Could a franchise be the right way to grow your real estate investing business?

Are you going to make money on this house?

Chapter 1: Starting Your Own Business……..…………………………...……3

Chapter 2: Frequently asked questions about becoming a real estate investor……………………………………..…..8 Chapter 3: A real world story from an investor who did it ……………………..….11 Chapter 4: Knowing the neighborhood is key for your investing..……………….…..17 Chapter 5: Top 10 franchise questions and 10 seldom-asked questions ....... 19

Chapter 6: One franchisee’s story…. 21

TABLE OF CONTENTS

Whether you are already a real estate investor, or have always had a passion for real estate, there are pros and cons to whether you should start your own business or align with a proven partner such as a franchise. Let’s walk through some of the points.

CHAPTER 1:Starting your own real estate business

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• You are in control and it is yours to do with as you choose. You choose how to serve your customers. This control can give you a great deal of satisfaction.

• You own the revenue production and profit and it is yours alone.

• You can build it up and sell it if you choose.

• You might be able to franchise it if you establish a successful business and license others to operate their own businesses and increase your profits.

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Starting your own

businessAdvantages

Could a franchise be the way to grow your business?

• High risk. No matter how much research and effort you put in, you run the risk it will fail. If you are the sole owner you assume all liabilities for failure.

• You have to do all the work, including all the research, marketing, and financing.

• The business might own you. You may have to work seven days a week for years before you can hire someone to manage it for you.

• Stress on your personal life. Many entrepreneurs are not able to take vacations or spend time with family.

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Starting your own

businessDisadvantages

Could a franchise be the way to grow your business?

• Lower risk. All the research and development has been done by the entrepreneur who built the company. You share in their knowledge of product, service and how to deliver results.

• High assurance of success. Companies know whether a franchise will succeed in a certain location and will not allow you to buy a franchise in a bad location.

• Marketing materials are provided. It can be very expensive to develop high quality TV ads, billboards and so on. Many overlook the importance of marketing.

• Continuing support from the company.• Franchises are proven businesses.

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Purchasing a franchiseAdvantages

Could a franchise be the way to grow your business?

• Upfront costs. You will need to raise the money on your own or you will need to get a loan or bring in partners.

• In addition to the upfront cost, there are frequently continuing costs to keep the business going, such as marketing.

• Royalties. You will be required to pay a portion of your revenue, or a regular flat royalty fee, to the franchising company.

• Term. You are frequently locked in for a minimum time before you can sell.

• Lack of control. In most cases you will not be able to change the products, services or the pricing structure.

Source Virtual Adviser from the Canadian government.

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Purchasing a franchiseDisadvantages

Could a franchise be the way to grow your business?

Q. How can I get started as a real estate investor?

A. Getting started as a real estate investor takes planning, education, business acumen and an understanding of many related facets of the real estate business. You can learn it on your own but it takes time. A franchise partner can help you get up and going more quickly with what you need to know.

CHAPTER 2:Frequently asked questions about becoming a real estate investor

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Q. How much money do I need to get started in real estate investing?

A. Generally, depending upon your credit score, lenders require 10 percent of the purchase price of your prospective investment property as a down payment plus closing costs. You should also have reserve funds to cover repairs or rehabbing costs, utilities, insurance and taxes during your holding period.

Q. How do I find investment properties?

A. Your initial goal as a real estate investor is to find and purchase properties at a discount. To accomplish this goal, you must spend an enormous amount of time driving neighborhoods, researching tax records, knocking on doors of strangers, conducting related research and a myriad of related activity before making a purchase. This is an example mentioned earlier about why a franchise may be an easier way to get started.

CHAPTER 2:Frequently asked questions

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Q. How do I know that I’m paying a fair price for an investment property?

A. There are many sources of local market data to help you obtain prices on comparable properties in your local market. Sources of data include the Multiple Listing Service (MLS), local appraisal district data, Web sites that list homes for sale and many other sources. Savvy investors don’t overlook the value of using their own eyes and intuition. A drive through a targeted neighborhood can reveal a wealth of data including whether or not local properties are well-maintained, if the neighborhood is in transition, the prevalence of for sale or for rent signs or obvious neighborhood problems.

CHAPTER 2:Frequently asked questions

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I have been a residential real estate investor, in some capacity, for quite some time.

I was investing in residential real estate for 10 years while I was a corporate executive. I was buying houses on my lunch hour. I was fixing and repairing and leasing houses on the weekends.

