Explaining a Deal Step by Step to a Beginner | Live Training

see most people are like how do I make cash flow it's like okay but that's where you get real wealth okay hey guys we're at the newest property we bought subject to we're gonna give you a tour we're gonna break down some numbers I'm going to use this handy dandy Sharpie to walk right on a wall that's going to end up getting painted so you guys can see how this deal came to fruition what the numbers are and how we're going to make money on it and the today I got a special guest Alex Guzman Alex how did you find yourself in this garage with me um running trash at quick trip of course please in three two one yeah hey shout out to some girl have you watching your YouTube video and everything we're going to make YouTube videos my brother's a real estate agent I'm here make sure I got baby girls too bro come on yeah no you're right on YouTube yes yeah this is crazy dude unreal it's great thanks guys appreciate it all right realistically I've fallen Pace on Tick Tock Instagram all the social media all the good stuff and I mean I've just been soaking in as much knowledge as I can from this guy he he we were just like pulling in to get gas today and bragging about how we have qts yes in Arizona but these Knuckleheads we got another special guest Robin here they don't have uh qt's over in Florida so I was like pulling in and I was like QT is the best QT is the best and then I hear pace morby and it was you recognizing and you ended up getting off your um shift like 30 minutes later yeah so we waited for you to make a YouTube channel welcome to the channel welcome to the channel welcome welcome um we'll put their Instagram names up he just bought his first house just had a baby named Mila um he's gonna abuse his FHA loan so if somebody wants to do a deal with Robin he's in um Miami okay and we'll put their Instagram information down below but let's go inside the house we'll break down the numbers explain to you guys and hopefully you got to think of a couple of questions that the audience might have okay this house is a good little house how'd you find it great question here come in here let's break that down okay how do we find I think the first question anybody's always going to ask is how did you find the deal wow this is not that good is it I need a better wall we'll end up painting this all right so how did we find the deal that's where the the question always comes up okay but what I would always want you to start with before you say where did I find the deal you always want to start asking the question what was the pain Point what was the pain point because there's always a pain point right and so when people think like you found the house you live in right now on Instagram you're not going to find these kind of deals on Instagram no way okay there was a pain Point okay and the pain is where this all starts okay so the pain and where this came from is the seller bought this house in 2021 okay and they used an FHA loan what does that mean that they only had to put down three and a half percent look at you dude yeah great answer so in 2021 the market goes pretty high and now the Market's trending downward as everybody's talking about right so what happens to their house that they bought in 2021 to the water they're a little bit underwater okay so that's the pain Point meaning that their house isn't worth as much they paid for it it well here's the here's the thing like you would you use bought your house right how much you pay for your house uh it's like just under 375 okay 375. how much is it worth today uh they say like almost four okay almost four okay this is great appreciative four actually okay so let's say it's worth 400 000. how much Equity do you have 15. you have you have 0.0 dollars of equity do you know why no because if you sold that house today for 400 000 you would have to pay your agent as the seller the other agent as the as the seller closing costs home warranty all sorts of things and the average cost to sell a house in the United States is about 10 percent so you would spend 40 you would spend 40 grand out of your pocket to sell a house you owe you just bought for 375. so you would actually be you would probably come out of pocket about fifteen thousand dollars to sell that property today wow so how much Equity do you have negative negative isn't that crazy yeah that is insane so the difference between 400 and 375 is called the spread but it's not technically your Equity okay so this house for example this seller was in a similar situation they bought the property for 5 uh seventy five and the property I bought the property today um at 575. okay so they basically got out what they put into it but how did they not have to write a check to get out of this deal you simply took over the payments and he said hey I simply right so here's what happened seller decides all right we need to sell okay this they decide we're gonna go uh they're moving out of state they have another job opportunity right so they move already they hire an agent okay and this is going to get to where how I found the deal they hire an agent and the agent goes and puts this house on where MLS the MLS damn bro you're on you're hitting them okay puts it on the MLS and sellers now gone the seller's now making uh what every month every month they make a mortgage payment so the house is no they still own it they oh sir but you're making it for them we're not there yet we're not there yet you're getting way ahead so seller decides hey we're gonna move out of town they leave the house vacant just like it is right now they hire an agent to try and sell the house and for five months it's been sitting here because if they sold it for what they owe on it they would do what what would have happened there they would have to cut a check to get rid of it yeah so the agent not knowing creative finance and what I'm about to tell you how I bought the house the agent's like I don't know what to do and what our team does is our team starts calling agents once the house has been on the MLS for a hundred days and we go hey looks like you're having a hard time selling that house on the market right would your seller be open to letting us just take over the payments on that 575. what do you think the agent says they go no then they say no again then they say no again then they say no again they said no four different times our team