Listen to the Podcast Here: On today’s episode of The Real Estate Nerds Podcast, fellow attorney-investor Michael Quarles is giving us a twofer. Normally, we focus on one Best Deal or Worst Deal–but Michael has two Bad Beats to share with us today, and a host of free information about negotiation, investing psychology, and why success is a “requirement” in his life. Description Useful Resources Michael Quarles on the Finer Points of Negotiation Scott Smith welcomes Rebecca Walser, who shares about her background, business philosophy and wealth building strategies. [1:00] Michael decides to share two of his worst deals with our listeners. Scott asks Michael to set the stage for the period of time before the deal. [2:00] Michael has been engaging in entrepreneurship since he was a teenager. He shares his general real estate investing strategy, but also describes himself as a “serial entrepreneur.” [3:30] Michael took a student to a presentation, and actually posed as the student to bolster his mentee’s credibility. After a lengthy wait in the car, the student emerged from the meeting dejected. Michael had thought everything would go perfectly, and asked what went wrong. The student simply replied “I started talking.” [4:45] Michael shares the lesson his student learned the hard way: “That’s the worst thing we can do: not realize when we’ve said enough. And when we’ve said enough, stop talking.” That resulted in the loss of the contract. [6:00] Michael points out that any time a seller offers you something, even something as minor as a beer or a glass of water, you should take it. These small offers are actually closing signals. “Consumers give us little hints and triggers that we can see,” he explains. [7:30] Scott wonders whether Michael’s point is really about how to listen. Michael clarifies that at this point, he means simply stop talking about real estate. [9:05] Michael shifts towards his thoughts on negotiation: “We can’t convince someone to do something they don’t wan to do…But through the art of negotiation, we can convince them to set a price that causes us to say yes.” He describes an example. [12:05] Michael gives some surprising advice on negotiation: “If you want to learn how to negotiate, how to communicate: go talk to a 3-year-old.” Michael points out children this age do not know how to lie yet, but have some reasoning abilities. [13:20] Scott asks about situations where execution does not line up with training, such as when they take classes like Michael’s. Michael points out that one must be a gifted storyteller to be an effective negotiator, and that practice is vital to any learned information. He and Scott do a brief exercise to illustrate this point. They speak back and forth using only three words, a tactic Michael recommends. [16:00] Michael describes how he always surveys his tenants after the fact. He found she did not get to communicate with him the way she wanted to, which he considers a personal failure. [17:30] Scott and Michael discuss the power of mimicking, a tactic effective with both children and fellow investors. Michael Quarles’ on the Beauty of Ugly Houses The two investors shift focus to the second deal Michael wants to discuss. [18:00] Michael bought a house that was “not quite a duplex” but had an additional small house in the back of the property. There was a double homicide in the house, which worked to Michael’s advantage with lenders. But that wasn’t the end of the criminal element: the offender who committed the homicides returned to commit an arson in an attempt to destroy the evidence relating to the homicides. [19:00] Michael easily resold the house to another investor who renovated it, got a tenant in, and is still profiting. The lesson he learned from this deal is simple: “Those deals that don’t conform are the ones where we make the most money.” He goes on to state he would buy every “ugly” house in his city, given the opportunity. [21:00] Michael’s current market is direct tenants and investor-buyers (typically flippers). There is a specific value in the types of houses he purchases–those under the median for the area. Michael encourages investors to look at the properties through the eyes of the consumer. [23:00] Michael points out that ethical, moral, and legal boundaries are critical. He also points out that the order of those is significant, as something can be legal but not ethical. [25:00] Scott points out that acceptance of certain harsh realities can serve the savvy investor. [26:00] Michael describes visiting a house that was outside of his comfort zone. He found a highly motivated seller who was in need of back surgery that made his home uninhabitable during his recovery. He also wanted a relatively low amount of the house. He sold it within ten days. The Takeaway: Facing Fear and Requiring Success Michael and Scott wrap up with their major lessons learned from Michael’s experience. [28:42] Scott points out a major learning lesson from Michael’s story. He finds that we must practice habits of success regardless of outcome. Michael counters that even a failure is a type of success, and necessary. [30:00] Michael asks about the cost of law school, and legal education generally. 3.5 years and $150,00 is the figure they settle on. He points out that many investors spend massive amounts of money to “hit the home run” upon execution. He shares a story of overcoming fear as he forged a professional relationship with a female investor. [32:00] Scott points out that a life of comfort is one that can cause regret about not taking more risks. He puts it bluntly: “Risk always means fear, and overcoming fear.” [36:00] Michael shares his own take-away. He encourages the audience to treat life like a requirement. Connect with Micheal Quarles Connect with Michael Quarles via his website, www.michaelquarles.com. Check out his podcasts, or use the form to ask him a question directly. Just click “Talk to Michael” and fire away. Listener Resources Thank you for joining us on today’s episode of the Real Estate Nerds Podcast. For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook. Don’t forget to subscribe to stay up to date and have the most current episodes of the Real Estate Nerds Podcast directly in your listening library. Every subscription helps us create new, custom content for you. What did you think of today’s episode? What would you like to hear more about in the future? Leave your thoughts and questions in the comments section below, or leave us a review in the iTunes store. We love hearing your feedback, so fire away. Join us again next time for another fascinating conversation and compelling story with experienced investor Trevor Robinson. Thanks for listening and joining us on our journey to become better investors! Hosted by Scott Smith, Lead Attorney and Founder of Royal Legal Solutions. Schedule your personal consultation now. If you have questions about our content or suggestions for future episodes or guests, reach our podcast team at [email protected].