We can attend all the workshops and learn all the techniques, but until you can start putting all the pieces together and understand how the motivated seller’s though process works and to think like a successful real estate investor you will still miss the truly great deals. Learn more about the Real Estate Investor Process of Thinking in this article from Larry Harbolt.
The Thinking Process’s of a Successful Investor and a Motivated Seller
Thinking Like A Successful Investor
An investor of real estate understands that general knowledge is not what it takes to create wealth. If general knowledge was what it took to create wealth, college professors would be the wealthiest people in this country and we all know that is not the case. Successful real estate investors know that it takes specific knowledge to create wealth. That is why real estate investors buy hard assets, (such as the seller’s house) at a price or with terms conducive to making a profit. If an investor can’t make a profit, they usually have no reason to buy a property unless they plan to live in the house. An investor who is a true capitalist knows they must always offer a seller something the seller likes and values more than what they are giving up or a deal will never happen.
Most sellers are looking for a large sum of cash, a monthly income stream, debt relief or any of a myriad of ways to receive that thing the seller likes more than what they are giving up.
Now that we have established this fact, as an investor it is your job to figure out what you can offer the seller that will be liked enough that the seller is willing to exchange their house for whatever you offered them. If both parties aren’t happy with the deal, it will never happen.
As an investor, your goal may be to acquire property for several reasons. You may want to make some fast cash by fixing up the property and immediately sell the property for as much money as you can get. You may want a monthly cash flow that a good rental property can provide this can give you some appreciation and an increased value over time, better tax treatment and mortgage pay-down that increases your equity position. You may want numerous rental properties that provide monthly cash flow to help you become financially free by replacing job income. By being financially free, you may want to pursue other interest or spend more quality time with your family. The bottom line of being an investor is to create money and income to benefit your family and give you more quality time in your life.
The following is what I think is how any investor must think. I want you to adopt this philosophy that has taken me years to understand, and that philosophy is:
As an investor, when you are trying to buy someone’s house always remember that the seller is always trying to buy your money (or your availability to money by means of a loan) with their house. Never think of the process as you are trying to buy their house with your money.
Why do I say this, it’s very simple. The seller can’t buy groceries with their house; they need your money to buy groceries. Without your money, they can’t take that once in a lifetime vacation they have always dreamed of, or pay off those high interest rate credit cards with their house, they need your money to do what they need to do or they wouldn’t be selling. By understanding this idea you now have more control over your deals because you may not want to use the precious commodity everyone needs most to buy any one house. You may want to divide the money up and buy several properties instead of only buying one. Yes, you are in control, so as an investor I strongly suggest, only offer what your formulas say you can pay and never pay more unless it benefits you. Never pay more than the deal can afford, and if you are trying to buy a rental property, you can never pay more for that property than a tenant can afford to pay you each month. Make sure in the long run, your family gets the most benefit from every deal or you don’t have a good reason to do the deal.
Thinking Like A Seller
As I’ve said all along, there are as many ways to buy a property, as there is property to buy. The reason for this is the fact that every seller has different issues in their life they need to address. It is your job to figure out what the seller is trying to accomplish, then go on to solve the seller’s problem whatever it may be.
There is a myriad of reasons why a seller wants to sell their house. Maybe the size of their family has grown and they have simply outgrown the house they have. Maybe the sellers have reached retirement age and no longer need such a large house to take care of. The sellers may have had a job transfer and need to sell their house quickly. The sellers may no longer be able to take care of the property or, afford the monthly payments any longer. The sellers may simply want to rid themselves of the large monthly payment trying to save their credit score. The house may have back property taxes owed the sellers can’t afford and their lender is threatening foreclosure if they don’t pay those taxes immediately. You will never know what motivates the sellers until you ask.
Some sellers want only enough money from the sale of their house to accomplish what they need to do. Some sellers want just enough money from the sale of their house to pay for the reason they are selling the house. Some sellers want an income stream while some sellers are simply out of their minds wanting more for their property than it is worth. However, no matter what the reason why the seller wants to sell their property it is your responsibility to find the reason why?
I have personally found some sellers only want debt relief while some sellers want as much money as they can get because they believe that the money they receive from the sale of their house will be the only money they will have to live the rest of their lives or to pay off debt or, take that dream vacation they have always wanted to take. Some sellers believe that the money from the sale of the largest asset they will ever own is all they will ever have to live a somewhat comfortable lifestyle, when this is the case most sellers are harder to negotiate with them. Some sellers think they deserve the maximum their property is worth when it is in perfect condition even though they failed to keep the property in good condition.
Based on this logic you will have a better understanding of why sellers say the things they do. As I said before, this isn’t rocket science it’s just a fact of life. When you understand how sellers think, you will be able to put together better and more profitable deals.
By finding out what the seller’s needs are, it will give you a position of power when negotiating. Here are some seller issues to think about.
When dealing with older people, do they need cash flow to survive?
When dealing with sellers of all ages, do they need money to buy another house?
When dealing with sellers of all ages, do they have pressing debt?
When you find a tired landlord, are they tired of management?
When dealing with older people or investors, are they more interested in interest than anything else?
When dealing with sellers of all ages, do they have a personalemergency?
When dealing with sellers of all ages, usually young people, do theyneed cash for a car or other item?
When dealing with sellers of all ages, do they need money to pay for a medical debt?
When dealing with sellers of all ages, are the sellers having troubletaking care of the property?
Real Estate Investor
Larry Harbolt is the nation’s leading Creative Seller Financing expert as well as a popular national real estate speaker and teacher whose time-tested strategies and nuts and bolts teaching style has helped thousands of aspiring real estate entrepreneurs realize their financial dreams with little or no money and without the need for credit. Larry has been successful creatively buying and selling real estate for over 30 years and has written numerous popular articles and real estate courses. Larry also has been running a meetup group for real estate investors in St Petersburg, Florida for over 13 years. Larry is the real deal!
Larry’s will be in Kansas City on September 9th at our Monthly Meeting discussing Creative Financing for Real Estate Investors and then he is coming back on Saturday September 13th, 2014 for an all day Deal Structuring Workshop. Please visit our calendar of events to learn more about these and other events at MAREI.