continued to reach out continue to reach out continue to reach out all right guess what happens six months goes by do you know what happens after six months with an agent and a seller of the house the agent gets fired automatically automatically after six months okay it's called they have a listing agreement right so they have an agreement that says you can try and sell my house for six months the agent says it won't take six months I'll have it sold in two weeks right agent gets fired it now is no longer on the MLS it goes to um it goes to public notice that the house has been expired from a listing and so what we do is our team goes oh my gosh call the expired listing so what do we who do we call now we go around the agent and we go directly to the seller and we say hey would you be open to letting us take over your payments and the seller says what absolutely yes and they said I didn't know that was possible is what they say okay so yo I didn't know that was possible that you could do that I go yeah we can just take over that payment it's called subject two what do you think the seller asked the seller says why didn't my agent present this option to me and we said well we gave him four offers they said no all four times the agent says my or the seller says my agent never brought this up to my attention wow this is happening like crazy all over the country right now okay so if you want to go get a deal like this you go to the expired listing list which is public record anyone can get that or do you need your license this is a really cool one so um for those of you guys watching if you guys want to get an expired listing training my wife did a two hour expired listing training for free we'll put that in the description watch that training you'll see exactly how to pull the list and what to say okay okay so my team says hey we're not going to go the age anymore we're going to go to the seller direct seller says yes amazing so this is what I did I I now you know where I found it right now you know the pain Point does this make sense absolutely okay now here are the terms of the deal I bought the property for 5.75 by the way if you guys want the um settlement statement or the HUD you guys want to see proof that we bought this property we'll put that in the show notes down below the in the description go down there click on that you guys can see how we close on this so 575 we ended up paying the seller fifteen thousand dollars that's yeah I had a question about that so where does because you always say buy it without money or without any of your money so this is this is why we invite people to these YouTube videos because they ask great questions I'll get to that so fifteen thousand dollars goes to the seller okay and then I paid also what else would I pay close there you go you can tell he's one he's doing deals he's one of my students he's a smart boy so you paid about five thousand dollars in closing costs okay you remember what closing costs are because you just bought a house right you're like wait who are all these people on those lines and making all this money like what okay so 15 000 goes to the seller five thousand goes to a title company to do all the paperwork on this okay and then depending on my exit strategy I'll probably need another 25 grand for this house okay and we'll go through what I think the exit strategy will be okay so let's just throw 25 000 on top of there okay so you got 25 30. so you got 45 000 to get this deal done okay and that's furnished that's new carpet that's everything decked out for you know let's see what do you guys think that's your wife she's like why are you not home she's like wait you're gonna be on YouTube right okay so you I you got a couple options right so this forty five thousand dollars will allow me to get to like an a a b or a c exit strategy exit strategy is just how we make money it's a stupid name actually we should call it the monetization strategy or money strategy like what how am I making money here right okay so I took over a house at 575 my payment on this house is 2300. and I have a four percent interest rate I took all that over how did I do that I hired a title company they transferred the deed right the deed is the ownership they transferred the deed from the seller's name to my name and the seller not on the property at all anymore the seller is not on the property at all they don't own it they don't have tax benefits they have nothing what is the seller still on the mortgage mortgage yep seller's name is still on the mortgage I'm now making the payments on that mortgage okay does that make sense okay who does you're like okay you you can do that isn't that weird you can do that right well I've seen it I've seen you say that but I've never really I mean I thought about it right I'll break down like what subject two is in another video just real quick so you can understand a little bit a little bit more in depth so um this is the loan that I just started making payments on but I own the house mortgage stays in the seller's name okay and I'll show you a technical way how that works in another video on that wall so now I've got a couple of options I could either a rent it as a regular rental the problem is rent rate in this neighborhood is twenty one hundred dollars is that a good strategy no that was yeah that was my first question I was like who's going to pay that much to rent right here nobody yeah right okay so I could rent it or I could do an Airbnb okay and I already know the Airbnb comps are a minimum 65 000 a year for this house so that means about fit a little over five thousand dollars a month I can bring in that five thousand dollars will more than cover the 2300 it'll cover my private money lender that's where the money the forty five thousand dollars comes from okay and I'll make some cash flow now there's also another option okay I could do midterm rental do you know what midterm rental is okay midterm rentals like traveling nurses it's corporate leases um let's say that that homeowner right there their hot water heater explodes in their house right right their insurance company will pay to for them to come here and live in my house for uh and pay my rent while they're fixing their house okay so like midterm rental is like Insurance Rental corporate leases traveling nurses a thousand different types of things okay um ALS Solutions is the name of the company that we use that fills