The Real Deal Real Estate Show with Larry Harbolt

Today Larry walks us through the ten essentials to creating a winning real estate deal. The key points he covers are:

1. Location, location, location — The old saying has some truth to it; location can make or break a good deal
2. Know what you’re looking for — What problem is this specific property solving today? Why do you want to buy now? What are your long- and short-term goals in real estate?
3. Work only with motivated sellers — If the seller doesn’t have a pressing need to sell, you’re wasting your time.
4. Research the rental income and property values — Whether it’s a rental neighborhood or a one where the residents own, make sure you know all the relevant property values.
5. Make sure the math makes sense — This is critical. Make sure that you carefully analyze the values of the property and the potential deal structures to maximize a win-win scenario for you and the seller.
6. Communicate with the seller directly — This is another must-do step, and why many deals can’t be found on the MLS or through real estate agents.
7. Review all of your information — Take everything that you’ve learned about the property and the seller to create a deal structure that will work for the seller and for you.
8. “Don’t tell me what you won’t do, tell me what you will do” — If a seller rejects your first offer, get them to tell you what they will
9. Make copies — Once the seller has accepted an offer, make copies of the sale agreement and highlight anything different or unusual in your contract.
10. Title insurance and title search — NEVER do a deal without these.

A deal isn’t a deal until the repair costs of the property are taken into account. No matter what kind of investing you do, you need to have a quality team of contractors and tradesmen on speed dial before you purchase any asset. You also need to be taking a turn around the property yourself and comparing it to the neighbors, in terms of aesthetics, amenities, and overall condition.

Before you even go inside the house to speak with the owner, take a look at the outside. How does the roof compare to the neighborhood? Is the siding in good condition? Are there any visible foundation weaknesses? Do the windows need to be replaced? Take inventory of this before you step a single step inside that door.

Once you’re inside the house, start taking stock of the interior: What is the condition of the walls? What materials are they constructed from? Is there mold or mildew, indicating a moisture problem coming from the roof? Is the wiring out of date and needs updating?  This is only a small sampling of the many possible repairs and issues that can come up in any home in any area. Make sure you properly vet all the costs to repair and update the house or property to ensure you get top dollar either in rent or when you resell the property down the road.

Where can you find reputable contractors and tradesmen? Ask at your local REIA, your mentor, or other fellow investors. Those in your local market should know who does the best quality work that will bring you the best return on your investment.

Bottom line: Don’t be afraid to ask for help.

Real Estate Investor Associations (REIAs) seem like the ideal place for beginning investors to learn the fundamentals. However, these associations function more as a networking space where most of the attendees are significantly less successful than they appear. These members are desperately trying to find a deal and not concerned with educating themselves or you. That’s why you’re better off attending quality, specialized training and finding yourself a knowledgeable mentor.

Finding good quality education and mentors is a challenge in itself, however. There are plenty of “drive-through” gurus who come into town like the circus and are just as flamboyant. They promise the pie in the sky and expect you to pay with the stars. Many of these gurus aren’t really training investors; they’re training worker ants to go out and find deals for them to continue to fill their pockets.

Should you pay a mentor? Absolutely; an educator who has been in the field and is giving their time to help you has earned that right to be compensated for that time. However, it certainly shouldn’t cost a small fortune. These mentors, like Larry, are happy to share their time as a way to give back to the investing community. They will teach you by walking you through the process, and you will learn by actually doing. This is your key to success in our industry and our business.

Price is not the deciding factor in any deal, no matter what the gurus out there try to tell you. Basing your buying decisions on price will end up costing you much more than you thought you saved in the end. By thinking beyond price in your deals and not considering the critical factors such as holding costs, you will get burned.

Focusing on price can also tempt you into markets you don’t understand. There are plenty of companies who will crow about the profits they can make you when you invest in their market, but how do they make that profit? What is the house like? What kind of neighborhood is it? Without the ability to see the property yourself, you’re driving blind into potential disaster.

