What You Missed September 2017 General Meeting
by Rob Earhart
Using Attitude as Leverage in Real Estate
September 5, 2017
What I’m really good at is keeping a good attitude. In real estate, I found that my attitude helped me succeed. I have picked out four situations that show how attitude developed a strategy.
Here I was sitting in my home after travelling the world, and late one night I saw Carleton Sheets on TV. I had not purchased real estate except for my home. I watched it several times and plucked out the $39 and I believed it.
I told my mentor that I wanted to do 12 houses and he said that may be too aggressive, but I ended up doing 13 that year. At that time, I dealt with Barnett Bank and they had a “Portfolio Loan Program.” I could finance multiple properties with them in a portfolio.
All my stuff is done in Polk County, and early on I developed a spreadsheet: 1st mortgage, 2nd mortgage, taxes, insurance, etc. It had to pay me at least $50.
I looked at houses and put the numbers in my spreadsheet, but I needed the sellers to give me a second. They agreed, but when I got to the closing, the closing agent said, “You can’t do that,” and would change the note. “I had to instruct her to do as we said,” and she did it.
You have to make your own rules. We even took a tractor as a downpayment for a sale. “You can take anything you want for a deposit as long as it’s legal,” she professed.
Another property is a five-unit house conversion next door to us. We would watch the constant stream of people going through this property and we called the police. The owner decided to sell it and Barnett had it on a portfolio loan, but then I had to put in a door between two units to make it a fourplex so Barnett could loan on it. The problem was that the appraisal came in too low, so we split off 25 feet of lake front property and, with that value, the appraisal came in at the right price.
We probably had 35 doors that we were managing in the Auburndale-Lakeland area and kept them up very well. In Auburndale, there was a 55-door complex that a bank wanted to get rid of at $23,000 per door. There was a mixture of duplexes, triplexes, two-story townhouses, etc. This was in 2005, right after the hurricanes of 2004, and a lot of roofs were bright blue.
I kept in touch with the bank and saw some things going on that were questionable. The price was too high at first, but the bank finally called and said they would like to have me assume the loan.
During this time, I had been checking out workshops like Ray Alcorn’s “Dealmaker's Guide to Commercial Real Estate.” I learned “commercial speak” and “bank speak.” I learned charts and figures, numbers and formulas. We had to put together a report that would sell our idea and allow us to take over the loans.
We assumed the first loan on a few of the units, then the next year, we approached them about taking over those other units.
“One thing about commercial, they are not 30-year amortizations,” Carol explained. In the five years of financing, the market had changed and we ended up losing it in a short sale.
I looked at a four-unit non-conforming property that did not need much work, but our private lender backed out because it was non-conforming. Then I notified the realtor that I was getting a different lender and would need a few days. She said no, but I called Bill Broncheck and he asked if I had used his contract. I said yes and he explained that the contract read “on or about” and, if they did not want to wait, we would be filing a “Memorandum of Interest” that would tie up the property. We ended up closing.
We bought a property that was half in Auburndale and half in the county, but was in the “Path of Progress.” Six months later, the county came to us to buy the property to expand the road. The appraisal was lower, so I talked to them and got them to agree to a higher figure. I had bought four duplexes for $72,000 each, but the first eminent-domain payment was $450k, so we made out well.
I ended up with 100,000 square foot of commercial acreage and could not give it away. It still had a house with no septic tank, so it was vacant and seemed to be held together by the termites holding hands.
I was going to rehab the house and get a good tenant, but a trucking company came to me to rent space for his tractor trailers. Not only that, he was also fixing up the house to use it as an office.
Leverage: that which gives positional advantage in any situation.
My Leverage: My belief that there is always a great solution, and staying open to it.
What am I doing now? I am working on “Transitional Housing” for women starting over. Also dealing with some Native American issues.
Use your creativity that makes your heart sing. There are many avenues that you can involve yourself in, so find out how to use the information you have in every way.