Many investors have unfounded fears about Subject-To deals; specifically, they usually have no idea what a Subject-To deal even involves! My goal today is to break down the confusion around this deal structure with old-fashioned knowledge. If you have the education, then you can use this strategy as a tool to acquiring more deals.
A “Subject-To” deal is defined as the acquisition of a property that already has a pre-existing mortgage. However, the person buying the property does not become personally liable for repaying that debt. This is the opposite of “assuming” a mortgage, where the buyer would take over the mortgage payments of the property they are purchasing and therefore becoming personally liable.
Remember: If you take a property Subject-To, YOU ARE NOT RESPONSIBLE FOR THE PREVIOUS FINANCING!
You need to make sure you have all the proper paperwork for the deal, including a Purchase Agreement and any documents if you’ll be putting the property in a Land Trust. You can learn about land trusts and how to structure your properties to best protect them at my Land Trust Bootcamp coming up in November.
For more information on my Land Trust Bootcamp from November 11-13 in Tampa, Florida, click here: http://www.larryharbolt.com/landtrustbootcamp.
For your own copy of my cheat sheet that walks you through Subject-To deals, visit larryharbolt.com/subject2.
Today I’m talking with my audience about taking full advantage of your real estate investing education. Most beginning real estate investors believe the least expensive option for education is at real estate investor’s meetings; this is completely untrue. Many of these meetings simply peddle a product from a traveling guru.
I learned from the “School of Hard Knocks” and made a LOT of mistakes while learning. You have the luxury that you don’t have to do stumble around in the field; you can find fantastic education from top-notch investors.
You need quality information, from people who teach quality material. You need to decide what your budget is for education; if you don’t have a large budget, then there are resources out there that are incredibly affordable and can get you started right now.
You need to use your education, wherever it comes from, to find deals in the market that has significantly less traffic than other people. You should be talking with sellers and making multiple offers; remember, you’re working towards a deal that’s good for your family and that is good for theirs.
Also, remember that networking is CRITICAL. You need to be making contacts and talking with other investors. These will be the people you’ll ask for advice, talk to about your market, or work with on deals you don’t want to keep but know they’ll want.
If you want real, affordable education, then take a look at our Cashflow Blueprint course at http://www.LarryHarbolt.com/Blueprint.
Today I’m covering a topic that I hear from everyone all over the country. These are the various roadblocks that stand between people searching for a better way than their 9-5 jobs and the reality of that dream. No one knows this better than me; I’ve experienced every single excuse and reason imaginable:
I worked seven days a week as a pipe fitter when my kids were young, and after every work day I barely had the energy to come home, eat, and collapse in my bed. My kids also had extracurricular activities and family functions I had to attend and didn’t really want to miss. However, many people who want to become investors use this as an excuse.
It’s hard to believe now but when I began, I had no idea what to do or say to every seller I contacted. Every conversation felt like “do or die” for me, with the pressure of supporting my family.
Even though I had children and a wife to feed, I was often laid off and between jobs during my first years in real estate investing. I made ends meet with unemployment checks and part-time work until I could find another full-time job. You can image this did not create an outstanding credit score.
A big hurdle for me when I began was the false mindset that you can’t start investing in real estate if you don’t have any money. It was unbelievable to me that sellers would offer seller financing terms and happily take payments instead of a lump sum of cash.
My first 16 years in the field, I went into each deal with no knowledge under my belt. I call this the “trial and terror” method; it was scary but I kept going. Eventually I got education and learned more than my one way of investing, pushing me to be more than a “one-trick pony”. Getting education is key and will unlock your potential, and now you can get it relatively inexpensively to get you going.
To take advantage of our new Cashflow Blueprint course, visit us at LarryHarbolt.com and click on the course on my front page.
Larry talks to his audience today about how to determine which exit strategy is the most effective for every deal you come across. When joining a group of his fellow mentor Robyn Thompson’s students on a bus trip to view properties, Larry noticed that instead of taking notes of needed repairs and renovations, most students just sat back and watched the scenery. They weren’t analyzing the properties or figuring how that property fits into their own investor identity. They weren’t asking any questions, let alone the right ones.
Some of critical questions you need to ask yourself are:
These questions are critical to understanding how to make money from almost every deal an investor comes across. An investor needs to understand the desirability of the neighborhood, the age of the property itself, and the condition of the streets and sidewalk in front of the home.
For more information about Robyn Thompson and her real estate rehab course, you can visit her website at http://robynthompson.com.
Today Larry is joined by Cynthia Schmidt, landlord and creator of the “Collect Back Rent” system. This system is a must for anyone who is a landlord or looking to become a landlord by walking them through the eviction and judgment process so even when your tenant doesn’t pay, you still get your money. Currently there is over $19 billion in outstanding judgments, and over 70% of those judgments are easily able to make their way into the landlord’s pockets.
