Selecting the Right Property for Investing
Anyone can make money in real estate when the market is booming in your area. The trick to making a solid investment that pays out big in today's market is to follow the process used by the professionals. The first question that you have to ask is which property is right for me? If you are new to real estate investment, or have lost your shirt trying to flip properties in the past, please pay attention to the points I will lay out in this article. Pros never buy based on a hunch or a guess. They always do their homework.
Basic Economics
We all know that the market is the intersection of Supply and Demand. The set price of goods or services is wherever consumer demand meets producer supply. In real estate, demand always sets price. However, real estate is more complex than just that, and you need to research why market indicators in your area are the way they are in order to make a wise investment. Why is there a high or low demand, what is driving the prices up or down, what are people looking for, are people making more money now? Of course, you are going to be looking for markets with a strong demand and low supply for investing techniques like flipping and wholesaling. However, even markets with a below average demand and above average supply of real estate can yield decent profits through investment techniques such as listing with a lease option and buying a home for rental.
Making money requires that you know when the market will go bad, or begin to boom. Waiting until after the market changes before making your move is a good way to do poorly. You will want to know when the market in your area is at its highest so that you can sell off and take your profits, and at the low end, ready to head up again, so you can get in on the best deals for future profit. You can leave this to chance, or you can pay attention to the market indicators and let them show you where it is going before it moves.
Market Indicators
Some indicators are more important than are others, but all should be considered before making an investment. When doing your research remember that your local numbers and statistics will not necessarily reflect those of the national market. Real estate values are always local in nature.
-Housing Affordability-
The National Association of Realtors (NAR) has an index that gauges median income against median price. A rating of 100% means that the median earner has just enough income to purchase a median priced home, assuming a 20% down payment. An index number above 100% means that the median earner has more than enough money to qualify for a loan on the same homes with the same money down. A rating of 100% is ideal for a growing market and a higher supply.
-Population Growth-
In general, a growing population means increased demand for real estate. For instance, if the average growth over the past five years in your town has been 3%, but a new highway and industrial park drive more people to the area then the population growth rate will probably increase. Supposing that the local chamber and county planning commission expect the growth rate to approach 10% in the near future, you will want to invest in this market.
-Employment-
Employment is a good indicator for an obvious reason. If chronic unemployment is high because of problems with local industry, like in Michigan, then this may not be the best time to invest in working class housing serving the needs of the auto industry because there simply is no money to buy real estate, and because people are leaving the area to seek employment elsewhere. On the other hand, investors who saw the increase in major corporations moving their operations to North Carolina made a huge profit. These companies brought a large influx of upper-middle class wage earners seeking housing and employment. The market there is still booming. Noticing the up or down shift in employment figures can help you predict the market ahead of its shift. The best indicators are low unemployment and a growing local industry.
-Consumer Confidence-
A market with high consumer confidence should do well. Low consumer confidence can depress a market through reticence to buy because consumers are unsure of their future earning potential. As expected, this hedges prices down. The NAR also measures consumer confidence. A score over 100 means that consumers have confidence in the economy, while a score under 100 means that consumers have less confidence, and the real estate market will reflect that. High consumer confidence often comes with low unemployment rates and a strong economy.
-House Sales-
The sale of homes is a direct indicator of how well the market is doing. High inventories, with homes sitting for more than 120 days will hedge prices down into a buyers market. If inventories and average time on the market are low then prices will be higher, and the time will be ripe for quick deals and investment techniques like rehabbing and wholesaling. You should be aware that sellers using multiple agents listing separately, and agents delisting and relisting properties could manipulate the putative Days on Market (DOM).
Home sales are really a following indicator. It is usually the result of higher consumer confidence, employment, and affordability.
-Interest Rates-
Lower rates often result in higher prices and more qualified buyers. Do not overestimate the importance of this indicator, though, for when consumer confidence is high, higher rates will have less of an impact on the market. Be on the lookout for cash-following properties when rates are low. Sometimes a percentage point can be the difference between a positive cash flow and a negative one.
