What You Missed September 2015 General Meeting
by Rob Earhart
Seller Financing is a Bonus of Creative Buying and Selling
Presented by: Larry Harbolt
September 1, 2015
Larry asked, “How many people are new in the business?” He explained that it’s ok to pay cash for properties or buy on terms but, if you don’t get off on a solid foundation, you’ll never get ahead.
“I was a builder and working in the cold country and got tired of the cold and moved to Florida. I started in the 70s when the interest rate was 16% or so. I was married with 6 kids so decided to go into real estate,” explained Larry. For the first 16 years, I had no one to learn the business from, so I learned by making mistakes.
I survived because I never gave up. My net worth was in my gas tank, so I had to be creative. I had 10 ways to buy a house and still use 8 of them today and none of them were for cash. No matter where you are, you can still make money in real estate.
You can do this business; it’s not that hard once you learn a few methods. “You never build a house from the roof down, you have to have a solid foundation,” said Larry. I have students all around the country: doctors, salesmen, etc., from all walks of life.
Larry showed a chart describing that home ownership now is the same as it was in 1965, so there is only going to be an increase. “I should have bought every property since 1980 and I would have been very well off,” Larry proclaimed. The number of people who could live comfortably without handouts numbered 4 out of 100.
You can only get anywhere if you follow a path that someone else has made instead of making all the mistakes. “I found 26 places I could find properties, not just the MLS.” There are tons of deals everywhere if you know how to look for them.
When I started, I would over analyze every deal and, by the time I wrote an offer, the house was gone. Most beginning investors lose out because they do not pull the trigger. You have to analyze your deals to make a decision quickly, have to learn to talk to sellers and have to learn to ask questions.
Most people use realtors to present offers and if the sellers don’t like the price you have no way to negotiate. You have to ask questions to find out why they want to sell and what they really want. Then make a deal that’s good for you and hopefully good for them, but not necessarily cash.
There are a million ways to make an offer, you just have to make an offer that the seller will accept: ask questions. Know what you are going to do with the property and, if you don’t know, you’ll never get ahead. If you wholesale, you just have a job. I found that, if I hold rental properties, I have tenants paying for my properties.
Even if you just break even, you will look like a genius in a few years when they are paid off and you have a bunch of money coming in. You have to be diversified. “You can lease option and collect money each month without a lot of your own money involved.”
Learn how to do “subject to” deals, and understand seller financing. “I have never had a seller ask for my credit report; they just trust you or not, so just develop a portfolio that you can show to create trust.
You need to have 25 houses free and clear paying you $10,000 to $12,000 per month. If you look where everyone else looks, you’ll find what everyone else finds. We are investors so we have to buy for less or it does not make sense.
There are four types of houses:
- Foreclosures, REO’s, bank owned
- Houses you don’t want
- Houses you can fix and sell retail
- Long term income properties
Every house you look at will fall into one of these four categories. You can build a base of buyers to take these off your hands because they don’t want to hit the streets to look for themselves. When you find a house, call everyone on the list to go by and tell you what they will give you for it.
There are four 4 phases of a profitable real estate deal
- Find the profitable deals. “I send letters to non-owner-occupied free-and-clear houses exclusively. They get my letters and then decide to sell. I can give them price or terms.”
- Analyze the deals you are interested in buying. “I have forms and have them fill out the blanks and then they know you are not ripping them off.”
- Negotiate those deals for extra profits.
- Create and structure profitable deals. “Every offer I made was one of seven different structures.”
Less than 20 % of the houses are in foreclosure or are bank owned. Also 30-40% of all houses in this country are owned free and clear.
What do you do with houses you don’t want? You need to find buyers for all types of houses so you can flip the ones you don’t want.
What about houses you can fix and sell retail? Sometimes they are not easy to sell. You have to know what the repair costs are going to be. “When I buy a pretty house, I have to know what I’m going to do with it.” You have to figure in your profit so you know how much to pay for it.
Keeper properties are ones you buy for long-term income.
- Trade stuff for down payment and equity
- Pay off the seller’s debt as your down payment and part of the equity
- Pre-pay several months payments to show good faith
- Make payments on the house they are moving to and apply the credit to the house they are selling to you.
Writing offers that have a chance of getting accepted. Negotiate to give the seller what they want.
Making intelligent offers
- Full price with seller financing terms
- Split funding, some money now and some later
- “Subject to” the existing debt
- Lease option is control without ownership. Lease it for 12 months with a right to renew for 15 or 20 more 12-month periods.
- Option to purchase. “The right to buy but not the obligation.” I can sell the option for income
- All Cash. Lowball offer
“Your income will be in direct proportion to your level of specific knowledge,” says Jimmy Napier.
Larry then explained about his courses that he offers. The “Red Course” is the beginning course with a forms disk and booklet. The “White Course” is where we do the analyzing and negotiating of your deals.
The “Blue Course” is where the money is made. This is how to structure deals: 35 deals and explanations on how to complete the deals. It has buying contracts and forms needed for buying and selling.
Larry then described several other items included on how to deal with contractors, with forms for saving you troubles and keeping them honest. He remained after the meeting to answer questions and explain his programs.