deed, the seller also conveys all
claim, right, and title to the property, but also warrants the title to be clear, subject only to such matters as may be shown in the deed. The warranty is recognised by law as the subject for future restitution of loss to the purchaser if the seller conveys any defects in the title. A seal is not required in some states; the term grant deed is used in place of warranty deed in some states. Deed Restrictions Limitations placed in a deed limiting or restricting the use of the land. Deed of Trust A sealed instrument in writing, duly executed and delivered, conveying or transferring property to a trustee. Default The failure to fulfill a contractual agreement. Deficiency Judgment Judgment granted after a suit to recover a difference between a legally imposed indebtedness and the dollars received from a foreclosure sale of the debtors assets. Depreciation A loss of utility and, hence, value from any cause. Direct Capitalization The conversion of anticipated net income into present value by dividing the income by an appropriate rate that reflects the prevailing relationship of net income to selling price for comparable properties being sold in the open market. Disclosure This is provided to clients; it is a summary of your loans and the costs associated with them. Discounting (Charging Points) Withholding a portion of a loan in order to adjust a contract interest rate, nominal rate, to competitive market interest rates. Disintermediation Withdrawal of funds from savings accounts in thrift institutions for the purpose of investing them in higher yielding, short-term securities U.S. Treasury certificates and notes. The process occurs during periods of high interest rates. Due-On-Sale Provision A covenant in a mortgage that allows the lender to call the mortgage due and payable if ownership of the mortgage property is transferred.
E
Easement A right or interest in the land of another that entitles the holder thereof to some use, privilege or benefit such as to place pole lines, pipeline, road thereon or travel over.
Economic Base The economic activity of a community which results in the exporting of goods and services to other areas and thus attracts income into the community from outside its borders. Economic Life The total period over which improvements to real estate contribute to the value of the property. Effective Age The years of age indicated by the condition and utility of a structure. Effective Gross Income The estimated potential gross income less allowance for vacancy and collection loss plus other income. Eminent Domain Governmental power and authority to acquire private property within its borders for public use upon payment of just compensation. Encroachment An unlawful extension of ones right upon the land of another. Equity Value in excess of a mortgage or deed of trust or value of an interest in a contract of sale. Equity Dividend Rate The ratio of annual cash throw-off to the original equity investment. Equity of Redemption A right which the mortgagor (borrower) of an estate has of redeeming it, after it has been forfeited by law by the non-payment, at the time appointed, of the money secured by the mortgage to be paid by paying the amount of the debt, interest and costs. Escalator Clause A phrase in an agreement providing for an adjustment of a price, rent or interest rate. Escrow Securities, instruments, or other property deposited by two or more persons or parties with a third person or party, to be delivered on a certain contingency, or the happening of a certain event; when used in the expression in escrow, in trust or trust, the state of being so held. The subject matter of the transaction is the escrow; the terms with which it is deposited with the third person or party constitute the escrow agreement; and the third person or party is the escrow agent. Execution A writ issued in the name of the people, under the seal of the court, and subscribed by the clerk, or issued by a justice of the peace directed to a sheriff, constable, marshal, or commissioner appointed by the court, to enforce a judgment against the property or person of a judgment debtor.
Externalities Influences emanating from outside a property which affect it and other properties, whether vacant land or improved property. Equity Dividend Rate The ratio of annual cash throw-off to the original equity investment.
F
Federal Deposit Insurance Corporation (FDIC) Governmental agency whose primary functions are supervision and insurance of accounts. Federal Home Loan Mortgage Corporation (FHLMC) A government related agency that provides a market for those wishing to sell previously originated mortgage loans. It primarily buys conventional loans from savings and loan associations. Federal Housing Administration (FHA) An agency of the U.S. Department of Housing and Urban Development (HUD) which insures private lending institutions against loss on loans under various housing programs established by programs. Federal National Mortgage Association (FNMA) A government-related agency that provides a market for those wishing to sell previously originated mortgage loans. It deals primarily in government-underwritten loans. Federal Reserve System (FRS) An independent government agency consisting of a Board of Governors and 12 regional banks that serve as a reservoir of funds for most of the nations commercial banks. The system allows for the creation of money through the system of reserves according to policy established by the Board of Governors. Through various tools. The Fed can speed up or slow down increases in the supply of money. These changes, in turn, are usually felt in increasing or decreasing interest rates. Fiduciary One who holds a thing in trust for another, such as a trustee. First Mortgage A mortgage that is first lien on the property pledged as security. Fiscal Policy The taxation and spending plans and patterns of the U.S. Government. Fiscal Year A corporations accounting year; it does not always start on January 1. Fixed-rate Mortgage A mortgage that provides for only one interest rate for the entire term of the mortgage. If the interest rate changes because of enforcement of the due-onsale provision, the mortgage is still considered a fixed-rate mortgage. Forbearance The waiving of a term of a mortgage.
