Stop Overpaying Your Financial Advisors

Hi Everyone,

I hope you had fun over the weekend. Heather and I are out in Kona for the summer Maui MastermindTM which starts today.

I wanted to talk to you about saving thousands on the fees and money you pay to your financial advisors. A few weeks ago I was reading an article in "Worth" magazine about this very subject.

The article shared the results of an interesting survey of 1,500 "affluent" investors, with affluent defined in 3 categories:

Group A--Those with $1-5 million of investable assets.

Group B--Those with $5-10 million of investable assets.

And Group C--those with over $10 million of investable assets.

The article showed the results from several studies done from 1995 through 2007. Here are the three bottom-line results that the article shared.

Finding One: Wealth builders today are 3-4 times more likely to negotiate fees with their advisors than they were in 1995! (For those in group A, in 1995 only 5.2 percent would try to negotiate a lower fee. By 2007 over 22 percent would!)

It’s also interesting to note that people in group C ($10 million or more of investable assets) were 2-3 times more likely to negotiate lower fees!

There is a moral to the story here: don’t be shy about negotiating lower fees, it’s what the wealthiest people in our society do. (Keep reading for the link to an audio class I just posted to Maui MastermindTM Online on exactly how to ask most effectively for a discount.)

Finding Two: The average person negotiated their fees DOWN by 10-30 percent! That’s a huge savings just for asking.

In addition, over the past ten years or so, the size of the discount that the average affluent investor has been able to get has grown by 50-100 percent. That means that in 1995 they got a 10 percent discount on their fees, then now they are getting a 20 percent discount. The trend is for you to save more and more money on your fees.

Finding Three: Between 90 and 100 percent of all those surveyed reported little or no difficulty in obtaining a fee reduction! That means just for asking you have a 90+ percent chance in getting your fees reduced.

What does all this mean for you?

The next time you work with your financial planner, or your stock broker, or your investment advisor, or your attorney, or your… fill in the blank… ask for a discount off the fees.

For those of you who are members of Maui MastermindTM Online, I just posted an audio workshop going through exactly how to ask for a discount the best way possible. The class is called, The Five Essentials to Negotiating Discounted Fees from Your Advisors. Members can listen to this class by clicking here.

Not a member yet? No problem, click here for a free 30-day trial membership. After that your membership is just $9.97 per month auto-billed to your credit card. Each week we add cutting edge updates to the site just for members. You can cancel at any time (but why would you want to?)

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Deadline to Get the Preemptive Tax Strategies Workshop for Free Expires at Midnight July, 31st!

You have less than 24 hours if you still wanted to take advantage of the special offer I made you at the end of last week. The offer was that when you register for the Wealth Vehicles Workshop by July 31st, 2007 for just $3,997, you will also get to attend the $6,000 Preemptive Tax Strategies Workshop for FREE! Click Here for Full Details and to Register Now! (This offer cannot be extended for any reason.)

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I’ll talk with you all later in the week with another wealth update.

My best to you,

David

P.S. For those of you who wanted to take me up on that special offer and attend the Preemptive Tax Strategies Workshop AND the Wealth Vehicles Workshop for just $3,997, remember that offer expires in less than 24 hours! It expires at midnight Tuesday, July 31st, 2007. Don’t miss out. Click here for full details and to register now! Or call our office toll-free 1-888-889-0944.

Negotiation Tip: Setting an Up-Front Agreement

Hi Everybody,

I'm on my way to this summer's Maui Mastermind event but I wanted to post this blog on a key negotiating technique called an "up-front agreement". I hope you enjoy it! (Don't worry, I've made arrangements so that you'll still get your weekly doses of ideas, tips, and strategies from me.

Setting an Up Front Agreement

What is your most precious resource as an investor? Some people will say money. Others will say good credit. We say it's time. Yet I watch so many beginning investors work for FREE! By this I mean that they invest all kinds of time and energy with a seller and on a potential deal all before they have a definite commitment from the seller that they have reached an agreement.

I am not willing to work for free and don't think you should either.

Instead, you will create the context up front with the seller that you will spend the time it takes to work through their situation and all the details provided they agree up front, that when the conversation is over, both you and the seller will let each other know exactly where you stand--either you have a fit or you don't.

Period. That simple.

In it's plainest terms an up front agreement is simply a commitment you and the seller make to each other to tell each other yes or no at the end of your conversation about the property.

