I admit the title is a bit hokey and a play on words. However, it also is one great investment alternative. The reading audience is very well aware of the opportunity in real estate investing but may not be aware of the alternatives that actually produce as promised.

Most people know about CDs, annuities, life insurance, stocks, bonds and other investment alternatives. However, not eveybody is familiar with Treasury Inflation Protected Securities or TIPS. The complete dirty lowdown can be found here.

For this post I’ll concentrate on only the cursory details. Simply put, TIPS are simple, inflation-indexed, fixed-income investments that deliver a real rate of return that the U.S. government guarantees will keep pace with inflation. Their measuring stick is the Consumer Price Index (CPI).

TIPS generated interest is taxable only by the federal government. State and local taxing agencies are not allowed to dip their grubby meat hooks into this interest bearing animal. This feature alone alone gives you an advantage over CDs and savings account.

Since they are indexed to inflation -no matter what you think about the validity of the CPI- you get another benefit. Here are some numbers to put TIPS into perspective.

Money Example

Assuming a person buys a $1,000 TIPS security with a 4% coupon and inflation is at 10% during the first year we own it, the face value of the TIPS would rise to $1,100. Additionally, the coupon rate of 4% would generate $44 in income.

NOTE: In reality, the payments change to reflect shifts in the CPI, and the payments are semi-annual. However, even though the numbers in the above example are static, I think you can get the idea. Heck, if you can figure a CAP rate in your head just from the figures tossed out by the seller, you definitely can grasp the shifting CPI rate.

A point of interest is that since their inception in 1997, TIPS have actually outperformed the U.S. Standard & Poor’s 500 stock market index. Given our current economic debacle, they’re likely to do even better I say editorially speaking.

You can invest in TIPS through your local bank or broker or if not inclined to use either facility, visit the above website and invest directly through the U.S. Treasury.

Diversification Is Still The Name Of The Game

I posted this information because I am a strong believer in diversification. I would bet those of us in the real estate investment arena who lost everything we had (I personally know several as they contacted me to do a short sale on their properties) during this bubble burst would now agree with me.

What we learned is something the investment community has preached for years - don’t put all of your nest egg into one investment vehicle. Spread it around to protect yourself.

I’m not preaching to the choir nor am I recommending TIPS as an investment. Like everything else, give them a look over and make up your own mind. If they fit your portfolio, go for it. If not, you at least learned about an another type of investment vehicle.

Photo Credit: zzzack

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Tags: inflation, investment, real estate investing, real estate tips, savings, Treasury Inflation Protected Securities

I’m in sunny Florida for the next two weeks on business/pleasure (of course there is always business in there for the tax deductions from our favorite Uncle.)

As I was getting my rental car at the airport, the guy at the counter asked me if I wanted the ultimate coverage insurance or the collision only. What this guy did was use the “yes or yes technique” or the “yes or yes” close. It is one of the best sales techniques around and if you are not utilizing it you are probably losing thousands of dollars worth of deals every year.

When the rental car employee asked me which one I wanted, I had to think for a split second and realized that I didn’t want either of them. This is such a powerful technique because when people are given two choices they automatically think they have to choose one of them. Another example is an owner of a pool hall near my house who uses this technique brilliantly. Every time that I walk into the pool hall he asks me if I would like a beer or would I like an appetizer (I bet 90% of the people choose one or the other and that very few people say neither……….except me. I’m just there for the pool and to take other people’s money. See, I believe in the use of OPM in everything I do, not just in real estate.)

After I have evaluated a property and I know that there is a deal to be had, I ask the seller “Mr. Seller would you like to set up a visit for Tuesday at 7 or Wednesday at 6, which works best for you?”

One of the most important ways that I use the “yes or yes” technique is by presenting multiple offers to a seller. Never, ever, present just one offer to a seller. If you present only one offer to a seller, then it is very easy to say no and you will not close many deals this way. I always present a minimum of two offers and many times three offers. My two offers are going to be a cash offer and a subject-to/lease option (terms) type offer. Even if I know there is no way the seller will do a subject-to, I still present the offer (this is extremely important to remember.) Even if your seller said there is no way you can take over his payments, still give him two offers so that he can choose your cash offer.
So when I am meeting with a seller, I say “Mr. Seller would you like our cash offer of x amount of dollars, or would you like us to take over your payments and you will receive x amount of dollars at closing? Which works best for you?”

There are many more ways to use this technique, such as when setting a closing date: “Mr. Seller, do you want to close on September 22 or September 25”? Or when you are purchasing a real estate course: “Do you want to pay in full, or would you like the easy payment plan of only $19.95 a month for 120 months”?

Well, I am back to the 500 degree Florida heat, sweating to death. So the next time you are meeting with a seller, are you going to present two or three offers?

Tags: closing deals, how to close, negotiation, real estate, real estate investing, real estate tips, real-estate-deals