This week, Larry talks about knowing where to find properties that you will want to buy to make the most properties.  The Multiple Listing Service is not usually the best option; mainly because it is difficult to get your offer in front of the seller.  If you are not direct to the decision maker, it is quite possible the “gatekeeper” will not do as good a job as you can pitching your offer.

Attorneys can be a good source of leads for investors because they often deal with sensitive issues that require homeowners to liquidate those assets.  As an investor, if you maintain a stellar reputation of being a person who does what they say they will do you might find this method very successful.

CPA’s are also a good resource, they often run into taxpayers that are on the verge of financial difficulty.  If you maintain a good relationship here, leads can come to you this way all year long.

Larry likes to focus on free and clear non owner occupied properties.  He finds that these properties are much easier to buy on terms from the owners as compared to those that have existing debt.  These sellers also may be facing a taxable event by selling their home, by offering terms, Larry give the seller an opportunity to reduce their taxes that year according to current tax code.  (Check with your CPA regarding IRS Section 121 and Installment Sales Agreements)

Investors often get caught up in price or value or compare that to the profit in a deal.  The value is subjective, and actually is in the eye of the beholder.  Depending on the type of buyer the value can swing wildly.  Here is an example a rehabber might value a $100,000 house at $50,000 because he has to invest $20,000 in repairs, spend more money to sell the home and pay taxes on the capital gain.  A Buy and hold investor might value the same house at $80,000 because it will bring $1,200 in rent as it sits today in its current condition.

Have you ever considered a trade for something?  Remember as a child, trading a couple sticks of gum for a baseball card?  You valued the baseball card more than the gum, and the card owner valued the gum more than the card.  Real estate is no different, people trade houses for all kinds of things that they value more than the house.  An example would be trading for a motorhome; the seller takes your motorhome in exchange for the equity in his home.  In this example the seller wants a motor home more than the equity in his home.  In this example, price really did not matter, it was a trade of one tangible item for another, its that simple.

Notes on the other hand, provide a catalyst to make a deal work.  More often than not, a note is valued more than the actual real estate to many people.  It is important to consider many options when making an offer, don’t assume its just cash that the other party wants.

Have you ever attended LArry’s never Step Into a Bank Again course?  You can read more about this course at www.LarryHarbolt.com

In this week’s episode, The Real Deal explains that today, many young folks feel that because they have no experience, that they need a partner.  The problem with that logic is that often the partner has little to no experience either.  When choosing a partner in a deal, that person should have quite a bit more experience than you do.

Instead of jumping right into a partnership with someone on the same level as you, perhaps it makes more sense to educate yourself, and then make an arrangement that makes sense with a “financial friend”.

It is critical to do the right thing when you take on a financial friend, no matter what, that friend needs to be treated fairly, and must be paid, before you get paid.  Don’t fall into the trap of believing that just because someone has a few dollars that they know anything about real estate investing.  It is critical to set boundaries up front, and to clearly define each other’s duties and responsibilities.

Larry also discusses being “hands on” with your rehab jobs and how that can work against you.  Commonly, newbie investors feel that they are actually “saving money” by doing the work themselves.  The actuality is that you can negotiate that savings when you buy, instead of trying to sort it out when you sell.  Larry goes on to explain his “white shorts” theory that helped him get his “hands out of the dirt” so to speak.

Have you visited the new and improved LarryHarbolt.com website?  Check it out and get ready to launch your investing career today!

Do you want to be able to conserve what cash you have? In this episode Larry will explain how to never miss an opportunity to negotiate for a better and more profitable deal. Larry explains how experienced negotiators look at any situation they find and see ways to maximize their profits.

Negotiating a great deal begins with knowing what the costs of holding the investment are and what can be structured to allow for a predictable return of profit from that investment.  Listen in as Larry breaks this down in an easy to understand manner.

Have you signed up yet for Larry’s lessons by email?  Text “Larry” to 773-770-4377 to sign up.