Here's how it sounds:

Investor: Samantha [seller], I'm willing to sit and invest the time to listen to all the details of your situation and to talk through all the possible options we can come up with. All I ask is that when we're done talking this all through that if what we talk through obviously isn't a fit for you, that you be willing to let me know that. If it obviously just isn't a fit, are you willing to tell me that?

Seller: Sure.

I: I appreciate that. I'm letting you know that you are not going to hurt my feelings. On the other hand, if what we talk through is a fit for you, are you willing to let me know that when we're done here today?

S: Yes if it is a fit I can tell you that.

I: Now I'll be doing the same thing in reverse. If I can't see a way where I can meet your needs and make a profit for myself, then I'm not going to want to buy your house. Are you OK if I have to tell you no I don't want to buy it? I mean, it wouldn't be anything personal about you, it would just be me saying it's not a fit.

S: I understand this has to work for both of us.

I: Exactly, and if I feel it's a fit then I'll let you know that too. I'll say, 'Samantha, this is a fit for me too.' So what we're agreeing to do up front is to let each other know when we're done exactly where we stand. Either, no it's not a fit. Or yes it is a fit. Is that what we just agreed to do? [This is called "reinforcing" the up front agreement.]

S: Yes it is. [and on to the next phase of the negotiation]

Do you see how powerful that language and strategy is? It's your way of telling the seller that you'll put your time in to see if it's a fit, if and only if they will promise to give you a decision right at the end.

(If you are really interested in negotiating strategies and techniques, check out the negotiating course I recorded last year called: Influence: How to Handle Every Business Negotiation You'll Ever Face. It's one of my best courses ever, but heck, I'm biased!)

That's it for this email. I hope you are enjoying your weekend!

My best to you,

David


P.S. Reminder that that special offer for you to get TWO workshops for the price of one is about to expire this coming Tuesday, July 31st at midnight! So if you wanted to be able to attend BOTH the August Preemptive Tax Strategies Workshop AND the October Wealth Vehicles Workshop for just $3,997 I urge you to register now. For more information or to register click here.

The Use of Intelligent Leverage In Your Investing

Hi Everyone,

It's another hot day here in Charlottesville as I am typing this. I'm actually on the campus of the University of Virginia on the second floor of a private library. It's one of those "hidden" nooks that I've found over the past few years that I escape to in order to write.

I hope you enjoyed the special report I sent to you earlier in the week called, The Nine Steps to Investing In Commercial Real Estate. If you missed out on that email I have two tips for you.

1. Add the following two domains to your "acceptable" list in your email program. Many times email filters can accidentally sort email that you want, like this bi-weekly E-Letter, in with email you don't. The two domains to add are: mauimillionaires.com and investorfattrack.com.

2. Check the www.mauimillionaires.com website under the "Wealth Updates" tab. I do my best to post all the content from the E-Letter, plus other articles as I write them, up there.

Sometimes I get a bit behind in this so checking your email is still the most reliable and fastest way, but at least it gives you a second chance.

This E-Letter I want to talk with you about the use of Intelligent LeverageTM.

Just what is leverage? Leverage is when you are able to take one unit of input, and direct it in such a way to produce a magnified return. In this article the leverage I am talking about is financial leverage--also known as loans.

I want to make one more key distinction, that of "Intelligent Leverage". Intelligent Leverage is a concept I created to define way I've observed the world's wealthiest individuals actually use debt to grow their wealth.

I define Intelligent Leverage as investment debt that is used that meets the following two criteria:

First, it's leverage that pays for itself. In other words, it must be used to acquire an income stream that is more than enough to pay for the financing costs including loan payments, interest, and other fees associated with it. For example, you borrow $100,000 to finance the purchase of a new piece of equipment for your business, where the purchase allows you to increase your business and easily pay for the cost of the financing.

Second, at its best, Intelligent Leverage is debt that is "non-recourse". This is a fancy, legal way of saying that it is debt that you do not personally guarantee. There is a principal of wealth building that says pay all your debts, but make sure that if worst comes to worse, you haven't given personal guarantees. You probably will never need that last layer of protection, but then again, you never know.

Let's look for a moment at how different levels of wealth builders use debt.

