When learning how to negotiate, there’s a very important lesson. You need to know how to talk to people. Every day when you get up and run your business, everything is a negotiation. Even though this is a lost art, you must learn how to build a rapport and bond with a seller.
Today, I want to talk about some things that I’ve noticed that’s going on in the real estate market. These things are making me think of the downturn of the real estate market in 2005, 2006 and 2007. Listen as I share what I'm noticing that could possibly make the market decrease again.
As most of you know, I like to be creative with seller financing deals. So I’m going to share some insight on what I look for when trying to find ways to be creative. For the deal to be successful, it has to have certain criteria. Not every house on the market will work. But there are some sellers who will be able to take payments from you.
Today, we're going to talk about how to be successful at seller-financed deals. First, one of the most important things is to pre-screen the seller. If you want to be successful at seller-financed deals, you have to discover right away if they are going to be willing to take your proposal. A few simple questions is all you need to know if the seller is motivated or not.
Subject to deals is one technique that you can use as a real estate investor. Many people don’t understand this method that violates no laws. Subject to is a term used to acquire a property that already has an existing mortgage on it but the person buying the property does not become liable for the existing mortgage debt. This is also known as taking the property subject to the existing mortgage.
As I look back over my nearly 40 years investing career I believe the major reason for my success is the fact that I have always been an expert in the areas where I looked for properties to buy. Almost every day, I was in the streets looking for opportunities. I was looking for opportunities other investors were not seeing. I knew where almost every unloved property was located in the areas where I buy houses.
Today, we're going to talk about how conformity is why many people today aren't successful. It is ruining our chances at a better life. Do you remember how when you were graduating from high school, you had dreams and plans about how you were going to change the world? Then, life set in. That's the problem. Most people end up getting a stressful job they don't enjoy that takes up so much of your time. They are told when they can take breaks and micromanaged. This type of job ends up souring many people because it puts such a limit on what you can do.
Almost every week I talk to an investor who went to a wholesaler training. But apparently whoever taught the training lived in another area where people have more money and fewer smarts. Because those beginners end up paying too much for a property when they buy it from a wholesaler who’s looking for someone who doesn’t know what they’re doing to take the property off their hands. I’ve seen it too many times.
Today is a real treat because I will be talking with one of my friends and mentors, David Tilney. In my opinion, he's the best there is in the business. He will be sharing from his 40 years experience of being a landlord. A lot of people are scared of being a landlord because of the negative stories. But David will explain how it can be a great experience as he reveals 11 things tenants want from a landlord.
When I first started, I didn’t have tons of cash to put down on my first investment properties, and I worked directly with the sellers to purchase their property. That was back in the early 1980’s when there were less resources for financing than there are today. Now, even if I had unlimited funds at my disposal, I would still purchase property the exact same way I did, and continue to do to this day.
I don’t purchase properties from the Multiple Listing Service (MLS). I purchase from older owners who don’t live in the property and own it free-and-clear. But I know that many of you still worry where to get the money for down payments on your investment properties, and that’s what we’re going to talk about today.
The first thing you have to do in any negotiation to purchase a property is ASK. There’s no reason why you shouldn’t ask if the seller will take payments for their equity for their property. It doesn’t matter if they don’t trust you yet, because you’re just asking for a chance to show them that you are a person of your word. Open up to them and you’ll be surprised how many sellers are willing to work with you.
Another strategy I would use is to postpone the payment. This was especially helpful when the property needed to be renovated. I would ask the sellers for a delay on the payments so I could get the property ready and put tenants in there. In one case, I immediately moved in a handyman who rented the property from me while he fixed the property for me, and in the six months we pushed back the first payment, I was able to collect the down payment money.
If that wasn’t possible, I would turn to a “financial friend” to supply the down payment money so I could close on the property. Once the tenant was in the property, I would collect rent and then pay back the financial friend.
Also working with the financial friend, you can pre-pay a certain number of mortgage payments in the beginning. For example, you could pay 24 months all at once and then not owe anything until the 25th month. This will leave you only the payment to your friend during that time. You can give your financial friend a better investment than just letting their money sit in the bank account, and the seller is happy to have some money to start with. Everyone is happy.