Foreclosure The legal process by which a mortgagor of real or personal property or other owner of a property subject to a lien is deprived of his interest therein. The usual modern method is sale of the property by court proceedings or outside of court. Form Report A special type of appraisal report that can be completed relatively quickly and easily. Fractions When dealing with mortgage notes, this term refers to a portion of the note. Fully Amortised ARM An adjustable-rate mortgage that has a monthly payment sufficient to amortise the unpaid principal balance (at the interest accrual rate) over the mortgage term.
G
Gap Financing A loan obtained by a builder to cover the potential difference between a permanent loan commitment and a construction loan, the amount of which is based upon a specified occupancy rate. Generative Function A product or service line of establishments that a customer intends to patronise when a shopping journey begins. Going Concern Value The value of a business considered as operating enterprise as opposed to a collection of individual groups of assets and liabilities. Government National Mortgage Association (GNMA) A governmental agency under HUD that provides a secondary market for mortgages granted under special purpose government programs. Graduated Payment Adjustable Rate Mortgage (GPARM) A mortgage that combines the features of a graduated payment mortgage and an adjustable rate mortgage. Payments are increased yearly during the graduated payment period and do not necessarily reflect changes in the interest rate during that period. At the end of any graduated payment period, if there is no option for an additional graduated payment period, the mortgage characteristics are those of a regular adjustable rate mortgage. Graduated Payment Mortgage (GPM) A type of mortgage loan that allows lower payments during the loans early years than would be the case with a standard fixed payment mortgage. The payments rise by a specified percentage usually during the loans first five to ten years. Grantee He to whom a grant is made.
Grantor He by whom a grant is made. The seller of real property, i.e., the grantor in a deed, gives up title. Gross Income (Rent) Multiplier (GIM) The relationship between sale price (value) and either Potential Gross Income or Effective Gross Income.
H
Hazard insurance A contract whereby, for an agreed premium, one party undertakes to compensate the other for loss on a specific subject by specified hazards, such as acts of God or war. Highest and Best Use, Improved Property Existing improvements which remain the highest and best use until a new use of the site generates sufficient value to justify demolition of the existing improvements and construction of new improvements. Highest and Best Use, Vacant Site That use of a site which results in maximum productivity and return on investment. High-ratio Loan A loan for more than 75% of the appraised value of a property; according to federal law, it must be insured. Home Bank Loan Act (1932) Created the Federal Home Loan Bank System. Home Mortgage A residential mortgage on one-to-four family property. Home Owners Loan Act (1933) Gave all savings and loan associations the opportunity to apply for a federal charter. Homestead Estate The rights of record of a head of a family or household in real estate, owned and occupied as a home, which are exempt from seizure by creditors.
I
Income Capitalization Approach A method of appraising real estate by which a propertys annual net operating income is divided by a rate reflecting a return on and of the investment. The rate is obtained from market transactions of similar properties, and the resulting number is an estimate of market value.
Incurable Defect, Physical Deterioration An item which is worn out and costs more to replace than the value added by the cure. Incurable Functional Obsolescence Defects in a buildings basic design or layout; an insufficient number of bathrooms and an inefficient traffic pattern are good examples. The cost to cure such defects is greater than the value added by the cure. Index A number derived from a formula used to characterise a set of data, which serves as an indicator for determining interest rate changes on ARMs/GPARMs. Most standard plans have used indexes based on Treasury bills. Individual Investors Private investors, unaffiliated with any organizations or institutions, who are purchasing a mortgage for their own profit. Sellers of real estate, who hold the paper on the property they sold, are included in this category. The regulations for licenses in any state are generally there to protect the private investor. Installment Sale A transaction in which a portion of the selling price for property is received in future periods. Insurable Value The portion of the total value of an asset(s) that is acknowledged under the provisions