Negotiation Seminar last weekend

Reach Returns

I attended a free 2 day seminar that was put on by Reach Returns over the last weekend.  Greg Pineo was the only speaker on both days.  He has been a real estate investor in the Seattle area for the past 30 years.  The seminar was advertised as education on the art of negotiation.  Instead, it was like most free seminars – an overview of the constellation of subjects that Reach Return’s education products cover.  They did encourage us to buy those products at every break.  I think Greg is a very good teacher and has a firm grasp of real estate investing.  He has owned several hundreds of buildings over the years and is very creative about how he structures the deals.  I have spent quite a bit of money on education from other ‘gurus’ – I think I would have been much better off if I had saved that money and bought Reach Return’s material.

Greg Pineo is a philosopher at heart – he often quotes Thoreau, Whitman, Ruskin and others.  If you have seen the movie Carpe Diem, then you can hear Robin William’s character in Greg.  Both revel in the words that inspire you to be.  To be all that you can.

Here are the hiighlights of my notes.  I recommend you attend this seminar if it comes to an area near you!

Greg started with a story from his youth – selling almond roca for his little league baseball team.  He learned important lessons (The Tao of Almond Roca):

• Be Bold – step up and do new things
• Always Bring References – your chance to close the deal is higher if they know somebody you know.  Saying ‘no’ says ‘no’ to both you and the referrer.
• Do Not Set Ceilings on the Possibilities in My Life!
• Ask Questions of Proposition – ‘would you consider selling?’, ‘do you want to rent this unit?’.  Questions that lead to a yes/no decision.  If you don’t ask for it, the answer is already ‘no’ – asking gives a chance for a ‘yes’

To live the Tao, we need to know what we want.  Not what the committee of voices in our heads say we SHOULD want.  Change the voice that limits our choices to one that encourages us to be everything we can be.  Henry Ford is quoted as saying that he was looking for a few people who did not know what can’t be done.  Look for those possibilities in life that lead to success.

John Ruskin – “Dream lofty dreams, and as you dream, so shall you become. Your vision is the promise of what you shall at last unveil.”

To be wealthy in real estate, we need to hold high-demand property over time.

There are three categories (chess metaphor) of properties that we can own:

• Pawns – these are owned for a short term for the purpose of increasing our capital.  Generally we want to assign these deals or get excellent financing
• 2nd row – owned for a real estate cycle (7-10 yrs) and sold at the right time in the cycle
• Back row – owned for the rest of your life.  These are the gems that you want your grandchildren to own.  There should be no reasons not to buy or rent (for you and potential tenants)

Toolbox (skills and techniques) + mindset = success

Greg talked a bit about the Seattle area geography, neighborhoods and market demand.  The developed city center (between Lake Washington and Puget Sound), some specific neighborhoods on the Eastside (Bellevue and Kirkland) and North (Edmonds) are all high demand.  Back row properties should be in these high demand neighborhoods.  Greg Pineo talks about the ‘romantic’ aspect of the neighborhood – this is a large part of the demand.  There is a lot of development going on outside these neighborhoods – there is a lot of land East, between the city and the Cascade mountains.  The challenge with this development is that it means that our property will always be competing with new construction.  We have less of this kind of competition in the existing high-demand neighborhoods.

The very best deals often come to us at the very worst times.  Greg theorizes that this is because the best deals should be in the hand of those brave enough to handle them.

Greg Pineo says that each day in the life of an investor is involved in searching for 3 things:

• Birds – property that fits our criteria for purchase
• Money – funds that we can use to buy these properties
• Buyers – people who will buy either our deals (wholesaling) or our properties (flipping).

We need to be prepared – before we encounter a property that we want to purchase.  We need to:

• Know our market
• Know sold comps
• Know rent comps
• Understand tax law – Estate tax and Capital Gains tax
• Understand area zoning and expansion potentials
• Understand construction and rehab costs

Negotiable Terms in any property deal:

• Purchase Price – what do they need to get to their next location
• Down Payment – How much?  When?  Over time or all at once?  Monetary or will something else work?
• Ernest Money – Cash?  Paid to seller or escrow?  Cash or note?
• Time – when do payments start?

When we get financing from sellers or private sources, we should have some special clauses to give us the most flexibility in our portfolio

• Substitution of Collateral – this gives us the ability to move the note to another property.  This gives us the ability to free up one of our properties so that we can sell it and keep more of money.  It also allows us to keep the best financing in our portfolio.
• Slice and Dice – this gives us the ability to exchange one set of notes for another set of equal value and terms.  In combination with the previous clause, this makes it possible to split a large note into a couple of smaller notes that can be moved to different properties.
• 1st Right of Refusal – this gives us the ability to payoff the note at a discount when the beneficiary decides to sell it to a note broker. Sometimes, a high purchase price with seller financing will result in a quick attempt by the seller to get cash by selling the note.  This clause can save us a large amount of money!

Banks make money 4 ways:

• Margin – difference between the amount they pay to borrow money and the amount they earn by lending it
• Fees – they charge us to do business with them
• Penalties – late payment penalties add a large amount to the bank’s bottom line
• Servicing – amounts earned by handling the payments and administration of the loan

We need to be a bank – if we buy on one set of financing and sell with a different set of financing, then we can earn money the same way a bank does.

I did not want this post to turn into a book, so I will close it up.  I got a lot out the seminar – Greg’s stories are very motivational and his deals are very creative.