Many landlords forget that their business is a BUSINESS and let their tenants take advantage of them with excuses. Landlords need to be firm with their 3 Day Pay or Quit notices; this protects them from losing their income and from tenants who are only too eager to put off paying their rent for as long as possible.
Landlords are spending their time following the lead of their tenants instead of vice versa. If you allow your tenants to slide constantly, this will only end up hurting you with your lenders, sellers, and financial friends who you’ve promised their return every month.
The “Collect Back Rent” system teaches landlords the proper procedure for their state, including the 3-day notice, how to file evictions, and how to recover your money in the discovery phase in court. The system includes your individual state’s procedures and paperwork.
To find out more about the Collect Back Rent system, visit Cynthia’s website here: http://www.larryharbolt.com/collectnow
Time is not an infinite resource; we only have so many hours, days, months, and years. Today Larry teaches the audience about how to wisely budget your time so you’re more effective in your investing and making the bigger monthly checks. Unlike what the traveling gurus will crow at the top of their lungs, real estate investing is not a part-time, high profit field. It requires long hours and working times outside of the normal 9-5 so you can access the sellers who work those 9-5 jobs.
A large part of using your time wisely is having a thorough understanding of your target market, whether it’s commercial, single family, multi-family, etc. You need to understand what materials are going to be well received by your market or you’ve wasted time AND money.
The key to getting the best bang for both your buck and your time? Understanding your incoming tenants or buyers, and that real estate investing often demands hours outside the norm. But that’s when the greatest rewards are earned.
Time and struggle can be good teachers but they also can be a horrible way to learn. As I look back over the past 38 years I think to myself, that was the life I had chosen, but the way I thought I had to do my chosen business could have been done much faster and easier to get me to my dreams.
Stop struggling no matter where you are in your learning curve and find and work with a successful mentor who can help you get the stress and struggle out of your life quickly. Why not get smart now instead of wasting years and alter lose the precious years simply because you were too independent and wasted good years when you didn't need to. You really need a good mentor to help you get to where you want to go, get one today.
There is more to cashflowing from a property than just purchasing it outright or even seller financing. Two of the highest investing strategies are the lease-option and master lease techniques, especially when a seller is reluctant to do seller financing terms.
Lease-options and master leasing a property comes with plenty of benefits: you’re not responsible for the many of the expenses that can come out of the rent, leaving you with a bigger monthly cashflow. Another perk of these lesser known strategies is the ability to flow with the market; if the property doesn’t bring in tenants after a certain period of time, you have the ability to just walk away once your lease is up.
Today Larry stresses the importance of treating your business… like a business! Real estate investing is unlike any other career; one person can make a huge impact in their community and in the lives of the families who they work with, and it’s easy to forget that you’re doing this for your own livelihood. Just like with any sound property, a solid foundation of financial self-discipline is going to keep your business afloat for decades to come.
Each property has to pay for itself, and has to be able to sustain its own existence by making enough for the debt service, taxes, and upkeep. He suggests pulling the annual costs, such as clean-up after a tenant moves out or the property taxes, in monthly increments so you’re never accidentally spending what you need to pay the government. By focusing on pulling out your expenses first before you take your cashflow, you’ll save yourself quite a few headaches during your investing career.
When you’re trying to buy a property, it’s critical to create multiple offers. Just throwing cash at the problem will end up costing you quite a bit in the end.
However, if the seller wants to retain control of the property so they know payments will be made, there are still a few options to create cash flow from the property:
Give the seller every opportunity to help you make money.
Holding costs are CRITICAL when calculating the total cost of a potential deal. These numbers have to be considered from the day you acquire the property until the day you sell it.
The traveling gurus and flashy seminars that crow about their students’ big checks in the tens of thousands never tell you about how much of that was actually eaten away by holding costs while they held it. Here are a few of the holding costs you need to consider:
Today Larry walks us through the ten essentials to creating a winning real estate deal. The key points he covers are:
A deal isn’t a deal until the repair costs of the property are taken into account. No matter what kind of investing you do, you need to have a quality team of contractors and tradesmen on speed dial before you purchase any asset. You also need to be taking a turn around the property yourself and comparing it to the neighbors, in terms of aesthetics, amenities, and overall condition.
Before you even go inside the house to speak with the owner, take a look at the outside. How does the roof compare to the neighborhood? Is the siding in good condition? Are there any visible foundation weaknesses? Do the windows need to be replaced? Take inventory of this before you step a single step inside that door.