of an insurance policy. Interest Accrual Rate The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payment, although it is not used for graduated payment mortgages and adjustable rate mortgages with payment change limitations. Interest-In-Advance Mortgage A mortgage for which the interest portion of each months principal and interest payment covers the period between the first and last day of that month (rather than of the preceding month). Interest Rate Buy Down Plan An arrangement wherein the property seller (or any other party) deposits money into an account so that it can be released each month to reduce the mortgagors monthly payments during the early years of a mortgage. During the specified period, the mortgagors effective interest rate is brought down below the actual mortgage interest rate. Interest Rate Change Date The date on which the mortgage interest rate changes for an ARM/GPARM; the effective date that a new interest rate begins to accrue on an ARM MBS pool. Interim Financing A subordinated loan from a land seller to a developer during the period the developer has a first-lien construction or development loan from an institution lender.
Intermediation The process of depositing funds in financial institutions, which serve as intermediaries in the flow of funds for investment. Internal Rate of Return The interest rate that discounts future cash flows and cash reversion from a project equal to the initial investment. Investment Entry Point (Urban Real Estate) Refers to the relative age of a property at the time of purchase by an investor with respect to the propertys time line.
J
Junior Mortgage Any mortgage that provides a lien that is subsequent in priority to another mortgage.
L
Leasehold Financing A loan for which a long-term leasehold serves as security. Typically, there is a loan on the underlying fee simple interest, which must be subordinated to the leasehold lender. Lessee One who possesses the right to use or occupy a property under lease agreement; the renter. Lessor One who holds title to and conveys the right to use and occupy a property under lease agreement; the landlord. Letter Report An appraisal form used only for simple, straightforward appraisals. Leverage The use of borrowed funds to finance the purchase of an asset, especially real estate. The effect of leverage can be positive or negative depending upon whether the interest rate on the debt is lower or higher than the rate of return remaining to the equity. Positive leverage enhances the equity return, while negative leverage decreases. Lien A hold or claim which one person has on the property of another as a security for some debt or charge. Lien Theory A modern approach to creating loan security in which the lender is considered to hold an interest in, rather than a title to, the property for security of the debt.
Liquidation Value The estimated proceeds, net of liabilities, which would result from either a normal or forced sale of an asset(s) if sold without being part of the business of which it was originally a part. Liquidity Relationship between a speedy sale price and the total number of dollars invested in the property. Loan The letting out, or renting, of a certain sum of money by a lender to a borrower to be repaid with or without interest. Loan Fee A separate charge added to the closing costs of the buyer. Loan-to-Value Ratio The relationship of the loan amount to the price or value of a property. Locational (Economic) Obsolescence Decline in the value of a building caused by the deterioration in the quality of its neighborhood. Long-Lived Incurable Defect A defect that will last as long as the building.
M
MAl (Member Appraisal Institute) Designation awarded by the American Institute of Real Estate Appraisers (AIREA) which signifies that an appraiser is qualified to appraise all types of real property and meets high knowledge and ethical standards. Margin The amount that is added to the index value to create a mortgage interest rate for an ARM/GPARM. Market Value The highest price that a buyer agreeing, but not forced to buy, would pay, and the lowest a seller, agreeing, but not forced to sell, would accept. Marketability Relationship between a speedy sale price and the current market value of the property. Market Rent Rental level ascertained by seeking out the rental rates for similar properties in the relevant market area. Market Risk The uncertainty associated with the decrease in the market price of an investment in response to a rise in market rates of interest. Market Segmentation The dividing of a large, more general market into smaller, more specific submarkets.
Maturity Date The final day of a given period concerning a mortgage or a lien (e.g., a mechanics lien or a builders lien). Mechanics Lien A lien affixed to land records for a specified period of time, usually on behalf of a tradesman for recapture of the unpaid costs of labor and materials. Mechanics liens must be satisfied when property changes hands. They are also enforced by court order. MI Any one of the private or state mortgage insurance companies that insure against loss in the event of a mortgagors default under a conventional mortgage. Modification and Assumption Agreement A written agreement to change the interest rate when the due-on-sale (or transfer) provision of the mortgage is enforced because of a change of ownership. It also releases the previous mortgagor from personal liability under the mortgage. Monthly Fixed Installment The portion of the total monthly payment that is applied to reduce the debt once a month. Monthly