Best Investment Properties
To put the odds in your favor, look for standard investment properties. Avoid the quaint and the kooky, and never buy an investment property just because you would want to live there. For the fastest turn-around, you want properties that will appeal to the greatest number of people. The point of investing in real estate is to get your investment back with a healthy profit. To that end, I recommend the following qualifications to ensure a quick flip.
* Priced right for you
* Needs a little work
* 5 to 50 years old
* Single-family dwelling
* Three bedrooms with two baths
* Decent area
* Priced from the lower median to median for your area
The price should be about 65% to 70% below the After Rehab Value (ARV) for a good discount. I will explain that later. You should keep the rehab costs between $10,000 and $12,000, which means that you want to avoid older homes that might need electrical or plumbing system replacements. Nothing sells better than single-family homes with three bedrooms and two baths. The best areas are working class neighborhoods where first-time homebuyers would want to live. Finally, most buyers will be looking for homes priced in the lower median through median range. Give the people what they want.
Getting Your Money Back
As an example, take a property that had an ARV of $150,000. Subtract 35% or $52,500, and you get a purchase price of $97,500. The reason you want to find property at this discount is that in order to get cash at closing, I advocate using a 'hard money' lender to purchase the property, rehab it, and then either sell it again at $150,000 or refinance the property to put a new loan on it. Most 'hard money' lenders will only loan 65% to 70% on the property. Some will loan on the After Rehab Value, and some will loan on the Fair Market Value. The key strategy for your success in flipping property is to work with lenders who loan on the ARV.
Surprisingly, this is one of the best markets for finding properties with this kind of discount transaction. Another benefit of using 'hard money' lenders is that they will review the property value and estimate the rehab costs so you will have someone checking your work to make sure you got it right. To learn more about hard lenders please follow the link below.
Gary Fee
http://www.fast4close.com/
Aquinas Company
21390 Bagby Road
Bowling Green, VA 22427
Monday, June 15, 2009
Thursday, April 2, 2009
Here Comes Peter Cottontail - but not to Food Lion
With Easter a week away, you'd think gathering a basket full of traditional treats would be easy to do at your local (and in my case, only) grocery store. I was a bit flummoxed on my weekly trip to market yesterday when all I could find were some Peeps and several boxes of broken bunnies from that company that makes its chocolate out of wax. Old wax. I won't name names; you know who you are.
Really, I don't know what Peeps are made of, but a friend at Stanford tells me they have a half-life longer than Plutonium and Twinkies combined. Just because I won't eat them doesn't mean they aren't endlessly entertaining. Gather the kids around the microwave on Easter morning, and show them what happens when you pop a Peep into the radar range. Then, release your little dickens with their new-found knowledge of physics, and let the fun spread through your neighborhood!
As for Food Lion, I can only presume they've cleared out their Easter candy to make room for the Halloween candy.
Really, I don't know what Peeps are made of, but a friend at Stanford tells me they have a half-life longer than Plutonium and Twinkies combined. Just because I won't eat them doesn't mean they aren't endlessly entertaining. Gather the kids around the microwave on Easter morning, and show them what happens when you pop a Peep into the radar range. Then, release your little dickens with their new-found knowledge of physics, and let the fun spread through your neighborhood!
As for Food Lion, I can only presume they've cleared out their Easter candy to make room for the Halloween candy.
Sunday, March 29, 2009
What's Wrong with Herbalife? -Part 2 "Why OBS?"
Why Online Business Systems?
In part one of "What's Wrong with Herbalife," I explained how Multi-Level-Marketing works. You will frequently find Google Ads on this site proclaiming the end of MLM. Don't believe them. By all means, click on the ads and download the reports and read them, but just because someone found something that works better for him than MLM does not mean there's anything wrong with it, or that MLM won't work well for you. I have some video links on the site to a couple of marketing gurus who back me up on this subject. The two major objections to MLM are first, Multi-Level means pyramid, and second, if the products were any good, they'd be sold in stores. Let's take those in turn.
