How Pace Morby Buys Rentals WITHOUT Cash or Credit (Creative Financing)

this is real estate rookie episode 236. people confuse debt and ownership meaning I can take over payments on a house and people go how don't you have to pay off the debt in order for you to become the new owner no I don't think about it this way if I go into a grocery store and I use a credit card and I'd buy a bunch of groceries who's the owner of those groceries if I use a credit card to buy them how do you know that if I use somebody else's money how am I the owner of those groceries my name is Ashley care and I'm here with my co-host Tony Robinson and welcome to the real estate rookie podcast where every week twice a week we bring you the inspiration motivation and stories you need to hear to kick start your investing journey and I usually read a review at this point but I didn't pull one up so I'm just going to ask you guys leave us an honest rating review on whatever platform it is you're listening to and we'll give you a shout out on the show so Ash we have an amazing guest one of my favorite episodes we've done recently we have pacemorber in the podcast and this was like an encyclopedia of everything subject to and and we are going to have them back on and do a live Workshop so we're super excited about that too but uh Pace talks about creative financing so doing subject two deals and seller financing breaks down what the differences between them who is you know the motivated seller to actually want to do these deals with you how to negotiate what the steps you take to actually get these deals done he also talks about how a truck with over 300 000 miles is what prompted his whole journey into creative Finance it was a really great story so make sure you listen for that as well so once again we are live from bpcon we are taking every advantage and opportunity of getting to meet people in person and get them into our interview room here that we have set up that is actually sponsored by pace so thank you very much for that pace welcome to the show thank you so much for joining us on our morning talk show or evening time this is amazing look at this backdrop you guys have they made this just for you guys no it's just for you all the other guests that have come in here is nothing it's just then they brought this all out that's when you gave it but for anybody that doesn't know you just tell us a little bit about yourself and actually how you got started into real estate oh great question so I came from a family of 12 kids okay so 12 kids in my family I'm number three nine kids underneath me same mom same dad and when I was growing up my parents uh were in the construction like trades I learned how to work really hard Blue Collar background and my dad could never afford the house the size of the house that he needed to house all the kids he had right so he had a job as an accountant and then moonlit as a contractor and so my whole life growing up my parents lived in sub two houses seller finance houses lease option houses in order to afford those houses so it was like my background in real estate and creative Finance but when I got older I became a contractor and I was open doors main contractor for like seven years so I opened up their markets and that's how I got into construction and got into the real estate world and one day somebody comes up to me and they go Pace why aren't you in real estate I'm like what are you talking about I am in real estate and they go no no open doors in real estate you're a service provider and I was like oh my gosh and it like hit me right in the chest and and I knew that I had to make a deviation into doing projects and construction and stuff for myself and so luckily I met some people at some meetups a lady named Brittany and she says here's how you do it here's how do you send out postcards here's how you do this and I got my first deal 10 years ago roughly and it was through a postcard it was a wholesale deal and that's how I got into real estate so we we talk all the time Pace about like the power of networking and building relationships and we were just talking about this before we started recording as well and something we tell all of our audience members is that you know if you want to get started in real estate investing oftentimes it's such a scary and lonely path and the best way to get past that is by networking and it's so funny that the person that you wanted to meet up was a person that kind of changed your life trajectory because the same thing happened to me I met a guy at a Meetup reinvest mostly in like vacation rentals and I met a guy at a Meetup and it was that guy that introduced me into airbnbs now we've got you know a portfolio across multiple States so it's like you never know where that one connection might take you yeah it's empowering so when you're looking at this path of real estate you if you look at it like everybody only has one flashlight I can only light the path in front of me so far and so I've got to find other people with other flashlights on the same path and so I've got to just put people on that path in front of me that have a flashlight too that light it just far enough and you'll get far enough down your path you'll get your first deal your second deal and you turn around you look back and you go I have never made a dollar in real estate by myself have you guys ever made money in real estate by yourself thanks so think about that like if you guys are at home right you're a rookie you're a newbie you're just starting in here if you're consuming content no matter how much content you take in or any education you take in you have to apply that with other human beings so you have to network it is an absolute requirement it's not a suggestion it's not a great idea it is an absolute requirement every single deal we've all done has had other people involved that you've had to network with in order to get those deals done unless you have you guys ever done a deal where you're like I didn't need anybody else no no isn't that weird to think about nobody talks about it but like two weeks ago I was like oh my gosh I've never made a dollar in real estate by myself so in the beginning when you mentioned your parents talking about how they were able to purchase properties you mentioned a couple terms like uh subject to can you talk about those different creative financing