DONT Make These MISTAKES | The Morby Method

yo yo yo good morning good morning good morning so this Zoom is going to be about the morbi method just helping people understand what the morbi method is and I want to highlight Logan because Logan's such a big leader inside of our community Logan holy crap look at this dude I swear like somebody pulled him out of a freaking magazine look how freaking handsome he is Logan is an incredibly intelligent guy also bro you're doing a great job on your content what's your Instagram how can we follow you at loganlee manzanaris guys go follow him he's great I I um consume his stuff he has great advice he's awesome he's somebody you should be collaborating with and that's that leads me into what we're going to talk about today is Logan comes into the community and immediately starts taking resources he has Intelligence he has in real estate and applying it to collabing with sub 2 students so a couple of things I want to highlight today is number one Logan as an individual somebody that you guys should be working with and reaching out to as a resource um and then number two I want to highlight the morbi method because it's something that solves a lot of people's issues where sellers want a really large down payment but they're willing to carry a smaller portion this is a strategy that you'll see more and more and more of it's frequently utilized in multi-family right big big big purchases 10 million 20 30 million dollar purchases a lot of times sellers understand that financing can be really tricky for those transactions and so they'll you'll see it a lot in multi-family okay but in single family you'll start seeing a lot more frequently especially as we educate and help the masses so um Logan let's break down this deal bro tell me tell me a story where did it start where'd the lead come from who did you partner with all the things I'm going to shut up and let you talk only for a second I'm going to bring you in here so to set the story is this deal would not have happened without all the zoom space you did on Word Method this strategy was not and nothing I've ever done before never even heard of and this deal that we're going to talk about we hadn't initially had agreed upon this deal in a totally different structure was not worry method and so this deal was done with another sub 2 student actually and his name is keto so if you guys don't know keto is like literally like a amazing human being he's got Amazing Stories so good that he wrote a book about it so if you guys don't know who keto is like definitely connect with him and we had done a couple deals together like as partners and then he brought me this deal where he had a hard money loan on it he couldn't get out of it and he wanted to get rid of it but he wasn't going to be able to sell it I but he needed to like pay off his lenders ASAP like he had balloons that were coming up and so we initially agreed I agreed to buy this from him on a cash transaction like I was just going to pay for it in cash and I was going to come back behind and actually basically do like a really quick bur I would I would we find it so that way he could get out of this these hard money loans and we agreed on a purchase price of two hundred thousand dollars because he said the home was worth about 225 220 000 I was like okay I'll come in about twenty thousand dollars equity and after thinking about it I was we were actually sitting in Dallas we were at a cleaning conference so if you guys don't know me my wife um and my wife she actually runs the company but if we own a residential cleaning company and we're sitting at this conference and I'm sitting there talking to keto on the phone while my wife is out there networking and like oh I just remember watching a zoom that pasted on this thing called more method and so I kind of walked him through I fumbled over my words of like what do you think about this potentially What if I actually what if I paid you more and pay 220 000 like I got to send my time on I can't I can't do this in two weeks you probably Gotta Give me four to six weeks in order for me to close this loan but I could actually maybe put a little bit more money in your pocket and if you're willing to carry that uh carry a note in second position then we can make this happen and you can actually get paid more and you get paid over the course of time and so it was like okay sounds good I think right and so I again I had no idea what I was doing I was just was like I heard this in a zoom but that's the that's the great thing about this is like people go okay so I heard that I heard the information but what's next right there that's the what's next right there is literally going I don't know everything I'm doing but I I heard it on a zoom and I'm going to apply it to something it's the only way to learn and that's the big step that a lot of people have a hard time with is like learning a new strategy and then going okay well I have something I can apply this to worst case scenario I screw it all up and Logan I know you know a lot about real estate but you at the time didn't know much about the strategy so you go okay I'm just gonna fumble through it and even though you in your mind fumbled through it you probably sounded like an like a real estate God to the seller yeah did the seller have any indication that you would never be more than he did I need more than he did and that's it right which and I knew this