Loan Constant The total monthly payments of principal and interest on a mortgage having a level payment schedule, expressed as a percentage of the initial principal amount of the loan. Moratorium A period during which an obligor has a legal right to delay meeting an obligation, especially such a period granted in an emergency as to debt or generally by a moratorium law. Mortgage A document providing written evidence of the right of a creditor to have property of a debtor sold upon default and foreclosure. Mortgage Assignment Occurs when a mortgagee sells a mortgage; the assignment is a brief form stating that the mortgagee, the assignor, transfers and assigns the mortgage and mortgage note to the purchaser, the assignee. Mortgage-Backed Security (MBS) An investment security that represents an undivided interest in a pool of mortgages. Mortgage Banker Any person, firm or corporation engaged in the business of lending money on the security of improved real estate and who publicly offers such security for sale as a dealer. Usually takes title to loans.
Mortgage Broker An agent whose chief function is to originate real estate loans for insurance companies, commercial banks and other investors. Usually does not take title to loans. Mortgagee The lender; the one to whom the property is pledged. Mortgage Equity Analysis A procedure for deriving overall capitalization rates and or valuing the debt and equity components. Mortgage Insurance Insurance covering complete or partial losses of principal and interest of a mortgage loan. Mortgage Interest Rate The rate of interest in effect for the monthly installment due. For fixed-rate mortgages or for adjustable rate mortgages that have an initial fixed-rate period, it is the rate in effect during that period. For adjustable rate mortgages after any initial fixed-rate period, it is the sum of the applicable index and the mortgage margin (rounded as appropriate and subject to any per adjustment caps or lifetime interest rate ceilings). Mortgage Margin The amount that is added to the index value to establish the mortgage interest rate for each interest rate change date (subject to any limitations on the interest rate change) for an ARM. Mortgage Note A negotiable promissory note secured by a mortgage on certain specific real estate. Mortgage Portfolio The aggregate of mortgage loans held by the lender. Mortgagor The borrower; the one pledging the property as security for a debt. Mutual Savings Banks Mutually owned thrift institutions operated for the benefit of their depositors. They are located primarily in the Northeast and have wider investment powers than the savings and loan associations.
N
Narrative Report An appraisal form that is a complete written explanation of the entire valuation process for a specific property. National Housing Act (1934) Established the Federal Savings and Loan Insurance Corporation.
Negative Amortization A gradual increase in the mortgage debt occurs when the monthly fixed installment is not sufficient for full application to both principal and interest. Actually, there will be an insufficient interest application. This interest shortage is added to the unpaid principal balance to create negative amortization. Net Income The part of the gross income that remains after the deduction of all charges, taxes or costs. Net Operating Income (NOI) Effective gross income less all relevant expenses; NOI includes only the income to the real estate. Net Worth The equity of the owners in the business, i.e., the net assets determined by subtracting all liabilities from the value of the assets. Net Yield The yield of certain property, real or otherwise, clear of all charges and deductions; that part of the gross yield which remains after the deduction of all charges, taxes or costs.
O
Open-End Mortgage Mortgage, or deed of trust, written so as to secure and permit additional advances on the original loan. Open Market Operations One of the economic tools used by the Board of Governors of the Federal Reserve System whereby the Fed purchases or sells government securities. Open Mortgage A privilege given to the mortgagor, which allows pre-payment of the principal at any time and in any amount. Operating Business Risk The type of uncertainty primarily concerned with the variance between budgeted and actual operating income and expenses. Operating Expense Ratio Relationship between operating expenses and projected gross income. Operating Financial Risk The type of uncertainty primarily concerned with the ability to pay operating expenses from funds provided from operations, borrowings, and equity sources. Overall Capitalization Rate The direct ratio between annual net operating income (NOI) and value or sale price of a property.
Over-Improvement An improvement that is not the most profitable use for the site on which it is placed because of its excessive size or cost. It does not produce the maximum possible land value. Owner of Record The entity that appears in the public records as the owner of a mortgage; usually the mortgage originator, unless the mortgage is subsequently assigned to someone else and that assignment is recorded.
P