our fills our houses for us okay asals Solutions also if you guys want to learn more about midterm rentals go to Tanisha Epps YouTube channel she's unbelievable we'll put a link down there below when you say fill your houses for you like is that like your property manager or something or is that just a whole different it's a company that's all they do that they get paid right ALS Solutions gets paid by the insurance company that's handling that to find houses for their tenants to live in so there's midterm rental and then there is another option there's so many other options I could turn this into like Assisted Living do you not need like a permit or something for that like you do so that's that's not a strategy that I was going to put on ABC or I could do pad split like house hacking it you put a wall down the middle or something or what this is so good dude so many great questions you don't even know what pad split is yet do you okay so pad split is a company that came out about two three years ago that started finding tenants to rent by the room and they charge people by the week to come in and live in these houses okay they can put nine people in this house at 175 dollars a week so what's the mouth on that pull out your phone nine times 175 and nine times 175. and 1575 yeah that's per week multiply that by four sixty three hundred okay sixty three hundred dollars more than Airbnb so we just did a training on this by the way in sub two for two for two hours last night we did a training on this so if you guys want I'll give you guys like a 30 minute uh snapshot of what that pad split training was all about last night but I think I'm going to turn this into a pad split it's like another third party company just like the AOS solution or yep third party company they find the tenants they screen the tenants they manage the property they deal with everything except for cleaning and Landscape wow so pad split I hire them they take 15 of that okay so they'll take like eight hundred dollars or so a month the rest of it's mine will I make money oh yeah I'll make like 1500 a month net on this property most definitely so where'd the 45 Grand come how am I going to furnish it how am I going to because I have to buy furniture for the pad split okay okay that forty five thousand dollars comes from who yeah PML pmo okay it can come from a PML or a p m p ml means private money lender do you have any like you have a brother or cousin uncle that has like forty five thousand dollars no okay do you know anybody has forty five thousand dollars um like liquid okay so your dad right so you could go to your dad and go hey Dad I need 45 000. I will pay you eight to ten percent per year for that money and out of the sixty three hundred dollars you pay him a monthly payment for that 45 Grand so you got into the deal no money out of pocket okay you took the 45 Grand to covered all these costs your dad gets a little monthly check every single month now a PMP is a private money partner so you go to your dad and you go hey Dad I need 45 Grand you want to be my 50 50 partner I'll bring the deal you bring the money and we split the profits nice yeah makes sense right okay so that's oh that's how I started the first couple of years I had a lot of private money Partners but I then realized I was giving up a lot of equity on my deals and I was like crap I don't want to give up Equity so I went this route and then every couple years I'll I'll pay them all the way off okay so does that make sense of what I'm doing with the house absolutely with private money lenders like how do you even go find your first one just Googling it and is that really just more so it's probably finding the deal and then people are like oh I will definitely so private money lenders are typically other Real Estate Investors that are like I want to be involved in a real estate deal so like in our mentorship for example you've obviously probably understand that I have a big sub 2 Community you see my sub 2 hat all my students wear the sub 2 Community had to so like if for example if you decided you want to raise 100 Grand could you raise 100 Grand today just inside our community absolutely I already have just with one phone call so just you got to be you got to be a private money lender myself I I'm lending it on a deal right now so everyone around you can be a problem you know Eric has is also in a deal it's just about having those conversations damn I didn't know he was bro why are you why don't you lend me the 45 Grand on this deal why do I have to go outside so yeah private money lenders are everywhere I think when you first start you go I want a private money partner right because then that way you and your partner are splitting like 1500 bucks a month so this house will make seven you have 750 bucks a month and your dad 750 bucks a month too okay but that's not where you that's not the only place you make money what are all the other places you make money in real estate well the equity over time um it's almost like you know okay so the first thing the first place we make money is cash flow right so I'm going to give you a whole master class on this so cash flow how much cash flow we're going to make on this 1500 bucks right yes so that's pretty good for a lot of people like you do you get three or four of these you're done working like you don't have to how many of these would you have to have to Big never have to have another job four or five yeah okay cool so two is appreciation so how much do you think this house will be worth in 10 years right now it's worth 575 what do you think it's worth it'll be worth in 10 years 700 750. okay so let's say it's worth 800 so in 10 years this property will make me 225 000 okay cool there's that's pretty good now um the third reason why we buy real estate is for the tax benefits okay the reason why I don't pay taxes you weren't you heard me on the phone with a lender I'm trying to buy a house in Montana what did that lender say why she can't give me a loan in Montana you're reporting too much ordinary income was it she said your ordinary income is completely wiped out from your rental depreciation which is your tax benefits yes so I make millions yep exactly what Trump does Millions but on paper you're not being on paper I look broke right so how do I do that I do that with tax benefits so here's how this works pull out your phone I'll teach you how to do that basically