Level One people use debt to finance a lifestyle that they really can't afford. The most common form of debt they use consumer debt, namely credit cards. They mortgage their future to fund their lifestyle today. It's no wonder that they end up in such tough financial positions. But it isn't like they are doing this to themselves and by themselves. A BILLION dollar industry is out there pushing them into taking on more and more consumer debt.

I recently read an interesting book called, The Dual Income Trap, in which the authors meticulously lay out all the ways the consumer credit industry works hard to push more and more credit (and hence more and more unsupportable debt) at Level One consumers.

Which is no surprise that when you look at Level Two wealth builders, so many of them are characterized by an irrational fear of debt. Looking at how hard they had to scramble to climb out of the pit of their staggering consumer debt, it doesn't surprise me that they are so fearful of it now.

But relating to debt out of fear is very disempowering. Leverage is neutral. It can be good or bad depending on the USE to which it is put. In just a moment I'll share what I see as the best uses of leverage for each level of wealth builder, but first I want to cover how Level Three people use leverage.

Level Three people intelligently use leverage to magnify their financial returns and lower their financial risks. Imagine that, you can actually use debt to lower your financial risks! Don't believe me? It's absolutely true.

You can use Intelligent Leverage to encumber your assets as a form of asset protection. You can use it to reduce your cash outlay in a deal, and hence your lower your risk. You can... you get the idea I hope.

So let's look now at how I suggest you intelligently use debt at each level of your wealth building.

At Level One: I suggest you use debt to finance your financial education. At Level One YOU are your greatest asset--your earning capacity, your skills, your ambitions, your network.

Just make sure you choose smart places to learn. I highly encourage you to read at least 2 financial books each month and attend at least 2 quality financial workshops each year.

I follow my own advice. I read at least double that many financial books each month and attend (in person or via recorded workshops) at least that many workshops each year. Why? It's made me a multi-millionaire before I turned 34, why would I stop now?

Side Note: If you haven't yet taken our foundational financial fluency courses I urge you to enroll now for the upcoming September events: The Mini-Maui Wealth Workshop plus the 2-day Financial Fluency Workshop. These two events, held back-to-back in Atlanta, are the best primer on succeeding financially available. I should know, I personally designed and created every minute of them to be exactly the wealth workshop I wished I would have had access to when I first got started building my wealth. And if you register now, the cost is less than $800 for BOTH!

Now for those of you at Level Two my advice is different. I still think you'll want to invest in yourself, but you should shift the bulk of your focus on investing on "forced appreciation" investment opportunities. These are deals that you can acquire an asset and "force" that asset to be more valuable. This could be growing a business, or improving a property, or buying a below value stock, or... You get the idea.

At Level Two you should use Intelligent Leverage to magnify your best financial investment moves for a greater return. I need to caution you here that this is NOT a license to speculate. Speculation is when you buy an asset at or close to market value in the HOPE that it will go up in value. That is not investing and I think you should be very cautious of any type of speculation.

Instead, I recommend that you develop your skills and advantages so that when you buy an asset, you know you are covered. For example, when I buy a 300-unit apartment complex for 70-cents on the dollar, I'm confident that I am making a smart investment move. Hence I'm very willing to boldly borrow (nonrecourse of course) to make that investment happen.

At Level Three I often use leverage to gain from forced appreciation deals, but I now also focus on using debt to magnify my passive, residual cash flow.

I can do this by using better debt to lower my debt service. Or I can use the debt to acquire cash flowing assets where the cash flow pays a healthy premium above my borrowing costs.
This is the ultimate use to put your Intelligent Leverage to work at--to help you increase your net worth and transition that net worth into passive, residual income.

Now before I end this E-Letter I just want to remind those of you who are serious about succeeding investing in commercial real estate that the special offer I made you in my last email is about to expire!

In case you need a quick reminder that special offer is:
Buy the course, called "How to Invest in Commercial Real Estate", by midnight Sunday, July 22nd, and you'll get the complete recordings from the negotiating 3-day workshop I taught earlier last year for FREE! That course would normally cost you $997 but when you take advantage of the special offer I am making you, using this unlisted link, you'll get the negotiating course free.

Order now! At midnight on Sunday that chance will be gone forever. Remember, your purchase is unconditionally guaranteed for a full year.

That's it my friend. I hope you have a great weekend.