Multi-Level-Marketing does look like a pyramid, yes it does. There are fewer people near the top making more money, and more people near the bottom making less. If that's your definition of a pyramid scheme then IBM is a pyramid scheme. So is General Motors, and maybe even the Wendy's down the block. I can't think of a single organization that isn't a pyramid. The difference between a corporate pyramid and an MLM pyramid is that climbing the corporate ladder depends more on the good will of those above you than on your own abilities and contributions, while climbing the MLM ladder depends in equal parts on your own abilities and contributions, and the good will of those below you, by which I mean the downlines that you recruited and trained. So, in a sense, it really is all up to you. The legal difference between MLM and a pyramid scheme is that MLM has a product to sell, whereas a pyramid scheme is merely selling the pyramid scheme itself. As we'll see, sometimes the line between them isn't well defined.
As to the quality of the products, I have to disclose that I'm a big fan of Herbalife. I love their products, and I believe that if you try them, you will, too. That being said, why doesn't Herbalife sell their products in the stores? Well, if you make a product, there are multiple routes to market. You can invest an immense amount of money in media campaigns, ship the product to warehouse distributors, and field an army of sales reps going from store to store trying to make room for your product on already crowded shelves.
You have to oversee sales promotions, do coupons, fiddle endlessly with packaging to draw the customers' eyes away from your competition's package, &c., &c., and so forth. Or, you could recruit users, who then become distributors. These people know and like your product, and they have little trouble selling it to others, face to face. They do their own advertising; indeed, they are the best advertising - living proof of what they're selling. You reward their volume with ever-lower wholesale prices, and don't really care what price they sell it at, although you certainly want them to make a profit so they'll continue to move your product.
The next step is to expand your sales team. Once again, you let your distributors handle that for you. You give them the best incentive there is - no, not a plaque - money. And not just a one time head-hunting bonus like you get in the corporate world, either, you give them a cut of their downlines' sales. You can afford to do this because the new downlines are paying you more for the product than their sponsors do. That's because your wholesale prices are on a sliding scale according to volume. There's nothing particularly fishy about this; corporate salesmen are usually paid on a volume scale as well. This "incentivises" them to make more sales so that their commission will be a higher amount on those sales.
Similarly, you give your distributors an incentive not only to sell more, but also to recruit more distributors who make money for them. You've got to see how this is a perfect setup for your company: By making your salesmen independent distributors, instead of employees, you unload a huge amount of HR bureaucracy, not to mention payroll, and your distributors are building their own pension plans with every downline they recruit. They even train them for you.
Here's where Online Business Systems (OBS) comes in. OBS is owned by some Canadians who figured out the importance of recruiting in MLM. They built an organization that sells Herbalife Independent Distributorships. They are essentially recruiting recruiters to recruit more recruiters. And that's how they got in trouble with Her Majesty's government. Canadian law does not define the difference between an MLM and a pyramid scheme as rigorously as the law here in the colonies. Consequently, they were hauled before the bench, and charged by the Solicitor General with running a pyramid scheme because, he argued, OBS was really selling OBS, not Herbalife products. A bewigged Queen's Counsel agreed that the main product of the organization was the organization itself, and found them guilty, slapped them with an astronomical fine, and ordered the principals to clean up their act. Which, to their credit, they did. I want to emphasize that Online Business Systems does conform to Canadian law, and has always operated within the laws of the United States.
In conclusion, Multi-Level-Marketing is legal, it is profitable, and Herbalife has a good product. Distributors who want to make more (much, much more), can grow their businesses geometrically by earnestly recruiting more distributors. To assist in this venture they can utilize organizations like Online Business Systems.
In part 3 of this series, I will show you how OBS operates.