Package Mortgage A debt secured by pledge of both real property and personal property such as range, refrigerator and furniture. Participation Clause The clause in a lease that requires tenants to pay additional rent on sales in excess of a certain amount. Participation Mortgage (a) A mortgage held by more than one lender; (b) a mortgage that calls for the lender to share in the operating income produced by the property. Partnership An association of two or more persons for the conduct of an enterprise other than in corporate form. Payback Period The time required for the complete recovery from cash throw-off equity funds invested in a project. Payment Change Date The date on which the monthly payment changes for an ARM/GPARM. It must fall within the month immediately following an interest rate change date, unless an ARM or GPARM provides for the monthly payment to change more frequently than the interest rate. Payment Change Interval The period that elapses between the payment change dates for an ARM/GPARM. Payment Change Limitations A restriction on the amount that the monthly payment for an ARM or GPARM can change on any payment change date. Pension Funds The accumulated savings of individuals set aside during their working lives for later use when retired. Personal Property A chattel; an item of property that is neither the land nor is permanently attached to the land.
POC Refers to the three most basic functions of management - planning, organizing, controlling. Portability Occurs when an owner takes a mortgage to another property when selling their home. In this way they avoid payout penalties, and can enjoy the same terms and interest rates for the life of the mortgage. Potential Gross Income The income that a property will produce with one hundred percent occupancy. Power of Attorney Authorization given to someone to act on behalf of an owner, by the owner and stated in written form. Preoperational Those steps taken to insure the ability to control. Prepayment Clause (Privilege) Mortgage contract clause permitting borrower to pay loan amounts in advance of their due dates. Prepayment Penalty Penalty for the payment of a debt before it actually comes due. Price The quantity of one thing that is exchanged for another; the amount of money paid; asked; or offered where sale is contemplated. Principal The amount of the loan minus the interest. It begins as the amount the loan was taken out for and gradually decreases as payments are made and interest is paid off. Principal of Substitution A valuation principal that states that a prudent purchaser would pay no more for real property than the cost of acquiring an equally desirable substitute on the open market. Promissory Note A signed document acknowledging the existence of a debt and promising repayment. Proprietorship Single ownership. The business and the owner are considered the same. Pro-rating Allocation of costs or revenues between buyer and seller according to the relative time each occupies the property. Purchase Money Mortgage A mortgage given by a purchaser of real property to the seller in part payment of the purchase price.
Q
Quantity Survey A method of estimating building cost in which all elements of labor, materials, and overhead are priced and totaled to obtain building costs. Quitclaim Deed A deed of release. An instrument by which the grantor relinquishes all right, title, or interest he may have in the property.
R
Real Estate Land, including its natural components such as minerals, water, and buildings or improvements. Real Estate Investment Trust (REIT) A passive investment vehicle whose distributed earnings are taxed only to investors who receive them. Realised Gain The difference between the net sale price and the adjusted basis of the property. Real Property The legal rights to possession, use and disposition of real estate. Recapture Rate (capital recovery rate) - Represents the percentage annual return of the capital invested in a depreciating asset. Reconciliation The process by which an appraiser evaluates, chooses, and selects from among two or more alternative conclusions or indications to reach a single answer (final value estimate). Reconstructed Operating Statement A statement of income and expenses prepared by an appraiser to indicate the probable future net operating income of a property. The forecast reflects the quantity and quality of services anticipated in the stabilised income, based upon the historic experience of the property and the experience of other competitive properties. Redemption Period The specified period in which a mortgagor can reclaim foreclosed property by making full payment of the mortgage debt, under a legally enforceable right of redemption in some states. Rehabilitation Mortgage A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.
Renegotiable Rate Mortgage (RRM) A series of automatically renewable short-term loans secured by a long-term mortgage. The renewable rate may be adjusted at intervals of three to five years. Rental Value The estimated amount of rent that could be obtained for the use and occupancy of a property. Replacement Cost The cost of construction, at current prices, of a building having a utility equivalent to the building being appraised, but built with modern materials and according to current standards, design and layout. Reproduction Cost The cost of construction, at current prices, of an exact duplicate or replica using the same materials, construction or standards, design, layout, and quality of workmanship, embodying all the deficiencies and obsolescence of the subject building. Residential Home Mortgage A mortgage that covers a residential property, i.e. a property that is designed as a dwelling used to provide living accommodations for one to four families. Residential Member (RM) Designation awarded by the American Institute of Real Estate Appraisers (AIREA) that certifies that the individual is qualified to perform appraisals on one-to-four family residences. Residual Techniques Assignment of a portion of income to part of an asset, with the remainder (or residual) flowing automatically to the rest of the asset. Reverse Annuity Mortgage (RAM) A loan arrangement in which a lender makes periodic payments to the borrower, with the borrowers equity interest in real estate serving as equity for the loan. The borrower may occupy the property until a specified loan-to-value ratio is reached. Right of Redemption The right of the owner to reclaim title to his property if he pays the debt to the mortgagee within a stipulated period of time after the foreclosure. Risk The chance of loss on an investment or from a particular hazard, such as fire, earthquake or wind. Risk of Default The risk that promised payments of interest and repayment of principal will not be met fully and on schedule.