deals and explain what those are so most people look at buying a home you got to go through a bank right you go down to Chase Bank of America Quicken Loans and you get up you apply you get a loan and you acquire a house right it's based on your credit how much cash you have and your credentials like how long you've been at your job what kind of job do you have um your degree those types of things are important credit score blah blah blah my parents no matter how good their credit score was my dad's income during the day was a c he was a CPA so he made sixty thousand dollars a year but he had 14 people in his household so how is my dad going to afford living in a eight bed five bath house making sixty thousand dollars a year he's not and paying for all the food clothes everything else right and so he what my dad did bless his heart um he would come home from his CPA job and then he would run a painting company but his painting company was all under the tables it was non-documented Cash so A bank's not going to look at that and go okay you're approved for a bigger house so what my dad did is he went directly to the owners of the properties that goes oh there's an eight bed five bath house or a seven bed four bath house my kids and my wife and I could live in there and my dad would go to them and say why don't we just work out a deal or instead of me going to the bank and applying you become my bank and I didn't really truly understand this until like later in life but I realized that creative Finance like the ability to buy anything without your own cash without any credit and without credentials applies to everything even things outside of houses and it was until I was like I was a contractor like I mentioned earlier that I really really hit home with me my dad didn't teach me this stuff I just knew we lived in bigger houses than my dad could qualify for and my dad would stay say stuff like owner carry seller finance and because I was a teenager and a knucklehead I didn't take the time to learn it and my dad also didn't utilize those strategies as an investment strategy he only used them to get his family into a bigger house it was more survival survival so when I became a contractor um I have this story that really hits home of what seller finance is it's my F-150 story have you guys ever heard this story it's cool no I don't think so all right great so I have this F-150 I'm a contractor my guys are driving the truck the truck hits 320 000 miles okay well now I've got some problems this truck's starting to have issues so I go okay well I'll take it out of my fleet and I'll throw it out on Craigslist and I'll sell this thing and I'll take that money go buy a better truck something with less problems so I where do we go when we want to find the value of a car a Kelley Blue Book boom Kelly Blue Book so it's like Zillow for cars right so I go on Kelly Blue Book and the truck says it's only worth five grand and I'm like okay well if I sell my truck for five thousand dollars on Craigslist Facebook Marketplace offer up whatever am I going to get five thousand dollars no because somebody's gonna come along and be like thirty five hundred dollars all cash today as if like I what else were you gonna pay with besides cash you know what I'm saying so I decided not to put it up for sale for five grand I put it up for sale for ten thousand dollars because I'm a belligerent seller okay and I go for 10 grand and I'm thinking so I don't need all the buyers I just need one buyer that would pay 10 grand well three months goes by I don't sell the truck so my wife comes in to me she goes why don't you know how your dad used to like buy houses where he would like just get the sellers to let him make payments why don't you sell your truck on payments and I'm like oh my gosh that's so freaking genius so I go back to Craigslist where I had the truck for sale and I changed one thing and it was F-150 will take payments so did I sell that truck for 10 grand I sold it for twelve thousand five hundred dollars and I let the buyer just make monthly payments to me and I was like oh my gosh I did this with a truck why can't I do this with a house now you might ask yourself the question of well why did why did Jose the guy who bought the truck for me why did he pay twelve thousand five hundred I also learned that the value in anything is not based on the purchase price the value this is important for people that want to learn creative Finance the value of anything is based on what you can do with the thing you bought okay so we he looked at that truck he made me 350 payment but he turned around and earned seven thousand dollars a month in a painting business he used for that truck so did he overpay for that truck no he didn't have to use his credit he used a thousand dollar down payment to get into a truck he couldn't otherwise qualify for and I was like I need to be doing this in real estate all the time like I can go acquire anything I want this exact way so I called my dad and I go is this what you've been doing is yes every single house I bought and so I go well what about people that have payments on their cars or on their house he goes oh you can just take over the payments I'm like you're joking me I can just take over somebody's payments on their car and he goes yeah go to leestrader.com you can take over somebody's lease right now like in two minutes you want to you want a BMW X5 you want a G wagon there you go to leestrader.com right now and you can take over somebody's G wagon just take over their payments and I was like you can do this with houses and that's what subject two is subject to is um a seller sells their house to you by you just taking over their existing payments you don't have to qualify you don't have to do anything just take over their payments and um seller finance means that the seller had the house paid all the way off and they create an agreement with you that says hey just make the payments to me and I was Off to the Races and we've now just this year we bought 600 multi-family deals with seller finance or with creative finance and we bought about 70 single-family homes all through creative Finance just this year alone that's awesome congratulations okay yeah pretty cool when you when you had that conversation with your dad were you already purchasing property I was doing some wholesale and how did that like