much that's it but really I was I was solving this problem and ultimately you've said this so well it's like you can never say the wrong thing to the right person and that's really what it was I was in a position to try to help him he had to get out of his hard money loan and there was no way he was going to be able to do it and he was so you had a seller that had a hard money loan so he was so was the story that the seller was getting ready to fix and flip the property but he got in over his skis he was maybe in too deep and he goes I don't know what I'm going to do here I got a hard money loan he thought he thought he was gonna so he uh like again amazing investor I'm literally an amazing deal finder amazing negotiator amazing manager he just has no credit he has no ability to qualify and get out of these loans so he did a great job of getting on the front end but then he basically ran that timeline of how was he going to get out of this this this bad loan right so that's where it came in and he's like okay like this deal sounds good but can you give me fifteen thousand dollars like next week that way I can pay off this one lender I had so it sounded like he actually had multiple loans that were coming due that he he wanted to pay off his hard money loans and so I did right I paid off fifteen thousand dollars right away we actually put it through we called it our earnest money and use that earnest money so I paid him the earnest money so let me back this up there's a lot of mistakes I made in this and like I'm not trying to be like I did not do this perfect there's a lot of things I look back on that we do differently uh however I had a lot of trust with this individual because we had actually done deals together like with Partners on other deals that um I did things that most I wouldn't recommend necessarily doing with a total stranger someone who you don't have and one of the one of those is you came out of pocket fifteen thousand dollars for earnest money so that you could number one to the seller so you went straight to the seller yeah and he used that money to pay off it pay off a loan before it even close a transaction right I love this okay so guys this is this is Step number one don't ever do that don't ever do that yeah so I'm gonna share I'm gonna share everything The Good The Bad Ugly right and uh at the market read me was like we got paid three thousand dollars of closing which we'll get there right but there was also a lot of mistakes I definitely well Logan here's the thing is like you you uh let's talk about why that's not a good thing right because you did it one because there was a level of trust two you understand the mechanics and you knew this was going to be a deal regardless but when you're a brand new person you're listening to this why should I never send money like earnest money directly to the seller why is that a problem yeah because they could just run away with it and you want a third party you want an intermediary and that's what a title company is an escrow company or you can even send it to an attorney I guess if you're in an attorney state so so this is an interesting question right and maybe it's because you didn't have it under escrow but I'd love to hear why because I've done this too right I don't do it often I probably do it maybe once a year where a seller goes I need a thousand dollars today to satisfy some problem and I'm like I can't wait to go through escrow or title I ha I have to go directly to the seller or there's been times where we have somebody moving out of a property we're going to close on and they go we need you to put the first and last month's security deposit on our new place as part of the purchase price and I go I would just go straight to the apartment complex cut a check and it's outside of escrow and it's kind of a it's always a weird scenario that we have to do it under yeah but you took 15 G's and gave it directly to the seller yeah obviously there was a level of trust there which is very rare because most of the time when you're working with a seller it's the first and the last time you'll ever work with that seller correct why didn't you just wire the 15 grand 2 title have title sit on it for a day and then wire it to keto was it because of the level of trust maybe just ignorance because I guess when the money existed it sits in escrow like that money's sitting there like no one can use that money and so he needed that money to go pay off a lender like today like so he went took that money and he paid off one of his lenders with the 15 000. I love it okay cool right so I think I heard you talk about this once it's like sometimes you gotta like understand the situation and do things that maybe maybe a little more risky uh in order to get the deal to go through and again this is like maybe this is maybe not the right message depending on where somebody is at but I guess in that situation like I trusted the situation and I was actually okay like if the fifteen thousand dollars didn't come back it'd be like well it was worth it based on what I believed that the outcome would have been yeah I like that yeah I think I talk about this a lot with lawsuits right where a seller will start ghosting you you're under contract with the seller and the seller starts ghosting you and somebody goes what should I do and I go how much are you gonna make I go 30 grand okay well it's probably worth you putting up some money to risk that it's