S
Sale and Contract-Back A financial arrangement in which an investor purchases real estate owned and used by a business firm and agrees to buy back the property in a land contract. Sale and LeaseBack A financial arrangement in which an investor purchases real estate owned and used by a business firm and the property is leased back to the firm by the purchaser-investor. Sales Agreement An agreement by which one of two contracting parties, called seller, gives a thing and passes title to it in exchange for a certain price in current money to the other party, called the buyer or purchaser, who on his part agrees to pay such a price. Satisfaction A written instrument that evidences the payment in full of a mortgage debt, and extinguishes the mortgage lien. Scarcity Limitations on the available supply of an economic good relative to the desire for it. Seasoning (of the mortgage) The on-going value of the note by payments made on it. The more seasoned the note, the more was paid on it. Investors tend to focus mainly on seasoned notes, which are more secure because theyve had payments made on them and thus have some money backing them. Secondary Market A market composed of purchasers of mortgages from institutions that originate mortgage loans to the individual users. Second Mortgage A mortgage that has a lien position that is subordinate to the first mortgage (see also Junior Mortgage). Security/Security Instrument Something given, deposited, or pledged to make secure the fulfillment of an obligation or the payment of a debt. Senior Residential Appraiser (SRA) A designation given by the Society of Real Estate Appraisers (SREA) to individuals having extensive technical training combined with long and varied experience. The designation certifies that they are capable of appraising complex properties and providing analytical services regarding real estate purchase and ownership. Senior Real Estate Analyst (SREA) A designation awarded by the Society of Real Estate Appraisers (SREA) to general practice, professional appraisers who have completed a program of professional training and experience in the appraisal of both income and residential properties.
Senior Real Property Appraiser (SRPA) A designation awarded by the Society of Real Estate Appraisers (SREA) to general practice, professional appraisers who have completed a program of professional training and experience in the appraisal of both income and residential properties. Sensitivity Analysis The process of measuring the effects of different loan provisions on mortgage payments and cash throw-offs. Service Corporations Subsidiary companies to savings and loan associations that have much wider lending and investment powers than the parent association. Servicing Taking all steps necessary to make certain that loan provisions are carried out. Setback The distance from a lot line which by law, regulation, or restriction in the deed must be left open; the linear distance between the lot line and the buildings or building line. Shared Appreciation Mortgage (SAM) A type of mortgage loan in which the lender shares with the borrower-owner in the differential between sale price and purchase price (appreciation) at the time the property is sold. In return the lender charges a lower interest rate. Short-Lived Incurable Defects Those defects that do not last as long as the major portion of the building. Sinking Fund Factor A multiplier used to compute periodic contributions to a sinking fund that will grow with compound interest at a selected rate for a specified period of time. Special Assessment A special charge against real estate such as street assessment or sewer assessment for installation of public improvements from which the property benefits. Special Assistance Function One of the functions of the Government National Mortgage Association that involves a number of programs. These programs involve making purchase commitments on certain types and categories of home mortgages which otherwise would not be readily salable. Special Forbearance A relief provision that provides for a period of reduced or suspended payments, followed by another period of larger than normal payments, to enable the mortgagor to cure the entire delinquency.