pivot and change everything yeah because there's a kpi if you guys don't know the word kpi means it's key performance indicator the number one kpi I looked at in my business at the time as a acquisition person buying deals was cost per contract so how much money in marketing did I have to spend in Billboard's TV radio postcards letters SEO PPC whatever it was what was my cost per contract and if you're a wholesaler or you're somebody out there trying to fix and flip the average cost per contract when you're spending money on Advertising is about seven to ten thousand dollars depending on what part of the country you're in so you go okay I want I want to go out and find my own deals direct to seller well you're gonna have to spend seven Grand in marketing that's daunting and scary for somebody that's brand new but with creative finance my cost is zero and so for me when I was wholesaling oh my gosh I can go to other people's sellers like a real estate agent or another wholesaler and go when you have a seller that wants too much money I'll buy it on seller finance and when you have a seller that has no equity I'll buy it on subject too and it changed everything for me and my cost per contract went to zero dollars so Pace you talked about your motivation for selling the truck seller finance if I'm a new investor can I make the assumption that the the motivation for homeowners is the same as your truck like what would prompt someone to want to sell their home subject to or or a seller fine okay so we let's talk about the difference between subject to and seller finance so subject to typically like I'd say 80 to 90 I haven't done the math on this but just my gut experience 80 to 90 of the time on a sub 2 deal the sellers in some sort of paint they're in foreclosure they're going through a divorce they don't have Equity a lot of times they refinance their house last year they pulled all their Equity out now they want to go sell they don't have any Equity so they can't sell without cutting a check that's subject to that's typically that pain so if you guys are looking for a sub 2 deal a really great place to go is expired listings agents what Market you're in um Buffalo you're in you're doing deals in Buffalo I thought I don't know why I thought you were doing deals in Florida no no maybe I saw you guys on vacation in Florida probably that's what it was okay there you go that's why see I follow you and I thought you were doing deals in Florida so um expired listings are a really great way to find sub two deals seller finance is not pain it's gain the seller of a seller finance deal wants one thing and one thing alone now there's other benefits than this one thing but the one thing that they care about anything else is they want to win the negotiation which means they want the Top Line price to be as high as possible okay so like I've got a deal in San Angelo Texas I just closed 30 days ago it's a 43 unit deal seller's name is Mario seller finance seller gave me zero dollars down four percent interest and he gave me 50-year note crazy right 50 years 50 years I took air I took Eric my video guy over there and it was just like jaw dropping to watch me negotiate this deal why would Mario do that well number one the property 43 units is only worth 2.7 million I paid 3 million did I overpay for the property I think most people go yeah you overpaid for the property but I go I didn't put any money down it cash flows on day one I have zero cost of capital why would Mario do that well he got three million dollars on paper I'm he's charging me Interest four percent he avoided going through an agent so he didn't have to pay um six percent to agents he didn't have to pay the closing costs no appraisal when you guys are in commercial the commercial world like multi-family appraisals are expensive surveys are expensive we avoided all of that stuff so if you compare him getting three million and at four percent he'll end up getting about six million dollars over the term of the loan but where do those payments go they go to his children so when he passes away he doesn't need the three million he's like I'm I'm worth 100 million dollars I don't need the three million dollars right now so the biggest reason is sales price the second biggest reason is that mitigates their tax liability so imagine if Mario who bought that property for a million 20 years ago sells it to me for 3 million 20 years later how much in taxes he gonna have to pay tax bill massive he has a two million dollar gain right so he's got a big influx of cash that comes into his bank account now he's got hundreds of thousands of dollars of tax but if we spread that out over 30 40 years what he can now do is every year he can offset the money he receives with other tax write-offs so essentially being zero zero tax liability on that deal okay so now that everybody listening knows that they know the advantages they know what they are for the seller what happens when you're actually negotiating with the seller you're face to face with them do you do it on the phone like what's your typical setting and then how do you actually convince them or pitch this give them some keep points I guess I love that so here's the great thing about creative Finance it's easier than cash by far people think oh I'm going to start with wholesaler I'm going to start with fixing and flipping and I'm going to start with Burr guys no no offense to any of those I do all of them they're all great they all work incredibly well but in order for me to do a wholesale deal I've got to offer 60 cents on the dollar 50 cents on the dollar in Creative Finance I can pay 80 90 cents on the dollar and make actually more money than the person who paid 50 cents on the dollar the greatest part about it is that creative Finance is the only thing that is a it's not a zero-sum game which means the seller makes more money it doesn't take money out of my pocket in a cash transaction I have to lowball a seller in order for me to make money on my flip or in order for me to have a good refinance on a burr in Creative Finance there's no banks needed no credit needed so I can pay the seller more on paper and when I'm talking to a seller I go well they go well why would I do that and go why honestly why would you pay why would you let somebody pay 60 cents on the dollar why wouldn't you let me pay 90 cents on the Dollar on