The REIC Strategy

The last post got my mind spinning so I wanted to share the basics of the REIC strategy. Now, Kris Krohn wrote an entire book on it so I certainly won't be going into that much detail. I highly recommend the book as a source of further information. It's very practical, an easy read that you can download on that site or you get a free hard-cover copy if you go to one of the introductory seminars.

Here are some of the key points to the "Straight Path" strategy:

• Buy at a discount
• Buy least 15% under retail
• Think of a bell curve. Most homes will be priced about right, but there will always be outliers on both sides: some priced too high, some priced too low. The ones priced too low don't stay on the market long. REIC specializes in finding these. 
• Consider how this impacts your risk and tolerance to market volatility!
• Buy at least 3bed/2bath homes under the median home value
• When the RE market tanks, what homes get hit worse, standard family homes or high end homes? Answer: high end homes get crushed! Yes, homes under the median price get hit too, but your standard family homes will not get hit nearly so bad.
• Buy homes that are move-in ready
• I'm not interested in fixing up a place. I don't like manual labor. I also don't want to spend a fortune to fix it up. After closing, it should be darn near ready to show.
• Lease-option exit strategy
• Lease-options sometimes get a bad name because the landlord's goal is to go through as many tenants as possible. Essentially taking advantage of his neighbor. This is not the case here. The goal of this lease option is to get the family owning the home.
• If the family feels ownership of the home, they will take more care of it. A classic line Kris uses is "just don't call me when the toilet breaks." In other words, they take ownership of it. This reduces the amount of time and effort you have to spend maintaining it.
• A lease option implies a down payment to "get in" plus a monthly payment that, if paid on time, will create discounts off the purchase price when they buy. (There is a recommended algorithm for down payment amounts and monthly rent that I will not entreat here.)  The down payment is another boost to minimizing your risk.
• Compassionate Financing (TM by REIC)
• There are so many responsible people who do not qualify for bank loans. Legitimate circumstances may have harmed their credit, they may have recently changed jobs, or any myriad of things. You can help them get into your home and help them qualify for a loan to purchase it.
• When a tenant purchases through your lease option, s/he/they can build more credit in the home than they often can through a conventional bank loan.
• REIC enables you to offer credit repair help for people who need it.
• Helping people get into a home they will purchase is a boon for them. Taking advantage of people is never right; helping them get into a home they can own is a great service.

I hope through these points you saw the 6 pillars well represented.

I don't want to keep jabbering on here, so I'll give you a few links.

• The 5 profit centers explain each place you can make money through this system and shows how even when one or two or three don't cooperate, you'll still be okay. You'll see the 6 pillars represented throughout this.
• You may be wondering by now what it would look like for you if you were to actually consider doing something like this. The 4 phases (yeah, they have all this number stuff set up, but it really is a good way of explaining it) can help you get a good feel for that.

Introduction to REIC

  As an upfront disclaimer, the intent of this post is to be informative; this is not intended to be an outright sales pitch. That said, I am a very happy and enthusiastic client and would unabashedly be pleased to learn of someone becoming a client through my introduction. Would I get a kickback? Yes. Would that motivate me to do this? Not at all. I'm no salesman, and for good reason. Is this some MLM? Not one bit.

  We joined REIC in September of 2010. They are a Real Estate Investment Company. So... who cares? I've always had big financial dreams and have pondered much about how to reach them. REIC has made a significant difference in my financial hopes and shown me how to reach them.

  I hope, here, to concisely paint a broad picture about what REIC is and isn't.

So, here goes. REIC:

• Helps others do, not just learn about, Real Estate (RE) Investing
• They do have training, but that's just the beginning. They do not charge for their training. (Well, there is a one-time fee to join so you could call that the training fee, but it gets you in for life.)
• They make money when you successfully transact (so actually doing) real estate. That is their business model.
• Provides you with a financial and investment coach for the rest of your life
• With your coach you will develop a 10 year financial game plan.
• (I can't begin to tell you how cool I think this part is; I just love it!)
• Your coach will train you initially and be there to help you all along the way thereafter.
• You are encouraged set up appointments to meet with your coach or you can simply call and ask questions as needed.
• Makes RE Investing accessible to the layman. They believe that any RE investment should (they call these the "6 pillars"):
• Take the least amount of time
• Take the least amount of effort
• Have the lowest amount of risk
• Provide service
• Work under any market condition
• Be profitable for the investor
• Strives to set realistic expectations
• I've never heard (from them): "You can not fail if you do what we say"
• I have heard things like:
• "There is risk in doing Real Estate and we don't want you to take on more risk than you're comfortable with"
• "This is how we minimize the risk"
• "Real Estate can be hard"
• "You can expect having some difficult moments as a Real Estate Investor"

What REIC is not:

• A pushy sales group
• They are passionate, but not pushy.
• I remember in my first seminar, Kris Krohn (founder) said something similar to: "Some of you will be excited about this and will want to jump in and we think that's great. Some of you will think this does not make sense for you and that's fine; we will part as friends."
• There was no "you must join tonight if you want to get this price" kind of stuff.
• A couple weeks after that first seminar, we decided we wanted to join. We met with Kris Krohn and, after a while of talk, I finally said: "So.... we're in?". I realized later that he would not invite me. For him, it had to come from me. I had to want it. That is not what I call typical sales. I liked it. I still do.
• A get-rich-quick scheme
• One of the greatest parts for me is the 10 year plan, or your plan to (be able to) retire in 10 years. I don't find 10 years to be "get rich quick".
• It seems to me that get-rich-quick shemes often make it sound easy and effortless. While REIC does try to take as much of the effort out of it as possible, they make no mistake to tell you that doing RE investing has its hard parts.
• An upselling company
• REIC does not try to make a living making sales to its clients. It makes a living when its clients transact real estate.
• This is not to say they do not advise us to make other purchases. That's part of why you get a coach - so you know what you need to do to successfully do Real Estate. (e.g.: We purchased liability insurance when we bought a property. There was no kickback to them on this. It was through our already existing insurance company.)
• An MLM
• When joining an MLM, there is a product or service you are selling. You can also get people "under you" selling that same product or service. Joining REIC, you are a consumer of the service.
• Technically there is a Direct Sales group within REIC that you can join if you wish... if you're a salesman. I don't know much about it. I'm there to be a Real Estate Investor, not a salesman. UPDATE
• The kickback you get for referring a friend is there for all, though much less than what you get if you are actually part of the Direct Sales team.

Well, this is getting pretty long winded. Some things I didn't mention here that I may in a later post (or would be happy to if you wanted to contact me directly):

• What their Real Estate Investment strategy is specifically (some of the "how's" to the "6 pillars" listed above).
• Some concerns I had going in that I think are not uncommon and some experiences that helped resolve them.
• Probably more, but I'm getting tired of thinking about this post for now.

Do you have any questions about REIC you'd like me to answer in another post? Do you have any concerns about REIC you'd like me to address? Not that I will resolve them, but perhaps I can provide some helpful information? Please feel free to let me know directly or in the comments.

EDIT:
I just found this video. It seems to cover a lot of what I just said and it's only 3:18 long. I can't get it to embed or I'd let you watch it right here. Sorry.