In part one of "What's Wrong with Herbalife," I explained how Multi-Level-Marketing works. You will frequently find Google Ads on this site proclaiming the end of MLM. Don't believe them. By all means, click on the ads and download the reports and read them, but just because someone found something that works better for him than MLM does not mean there's anything wrong with it, or that MLM won't work well for you. I have some video links on the site to a couple of marketing gurus who back me up on this subject. The two major objections to MLM are first, Multi-Level means pyramid, and second, if the products were any good, they'd be sold in stores. Let's take those in turn.
Multi-Level-Marketing does look like a pyramid, yes it does. There are fewer people near the top making more money, and more people near the bottom making less. If that's your definition of a pyramid scheme then IBM is a pyramid scheme. So is General Motors, and maybe even the Wendy's down the block. I can't think of a single organization that isn't a pyramid. The difference between a corporate pyramid and an MLM pyramid is that climbing the corporate ladder depends more on the good will of those above you than on your own abilities and contributions, while climbing the MLM ladder depends in equal parts on your own abilities and contributions, and the good will of those below you, by which I mean the downlines that you recruited and trained. So, in a sense, it really is all up to you. The legal difference between MLM and a pyramid scheme is that MLM has a product to sell, whereas a pyramid scheme is merely selling the pyramid scheme itself. As we'll see, sometimes the line between them isn't well defined.
As to the quality of the products, I have to disclose that I'm a big fan of Herbalife. I love their products, and I believe that if you try them, you will, too. That being said, why doesn't Herbalife sell their products in the stores? Well, if you make a product, there are multiple routes to market. You can invest an immense amount of money in media campaigns, ship the product to warehouse distributors, and field an army of sales reps going from store to store trying to make room for your product on already crowded shelves.
You have to oversee sales promotions, do coupons, fiddle endlessly with packaging to draw the customers' eyes away from your competition's package, &c., &c., and so forth. Or, you could recruit users, who then become distributors. These people know and like your product, and they have little trouble selling it to others, face to face. They do their own advertising; indeed, they are the best advertising - living proof of what they're selling. You reward their volume with ever-lower wholesale prices, and don't really care what price they sell it at, although you certainly want them to make a profit so they'll continue to move your product.
The next step is to expand your sales team. Once again, you let your distributors handle that for you. You give them the best incentive there is - no, not a plaque - money. And not just a one time head-hunting bonus like you get in the corporate world, either, you give them a cut of their downlines' sales. You can afford to do this because the new downlines are paying you more for the product than their sponsors do. That's because your wholesale prices are on a sliding scale according to volume. There's nothing particularly fishy about this; corporate salesmen are usually paid on a volume scale as well. This "incentivises" them to make more sales so that their commission will be a higher amount on those sales.
Similarly, you give your distributors an incentive not only to sell more, but also to recruit more distributors who make money for them. You've got to see how this is a perfect setup for your company: By making your salesmen independent distributors, instead of employees, you unload a huge amount of HR bureaucracy, not to mention payroll, and your distributors are building their own pension plans with every downline they recruit. They even train them for you.
Here's where Online Business Systems (OBS) comes in. OBS is owned by some Canadians who figured out the importance of recruiting in MLM. They built an organization that sells Herbalife Independent Distributorships. They are essentially recruiting recruiters to recruit more recruiters. And that's how they got in trouble with Her Majesty's government. Canadian law does not define the difference between an MLM and a pyramid scheme as rigorously as the law here in the colonies. Consequently, they were hauled before the bench, and charged by the Solicitor General with running a pyramid scheme because, he argued, OBS was really selling OBS, not Herbalife products. A bewigged Queen's Counsel agreed that the main product of the organization was the organization itself, and found them guilty, slapped them with an astronomical fine, and ordered the principals to clean up their act. Which, to their credit, they did. I want to emphasize that Online Business Systems does conform to Canadian law, and has always operated within the laws of the United States.
