Chapter 20 USING YOUR TALENT AND HIDDEN BENEFITS TO BARTER YOUR WAY INTO REAL ESTATE

Question 1

What is the goal of the chapter?

Answer 1

To reinforce the use of natural or learned talents, abilities, and hidden benefits of properties in negotiations through barter.

Question 2

List the key terms discussed in the chapter goal.

Answer 2

• Natural or learned talents
• Abilities
• Hidden benefits
• Properties you own or will acquire
• Solve problems

Question 3

Define ‘natural or learned talents’ in the context of real estate.

Answer 3

Contributions you can make to improve a property based on your skills, such as decorating, painting, or gardening.

Question 4

What management skills are important in real estate?

Answer 4

The ability to manage tenants and deal with hired workers.

Question 5

How can cooking skills relate to real estate transactions?

Answer 5

By offering catering services as part of a down payment for a property.

Question 6

What does the term ‘abilities’ refer to in this chapter?

Answer 6

Skills or professions that can be valuable in finding and negotiating properties.

Question 7

Give an example of a profession that can aid in real estate transactions.

Answer 7

Being a computer whiz who can analyze tax rolls and databases.

Question 8

What are hidden benefits in real estate?

Answer 8

Unused or undetected advantages of properties that can be bartered or sold.

Question 9

Provide an example of a hidden benefit.

Answer 9

Renting out a boat dock behind a house.

Question 10

What should you consider when evaluating properties you own or will acquire?

Answer 10

Potential benefits such as space for fruit trees or gardens.

Question 11

Fill in the blank: The key to a win/win situation in real estate is to solve your problem as well as that of the _______.

Answer 11

[other party]

Question 12

True or False: Most sellers have no agenda in real estate transactions.

Answer 12

False

Question 13

What is a common misconception sellers have about their properties?

Answer 13

They often believe their property is worth more than its actual value.

Question 14

What is essential for success in real estate investing?

Answer 14

A good grasp and strong focus on your goals.

Question 15

Define ‘barter’ in the context of real estate.

Answer 15

The exchange of goods, services, or promises for similar items.

Question 16

What is an example of a barter transaction?

Answer 16

A CPA offering services as a down payment for a condominium.

Question 17

How can bad credit affect real estate investing?

Answer 17

It can make obtaining loans from banks difficult.

Question 18

What is the importance of equity in real estate?

Answer 18

It simplifies the process of getting a mortgage or financing.

Question 19

Fill in the blank: The more _______ you have, the easier it is to secure financing.

Answer 19

[equity]

Question 20

What does realizing you need to get closer to your goal involve?

Answer 20

Understanding the intrinsic versus realized benefits of your properties.

Question 21

What is the intrinsic benefit of owning a vacant lot worth $150,000?

Answer 21

$150,000 banking benefit

This benefit is not realized unless the lot is used for investment or development.

Question 22

What factors should be considered when evaluating the ownership of a vacant lot?

Answer 22

• Reasons for ownership
• Desired benefits
• Potential for appreciation
• Alternatives to holding the property

Question 23

What cash offer is presented by Charlie for the vacant lot?

Answer 23

$110,000

This creates a comparison between cash and the value of the lot.

Question 24

What alternative offer does Alex present for the vacant lot?

Answer 24

A 48-foot sailboat with a $60,000 mortgage

This introduces another opportunity to evaluate potential benefits.

Question 25

How can assets be viewed in relation to achieving one's goals?

Answer 25

As a route to goals through barter and exchange

Question 26

What is the primary goal of the 'vacation on me' barter transaction?

Answer 26

To offer the seller a benefit that guarantees the deal

Question 27

What organization is RCI associated with?

Answer 27

Timeshare exchange network

Question 28

What is a timeshare?

Answer 28

A condominium ownership divided into 'week' segments

Question 29

What is the benefit of using barter in real estate transactions?

Answer 29

To facilitate deals without cash transactions

Question 30

What are barter clubs?

Answer 30

Organizations that act as clearinghouses for barter exchanges

Question 31

What is a key benefit of accumulating barter dollars?

Answer 31

Freedom to make one deal and spend credits in multiple places

Question 32

What should be checked to determine if a barter club is reputable?

Answer 32

* Business duration (more than five years) * List of members before joining * Member satisfaction * Owner references * Better Business Bureau information

Question 33

What is one way to reduce the cost of a holiday?

Answer 33

Swap the use of your home for a holiday

Question 34

What is sweat equity?

Answer 34

Your own work or labor used to provide value in a transaction

Question 35

Why do sweat-equity transactions sometimes work?

Answer 35

* Sellers believe the buyer will complete the work * Sellers are willing to sell on easy terms

Question 36

What property characteristics should be sought for sweat-equity deals?

Answer 36

* Not more than a one-hour drive * In need of repairs * In areas with higher property values * Properties you want to own * Manageable properties

Question 37

What type of seller is ideal for a sweat-equity transaction?

Answer 37

A busy professional who cannot manage their property

Question 38

What should a buyer assess before committing to a sweat-equity deal?

Answer 38

* Their own abilities * Time available for work

Question 39

What is Robert Johnson's occupation?

Answer 39

Manager of a supermarket

Question 40

What are some of Robert Johnson's sweat-equity abilities?

Answer 40

* Good at painting * Gardening * Light carpentry * Physically strong * Flexible work hours

Question 41

What should a property buyer do before purchasing?

Answer 41

* Visit the property at different times * Understand the rental market * Know zoning and subdivision restrictions

Question 42

What is sweat equity?