My best to you,

David Finkel

P.S. Remember, the special offer to get two of my most popular home study courses on investing in commercial real estate and negotiating for the price of one expires at midnight on Sunday! Order now!

P.P.S. I posted a new online workshop for Maui MastermindTM Online members on the different kinds of wealth vehicles. It's approximately 28 min. long and in it I walk you through the pro's and con's of each vehicle, plus share with you some key distinctions between how Level
Two and Level Three people approach their investing. Members click here.

Not a member yet? No problem, click here to sign up for a free 30-Day Trial Membership and get instant access.

Selling Your Property in a Down Real Estate Market

Hi Everyone,

I hope you had a great 4th! Heather and I saw fireworks in a park here in Charlottesville, VA with two friends of ours. It was the first time in several years I’ve seen a show like that. Is it my imagination or have they gotten better with them?

In today’s E-Letter I wanted to talk about a specific strategy to sell your property faster and for a higher price in a down market. I also have some brand new announcements for you that you will want to make sure to see.

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Selling Your Property in a Down Real Estate Market

I understand what it’s like to be an investor with a few houses on the market that just won’t seem to sell. You look at the mortgage payment you are stuck making each month and the added expenses for keeping the property maintained. Yuck!

And it only gets worse if you have MULTIPLE properties up for sale at the same time.

I wanted to share a strategy with you about how to sell your property faster and for a premium, even in a down market. Sound too good to be true? Well keep reading.

The key is to separate your property from the masses of homes glutting the market. The best way to do that is to offer TERMS. Most of you have read my books on selling properties on a “Rent to Own” basis. (If you haven’t, I suggest Buying Real Estate Without Cash or Credit as the best “introduction” I’ve written on the subject.)

Today I want to talk about another technique. A strategy designed to get you CASH for you property much faster. The strategy is to sell your property with owner carry financing.

By offering your property with you carrying back a healthy second mortgage you are able to make your property stand out from the pack.

Let’s take the example of a $500,000 house you’ve been trying to sell for 6 months. (I know some of you live in areas lots more expensive, and others live in areas lots cheaper, but hey, I’ve got to start somewhere.)

You can offer to carry back a $50,000 second mortgage to help your buyer out. Now before you say you want your cash, hold on for a moment. I’ll help you get your cash, in fact more cash, if you give me a second.

But first, if you sold the house in a down market, how much would you have to discount the price to finally get it to sell? Maybe $20,000 or more? Let’s assume you have plan A which is to sell conventionally with NO owner second. In that case you sell it for $480,000 (after you buyer negotiates you down from your 500k asking price.) Of course you’ll probably have commission to an agent(s) and closing costs, but the house would be sold.

Plan B is to sell it with owner financing. Now out of a 100 houses for sale how many offer owner financing? Less than 5 percent! So now you already are radically reducing your competition from 100 other home to 5 other homes! In other words you’ve reduced the supply for this type of deal for buyers by 20-fold!

Plus, by offering to carry back a $50,000 second you have made it much easier for someone to get the loan to buy the property (after all, now they need to borrow $50,000 less from the bank!) This means you’ve increased the pool of potential buyers who can afford your property.

In other words you’ve increased the demand!

Now you already know enough about economics that when you reduce the supply and increase the demand the price must go up. In my experience selling LOTS of houses with owner financing I think you’ll get at least a 5-10 percent premium on your purchase price. In our example you’ll be able to sell the property for at least $520,000.

So far your “$50,000” second got you $40,000 more on the price! Now you have two choices. Choice one is to either take payments on the second mortgage at 10-12 percent interest (or higher) with a balloon note due for the balance in 3,4,5 years. Or you can SELL that note at a discount and get $25,000-40,000 cash right away. Both options get you MORE money selling this way, plus you’ll have the sale happen much faster.

Now I’ve had to cover that pretty quick. For those of you who are Maui Mastermind Online members, I did a 20 minute class on this technique that should be up as of Friday, July 6th.
If you are not a member yet, click here for a free 30-day trial membership if you want access to the class (and dozens of other classes on investing, financial fluency, tax strategy, and building businesses).

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New Special Report Up On Maui Mastermind Online!
How to Cash In On Your Real Estate ContactsMany investors make the costly mistake of considering real estate agents as competitors. This mistaken belief costs not only time, but potentially thousands of dollars from lost deals. Learn how to build a powerful and profitable relationship with a real estate agent. INSTANT ACCESS!