In conclusion, Multi-Level-Marketing is legal, it is profitable, and Herbalife has a good product. Distributors who want to make more (much, much more), can grow their businesses geometrically by earnestly recruiting more distributors. To assist in this venture they can utilize organizations like Online Business Systems.
In part 3 of this series, I will show you how OBS operates.
Friday, March 13, 2009
What To Do With Your Spare Time
Working from home can save a lot of commuting time over the space of a year. Work-From-Home businesses can also put you in charge of your time. With Spring right around the corner, you might be planning to utilize your new-found financial freedom by scooping up the kids and hitting the road - maybe to an amusement park. When those parks that close for the Winter first open, they aren't as crowded as they become in the Summer. While much of the amusement at amusement parks is created by all the people around you, those crowds do mean longer queues at the rides. So Spring, at least in the more temperate climes, is the best time to visit your favorite roller-coasters.
Andy Hine, founder and chairman of the Roller Coaster Club of Great Britain (RCCGB), recently shared some tips with the BBC for getting the most out of your park visit:
Andy Hine, founder and chairman of the Roller Coaster Club of Great Britain (RCCGB), recently shared some tips with the BBC for getting the most out of your park visit:
- Sit at the back of the train to whip over hills and enjoy more 'airtime'.
- Extend your arms to stretch trunk and enhance physical sensations.
- "Keep your eyes open no matter how scared", because the imagination only creates worse.
- Trains go fastest just after rain and at the end of the day.
- For shorter queues, start visit at the back of the amusement park, move round it counter-clockwise, and ride during lunchtime.
Mr. Hine also opined that the best roller-coaster in the world could be found at Knoebel's Amusement Resort in Pennsylvania. The historic wooden Phoenix isn't very tall, and isn't very fast, but it gives its riders more airtime than any he's ever been on. High praise from coaster aficionados on the other side of the ocean! For maximum airtime in one day, though, you can't beat Cedar Point in Sandusky, Ohio, which contains 17 coasters.
Knoebel's opens April 25th, Cedar Point on May 16th.
Thursday, March 5, 2009
As If Being Unemployed Isn't Bad Enough . . .
Many people without jobs report feeling lonely and disconnected from the world. A number of telemarketing firms have initiated a new campaign to let job seekers know that they are still loved. These firms have been registering themselves as 'employers' at online job search sites, which allows them to peruse resumes posted by the underemployed, unemployed, and deeply suspicious soon-to-be formerly employed. Some job sites allow you to post your resume without contact information, but still make your 'profile' available to prospective employers unless you specifically choose to make it private.
Telemarketers are culling phone numbers from intact resumes and profiles for sales contact information, which, according to their mostly disbarred or never-passed-the-bar legal departments, is permissable under federal and state 'do not call' laws. They are then robo-dialing the heck out of them. They believe that your mutual association with the job service allows them yet another loophole through which they may slither, viz., that a company may call a consumer for up to three months after the consumer makes an inquiry or submits an application to the company. By defining the posting of your resume as an application, they figure you're fair game.
When the FTC's National Do Not Call Registry was first set up, it wasn't necessary to list your cell phone because those were already protected by reason that back then even receiving a cell call was expensive. Of course, that's no longer true, and you can now register your mobile phones, as well. Also, thanks to the Do-Not-Call Improvement Act of 2007, numbers now remain registered forever. To check the status of your registrations go to https://www.donotcall.gov/confirm/conf.aspx.
However, if you own your own business, and use a cell phone for business, as I do, you're pretty much out of luck since the law allows 'business to business' sales calls. It will take another lengthy lawsuit to properly define what 'business to business' actually means. In the meantime, I've set up my own Do Not Answer Registry. My cell phone allows me to enter five numbers per contact, so I created a series of contacts with names like "Do Not Answer", "Don't Answer", and "Jerk". Whenever I get robo-dialed, I add that number to one of these contacts. Seeing those names pop up on the screen when the phone rings allows me to hit the Ignore button without even wondering who it is.
