"How to Negotiate Like a Pro and Require Success in Your Life"
Real Estate Investing Expert
Episode 43: "Bad Beats"
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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.
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.
Thank you for joining us on today’s episode of the Real Estate Nerds Podcast.
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When making business decisions that affect your long-term goals, like what types of investments to make with your retirement dollars and which vehicles to use, it really is best to be aware of all of your options. We frequently talk about the Solo 401(k) and Self-Directed IRA as tools for funding your retirement. But what about life insurance? And what about the stock market? What if we told you there is a tool that allows to to reap some benefits of both? It’s called Indexed Universal Life Insurance–and some investors have found it a useful addition to their retirement plans.
What Is Indexed Universal Life Insurance?
Indexed Universal Life Insurance (IUL) plans are a variety of permanent life insurance plan that features a cash-building element. One primary benefit of these plans is that the policy holder gets some of the gains of being associated with the stock market without all of the risk Wall Street is famous for. This is in no small part because of how these policies are designed. IULs earn in part because they are directly linked to a market index, such as the Dow or the S&P 500. Any gains remain within the policy, albeit a cap rate will limit how much you can make. However, you are protected during a particularly bad year for your index with an IUL. The worst case scenario with these plans is that you make nothing, but you never actually lose money no matter how poorly your index performs. The protection of your principal is actually derived in part from the same cap rate that limits your gains.
How much money do policyholders stand to make? Historically, returns run between 5-9%. The S&P Index has actually returned at 9-11%, but the upside limit on UILs stems from the account’s cap rate. For this reason, many advisors argue that the UIL can make a wise addition to a retirement or estate plan once more traditional and self-directed accounts are maxed out.
Tax Benefits of Indexed Universal Life Insurance (IUL) Plans
There are three key tax benefits of IULs. First, you may pay into the policy with pre-tax or after-tax funds. Withdrawals from the policy may be made tax-free if you are under 59 1/2. Such withdrawals are regarded as loans, with your death benefit serving as collateral. Any funds paid out to the beneficiary are also tax-free, including normal benefits upon your passing. This is true regardless of their value.
Ask the Experts at Royal Legal Solutions About Your Retirement Planning Options
Regardless of where you are in the retirement planning process, Royal Legal Solutions an assist you. We have extensive experience educating investors about self-directed investment options. Many of our investor-clients love our Solo 401k information, product, and compliance services. Our Self-Directed IRA services can also be helpful for retirement planning, as the SDIRA is yet another vehicle that allows you to diversify and take total control of your investments. To determine which of the available retirement planning strategies are best for you, consult with one of our experts at Royal Legal Solutions. You may also contact us with any questions you may have about your options.