not going to go anywhere even with a lawsuit or an attorney but when people go oh well I'm gonna make three grand I'm like that's not worth any risk at all okay don't do that seller needed 15 grand your job Logan is as an investor is just constantly solve seller's problems so you go I can solve this problem and based on my outcome or my benefit I'm willing to solve this problem right now to make sure the seller's taken care of so that I have the result that I want as well yeah and so that was our that was the first piece of the transaction and we got a PSA a purchased agreement set up and got all that piece set up and then at that point was like damn Logan he's gangster did you guys just pick up on this he spent he sent 15 grand before he had a perfect purchase and sell agreement I did I did I mean a level of trust bro this is this is an important thing levels of trust right so in a normal situation this is why we do these The Good the Bad and the Ugly in a normal situation I would never do anything for a seller unless I had a purchase and sell agreement and then the other thing that you got to pick up on this is that I would never send money to a seller without going through a third-party intermediary however the reason Logan did this is because he had a different relationship with that person so remember understand the rule and then make a judgment call based on the individual circumstance and so then so the second piece of doing Word Method is that we got to get a loan right and so then at that point I have the PSAs I can take that to lender I used my investor loan so again another resource that lo and behold we got from this group and how did that work out by the way my investor loan did you was it good were you treated well this was my third transaction with them transactions so this was the third one and yeah so we already had a relationship got through the very first transaction so if you guys haven't done a loan like you have to give all your experience or credibility all those other things so it takes a little bit of process to get your first one set up and then now I can just go in there and get a loan faster I should say it's not sorry okay so here let's talk let's talk about this for a second because this is an important thing for you also Logan so here's what happens with my investor loan.com I we've used them for now over a year we use them for our fix and flips we use them for our bird deals right so refinancing out in the long term 30-year amortized loans and they're great to work with the challenge is that they have a lot of people in our group and you know other people that we refer them to I don't I'm not getting paid by my investor loan but I enjoy working with them and and so it's kind of the same thing with like Anderson business advisors is that I referred people to Anderson business advisors and I got a lot of people that got mad at me and I was like I'm never going to refer another business and tell I've used them for six months or longer on my own and um so once we did we started working with them but the problem is there are people that get rejected from my investor loan based on a couple of different circumstances one maybe they like filed bankruptcy 17 hours ago right that's probably problematic okay they also have never done a deal in their life that's that's also problematic because my investor loan a lot of times will base your loan and your rate on your experience level so what I'm finding a lot of times is that people will go to my investor loan.com to secure money and either a they get they get the money right they go and do the deal and everything's great or B they get rejected for one reason or another if you guys get rejected from myinvestor loan.com for whatever reason it doesn't mean you're actually rejected it just means that you need to bring on a partner that you can leverage their experience so somebody like a Logan would be a really great resource he's already gotten secured with my investor loan so you could go to Logan and go hey Logan I've got a deal but I've been turned down will you be my sponsor on the loan if I give you a portion of the deal this is what I'm doing right now I have a lot of people coming to me and going hey Pace because of your balance sheet your liquidity your credit score and your experience you can get the lowest rate saves me a lot of money and I currently can't even get any rate because I can't get secured anyway so if you guys need help with stuff Logan is an amazing leader he'll underwrite deals with you he'll partner with you I would I don't know if Logan wants this but if I were you guys I would call Logan and go hey will you sponsor me at myinvestorloan.com um whether it's a like the one in Fort Collins I'm doing I sponsored the loan and I became 50 owner of The Fix and Flip so we'll split the Fix and Flip 50 50 because I was able to make that deal work whereas they couldn't have on their own so it's a really great strategy it's part of the Gator lending strategy of utilizing a resource to make sure a deal has happened and the resource is your ability to sponsor somebody else's loan so I just want to let you guys know that that's a pretty powerful thing that Logan just said that if you guys get rejected from whatever lender you have a hard time getting a good rate Logan is a really great person to go and leverage his experience his balance sheet his liquidity um his credit score Etc to get a deal done that you