Once you’re inside the house, start taking stock of the interior: What is the condition of the walls? What materials are they constructed from? Is there mold or mildew, indicating a moisture problem coming from the roof? Is the wiring out of date and needs updating? This is only a small sampling of the many possible repairs and issues that can come up in any home in any area. Make sure you properly vet all the costs to repair and update the house or property to ensure you get top dollar either in rent or when you resell the property down the road.
Where can you find reputable contractors and tradesmen? Ask at your local REIA, your mentor, or other fellow investors. Those in your local market should know who does the best quality work that will bring you the best return on your investment.
Bottom line: Don’t be afraid to ask for help.
Real Estate Investor Associations (REIAs) seem like the ideal place for beginning investors to learn the fundamentals. However, these associations function more as a networking space where most of the attendees are significantly less successful than they appear. These members are desperately trying to find a deal and not concerned with educating themselves or you. That’s why you’re better off attending quality, specialized training and finding yourself a knowledgeable mentor.
Finding good quality education and mentors is a challenge in itself, however. There are plenty of “drive-through” gurus who come into town like the circus and are just as flamboyant. They promise the pie in the sky and expect you to pay with the stars. Many of these gurus aren’t really training investors; they’re training worker ants to go out and find deals for them to continue to fill their pockets.
Should you pay a mentor? Absolutely; an educator who has been in the field and is giving their time to help you has earned that right to be compensated for that time. However, it certainly shouldn’t cost a small fortune. These mentors, like Larry, are happy to share their time as a way to give back to the investing community. They will teach you by walking you through the process, and you will learn by actually doing. This is your key to success in our industry and our business.
Price is not the deciding factor in any deal, no matter what the gurus out there try to tell you. Basing your buying decisions on price will end up costing you much more than you thought you saved in the end. By thinking beyond price in your deals and not considering the critical factors such as holding costs, you will get burned.
Focusing on price can also tempt you into markets you don’t understand. There are plenty of companies who will crow about the profits they can make you when you invest in their market, but how do they make that profit? What is the house like? What kind of neighborhood is it? Without the ability to see the property yourself, you’re driving blind into potential disaster.
This week, Larry talks about knowing where to find properties that you will want to buy to make the most properties. The Multiple Listing Service is not usually the best option; mainly because it is difficult to get your offer in front of the seller. If you are not direct to the decision maker, it is quite possible the “gatekeeper” will not do as good a job as you can pitching your offer.
Attorneys can be a good source of leads for investors because they often deal with sensitive issues that require homeowners to liquidate those assets. As an investor, if you maintain a stellar reputation of being a person who does what they say they will do you might find this method very successful.
CPA’s are also a good resource, they often run into taxpayers that are on the verge of financial difficulty. If you maintain a good relationship here, leads can come to you this way all year long.
Larry likes to focus on free and clear non owner occupied properties. He finds that these properties are much easier to buy on terms from the owners as compared to those that have existing debt. These sellers also may be facing a taxable event by selling their home, by offering terms, Larry give the seller an opportunity to reduce their taxes that year according to current tax code. (Check with your CPA regarding IRS Section 121 and Installment Sales Agreements)
Investors often get caught up in price or value or compare that to the profit in a deal. The value is subjective, and actually is in the eye of the beholder. Depending on the type of buyer the value can swing wildly. Here is an example a rehabber might value a $100,000 house at $50,000 because he has to invest $20,000 in repairs, spend more money to sell the home and pay taxes on the capital gain. A Buy and hold investor might value the same house at $80,000 because it will bring $1,200 in rent as it sits today in its current condition.
Have you ever considered a trade for something? Remember as a child, trading a couple sticks of gum for a baseball card? You valued the baseball card more than the gum, and the card owner valued the gum more than the card. Real estate is no different, people trade houses for all kinds of things that they value more than the house. An example would be trading for a motorhome; the seller takes your motorhome in exchange for the equity in his home. In this example the seller wants a motor home more than the equity in his home. In this example, price really did not matter, it was a trade of one tangible item for another, its that simple.
Notes on the other hand, provide a catalyst to make a deal work. More often than not, a note is valued more than the actual real estate to many people. It is important to consider many options when making an offer, don’t assume its just cash that the other party wants.
Have you ever attended LArry’s never Step Into a Bank Again course? You can read more about this course at www.LarryHarbolt.com
In this week’s episode, The Real Deal explains that today, many young folks feel that because they have no experience, that they need a partner. The problem with that logic is that often the partner has little to no experience either. When choosing a partner in a deal, that person should have quite a bit more experience than you do.
Instead of jumping right into a partnership with someone on the same level as you, perhaps it makes more sense to educate yourself, and then make an arrangement that makes sense with a “financial friend”.