so if you're how are you saying that your house lost value the IRS does this here's what they think okay and this is their rule not mine okay the IRS it's called depreciation and the IRS says all right um you bought a house for 5.75. we believe that in 27.5 years your house will have to go through an equivalent dollar amount of repairs as what you bought it for over 27.5 years so here's what they do how many repairs would that be on a yearly basis do 575 divided by 27.5 20 900. okay so twenty twenty thousand nine hundred yeah okay so that means every year the IRS will give me a tax benefit of twenty thousand nine hundred dollars based on just this Home Alone now here's what the freaking cool thing about depreciation is in the IRS is they will allow me to take seven of those up front in my first year so multiply that by seven 146 000. a hundred and forty six thousand dollars in tax benefit in my first year of owning this house that means this one house for most people in wholesale last year you made a hundred and ninety thousand dollars you probably paid fifty thousand dollars in taxes that's almost exactly correct it was 45. okay if he bought just this if he bought this one house he would have paid almost no money in taxes so he would have saved 50 Grand his in one year in actual tax benefit to his pocket for buying this house and no money out of my pocket because Eric's is responding Eric wants does you see how this works sell I take over the seller's mortgage the money that I need for furniture and all this stuff comes from Eric right I get the cash flow I get the appreciation of future growth and I get the tax benefits on top of it okay now the fourth reason why we buy real estate is because of pay down what does that mean that means my tenants pay down my 575 debt right so am I paying that debt or my tenants renters okay so that's the that's the silent savings account I call it so what happens is every month that goes down and down and down and down and down so what happens is over time I owe 575 the house is worth 5.75 and over time it goes up to 800. and over time it goes down to 200 and I this house will create a Delta of six hundred thousand dollars see most people are like how do I make cash flow it's like okay but that's where you get real wealth okay so that's the I call that the Delta the Delta is pretty special now do you know how much the average let's look this up Google what's the how much the average human being average American retires with what's the dollar amount probably 100 to a 300 cab as the number I don't know the answer by the way YouTube is is this a good video or not this is a this is a good video are you learning anything 5 000 how much 65 000 see this is what's crazy I buy a house with no credit check I didn't have to come out of pocket nobody asked for my 65 000. you will retire on one house okay ten times more money in value off one house than the average American will retire yeah you don't need to go do thousands of these you do like five to ten and you're like the richest human being in your family oh for sure you do 10 of these you retire with six seven eight million dollars that's pretty dope yeah okay so pay down you let the tenants pay down the debt you let the tenants give you the cash flow you let the tenant you wait for the time frame to go up and then the IRS rewards you for buying real estate it's crazy so over those seven years that's which again 150k in taxes no you get it all you get it all in your first year yeah they give you about in the first year it's called accelerator acceleration accelerated depreciation or bonus depreciation wow because like oh it's your first year you can if you want we'll give you seven years up front and then on the eighth year I can start doing it again wow pretty cool right yeah it's crazy those are their rules right we just play by them those are it's IRS rules I have no I had nothing to do with that okay now um this property is pretty special and if people want gosh this is like a full breakdown guys this is really really cool I wish somebody taught me this when I learned this so um the great thing is um I mean all of this is pretty freaking great and this is all I do all day long is just go I don't like how do I buy one of these a day one of these a day I don't need to be licensed I don't need to be an agent right I don't have to be really even that educated I don't have to have any credit check nobody has nobody this 45 Grand did the seller know I didn't have any I didn't use any of my own money okay that's a good point so did they don't ask for like proof of funds or something like that the agents will ask for Approved funds but how does a seller even know what proof of funds is how would they even know right you know because you've been watching YouTube and you've been watching wholesale stuff this agent would cause a problem for you but the seller's not going to say well what's your proof of funds the seller doesn't even know what proof of fund they've never even heard that word before in their life now here's what we'll do guys we'll do a we'll do a two-part video here and this is a good breakdown of this actual specific deal we'll give you guys a couple of cool things we'll give you um my wife's training on how to find expired listings will give you these boys Instagrams so you guys can DM them and chat with them also you're a private money lender so people need money this guy's rich man I'm like like so rich okay that's that's two number three what we'll do is we'll give you um the settlement statement on this particular deal so you can click down below and see the address and see all that kind of stuff and see that where we really do this business um and then the fourth thing that will give you pad split training okay give you the pad split training so you understand that and in this next video what we'll do is we'll walk through the house and I'll show you guys how pad split will actually turn this house into a multiple room property in ways that you didn't even know it were possible so we'll see you guys in the next video on part two of the real deal breakdown at Anderson

Channel: Pace Morby

Views: 71,951

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, investment strategies, creative finance, Find Their Pain Points | Live Seller Call, Live call, Seller call, pain points, Find

Id: sUSNYKGP8Rc

Length: 26min 17sec (1577 seconds)

Published: Fri May 12 2023