otherwise could not do on your own yeah 100 and that's I've seen you've been I've watched you doing that and I had a conversation with Brandy who's a sub 2 super who's on our team and I was like we need to do what pace is doing and like we have that all that stuff that you just talked about like we have that that resource and we'd love to help people out in that situation because how can people get a hold of you Logan what's that how can people get a hold of you uh just Instagram or do you want to give your phone number out you want to give your Instagram or Facebook I'm I'm active in the Facebook group inside Instagram and yeah just reach out to me there I respond to all my messages so amazing okay cool yeah so we got the loan right and so when it comes to murder method if you guys have fallenwater method then you guys know that the deal is very contingent on what the appraisal of the property is right so like we can agree on that we think the property is worth this but let's say that we think the property like again in this case we thought the property is worth 220 000 but what if the appraisal come back at 200 000 or 190 000 all of a sudden the numbers change and so again another mistake I made is that we made this whole agreement based on a purchase price we weren't even sure if it was going to get appraised on right because we were trying to push the purchase price that way I could get as much money to the sellers we possibly could okay let me pause here again because this is the third mistake that Logan made we should just call this the mistake the morbi method mistake I I freaking love this guy but this is the thing guys you have to understand like you got to go and make mistakes you got to get out there what I love about Logan's uh mentality is that he sitting here telling his friends and people like I'm gonna go get a house in Arizona I'm gonna get a house in Arizona he wakes up one day he goes man I haven't done anything to do that I'm gonna go solve that today right he just he's one of these like we all have those moments where we say here's my intention here's my intention here's my attention doesn't go anywhere but you got to wake up one day and you just go all right well that was fun talking about intention didn't get me anywhere I'm going to take action so action takers are people who put themselves in these situations so the third thing he did wrong okay that I would advise you guys against is what I would normally do is I get a purchase and sell agreement step one then open escrow step two take that contract as I'm my title company or my closing attorney is pulling a title report to make sure everything's clean and clear and all that kind of stuff as they're doing that I'm simultaneously submitting this to my investor loan.com and figuring out what they would appraise it for once I know that it's going to appraise and the deal is going to work then I would be willing to wire 15 grand to the title company that they would then disperse to the seller so Logan did a lot of things backwards but guess what he still accomplished the same effect which is great got to the finish line and the property ironically actually appraised for more than our purchase price so we kind of left a price for 225 and we our purchase was 220. so we left a little bit on the on the table uh I guess for Life a better word so yeah so we got it got it appraised everything on that process went through so they appraised did they praise it as is or do they praise it as here's what the ARB is going to be so it was it's a cash flowing it's a cash flowing property um so there's renter in there no no rehab no rehab no it's just it's TurnKey okay all right so you get you have a 220 purchase is that right 220 purchase you get appraised for 225 it already has a cash flowing renter in there which is amazing no rehab you then get a loan secured at what dollar amount how much money did they give you uh 176 000 was the was the note and the interest rate I don't quite remember we just did a couple was like it was 6 25 or 6.75 somewhere in there it was it was the one maybe the worst times to get a a loan in the last month or two but that's what it was right so it was well here's the thing is that people need to understand this is like Logan you've been in real estate for a bit so you understand you know six percent interest people think it's diabolical and horrible but it's kind of historically always been around that I mean our parents when they were buying houses were getting interest rates at 12 and 18 percent yeah guys we are so spoiled in this country with low interest rates like five to seven percent interest is actually not horrendous it's just that we've been so spoiled and if you have not made money in real estate in the last couple of years man you have been you've been just chilling on the sidelines that's all there is to it you basically have had free money so does the property still cash flow even at six and a half percent interest and that's the question I asked I think people get so fixated on this over here they should fix it on interest rate but like does it still cash flow does it still make sense even with a six percent does it still make sense at ten percent does it still make sense at 20 like if it still makes sense then why not go through with it okay so you get a hundred and seventy seven thousand dollars from my investor loan which means that you have a gap of roughly 50 000 bucks yep so what