You can also put the down payment on the back end of the loan as a few extra payments at the end of the life of the mortgage. Any dollar you can save today is a dollar you can start putting to work somewhere else.
Did you know you can TRADE to pay your down payment? If you have a vehicle, equipment, etc. that can be valuable to the seller, why not use that as a down payment and save your cash? I once had traded a Chevy truck to a brick mason who needed it for his business. I didn’t need the truck and I got more than the blue book value off that mortgage.
These are just a few creative strategies when you think you can’t afford a down payment on a potential investment property. You don’t NEED money to MAKE money in this business; that’s the beauty of it!
Be sure to head on over to my website, LarryHarbolt.com, for more tips and tricks on how to become a better investor.
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Today I want to talk about something I see as a huge problem for everyone just starting out in the real estate investing business. Too many people don’t understand what information they need to get from the seller in order to be successful in this business.
Today I want to talk to you about lessons I learned when I was a pipefitter in the construction industry. I worked at many nuclear powerhouses, and the one thing we were told was "Plan your work and work your plan."
Today I’d like to talk about an easy you can begin to increase your income, and that is by creating a list of goals. One of my best mentors was a man by the name of Jim Rohn. Jim changed the way I thought about my goals and my business. He pushed us to put a list on the wall in our office that we could see every day. He called this our "Silent Seminar".
Today I want to talk to you about making sure you work with the right attorneys and get the right information when it comes to land trusts. Many of my land trust students have gone to attorneys and been told that the strategy is illegal. This is simply not true. Most attorneys are not familiar with land trusts and have very little experience with trusts in general.
Land trusts are legal in every state. They aren’t a special document or exception to the law, they’re a completely legal strategy to protect yourself and your assets.
We use land trusts for many reasons, but one of the biggest ones is for privacy and estate planning. When you pass away, you can help your family avoid the hassle of probate by putting your properties in land trusts. It also keeps you out of the public eye and away from those looking to file nuisance lawsuits for a quick payday.
I once bought 10 houses in 1 week. I paid a paralegal $600 for each land trust, but when I reviewed the paperwork, I realized they were exactly the same contract. The only thing that changed was the name of the property. So why did I pay someone $6,000 when I was able to easily make the new trusts myself on my own computer?
At my land trust boot camps, I give you all the documentation you need to create your trust. All you need to do is fill in the information about your own property and you’re good to go. You don’t need to pay what I did for an attorney or paralegal to create trusts for you.
A land trust is simply a contract. Contracts are legal under our country’s commonwealth law. This is the law that came over with the Pilgrims from England.
Make sure you visit my website, LarryHarbolt.com, for all your real estate investing educational needs.
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Today I want to talk about something that I fell prey to many years ago. I’ve talked about how I started in the business with no money, no credit, and no experience. I made a LOT of mistakes, and today I’ll tell you about some of my biggest ones.
In 1986, I bought an 8-cabin lakeside resort. I had no idea how to really research or analyze properties to see if they were a good deal. I talked with the seller and they agreed to give me the property on terms. I asked for a list of guests that came through, the expenses, and the income. I believed what the seller told me and pretty soon, I realized some of the info he gave me wasn’t true, and I was in deep.
The guest list the seller gave me wasn’t for guests coming through for a year, it was for the entire time the property had been open. He fudged the numbers for the expenses and lied about how much maintenance was required to keep it running. That property ended up being a huge struggle for my wife and I to maintain, but we did keep it for 10 years.
From those mistakes I made, I learned that I needed to do a much better job of researching any property I was thinking about buying. I thought I had learned this lesson, but another property I bought in 1990 showed I was wrong.
My wife wanted to buy a convenience store during this time, and I thought I knew exactly what we needed to know to buy it. The seller’s CPA provided the numbers and I thought I was set, so we purchased the store. The problem is, even though we made more sales than the previous owner, our profit margin was nothing like what the seller had presented. We struggled with that store for 2 years, with my wife working in the store herself because we couldn’t find quality help.
Don’t believe what sellers tell you when they need to sell a property. When it comes time for the numbers, ask the seller for 4 to 5 years worth of tax returns so you can see the truth.
Don’t try to save the world. You’re already in the business of helping people, but if you try to help every single person you come across, you’ll simply replace them in the quicksand. You can help more people by keeping your business successful than if you’re doing bad deal after bad deal because your heartstrings are tugged.
