This is a recorded Coffee Talk interview (Nov 20, 2015) between Mark J. Podolsky and David Barnett promoting Barnett's book Invest Local (investlocalbook.com). The conversation explains core ideas from Invest Local — using seller-financing (notes), calculating effective yield, and leveraging notes to magnify returns — illustrated by a mobile-home deal that produced high returns and helped a buyer post-bankruptcy. The interview also contrasts raw-land advantages and discusses Barnett's other book, Franchise Warnings, which critiques franchise systems and describes alternatives like equipment-based business opportunities.
Chapters
Hey, it's Mark Podolski, the land geek with your favorite niche real estate website, thelangeek.com and today on Coffee Talk, I have David Barnett. David, how are you?
I'm doing well, Mark, how are you? It's good to see you.
It's good to see you, David. What's the best website to find you at?
It's investlocalbook.com investlocalbook.com because, because I wrote a book called Invest Local and I.
Have it right here. And I like to brag because it's signed. I love this book. So I really like the book in the sense that it's, you know, it's digestible, but it's meaty yet digestible. You know what I mean?
Yeah, yeah.
Because most of these business books you can really just, you know, it's 20 pages of meat and then the rest are like example, example, example. This is kind of just all meat. I'm full after reading it.
Well, you know, one of my readers actually said to me once that they felt like reading the book was like sitting down to have a conversation with me. And they said that it was, they found it very easy to read even though they didn't have any sort of business or financial background, specifically finance background. Right. And the secret of the book is a lot of what's in that book I probably learned in my Finance 201 course at university. You know, time value of money and, you know, all that stuff that is pretty high brow, you know, sort of book learning kind of stuff. But when you break it down and show someone, hey, if you buy low and sell high and sell on a note, here's your effective yield. People can get pretty excited about that. And then further to then take that note and leverage it in some way either through debt or equity, by bringing a partner on board and then magnifying that rate of return. One of my favorite examples from the book is the trailer home or mini home example where I wrote a note with a face rate of interest of 19.9%. My effective yield was over 20 because of a lending fee. But then I turned around and leveraged that note and used it as collateral to borrow from someone else. And my rate of return went up to 150%. And, you know, it really opens people's eyes because in that particular deal, a woman who, you know, just had come out of bankruptcy and couldn't get a loan was able to buy a home. I was able to make some money and a friend of mine who has an interest in trying to Earn higher rates of return, ended up getting three times what he could have at the bank as far as a rate of interest.
Yeah. So I love it. It's happiness all along the continuum in that.
Yeah.
Yeah.
So it's. It's win, win, win. And. And basically, I think that. I think there are a lot of people out there that know these secrets, and I think they keep them pretty close to their chest, you know, and. And they. They think that they're, you know, the secret sauce of becoming wealthy, and they are. The fact of the matter is, a thousand people could read the book, and as we were talking about before, very few of them might actually take action and implement some of the things in there.
No, it's so important to take action, even if it's imperfect action. It's better to take imperfect action than have paralysis analysis, whereas analysis by paralysis. I keep forgetting the cliche, but you.
Know what I mean. Well, it's funny because one of the experiences that brought me to the point where I could write the book was I had read that fantastic book called Deals on Wheels by Lonnie Scruggs, which I don't know how old it is, but 25 years old or something like that. And in that book, Lonnie would buy older mini homes or mobile homes, buy them for cash for a low price, and then sell them for a higher price on a note. And I read his book and I said, I'm going to do that. And I outline in Invest Local how that deal really did not work out well for me at all, but it laid the seeds for figuring out how to make those deals work for me every time. And that was simply let the buyer find the home first and then come into the deal afterwards. Because Lonnie, in his book, talked about how you had to be good friends with the trailer park managers. And that was the difficulty I had, was park management actually changed while I owned the home. And the new owners were this big corporate entity, and it wasn't a guy you could go talk to. It was a book of policies being thrown at you all the time. And all of a sudden, you know, costs I had never foreseen came out of the woodwork like. Like they. They actually had a. A mandate that whenever a trailer was sold, any oil heating had to be removed.
Yeah, see, that's why you got to do my thing with the notes, because raw land, there's no maintenance, no tenants, no toilets, no termites. Yeah, yeah. Well, the same thing.
It's an advantage with a raw land. With my thing, though, I let. I let the buyer deal with all that, and they take care of those problems. And I'm only. We know the deal's done when it comes time to do the financing.
That's even better. That's even better. So I love it. So Invest Local. People go to investlocalbook.com it's fantastic. But before we end, David, because you're so generous, you sent me another book signed, by the way, Franchise Warnings sent.
Yeah.
Okay, let's say that I could only have one book, right? Which would you recommend? Like, which is your favorite child? I know. You know, it's not. It's terrible to say that, but my.
I guess that it's two very different messages for two very different audiences.
Right?
And Invest Local. I really teach some new things to people, and you really can expand your mind with Invest Local. Franchise Warnings is just that it's a warning about franchise systems. And all of my background and experience has to do with small businesses and how they're run, how they're valued, buying and selling them and how they're financed. So you can see how the two kind of tie together. In my own experience, I spent years as a business broker, and in that time I helped people buy and sell a lot of franchise businesses. And in the beginning, I was drinking the franchise Kool Aid because I thought, hey, here's a great way to reduce risk by having an established known system in place with an established brand, etc. Etc. I thought it was fantastic.
Yeah, you wouldn't want to own a Subway right now, would you?
Well, you know, by the time I got out and I had seen how these relationships really work, thought, wow, you know, there's nobody out there talking about the dangers involved in these franchise business systems. I mean, if you go into Amazon, I think there were like two or three books that talk about the downside of franchising versus hundreds of books that talk about, you know, how to choose the right franchise system. And the reason is, is because everyone's got their hand in the pot. You know, there's franchise floors. They want to sell you a franchise. There's other franchisees that want to sell you theirs because they want out. There's franchise brokers that want to get paid a commission for lining you up with a franchise company. So. So everyone's got their hand in the cookie jar, and they're waiting for you to come and fill the cookie jar, right, with your savings and your home equity and stuff. And so franchise warnings, I basically break down my experiences, and then I talk about the relationship, why there's an imbalance, the dangers and the different options because you don't have to get into business by yourself. There's a whole other realm of what we call business opportunities where you can get somebody else's operational system, somebody else's equipment. I use the example, for example, between KFC and Broaster Chicken. So KFC is a franchise. You have to run everything specific to their system, whereas Bro Ster Chicken sells equipment and spices. And if you want to put up their sign, you can and you can. They'll give you an operations manual, they'll teach you how to use their equipment and how to run a successful restaurant. But any day you choose, you can take down that sign, you can change the name of your restaurant. You're not paying them a royalty, you're just buying goods from them. And you know, it's interesting because I talked with a dealer for Broaster Chicken. He was telling me about all the high end fancy hotel restaurants that actually had their equipment in their kitchen. And you would never know. They just want to have high end equipment to produce a really great product. And you know, you can't do that with KFC's 11 herbs and spices. Right, right.
That's a great example. That's a great example. Well, David Barnett, thank you again for having a cup of virtual coffee with me on Coffee Talk and sharing some very valuable information with our people. And again, if you want to learn more about David Barnett, go to investlocalbook.com that's right. I can tell you the books are fantastic. They're even better if you can get a signed copy like me. Thanks, David.
