The Real Deal Real Estate Show with Larry Harbolt

Today I want to talk about something I see as a huge problem for everyone just starting out in the real estate investing business. Too many people don’t understand what information they need to get from the seller in order to be successful in this business.

Today I want to talk to you about lessons I learned when I was a pipefitter in the construction industry. I worked at many nuclear powerhouses, and the one thing we were told was "Plan your work and work your plan."

Today I’d like to talk about an easy you can begin to increase your income, and that is by creating a list of goals. One of my best mentors was a man by the name of Jim Rohn. Jim changed the way I thought about my goals and my business. He pushed us to put a list on the wall in our office that we could see every day. He called this our "Silent Seminar".

Today I want to talk to you about making sure you work with the right attorneys and get the right information when it comes to land trusts. Many of my land trust students have gone to attorneys and been told that the strategy is illegal. This is simply not true. Most attorneys are not familiar with land trusts and have very little experience with trusts in general.

Land trusts are legal in every state. They aren’t a special document or exception to the law, they’re a completely legal strategy to protect yourself and your assets.

We use land trusts for many reasons, but one of the biggest ones is for privacy and estate planning. When you pass away, you can help your family avoid the hassle of probate by putting your properties in land trusts. It also keeps you out of the public eye and away from those looking to file nuisance lawsuits for a quick payday.

I once bought 10 houses in 1 week. I paid a paralegal $600 for each land trust, but when I reviewed the paperwork, I realized they were exactly the same contract. The only thing that changed was the name of the property. So why did I pay someone $6,000 when I was able to easily make the new trusts myself on my own computer?

At my land trust boot camps, I give you all the documentation you need to create your trust. All you need to do is fill in the information about your own property and you’re good to go. You don’t need to pay what I did for an attorney or paralegal to create trusts for you.

A land trust is simply a contract. Contracts are legal under our country’s commonwealth law. This is the law that came over with the Pilgrims from England.

Make sure you visit my website, LarryHarbolt.com, for all your real estate investing educational needs.

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Today I want to talk about something that I fell prey to many years ago.  I’ve talked about how I started in the business with no money, no credit, and no experience. I made a LOT of mistakes, and today I’ll tell you about some of my biggest ones.

In 1986, I bought an 8-cabin lakeside resort. I had no idea how to really research or analyze properties to see if they were a good deal. I talked with the seller and they agreed to give me the property on terms. I asked for a list of guests that came through, the expenses, and the income. I believed what the seller told me and pretty soon, I realized some of the info he gave me wasn’t true, and I was in deep.

The guest list the seller gave me wasn’t for guests coming through for a year, it was for the entire time the property had been open. He fudged the numbers for the expenses and lied about how much maintenance was required to keep it running. That property ended up being a huge struggle for my wife and I to maintain, but we did keep it for 10 years.

From those mistakes I made, I learned that I needed to do a much better job of researching any property I was thinking about buying. I thought I had learned this lesson, but another property I bought in 1990 showed I was wrong.

My wife wanted to buy a convenience store during this time, and I thought I knew exactly what we needed to know to buy it. The seller’s CPA provided the numbers and I thought I was set, so we purchased the store. The problem is, even though we made more sales than the previous owner, our profit margin was nothing like what the seller had presented. We struggled with that store for 2 years, with my wife working in the store herself because we couldn’t find quality help.

Don’t believe what sellers tell you when they need to sell a property. When it comes time for the numbers, ask the seller for 4 to 5 years worth of tax returns so you can see the truth.

Don’t try to save the world. You’re already in the business of helping people, but if you try to help every single person you come across, you’ll simply replace them in the quicksand. You can help more people by keeping your business successful than if you’re doing bad deal after bad deal because your heartstrings are tugged.

Make sure to visit my website, LarryHarbolt.com, for all your real estate investing education needs.

Also, please make sure you leave me a review on your podcast player so I know I’m continuing to provide you with quality content. And if you’re getting value from my podcast, make sure to tell a friend!