Strategic Asset Allocation: How Much Money Should You Put In Any One Investment?

Like I told you in the last eLetter, I was stepping up my commitment to get you more and more useful wealth tools.

This week I wanted to talk about your investing. It will apply to anyone who has ever asked themselves how much money should they invest in any one investment.

I hope you enjoy it!

Strategic Asset Allocation: How Much Money Should You Put In Any One Investment?

One question I get over and over again is how much money should a person put in any one investment. To really answer that question one of the key factors is something called "Strategic Asset Allocation", which is a discipline of investing your entire net worth strategically versus investment by investment.

Strategic Asset Allocation is something that says you need to look at your entire net worth, and intelligently plan out exactly what percentage you want of your net worth in what risk categories.

Most people when presented with an opportunity to invest in two investments compare the returns of those two investments. But this can be misleading. It's impossible to accurately compare returns across risk categories because you are not comparing apples to apples.
A much smarter way to sort through investment opportunities is to first strategically decide how you want to apportion your entire net worth across your Risk SpectrumTM.

Here's an interesting thing--everyone has their own Risk Spectrum. That's because what is risky for one person my not be as risky for another. There are many factors that influence risk from experience level with that particular wealth vehicle to specialized knowledge to financial situation.

My current strategic asset allocation plan is to hold 25 percent of my wealth in low risk investments, 50 percent in stable cash flow producing investments, and 25 percent in medium risk forced appreciation/upside investments.

What do you want your asset allocation to look like? You must factor in your current wealth stage and level, your age, your financial goals, and your current asset base.

The next time you are presented with several investment opportunities the first question you should ask is how do they fit into your personal strategic asset allocation plans? Then and only then should you evaluate the deals that fit your investment needs to assess the risks and potential rewards of these deals.

That's the first part, to strategically plan out what percentage of your net worth you want to invest over what risk categories.

The second part is to decide what limits you'll place on investing on any one investment. This is where a very important concept called "Compression of Capital" comes into play.

Compression of Capital says that every investment has a certain fixed cost of time, focus, effort, and money that is there regardless of how much or how little you invest. There is a cost to analyze the opportunity, to do your due diligence, to set up the funding arrangements, to oversee your investment interest over time, and eventually a cost to sell your investment.
Most wealth builders never think about these costs so they over-diversify. They feel that to keep safe they should spread their investment capital across a broad cross section of deals. But this increases these fixed costs (financial and otherwise) to a point that they don't make sense.
Instead, wealthy people have learned that they need their financial moves to be big enough that they have the power for the returns to more than outweigh the costs. So rather than investing your $100,000 that you've allocated for medium risk forced appreciation deals in 25 different investments, you might instead invest in that money across 3 or 4 choices.

While it's important to make sure not to spread yourself too thin (so that you lose the power of your investment focus and have too much of your resources eaten up by the extra costs associated -- financial and non-financial -- of too broad an investment front) it is also important not to concentrate too narrowly. What's the right blend? I wish there was a one size fits all formula. There isn't. Here is the criteria that I personally use:

If I am a passive investor in a deal then the MAXIMUM of my net worth that I will put into the deal is 5 percent of my net worth.

If I am a passive investor in a deal but I have some meaningful participation with the decision makers (a seat on the board, etc) then I'll put in up to 10 percent of my net worth (MAXIMUM).

If it is my own deal, I'll put in up to 25 percent of my net worth in any one deal.
Now the above is my criteria. Yours might be different, in fact, it almost certainly will.

Notice though the key distinctions I've made between the various degrees of control of an investment. The lower my personal control, the less of my money I am willing to risk. The only exception to these are conservative investment options that have virtually no risk to my capital (government bonds, money market accounts, etc.)

(There is a lot more about this topic that I will put into an online workshop for the Maui Mastermind Online membership site. I'll have it up by the middle of next week.)

That's it for this email. Have a great weekend!

My best to you,

David

P.S. For those of you who signed up for your free trial membership to Maui MastermindTM Online last time, thank you. What are the rest of you waiting for! Go ahead and take me up on this free 30-day trial offer. If you don't like it you can cancel and you'll never pay a dime. Plus you'll get to keep the $495 downloadable wealth course that new members like you get as a free gift just for trying it out! Start your free 30-day trial membership right now!