What You Missed August 2017 General Meeting
by Rob Earhart
Seller Financing
Larry Harbolt
August 1, 2017
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 Union Pipe Fitter, working in the Michigan cold, got tired of it and moved to Florida. I was married with six kids, so decided to go into real estate, with zero dollars and zero knowledge,” explained Larry. For the first 16 years I had no one to learn the business from, so I learned by making my own mistakes. Now you have a ton of people in Florida who can teach you how to succeed.
“Do you understand the component parts of a Profitable deal?” asked Larry. “Have you seen the TV shows on how to flip houses for fun and profit? Especially the ‘Zombie’ show in Orlando? All their numbers are puffed up to make it look like you will make a lot of money with just a little work.”
You can do this business. It’s not that hard once you learn a few methods. “This is one of the greatest businesses because there is no upper limit on what you can earn.”
“What are your goals?” “What is your why?” queried Larry. “Everyone says they want to make more money, but you need a plan to succeed.” “The way you will create wealth is to find the property, fix it up and rent it out. You must plant seeds to watch them grow, and real estate is no different than a farmer planting his seeds. You have to start somewhere.”
People ask me, “What is happening in the real estate market? Prices going up and up? How about 2006? Is there a lack of good properties in the MLS?” “I don’t use the MLS to find my properties. I send letters to non-owner occupied, free-and-clear properties where I can deal directly with the owner. That way I can get my best deals. The MLS lists properties with prices, but I need terms so I have to look elsewhere.”
“I use letters and postcards, buying lists of 1,000 to 3,000 names and addresses, then send out 25 to 50 per week,” advised Larry. There are several types of lists you could use besides the one I use: probates, foreclosures, eviction records, code enforcement actions, etc. Your easiest is networking with other investors like here at SREIA.
What is the most popular property to invest in? Single family homes with 3 bedrooms, 2 baths, with one or two car garages are best. There are also multi-unit apartment houses, condos, and mobile homes. If you deal in mobile homes, be aware that, if built before 1976, you cannot get a new title.
What sells the homes? Amenities that the ladies like sell the homes: things like large bedrooms, walk-in closets, large bathrooms, pools, and garages. The best are location, amenities, price and terms, in that order.
What makes the most profitable deal? If you use institutional financing, you will be limited in the number of deals you can do. How good your credit is, having provable W-2 income, and your credit history will affect your interest rate. Also, banks will not finance repairs, so you will have to have some money of your own in reserve.
“What makes you think that this house will be profitable?” he asked. Do you like the house, is it in a good neighborhood, not a war zone, is the price right, and it doesn’t need many repairs. Some of the most important requirements are that it is near schools and hospitals, and is in a good school district.
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 must 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 and I can build wealth, not just a job.”
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.
What are the four best ways to control a property?
- Buy it outright
- Lease option the property
- Option it to flip the option or buy it in the future
- “Using seller financing, I can make 100 different offers, and one will strike a chord with the seller”
“How do most investors determine the value of a property when coming up with a price to offer?” asked Larry. “You can use the MLS comps which are fairly accurate, you can use SWAG, Scientific Wild-A__ Guess, or the best is an appraisal from a licensed property appraiser.” “Forget Zillow,” warned Larry, “it is more wrong about property values than right!”
Here are some creative strategies you can use:
- Trade stuff for down payment and equity
- Pay off seller debt as your down payment and part of the equity, especially hospital debts.
- 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.
Some ways of making intelligent offers:
- Full price with seller financing terms
- Split funding, some money now, 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. Usually a lowball offer
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 his upcoming “Bootcamp” and its hands-on learning method. For four days, you will learn everything about how Larry finds, structures, and closes deals. The boot camp includes all three courses, and you will be armed with the best knowledge about buying homes available.
