What You Missed June 2018 General Meeting
by Rob Earhart
Larry Harbolt
Creative Seller Financing
June 5, 2018
Larry introduced us to his Monday night meeting at the Hibachi Café and explained that it is a networking meeting and we are all welcome.
“I have been in the business for 39 years and I do a podcast: ‘The real deal real estate,’” stated Larry.
Larry asked that we check it out and give him some feedback on what more he can provide. I’ve been in the streets but I was not familiar with what people needed to hear in order to go out and do some deals.
In the real estate market, there seems to be a shortage, if you look where everyone else looks. You need to look where the others are not. There is no magic pill that will make you wealthy overnight. Even the ones on HGTV say they are wholesalers, but they are really selling retail.
They use outrageous numbers that are not correct, no matter what they promise you. Has anyone heard of Snap Flipping? They were charging $1100 for a three-day course and would supply all the money you would ever need. Larry warned, “we found that they were actually selling a $50,000 course that would get you to the money supply. Stay away from those types.”
The key to your success is two words: Specific knowledge. Everyone wants to just go out and buy houses, but you need specific knowledge to make sure you will make money. I know education is expensive, but anytime you can get quality education and pay for it with a small contract assignment, you can use it for the rest of your life.
That’s what I want to show you tonight: a way to become successful.
Start with information that will get you started in the right direction. We need a step-by-step structure to help you get started. Most investors need to be able to see the telltale signs of opportunities.
The 5 main reasons real estate investors fail
- They don’t know where to find the good deals. If I threw a list of deals from the MLS in a punchbowl, what would you be looking at? --> The same thing everyone else is looking at. Also, what are the listings based on? --> Price. “I need to find the best deal by talking to the owners.” Larry showed a list of 25 ways to find properties that are not in the MLS.
- They truly believe that all sellers want all cash. What good is cash? They really don’t want cash, they want what the cash can do for them. There are certain questions I want to ask, and dealing with Realtors, they don’t want to let you talk to the seller directly.
- They aren’t able to effectively negotiate each deal because they don’t know how. When I sit down with a seller, maybe they need a car, and I can buy a car for less than they can. I have to find out what the seller really wants. It’s a skill that can be learned.
- They don’t know how to make any offer besides all cash. “There are dozens of ways to make an offer.”
- They don’t have access to affordable funding. (The $100,000 house for cash.) What if you put down 10% and paid the seller over 30 years? Then you could have the tenants paying off the house over time. You would still have $90,000 and could do it over and over again.
In my rental properties I assume 45% for expenses so, on an income of $900 with a mortgage of $600, the $300 is not cash in my pocket like the seminars teach.
You don’t want to be a one-trick pony. I hear a lot about wholesaling, but then you are like a hamster on a wheel. Retail? That is what the TV shows show you,
Subject to? The bank can call the loan, but normally will not.
Lease options? Good for getting started.
Fix and sell retail? You have to have a crew and have to have money to fix the house. I have seen many investors who buy in bad areas, find that no one wants it and they spend too much to fix it up. A lot of people end up giving the property back to the bank.
To live comfortably, you will need 20 to 30 income properties: your path to wealth. Rental income is the least-taxed of any income in the USA. Why do I say 20-30? How many properties do you need to provide the income you want to live on? “You have to plant a seed to get a tomato.”
We used to say 20 houses, but now with healthcare costs, we suggest 30, to make sure you have your care covered.
When you come to these meetings, don’t think you are the only one who has not done a deal.
Step 1 – Find deals other investors aren’t looking at.
First you must recognize what you’re are looking at. Every property you are looking at has a highest-and-best use. That will determine how you will structure the deal.
Make sure you never miss anything important. Larry said, “I was a licensed builder and appraiser.” He then showed a list of things you don’t want to miss.
I believe in price or terms. I don’t care what it costs if I can get the right terms. I can pay your price for your house, if you’ll accept my terms.
Step 2 – Know your numbers.
“I have a cheat sheet showing what I need to know for a single family home: comps, plans for the house, what to do if you and the seller cannot come to terms."
You have to have the right formulas that give you the real story of each property before you make your offer to buy every property.
Step 3 – Know your repair numbers.
If I’m going to assign a property, I have to figure how much it would take to fix it up, so I know how much to pay, so I can sell a good deal to the next investor, who will have to make a profit.
For extra profit, go to higher-priced open houses and take pictures of the amenities and put them in your lower-priced house. It makes your house stand out and sell for more.
Step 4 – Know how to negotiate with sellers.
Collect as much information as you can about the property and the seller before starting your negotiations. I come up with different strategies, so when the seller nixes the one idea, I will have another.
“Always have all the paperwork you might need to structure any deal with you.” Larry showed a list of all the forms you need to carry.
You need a telephone script for talking with sellers on the phone.
I only go after non-owner-occupied, remote owners, owned free and clear. I find that most of the people I deal with are older and not technically up on the newer technologies.
Think about what you need to know before you start your negotiations.
Study the appropriate response to any seller objection.
Be sure to ask the who, what, where, and why questions. Larry showed a sheet that he uses to remind him of the questions to ask.
Step 5 - Understand the use of Money.
What is money? One type of currency that we can use to buy something.
Larry explained that he has 6 kids, 15 grandkids, and 5 great grandkids and he is still buying houses to help take care of them. “I won’t tell them, because they will get lazy and just wait for me to go so they will have money. I want them to struggle,” advised Larry.
Everything is in Trusts, because if anyone knew what I owned, there would be every dirtbag trying to collect from me. If your name is on several properties, someone can trip and fall on one of them so they can sue you.
There are several types of financing:
Seller financing: the owner carries a mortgage
Institutional financing: i.e., banks, credit unions, mortgage companies
Subject to the existing financing: Make sure you have the seller send a certified letter to the lender stating that you are the property manager and will be making the payment. I just make the payments, I don’t assume the loan. I get the deed and will own the property.
Hard money: “My least favorite money, but if I’m holding it for only six months and selling retail, it can be effective and not that costly.”
Barter: “Use what you have, to get what you want, to get what you need.”
Step 6 – Make multiple offers.
Larry has a sheet showing the different ways to make an offer. “Don’t be afraid to know the right offer to make.”
- Full price with seller-financing terms
- Seller terms with interest
- Split funding
- Lease with option to buy
- Option
- Trade stuff for equity
Larry talked about the motorhome traded for notes and the motorhome traded for the home. The payments after 27 months would go into a bank account so the homeowner can buy gas for his motorhome.
Larry began to talk about the three courses he sells for creative-seller financing. The Red, White, and Blue courses were described; the Blue was the profit course. You get the course, the audio CD’s and laminated sheets to begin your real estate business in the right way.
Larry explained his discount program for that evening and the bootcamp dates. He stayed for a while to answer questions.