do we do with that Gap in The Morbid method what did you do how did you structure that okay another mistake ready yes I brought it out of my own pocket right um I just came to the closing table with that money because we had it in hindsight I would have probably borrowed it just to keep that that liquidity strong for other deals that I have going on right because again if that's because we always have multiple deals going on um and if we're the ones who are qualifying for loans we need liquidity as I talked about before and so in the future I'll have somebody be like a transactional lender and allow them to come into the game use their money let them play uh and keep the cash in my Reserve accounts that way I can continue to sponsor more loans and continue to go out there oh I like that okay let's let's dig on that for a second so people understand here's here's the thing when you guys are sponsoring right in the gator tribe when you're sponsoring somebody's loan what happens is a lender will go to a Logan or to a pace and say hey we need to know four things we need to know what's your credit what's your experience right what's your net worth when you're doing multi-family sponsoring they're going to want to know your net worth and then also they want to know your liquidity they want to see how much money do you have in the bank right now and does that justify us giving you a loan so when Logan uses that 50 000 some odd dollars to go out and fund the second portion of this the down payment essentially when he uses his own money that means he's pulling money out of his liquidity account which then harms his ability to go sponsor other loans right and so that's what he's referencing he's saying well in hindsight I would have just used A transactional lender that comes in and brings the money in temporarily for a day or 24 hours so you you fund the money yourself so did you end up having title and escrow refund that to you after the transaction was done and creating a second note what did you end up doing okay are you ready you ready for your mistake I didn't know what's like we're on what one mistake number four knows what mistake we're on please type it in the chat I have no idea right okay so uh we couldn't close the loan as quickly as the seller wanted to so we had to extend it out a couple I can't remember exactly what the reason was but he's like I need another fifteen thousand so now you've got 30 grand of the seller situation because he's like he's got these bad situations going on behind the scenes exactly so wired another fifteen thousand right so but maybe that might be the last mistake I made I think maybe I don't know we'll see but uh I'm on mistake watch right now I'm looking for the next mistake I'm hoping we get to five maybe six all right so now I have 30 000 directly to the seller in his pocket outside escrow all the stuff okay um my investor loan I need to bring 38 000 ish to the table and so all in I had 68 000 that was out right and so then appraisal came through lending approved everything close the transaction so here's what happened after the transaction closed again maybe a mistake on this back-end too is that after the transaction closed I don't know if everyone understands this actually I know most people don't understand this because I walked through somebody yesterday on a on a potential morning at the deal and what happens when a transaction closes is that all those liens that are on the property they get paid off right so any sort of liens against property whether it's an Institutional lender or a private lender doesn't matter they all get paid off before the seller actually gets their money and so I can't quite remember exactly what all his notes that he had out were but he ended up profiting seventy seven thousand dollars after all the notes were were paid off so it sounds like he had about um a hundred thousand dollars in leans against the property yeah and I could be wrong here maybe it was maybe it was less because you gave him 68 that you gave him sixty thousand dollars essentially no you gave him thirty thousand dollars to him directly plus you had my investor loan wire 177 thousand dollars to Escrow so it was 200 000 total right yep so out of that two hundred thousand dollars total that paid off all his liens everything and then he had seventy seven thousand dollars that was basically everything the dust is settled everything's done he's got 77 000 sitting there yep in profit correct right and so at that point our agreement was that he was going to pay back all of that 68 000 first okay he's going to pay it all back first and so he did he paid back that holds 68 000 first and then that left about 67 42 I believe is what the actual number was and our agreement was that we would actually split that we split the like whatever the profit was on that just like it was my incentive to basically move from our original deal going back to this full circle original deal was that I agreed to like I was just going to pay for it in cash and then I would basically do a burp I was like this doesn't make sense for me I'd have to go through double closing all this other stuff I was like how do we do this I was like and if we do it this way I actually I I can actually pay you whatever the difference is on that as a way to incentivize him to go through this mortgage method rather than me having to do a basically a quick bird love it okay so after the 68 000 was paid off