Anyone familiar with how the phone companies allocate numbers can make a fair guess at whether a number belongs to a mobile or land line. Telemarketers have a different approach to contacting cell owners. Because it is so easy to switch off the ringer, ignore, or send a call directly to voice mail, telemarketers will call these numbers repeatedly within a very short time, hoping that you'll answer at least one of them. I recently received 8 calls within 3 minutes from the same outfit starting at 9:48pm. I found the calls on the missed call listing the next morning. Curiously, no voice mails were left. These vultures know that active job seekers are unlikely to ignore a phone call from a prospective employer, so they dial relentlessly, sometimes using a revolving bank of numbers to confuse you.
In this job market there are two things you can be sure of; 1) an actual employer, or corporate head hunter, won't call you twice, but they will leave a message, and 2) nobody with a robo-dialer wants to pay you. One can't help but wonder what it is in the collective American psyche that makes so many people think that the best way to make a sale is to infuriate the prospect.
Telemarketers are culling phone numbers from intact resumes and profiles for sales contact information, which, according to their mostly disbarred or never-passed-the-bar legal departments, is permissable under federal and state 'do not call' laws. They are then robo-dialing the heck out of them. They believe that your mutual association with the job service allows them yet another loophole through which they may slither, viz., that a company may call a consumer for up to three months after the consumer makes an inquiry or submits an application to the company. By defining the posting of your resume as an application, they figure you're fair game.
When the FTC's National Do Not Call Registry was first set up, it wasn't necessary to list your cell phone because those were already protected by reason that back then even receiving a cell call was expensive. Of course, that's no longer true, and you can now register your mobile phones, as well. Also, thanks to the Do-Not-Call Improvement Act of 2007, numbers now remain registered forever. To check the status of your registrations go to https://www.donotcall.gov/confirm/conf.aspx.
However, if you own your own business, and use a cell phone for business, as I do, you're pretty much out of luck since the law allows 'business to business' sales calls. It will take another lengthy lawsuit to properly define what 'business to business' actually means. In the meantime, I've set up my own Do Not Answer Registry. My cell phone allows me to enter five numbers per contact, so I created a series of contacts with names like "Do Not Answer", "Don't Answer", and "Jerk". Whenever I get robo-dialed, I add that number to one of these contacts. Seeing those names pop up on the screen when the phone rings allows me to hit the Ignore button without even wondering who it is.
Anyone familiar with how the phone companies allocate numbers can make a fair guess at whether a number belongs to a mobile or land line. Telemarketers have a different approach to contacting cell owners. Because it is so easy to switch off the ringer, ignore, or send a call directly to voice mail, telemarketers will call these numbers repeatedly within a very short time, hoping that you'll answer at least one of them. I recently received 8 calls within 3 minutes from the same outfit starting at 9:48pm. I found the calls on the missed call listing the next morning. Curiously, no voice mails were left. These vultures know that active job seekers are unlikely to ignore a phone call from a prospective employer, so they dial relentlessly, sometimes using a revolving bank of numbers to confuse you.
In this job market there are two things you can be sure of; 1) an actual employer, or corporate head hunter, won't call you twice, but they will leave a message, and 2) nobody with a robo-dialer wants to pay you. One can't help but wonder what it is in the collective American psyche that makes so many people think that the best way to make a sale is to infuriate the prospect.
Wednesday, March 4, 2009
An Open Invitation to Share Your Story
I would like to invite others with home-based businesses to share their stories with us. Just send me an email to be added to the authors' list.
garyfee@verizon.net
garyfee@verizon.net
Friday, February 27, 2009
What's Wrong with Herbalife? -Part 1
Can you be an Independent Herbalife Distributor? Sure, why not? All you have to do is take the products, wear a big button, and everywhere you go, people will walk up to you and ask you how you lost so much weight. Easy sale.