Answer 42

Sweat equity refers to the non-monetary investment of time and effort into a project, often in real estate, where individuals improve a property through their own labor.

Question 43

What should the Johnsons avoid when looking for a property?

Answer 43

Properties that require work outside their major advantages, such as plumbing or electrical repairs.

Question 44

What geographic area were the Johnsons studying for potential investment?

Answer 44

A nice residential area near where they lived with a mix of different kinds of real estate.

Question 45

What methods did the Johnsons use to search for properties?

Answer 45

They rode bicycles through the area and consulted with a real estate sales clerk named Phyllis.

Question 46

Why did the Johnsons attend monthly city council meetings?

Answer 46

To learn about developments in the area, such as a new government center that would increase rental demand.

Question 47

What was the condition of the property that the Johnsons found for rent?

Answer 47

The property was in poor condition, with a bad lawn and an abandoned truck in the yard.

Question 48

What repairs did the Johnsons identify for the property?

Answer 48

Cleaning, painting, new carpets, new drapes, lawn care, and shrub maintenance.

Question 49

What was the proposed purchase price the Johnsons suggested to Dr. Funt?

Answer 49

$270,000.

Question 50

What was included in the Johnsons' proposal to Dr. Funt?

Answer 50

Repairing and cleaning the house, with Dr. Funt only covering the cost of materials estimated at $8,000.

Question 51

What financing terms did the Johnsons propose in their offer?

Answer 51

A personal note from Dr. Funt for $20,000 with interest only for seven years at 7%.

Question 52

What was one critical element of a sweat equity proposal?

Answer 52

Put everything down in the contract, specifying expectations and outcomes.

Question 53

True or False: The Johnsons needed to complete all repairs within 90 days to keep the property.

Answer 53

True.

Question 54

What is 'scrip' as described in the text?

Answer 54

A form of legal currency created by individuals to represent value for services or products.

Question 55

Fill in the blank: Scrip can be used in transactions as a form of _______.

Answer 55

payment.

Question 56

What did Charles, the restaurant owner, use as part of his down payment for a duplex?

Answer 56

His own scrip printed in $10 increments.

Question 57

What is 'watered scrip'?

Answer 57

Scrip acquired from others at a discount, representing credits against their services or products.

Question 58

What did Ellis, the kitchen appliance store owner, print for his down payment?

Answer 58

Scrip in $250 denominations.

Question 59

What should you do to improve your position with a new property?

Answer 59

Look for opportunities to sell or exchange it prior to closing.

Question 60

What should you do if unexpected issues arise during a deal?

Answer 60

Do everything you can to fulfill your deal commitments.

Question 61

What is a true statement about attending city council meetings?

Answer 61

They can provide valuable insights into local developments that affect property values.

Question 62

What was the outcome of the Johnsons' efforts on the property?

Answer 62

The home was appraised at $350,000 after renovations.

Question 63

What should you ensure regarding the option to buy in a sweat equity proposal?

Answer 63

It must be very specific.

Question 64

What is the primary benefit of creating scrip for businesses?

Answer 64

It brings businesses customers they don’t already have, generating more cash-based business. ## Footnote Scrip has advertising value that accounts for the discount offered.

Question 65

What does 'buying scrip on your terms' entail?

Answer 65

Offering something of value for scrip at a greater face value than the cost of the item or service. ## Footnote Examples include second mortgages, options to buy property, or leases in exchange for scrip.

Question 66

Define commissioned scrip.

Answer 66

Scrip established through a third party and redeemed as cash, less your commission. ## Footnote Commissioned scrip does not allow for long-term payback like watered scrip.

Question 67

What is a potential deal structure involving a cruise ticket in a real estate transaction?

Answer 67

Offering a ticket on a cruise as part of the down payment to meet the seller's terms. ## Footnote This can entice sellers who enjoy travel.

Question 68

List some types of businesses to establish relationships for profitable scrip transactions.

Answer 68

* Travel agencies * Kitchen and home appliance dealers * Lumber yards * Jewelry stores * Restaurants * Resorts * Legal services * Accounting services * Used and new car agencies * Auto repair shops ## Footnote These businesses provide valuable scrip products.

Question 69

What should a firm agreement with a business for scrip cover?

Answer 69

* Name and address of the business honoring the scrip * Duration the scrip is valid * What the scrip includes and excludes * Liability terms if the business is sold * Penalties for dishonored scrip * Redemption details and commission structure ## Footnote Clear agreements help avoid disputes.

Question 70

True or False: Scrip and barter transactions work best when offered upfront.

Answer 70

False. ## Footnote They are more effective as kickers later in the transaction.

Question 71

What are 'kickers' in a transaction?

Answer 71

Any form of benefit given to the seller to entice them to complete the deal. ## Footnote Examples include vacations, lessons, or other perks.

Question 72

What is a depreciation kicker?

Answer 72

A tool used to create tax benefits for the seller, potentially closing a deal that is otherwise stalled. ## Footnote It can provide financial incentives to the seller.

Question 73

What are some potential pitfalls when engaging in barter deals?

Answer 73

* Not checking values carefully * Getting too deep in barter club accounts * Poor documentation of deals * Not having a solid legal representation ## Footnote These issues can lead to financial losses.

Question 74

What is sweat equity?

Answer 74

The value added to a property by the owner's labor in renovations or improvements. ## Footnote It is beneficial for investors with strong work ethic but limited cash.

Question 75

What should be considered when making offers involving kickers?

Answer 75

Ensure that you can deliver on the promises made and avoid tying yourself to unwanted commitments. ## Footnote It's wise to establish a cash value for all kickers.