Good Luck and Happy Investing!

I talk to students and other people all the time about the market. So many people are discouraged because they think there are not enough opportunities out there or they’re getting snatched up before they can act. I had this happen to me recently on an 11 unit building I was working to get for another investor.

When the economy is good, it’s a seller’s market. This means the prices are going up, sellers are less flexible, and the money is flowing into the economy, which means more investors. In a bad economy, it’s a buyer’s market. The money isn’t flowing as freely and it means sellers are more willing to negotiate in order to get the deal done.

When I started out as a real estate investor, I had no money, no credit, and was unemployed a lot. I had no money because all the money I did bring in was for my wife and my six kids, who were all selfish enough to want to eat three meals a day.

I got into real estate in that environment with no training, and I learned many lessons the HARD way. I want to share some of these lessons with you today, because many of you might be struggling with these same issues today.

When I started in real estate, I felt completely out of my depth. I had no idea how to make an offer, analyze a property, or even understood the process. I just knew I wanted to buy houses! Over the years I managed to put together some amazing deals, even without formal training, because I HAD to. Every investor is going to make mistakes, but it is helpful to learn from someone who has already made quite a few so you can learn from them and avoid them yourself.

Here are some of the lessons I learned the hard way:

1. Not all sellers want cash for their property

Some sellers want checks coming in every month instead of cash, like another social security check to help them in their old age. That check could mean the difference between three meals a day or crucial medication for many people.

Others don’t want cash because they know they’ll burn through it; some people just can’t handle large lumps of sums of cash. You also don’t need a large down payment for many properties. Don’t assume every seller wants cash; they have to use the cash for SOMETHING, so find out what it is.

1. You HAVE to know your numbers before you buy

Back in the 1990s, I bought a convenience store. I asked the seller for the numbers: income, expenses, etc. He gave me numbers but they were WAY off, and it ended up being a real struggle to keep that store going.

Bottom line: don’t take anyone’s word for it, DO YOUR RESEARCH.

1. You need to know what your repairs are going to cost

When I came to Florida, I started working with a real estate agent, because I didn’t understand this new market. He convinced me to only look at lower price properties and to make offers on every property in that price range at 50% of the asking price.  I didn’t buy many properties with this strategy, but one I did ended up costing me quite a bit. It had a lot of problems, including a $5,000 assessment for hooking up the residents to the city sewer line. In the end, I lost money on that house.

Just because you buy at a discount, it doesn’t guarantee you’ll make a profit.

Here’s a secret: instead of a down payment, use that money to pre-pay several months of mortgage payments. If I don’t have to make a payment for months and get a tenant in there, I can build that money back up pretty quick.

If you don’t have the property, ask for a moratorium on the payments or defer the first payment so you have time to fix up the property first.

1. If you get in trouble making payments to a seller, stay in touch with the people you owe money to

Let them know that you’re working on getting things straightened out; don’t avoid them. Keep in contact so they know you’re not blowing them off.

1. Partnerships aren’t always the best idea

If you don’t know what you’re doing and the other person is in the same boat, then you just have two people who don’t know what they’re doing. Most likely, you’ll end up doing all the work and the other person will still want half of the profits. All three of my partnerships didn’t work out, and now I know I could have done it by myself because that’s what I ended up doing anyway!

1. If you’re short of cash, think about using items instead of cash

You can use things like cars, boats, or anything else instead of cash in a deal. If the seller will accept it, it’s fair play. Find out what the seller wants instead of cash and trade it to make an amazing deal. Bartering is still alive and well in today’s market, so use it to your advantage.

Don’t be a fool; be a THINKER.

Make sure to visit my website, LarryHarbolt.com, for all your real estate investing education needs.

Also, please make sure you leave me a review on your podcast player so I know I’m continuing to provide you with quality content.

Good Luck and Happy Investing!