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.