Spread The difference between the cost of and yield on an investment. Standard Payment Calculation The method used to determine the monthly payment required to repay the unpaid principal balance of a mortgage in substantially equal installments over the remaining term of the mortgage at the current mortgage interest rate. Static Risk Risk associated with unusual occurrences such as storms, fire or theft that affect one property, but not all properties of the same class. Straight-Line Depreciation The process of calculating a theoretical, uniform annual loss of value of a wasting asset based upon the estimated useful life of the property when acquired. Strict Foreclosure In Florida, the courts give the mortgagor a period of time to cure the default and during this grace period, the mortgagor has the right to remain in possession of the property, unless otherwise agreed to in the mortgage agreement. Subordination The act of a creditor acknowledging in writing that the debt due him by a debtor shall be inferior to a debt due another creditor by the same debtor (see also Junior Mortgage). Sum-of-the-Years Digits A process by which a theoretical loss of value is calculated for a wasting asset as a deduction for computation of federal income tax. The rate of depreciation is very rapid in early years and more gradual in later years. Surety One legally liable on default of another. Suscipient Function A product or service line of establishments which attract passersby who are attracted to the vicinity primarily by other establishments that merchandise more basic goods or services.
T
Tandem Plan A two-part process in which the Government National Mortgage Association (GNMA) makes a commitment to purchase a package of mortgages, usually to the Federal National Mortgage Association (FNMA), at the current discount rate. GNMA then resells the package to FNMA at current discount rates for less than the original purchase price. Tax Deferred Exchange When income producing real estate is exchanged for other income producing real estate, termed like property, the realised gain on the exchange need not be recognised.
Term Mortgage One having a specific term, usually not over a five-year maturity, during which interest is paid but the principal is not reduced. Title The means whereby the owner of the land has the just possession of his property. Title Insurance A type of insurance that insures against defects in the title that were not listed in the title report or abstract. Title Search An effort to determine the state of a title through an examination of public records. Title Theory A concept of mortgages in which a mortgage is assumed to represent an actual conveyance of title to mortgage. Transfer of Ownership Any means by which the ownership of a property changes hands. Treasury Index An index that is used to determine interest rate changes for certain ARM plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities. Trust Deed An agreement in writing conveying property from the owner to a trustee for the accomplishment of the objectives set forth in the agreement. Trust deeds are generally used in many states rather than mortgages to secure loans on real property. Trustee A person, real or juristic, holding property in trust. Two-Step Mortgage An adjustable rate mortgage that provides for one interest rate for the first five or seven years of the mortgage term and a different interest rate for the remainder of the mortgage term.
U
Under-Improvement An improvement which is not adequate to develop the highest and best use of a site; usually a structure which is of lesser cost, quality, and size than typical neighborhood properties. Unencumbered Property Property that is free and clear of any assessments, liens, easements, or encumbrances of any kind. Also known as clear title. Unit Comparison Method The reduction of properties to appropriate units in terms of which comparisons of otherwise not directly comparable properties, can be made.
Unit in Place Method A method of estimating construction costs which involve estimating the unit cost of component sections of the structure installed in place. The unit includes both materials and labor. Utility The capacity of an economic good to satisfy human desires or needs.
V
Valuation The act of establishing the value of real property. Value The quantity of one economic good which can be obtained in exchange for another; value in a general sense is conceptual and means different things to different people. Variable Rate Clause (mortgage) A mortgage instrument carrying an interest rate that varies with changes in market rates in general, such as the prime rate or the bond market rate. Vendee The person to whom a thing is sold. Vendor Seller. Vendor Take-Back Mortgage Also known as seller financing, it is when the buyer of a property borrows the money from the seller as opposed to the bank. The seller then takes small payments based on the payment period of the mortgage. Veterans Administration (VA) Created as part of the Servicemens Readjustment Act of 1944 and authorised to guarantee a stated percentage of loans made to qualified veterans by qualified lenders.
W
Waiver The relinquishment of a right or refusal to accept a right. Warehousing An arrangement whereby an originator-mortgagee obtains short-term interim credit secured by mortgages for the purpose of bridging the gap between the completion of construction and eventual sale of the mortgage on the property to an investor-mortgagee.
Warrant A covenant whereby the grantor of an estate and his heirs are bound to warrant and defend the title (see also Deed). Wraparound Mortgage In general, a third party lender refinances the property by assuming the existing mortgage, and its debt service, and wraps around a new, junior mortgage.
Y
Yield Return on an investment. Yield to Maturity A percentage of funds borrowed that are returned to the lender annually in consideration of the fact that the loan will be paid when it reaches maturity.
Z
Zoning Land use, determined by municipal authorities, to which property may be put to in specific areas.
THIS IS YOUR ON RAMP TO THE FAST TRACK TO WEALTH