It started as an alternative to traditional stock market investing. Then, it slowly became a hobby, then a passion, and then I realized its potential as a business.

As a full-time corporate executive for 20 years, I could see the potential of my real estate investing. I could see how it could evolve from an investment strategy to a business strategy. But I needed some way to scale it and unlock the potential. That is exactly what a HomeVestors franchise provided to me.

CHAPTER 3:A real world story - Kevin Guz

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Kevin Guz

It was the key that unlocked the door from being a part-time or weekend warrior of a real estate investor, to a full-time entrepreneur/ business owner centered around single family residential real estate investing.

As a HomeVestors franchisee in Dallas, I have the chance to speak with independent investors interested in joining this brand. And, since I was a former part-time investor myself, I understand the very different aspects of this process.

Please note: Being an independent real estate investor is not synonymous with freedom. Yes, you are "free" to do whatever you want – I was free to do likewise – but that freedom is narrow and not always effective.

A private investor does not necessarily have the visibility or instant credibility that a company like HomeVestors enjoys.

Nor does that investor have the built-in, local network of contractors and subcontractors, electricians, carpenters, gardeners, roofers and plumbers that HomeVestors can call upon without delay. He or she must find these professionals by himself or herself, which is not easy to do.

CHAPTER 3:A real world story

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Also, an independent investor enters a neighborhood with no name recognition. Why? Because he or she does not have the national advertising budget, online promotional campaigns and broad portfolio of experience that a brand like HomeVestors has.

People sometimes say, “Hey, I can be a residential real estate investor from my kitchen table; why do I need HomeVestors?”

It’s the HomeVestors brand. The “We Buy Ugly Houses” brand. It is incredibly powerful and that is truly what unlocks your potential. We are the people nationwide that distressed sellers come to when they find themselves in a position where they need to sell their home, and sell it quick, because for whatever reason it cannot be sold successfully on the traditional retail market.

And, they are looking for someone they can trust and who they can count on to solve this situation for them. It’s that brand that attracts those people that nobody else has access to.

That credibility corresponds to some very impressive numbers. For example: HomeVestors has bought, renovated, rented or sold over 50,000 properties nationwide. That means when I enter a neighborhood – when I enter my neighborhood – I have a positive reputation, as a HomeVestors franchisee, that precedes me.

CHAPTER 3:A real world story

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As I explain in this broadcast, homeowners already know about HomeVestors. I do not have to "prove" myself, nor do I have to explain what HomeVestors does. I arrive with a strong brand name at my side, quality service at my disposal and a wealth of local resources at my request.

Those contractors and carpenters (and others) referenced above – they already work with franchisees.

So, HomeVestors simultaneously enhances its visibility throughout the U.S. while it strengthens its ties with individual vendors in communities across America.

I could never do those things on my own, not without a full-time marketing department, guidance from colleagues, training programs and so many other resources that an independent investor lacks.

In my case, being a HomeVestors franchisee makes it simpler – and better – to create a corporate identity that potential clients respect. It also means that referrals are more frequent, thanks to word-of-mouth testimonials and an established record of sustained success.

These benefits do not, however, suddenly or magically accrue to any and all franchisees. We are part of team, regionally and nationally, and have a responsibility to behave with absolute professionalism.•

CHAPTER 3:A real world story

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In other words, how I do business in Dallas has an impact on how a fellow franchisee does a deal elsewhere; we have a mutually beneficial goal to be every prospective client's trusted adviser and every franchisee's ally.

Some valuable advice to those reviewing HomeVestors and its select competitors: Perform your own due diligence.

Which is to say, I do not have to be a corporate cheerleader for HomeVestors; and I have no interest in bashing our competition. I do, however, have an interest in telling the truth, free of any exaggerated statements or unsubstantiated claims.

And, the truth is, I am proud to be a HomeVestors franchisee. I am thankful to be a member of this brand because of the advantages it offers and the confidence it inspires among residents nationwide.

Based on these facts, I happily recommend HomeVestors to someone who wants the influence this company possesses. Those assets translate into sales – a lot of them – that no independent investor can match. These reasons are why I am a proud HomeVestors-Dallas franchisee.

I welcome the chance to speak with investors thinking about joining this organization. I am here to help, with enthusiasm and accessibility.