It is critical to do the right thing when you take on a financial friend, no matter what, that friend needs to be treated fairly, and must be paid, before you get paid. Don’t fall into the trap of believing that just because someone has a few dollars that they know anything about real estate investing. It is critical to set boundaries up front, and to clearly define each other’s duties and responsibilities.
Larry also discusses being “hands on” with your rehab jobs and how that can work against you. Commonly, newbie investors feel that they are actually “saving money” by doing the work themselves. The actuality is that you can negotiate that savings when you buy, instead of trying to sort it out when you sell. Larry goes on to explain his “white shorts” theory that helped him get his “hands out of the dirt” so to speak.
Have you visited the new and improved LarryHarbolt.com website? Check it out and get ready to launch your investing career today!
Do you want to be able to conserve what cash you have? In this episode Larry will explain how to never miss an opportunity to negotiate for a better and more profitable deal. Larry explains how experienced negotiators look at any situation they find and see ways to maximize their profits.
Negotiating a great deal begins with knowing what the costs of holding the investment are and what can be structured to allow for a predictable return of profit from that investment. Listen in as Larry breaks this down in an easy to understand manner.
Have you signed up yet for Larry’s lessons by email? Text “Larry” to 773-770-4377 to sign up.
There are no lack of opportunities if you have the specific knowledge that allows you to recognize deals other investors can't see.
In this episode, I teach us how to learn the difference between general knowledge and specific knowledge. Many think that its specific knowledge that gets the deal done and discount or overlook the benefit of general knowledge.
Today, I also discuss how to know the difference between a good deal and a bad deal because of your specific knowledge. There are many factors to consider which I cover in this episode.
Investors often tell me there are no great deals anymore. I assure you that no matter where you live you can be assured that there are many great opportunities just around every corner once you know what to look for.
The Strategy of “Subject To” is becoming more and more popular every single day. Basically, this strategy works as follows:
When you find a property that has an affordable mortgage in place, it is possible to take title to the property subject to the existing mortgage. The term subject to is meant to state that the current mortgage remains in place, even though the deed transfers to the new owner.
Many notes these days have what they call a “Due on Sale” clause, which basically means when the property is sold, that the note must be paid in full. Larry discusses how this is not a law per se, yet agreement between lender and borrower. In many cases, the bank will allow the transfer to happen, especially when they fear the current owner may default.
There are other instances where the banks will not allow the transfer of deed to occur without calling the loan due. When a bank calls the loan due, they demand the full balance be immediately paid to the bank to satisfy the mortgage.
One of the benefits of attending Larry’s Never Step Into a Bank Again Bootcamp is that you will learn how to avoid using the bank at all. When you avoid the banks, you can do more deals, with less headache and more profit. Want to learn more? Go HERE
This week on the Real Deal Podcast, Larry Harbolt discusses the importance of financial discipline. Larry tells the story of “Take a Millionaire to Lunch” where he does just that. It was out of the box thinking such as this that helped Larry learn the skills necessary to be successful as an investor.
Larry discusses taking the time to build a relationship with those who are more successful than you and by doing so be in a position to ask them question that will help you learn. It has been Larry’s experience, that if he simply asks, others will simply capitulate by answering his questions.
Time is a precious commodity, when taking the time of those more successful than you, be respectful of their time, being sure to be on time, and keep your phone OFF. There is a difference between being appreciative and being overbearing. When the other party is speaking, you should spend most of your time (70-80%) listening, and only the remainder talking.
It is meetings like these, that can become the most important meetings you will attend during your investing journey. Be sure you bring a notepad to keep notes, and be sure to pick up the check!
It is important to think like the rich think. “Money” is simply a tool, nothing more, nothing less. Just because a bank is willing to make a loan, does not mean that the loan makes sense for the investment you are considering. Take the time to calculate the costs, in addition to the interest rate and never forget to understand the terms and how it will impact your investment.
Have you ever wondered why some investors are successful while others struggle to make money from the deals they do?
Their secret is knowing how to analyze every deal to separate the good deals from the bad deals. In this episode of The Real Deal Podcast Larry Harbolt discusses the how and why of breaking down the deal.
This week, Larry "The Real Deal" Harbolt lays it all down when talking about who you should be taking your advice from.
In the real estate world, we often get handed lousy advice from those who are not in the business; but also are clueless about it. Larry gives tips on how to choose which educational systems you should focus on and who you should consider getting advice from.
Later, Larry addressed the topic of being in a rush to buy a bunch of units or do a bunch of deals. This type of "rushed" behavior leads to almost certain financial disaster. Tune in and learn from the best, Larry Harbolt.