Make sure to visit my website, LarryHarbolt.com, for all your real estate investing education needs.
Also, please make sure you leave me a review on your podcast player so I know I’m continuing to provide you with quality content. And if you’re getting value from my podcast, make sure to tell a friend!
Good Luck and Happy Investing!
I talk to students and other people all the time about the market. So many people are discouraged because they think there are not enough opportunities out there or they’re getting snatched up before they can act. I had this happen to me recently on an 11 unit building I was working to get for another investor.
When the economy is good, it’s a seller’s market. This means the prices are going up, sellers are less flexible, and the money is flowing into the economy, which means more investors. In a bad economy, it’s a buyer’s market. The money isn’t flowing as freely and it means sellers are more willing to negotiate in order to get the deal done.
When I started out as a real estate investor, I had no money, no credit, and was unemployed a lot. I had no money because all the money I did bring in was for my wife and my six kids, who were all selfish enough to want to eat three meals a day.
I got into real estate in that environment with no training, and I learned many lessons the HARD way. I want to share some of these lessons with you today, because many of you might be struggling with these same issues today.
When I started in real estate, I felt completely out of my depth. I had no idea how to make an offer, analyze a property, or even understood the process. I just knew I wanted to buy houses! Over the years I managed to put together some amazing deals, even without formal training, because I HAD to. Every investor is going to make mistakes, but it is helpful to learn from someone who has already made quite a few so you can learn from them and avoid them yourself.
Here are some of the lessons I learned the hard way:
Some sellers want checks coming in every month instead of cash, like another social security check to help them in their old age. That check could mean the difference between three meals a day or crucial medication for many people.
Others don’t want cash because they know they’ll burn through it; some people just can’t handle large lumps of sums of cash. You also don’t need a large down payment for many properties. Don’t assume every seller wants cash; they have to use the cash for SOMETHING, so find out what it is.
Back in the 1990s, I bought a convenience store. I asked the seller for the numbers: income, expenses, etc. He gave me numbers but they were WAY off, and it ended up being a real struggle to keep that store going.
Bottom line: don’t take anyone’s word for it, DO YOUR RESEARCH.
When I came to Florida, I started working with a real estate agent, because I didn’t understand this new market. He convinced me to only look at lower price properties and to make offers on every property in that price range at 50% of the asking price. I didn’t buy many properties with this strategy, but one I did ended up costing me quite a bit. It had a lot of problems, including a $5,000 assessment for hooking up the residents to the city sewer line. In the end, I lost money on that house.
Just because you buy at a discount, it doesn’t guarantee you’ll make a profit.
Here’s a secret: instead of a down payment, use that money to pre-pay several months of mortgage payments. If I don’t have to make a payment for months and get a tenant in there, I can build that money back up pretty quick.
If you don’t have the property, ask for a moratorium on the payments or defer the first payment so you have time to fix up the property first.
Let them know that you’re working on getting things straightened out; don’t avoid them. Keep in contact so they know you’re not blowing them off.
If you don’t know what you’re doing and the other person is in the same boat, then you just have two people who don’t know what they’re doing. Most likely, you’ll end up doing all the work and the other person will still want half of the profits. All three of my partnerships didn’t work out, and now I know I could have done it by myself because that’s what I ended up doing anyway!
You can use things like cars, boats, or anything else instead of cash in a deal. If the seller will accept it, it’s fair play. Find out what the seller wants instead of cash and trade it to make an amazing deal. Bartering is still alive and well in today’s market, so use it to your advantage.
Don’t be a fool; be a THINKER.
Make sure to visit my website, LarryHarbolt.com, for all your real estate investing education needs.
Also, please make sure you leave me a review on your podcast player so I know I’m continuing to provide you with quality content.
Good Luck and Happy Investing!
I've been seeing an issue recently with some of my investing students: they’re bringing deals to me to look over as we work together, and many of these deals have no way of making money. These students are just desperate to either put a deal in their pocket, or more often, they feel deeply for the seller and want to help them.
The problem is, even though what we do as investors is a service-based business, we can’t sacrifice our own livelihood to help every seller we come across.