Let me tell you about my experience with Herbalife. I was recruited through the Partner with Paul web site when I was looking for an internet business. I had no idea that Herbalife was the company that I would be partnered with. I was soon parted from $9.95 for a Decision Packet that arrived a few days later, followed by a call from someone who introduced himself to me as my "coach". The decision packet came from the Online Business Systems, and contained some remarkable testimonials from some very Beautiful People about how OBS had made such huge differences in their lives and bank accounts.
My coach read me a script that eventually revealed Herbalife International's place in the scheme. At this point I would like to mention that Herbalife makes some fantastic products that really work. I lost 20 pounds in 30 days. And these aren't some tonics Granny whips up out by the cement pound, either. Herbalife has an army of doctors, scientists, and grad school researchers developing their products. They've been in business for almost 30 years, and have close to 40 million customers in 70 countries. Herbalife isn't just a weight loss company. Their products are designed to help you get the best nutrition so that your body functions the way nature intended. They have supplements for increased energy, heart function, attention, athletic prowess, visual acuity, clearer skin, and even (blush) sexual health.
So how come I didn't find out about this fantastic company until a week into the recruitment process? Why couldn't they just come out and say, "You're going to be selling Herbalife"? Because, as it turns out, that isn't what I was really going to be selling. The incredible income from being an Herbalife Distributor doesn't come from selling Herbalife, it comes from selling Herbalife Distributorships.
Welcome to MLM, or Multi-Level Marketing. Although the compensation plans in MLM seem arcane, they are based on two different types of profit, retail and wholesale. Retail profit is the difference between what it costs you to sell a product, and the price that your customer pays you for that product. Everyone pretty much gets that concept. In any MLM, you want to recruit downline distributors for the wholesale profits they make you. They keep their retail profits on what they sell, and the parent company gives you a cut on your downline's sales as well. This is a share of the difference between what it costs Herbalife, in this case, to sell the product to your downline, and what your downline pays Herbalife to buy it. In order to do this profitably, there have to be different wholesale prices for different distributors. You might get your product at 50% of the retail price, which gives you a 100% mark-up, while your immediate downline buys the same product at 58%, and his downline buys it at 75% direct from Herbalife. The wholesale price charged to distributors is based on their volume. What this means is that your downlines are paying more for the same product than you are, and your cut of their sales comes from that extra 8-25% that they pay Herbalife. Every Multi-Level Marketing plan has its own rules for handling what happens after your downlines hit the same wholesale price that you're at, but there's enough cushion built into the rock-bottom wholesale price for the company to continue giving you a bonus for their sales. There are also rules for when a group of distributors might be split off from you into their own organization, but even then, the royalties keep on coming.
If this all sounds like a pyramid, it's because it looks like one: You recruit ten distributors, they, in turn, each recruit ten more, and they each recruit ten more, and now you're up to a thousand downlines fanning out in a classical pyramid shape. But it's not a pyramid scheme in the legal sense. The difference is that a true pyramid doesn't have a product, or rather, the pyramid is the product. And in a pyramid, you can never make more than your upline. A good Herbalife distributor can reach that 50% volume, and eventually surpass his upline in sales of the product, which is what pyramids lack.
So, where does Online Business Systems fit into all this? OBS is another company (one of several), that sells Herbalife distributorships. That's their product. But, more than that, what they sell are so-called Supervisor distributorships. While every distributor gets a cut off his downlines, Supervisors are eligible for the royalties produced by downline Supervisors, and their downlines. If one of your downlines becomes a Supervisor before you do, his organization, and the royalties they produce, essentially belong to your nearest upline Supervisor. The point of Online Business Systems is to make you a Supervisor before you even have a single downline.
Next -What is OBS, and How do they operate? Watch for Part 2.
http://garyfee.theonlinebusiness.com/ will take you to the recruiting site that OBS set up for me. Pay attention to how the site tries to get your contact information. Let me know what you think.