CHAPTER 3:A real world story

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By Kevin Guz

I recently had an opportunity to purchase a home in a great neighborhood. It had great resale potential, plus great lease opportunity if you wanted to buy and hold it. I could have done a spreadsheet on the house and the numbers would have looked great.

Had I not gone to see it in person in the neighborhood, I might have made the purchase based on the spreadsheet numbers and made a critical mistake just because the numbers looked so good.

CHAPTER 4:Knowing the neighborhood is key for your investing

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Going to that particular house, I found it ended up being on the exterior perimeter of this great neighborhood subdivision. Lo and behold, I stepped into the backyard, looked up, and there was the power plant supplying power to that community. The towers rose high. The wires ran left and right.

It’s a good example where just because the numbers look great and you know it’s a great neighborhood, you’ve got to go to that house. As it turned out, that house was a block over from, and on the exterior perimeter, of that great neighborhood where those great returns were available. Because of what I saw in the neighborhood visit, it made the deal null and void for that particular house and it was no longer a good investment.

If you are an investor looking to buy a home in a particular neighborhood, whether you live in that city or not, your knowledge of that section of a neighborhood should be just as good as the local police department or fire department. They know a city block by block and street by street.

CHAPTER 4:Knowing the neighborhood

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Jeff Elgin, is the CEO of FranChoice, Inc, a company that provides free consulting to those looking to buy a franchise. Recently in Entrepreneur he wrote about his top 10 questions to ask:

1.How much total investment will this franchise require?2.How much will I need in operating capital reserves to cover losses after opening the franchise until it reaches the breakeven point in terms of cash flow?3.How much extra cash do I need to cover living expenses while I am starting up the franchise?4.How long will it take my new franchise to reach break even?5.How much of my total investment, including capital reserves, do I need to have in cash?6.What standard financing options exist for me?7.What alternative financing options exist for me?8.How much money can I make in this franchise?9.What are the ranges in financial performance of the existing franchisees?10.How financially strong is the franchise company?Visit Jeff’s site at www.franchoice.com

CHAPTER 5:Top 10 questions about buying a franchise

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Carol Tice writes for Forbes Magazine and says there are some seldom-asked questions that are important:

1.What are franchisees saying about the franchisor?

2.What’s the turnover rate?

3.What’s the failure rate?

4.Why did your franchise fail?

5.Would you buy this franchise again if you had it to do all over again?

6.What’s it really like to work in this business?

7.How are conflicts resolved?

8.Are all locations franchises?

9.What support do you offer beyond the initial training?

10.What is the business experience of the franchise managers?

CHAPTER 5:Top 10 seldom-asked questions to answer before you buy a franchise

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I'm a HomeVestors franchisee and I can explain why 90%+ of those that try to invest on their own fail. Yes, HomeVestors is a franchise system. Yes, they charge fees...that's what franchisors do. It's the same for McDonald’s and Subway. Could you create your own burger shop? Yes? Could you ever compete against McDonalds....it's unlikely.

I started my HomeVestors franchise 6 years ago. My wife and I had zero residential real estate experience...had never bought a single house. By working hard, leaning into the HomeVestors system and brand, and working hard (yep...twice as hard as everyone else), we bought 65 houses in our first year. BTW - this was 2008 when the market was "crashing."

The primary things that benefit HomeVestors franchisees are: 1. The Brand - nearly $250 million has been spent advertising and building the brand. It's known from coast to coast.

CHAPTER 6:What one investor, Mike Hambright, has to say

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Mike Hambright

It's a well known fact that people generally trust national brands, and would prefer to work with national companies that have a reputation to uphold. We're professional, and that allows us to be much more successful in getting contracts than the 'next guy'. It generally also allows us to buy houses at deeper prices, because we're more trustworthy.

2. Lead Generation - Nobody can compete with us. I won't dwell on this. This is the single most important thing in real estate investing.

3. Ongoing mentoring and support - The franchise model has evolved over the last few years to include a 'Development Agent', or coach and mentor. I've purchased about 300 houses at super deep prices over the last few years. I'm now a development agent, coach and mentor a large and rapidly growing group of franchisees from coast to coast. Most real estate investors are on an island. They don't have anyone to learn and grow with. HomeVestors team based approach allows us to surround ourselves with hundreds of other people doing the exact same thing as us, and generally willing to share all we know with each other.

CHAPTER 6:Mike Hambright

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If you’re interested in growing your real estate investment business or getting started in real estate investing please get in touch.

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