there was 67.42 that's what it was like left over and then we just split it so he took 33.71 and I took the other 33.71 and I put that in my pocket and I had the property okay so he this is where he accomplished like a very clean you know they call it the infinite Burr method when you can do a bur method and you get all of your money back okay it's very rare in Burr but in morbi method it's not that rare it's actually very very common and Logan's this is your first morby method is that correct yeah and work on another one and you know I promise you from this Zoom you're going to do probably a hundred more so so essentially here's what happened he could have okay he could have gone to who else who else is in here I know Logan doesn't need the money but let's just hypothetically say who in here in this Zoom right now has 68 000 they could have loaned to Logan for a week or so while he waited for the escrow to close yeah and looking back on it Pace I would have used that that 3371 that I made as profit I would have much rather given that uh to A transactional lender as their profit instead of me keeping like I didn't need that money but I could have used that as a way to continue to have deal flow right I'm I'm not sure they have more deals than that 33.71 right so he tied up this is guys this is the advantage of transactional lender brings to you right is that you can be in the middle of multiple deals rather than saying oh man a lot of my cash is tied up in this one freaking deal I'm kind of locked in and depending on who you are you know Logan lives in Bozeman so they have a billion dollars that you can't live in Bozeman without having a billion dollar net worth that's what I've heard at least um so he he's not it's not problematic for him necessarily but a lot of your clients in transactional lending that are running a morby method transaction there's a pretty significant benefit for you coming in for that 68 000 for let's say 10 days or so receiving that 3 700 whatever and Logan never having to put any money into the deal what's what what have you right so you did it you got all your money back you got all your money back and you got paid to freaking do it so does the seller have a now a second lien position against the property yeah and so so let's get into that so that's the first half so there's two parts of the morning method and the first half is that that front piece is like can I get into the to the deal with no money or maybe a little money or in this case actually get paid right I would say that was like the ideal morning that's a deal kind of like very similar to the bird like you want to try to get as much of your money out um as you possibly can and so that's the first half of the deal the second half is all what is the cash flow right he's got to make sure that we want to cash flowing asset and so our our Piti on this property is 14.59 and our second and that's our first position that's my investor loan second position is a zero percent interest uh 150 a month payments we just literally made it 100 a month and all that goes towards the principal which the principal is forty thousand dollars and so with that being said was that 1450 plus 150 is 1600 right but the reason why I really like this property is that or this deal is because that tenant is his lease comes to the end his lease comes to the end at the end of the month and we offered actually a lease option to try to like move that needle on that on the property and he declined and so we actually will just turn it into a corporate rental or short-term rental and we'll be able to make you know three thousand thirty five hundred dollars a month on that and then of course we'll have a healthy cash flow so your net your net cash flow and that probably be somewhere around a thousand dollars a month net yeah ish right but we have an asset that we got paid and you say this a lot and this is this is the reason why I I truly admire you and um really adore you is that like I will do things for the story like I manifested this when I thought about that I was like oh this is gonna be a great story it's gonna be an amazing story like how can I tell someone how can I catch someone's attention when I say I just bought a house I got paid to buy a house you got paid to buy a house right that's that's the most gangster statement ever people like oh man I got into this deal with no money no credit no credential bubble it's like no dude I got paid to buy a house that's already cash flowing that I didn't have to put any renovation into on day one it was Cash flowing that's that's a pretty powerful statement yeah so honestly that's like a big reason I did in the in the benefit that I got paid and the benefit that it's cash flowing like those are all just benefits but I would have done it without that just to say I got paid to buy a house [Music]

Channel: Pace Morby

Views: 16,099

Keywords: real estate, real estate investing, pace morby, pace morby creative financing, pace morby subject to, real estate mentor, subject to real estate, real estate advice, real estate investing for beginners, real estate investing strategies, creative financing real estate, real estate for beginners, investing for beginners, how to invest in real estate, pace morby seller financing, subto pace morby, No money, how to, Morby method, Don't Make these mistakes, Mistakes, Method, these

Id: 7RVVqO3xLuM

Length: 29min 3sec (1743 seconds)

Published: Wed Sep 28 2022