Let me tell you about my experience with Herbalife. I was recruited through the Partner with Paul web site when I was looking for an internet business. I had no idea that Herbalife was the company that I would be partnered with. I was soon parted from $9.95 for a Decision Packet that arrived a few days later, followed by a call from someone who introduced himself to me as my "coach". The decision packet came from the Online Business Systems, and contained some remarkable testimonials from some very Beautiful People about how OBS had made such huge differences in their lives and bank accounts.
My coach read me a script that eventually revealed Herbalife International's place in the scheme. At this point I would like to mention that Herbalife makes some fantastic products that really work. I lost 20 pounds in 30 days. And these aren't some tonics Granny whips up out by the cement pound, either. Herbalife has an army of doctors, scientists, and grad school researchers developing their products. They've been in business for almost 30 years, and have close to 40 million customers in 70 countries. Herbalife isn't just a weight loss company. Their products are designed to help you get the best nutrition so that your body functions the way nature intended. They have supplements for increased energy, heart function, attention, athletic prowess, visual acuity, clearer skin, and even (blush) sexual health.
So how come I didn't find out about this fantastic company until a week into the recruitment process? Why couldn't they just come out and say, "You're going to be selling Herbalife"? Because, as it turns out, that isn't what I was really going to be selling. The incredible income from being an Herbalife Distributor doesn't come from selling Herbalife, it comes from selling Herbalife Distributorships.
Welcome to MLM, or Multi-Level Marketing. Although the compensation plans in MLM seem arcane, they are based on two different types of profit, retail and wholesale. Retail profit is the difference between what it costs you to sell a product, and the price that your customer pays you for that product. Everyone pretty much gets that concept. In any MLM, you want to recruit downline distributors for the wholesale profits they make you. They keep their retail profits on what they sell, and the parent company gives you a cut on your downline's sales as well. This is a share of the difference between what it costs Herbalife, in this case, to sell the product to your downline, and what your downline pays Herbalife to buy it. In order to do this profitably, there have to be different wholesale prices for different distributors. You might get your product at 50% of the retail price, which gives you a 100% mark-up, while your immediate downline buys the same product at 58%, and his downline buys it at 75% direct from Herbalife. The wholesale price charged to distributors is based on their volume. What this means is that your downlines are paying more for the same product than you are, and your cut of their sales comes from that extra 8-25% that they pay Herbalife. Every Multi-Level Marketing plan has its own rules for handling what happens after your downlines hit the same wholesale price that you're at, but there's enough cushion built into the rock-bottom wholesale price for the company to continue giving you a bonus for their sales. There are also rules for when a group of distributors might be split off from you into their own organization, but even then, the royalties keep on coming.
If this all sounds like a pyramid, it's because it looks like one: You recruit ten distributors, they, in turn, each recruit ten more, and they each recruit ten more, and now you're up to a thousand downlines fanning out in a classical pyramid shape. But it's not a pyramid scheme in the legal sense. The difference is that a true pyramid doesn't have a product, or rather, the pyramid is the product. And in a pyramid, you can never make more than your upline. A good Herbalife distributor can reach that 50% volume, and eventually surpass his upline in sales of the product, which is what pyramids lack.
So, where does Online Business Systems fit into all this? OBS is another company (one of several), that sells Herbalife distributorships. That's their product. But, more than that, what they sell are so-called Supervisor distributorships. While every distributor gets a cut off his downlines, Supervisors are eligible for the royalties produced by downline Supervisors, and their downlines. If one of your downlines becomes a Supervisor before you do, his organization, and the royalties they produce, essentially belong to your nearest upline Supervisor. The point of Online Business Systems is to make you a Supervisor before you even have a single downline.
Next -What is OBS, and How do they operate? Watch for Part 2.
http://garyfee.theonlinebusiness.com/ will take you to the recruiting site that OBS set up for me. Pay attention to how the site tries to get your contact information. Let me know what you think.
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