Your ENTREPRENEUR START-UP MANUAL is jam-packed with business-building information specifically designed to power start your drive to personal financial independence.
This Manual Contains: The Entrepreneurial Challenge Do You Have What It Takes? Getting Your Business Started The Entrepreneur as Real Estate Investor Calculate Your Net Worth Avoiding Roadblocks on the Road to Success Mindfeed & How You Can Profit from It Your Action Plan Time Management Forms Glossary of Real Estate Terms
2009 Tigrent Brands, Inc. All rights reserved. 09BW5122 v1 6-09

Building Wealth Ideas For Entrepreneurs

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Building Wealth Ideas For Entrepreneurs

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IDEAS ENTREPRENEURS

Do You Have What It Takes?

2009 Tigrent Brands, Inc. All Rights Reserved.

Do You Have What It Takes?

Do You Have What It Takes?

Entrepreneurial Personality Test

Entrepreneur Start-Up Kit

Do You Have What It Takes?

DRIVE AND DESIRE

Entrepreneur Start-Up Kit

Entrepreneurial Personality Test Scoring

Do You Have What It Takes?

Getting Your Business Started

2009 Tigrent Brands, Inc. All Rights Reserved.

Getting Your Business Started

Entrepreneur Start-Up Kit

PART 1: CHOOSING YOUR BUSINESS What Business Suits You?

Getting Your Business Started

Business Evaluation Worksheet

Entrepreneur Start-Up Kit

SHOULD I BE IN MY OWN BUSINESS? IF SO, WHY?

REASONS WHY I SHOULDNT

Getting Your Business Started

Entrepreneur Start-Up Kit

Your Own Small Independent Business

Getting Your Business Started

Buy an Existing Business

Entrepreneur Start-Up Kit

More Business Ideas

Getting Your Business Started

Entrepreneur Start-Up Kit

Getting Your Business Started

Entrepreneur Start-Up Kit

Getting Your Business Started

Entrepreneur Start-Up Kit

PART 2: STARTING YOUR BUSINESS

Getting Your Business Started

Entrepreneur Start-Up Kit

Getting Your Business Started

Entrepreneur Start-Up Kit

Getting Your Business Started

PART 3: LOCATING YOUR BUSINESS

Determining Your Business Location

Entrepreneur Start-Up Kit

Unique Issues to Your Business

Real Estate Contracts

Getting Your Business Started

Entrepreneur Start-Up Kit

PART 4: FINANCING YOUR BUSINESS

Loan Types for Entrepreneurs

Accounts Receivable Loan

Getting Your Business Started

Small Business Loan

Entrepreneur Start-Up Kit

Preparing a Loan Proposal

I. Loan Request Summary

II. Your Business

Getting Your Business Started

III. Market Analysis and Strategy

IV. Management Team

Entrepreneur Start-Up Kit

PART 5: BUSINESS ESSENTIALS