of what it's worth it's what would you rather do go into appointment and pay 90 cents on the dollar or 50 cents on the dollar 50 cents really yeah no I mean like in or in terms of like as a salesperson yeah as A salesperson as a salesperson no no as let's say that you're a wholesaler okay okay and your job is to go in and get a contract with the seller directly right there's no agent you're not the agent you're just a you're just acquiring the deal you have to convince that whole that homeowner to sell their property to you for 50 cents on the dollar to be a wholesaler but in Creative Finance I can tell them to sell it to me at 90 cents okay so yeah so they're going to be they're making willing to make way more the second they see how much more money they're making it's like why would they ever sell on cash so okay it's a cleared up as you're saying that you're able to make the numbers work at 90 cents on the dollar and that's the advantage yeah all day long okay so like for example if I go out and if I did that same deal with Mario and I had to buy it cash I would have had to given given him like 2.4 2.5 million dollars to make it work and guess what I would have had to do qualify for a loan and then go raise seven hundred thousand dollars from Partners or investors and give that seven hundred thousand dollars worth of ownership to those investors so now I'm into that deal with a higher interest rate I had to pull my credit and to raise money give up ownership and the seller actually got less money okay so let's let's break that down even more how are you figuring out what that purchase price is so are you working backwards we're always working backwards okay so the number one thing I always ask so when a seller's I go what are you looking for Mario says I want three million dollars I go great if I was able to come up to three million dollars could you give me terms Mario says sure I'll give you terms what are you thinking and I go well here's the problem Mario most of my deals I buy are zero dollars down zero percent interest so I doubt you'll want to do a deal with me he goes I'll do zero dollars down but I will not do zero percent interest I go okay well what are you thinking this is all recorded by the way I record most of my appointments I'll do four percent I go okay great do you want a balloon he goes no if I do I do a balloon I still have the same tax problem I'd rather just let you make payments to my kids even after I'm passed away and my kids keep bearing the interest it's a great investment so that's how that literally was like a four minute conversation so Pace are you are you specifically looking for you talked about failed listings as one way yep you talked about talking with with wholesalers or agents that you know the sellers may be asking for too much but say I don't have a relationship with an agent say I don't have a relationship with a wholesale I'm brand new yeah am I just going on the MLS looking for listings that say seller financing or creative financing like what other ways can I you could do that so you could go on the MLS if you are an agent you could go on the MLS like if you go on landwatch.com if you guys ever heard of land watch so gangster it's a great website if you go to land watch landwatch has 11 400 seller finance listings right now on their website eleven thousand that's Nationwide if you go in your MLS you'll average depending on the market you'll average about a hundred seller finance listings per 1 million population so there's a lot of seller finance stuff out there but let's say that I'm brand new I don't know any of that where what list do I go pull I would go to listsource.com or wherever you guys if you guys are using prop stream they're a big sponsor of this event foreclosures huge right now this is what I love doing too and you guys should have me back I'll call foreclosures with you guys we'll do it like tell them in the comments tell them whatever I will call foreclosures live so foreclosure list is the easiest we get a deal in 15 minutes hands down easy done foreclosure is really good expired listings is really good people are going through divorce people are going through bankruptcy typically that's sub two deal seller finance is a high Equity list so you can literally pull a list on list source that says people have their house paid off um or you can see people that have owned a property for over 10 years that typically is a really great seller finance opportunity too so once I once I find someone pays them like okay this person's a good uh candidate for seller finance or sub too how do I structure that in a legal sense so that they don't just like run away with the property you're like trying to kick me out after I've moved in well who he who has the deed is the one that controls the property right so it's set up the same paperwork that you go to if you go to Bank of America and you get a loan from them it's literally the same paperwork so it's no different than anything else same paperwork same documents same ownership goes to you it's not some like under the table weird thing the deed comes in your name there's no nobody can change anything about that right so think about this too this is something that confuses a lot of people people confuse debt and ownership meaning I can take over payments on a house and people go how don't you have to pay off the debt in order for you to become the new owner no I don't think about it this way if I go into a grocery store and I use a credit card and I buy a bunch of groceries who's the owner of those groceries if I use a credit card to buy them how do you know that if I use somebody else's money how am I the owner of those groceries you take them home okay so great I love that so two reasons why one I have the ownership physically right but couldn't somebody just come up and steal those from me they could but the second thing I have is I have a receipt and proof of purchase okay so in real estate the receipt of real estate is called the deed whoever holds the receipt is the owner of those groceries whoever holds the deed is the person who holds holds that property so think about this I go to the grocery store I buy groceries with an American Express and I'm walking out of the parking lot and I walk up to you and I go hey I see you got those groceries what'd you pay for them you go 200 bucks I go I'll pay the I'll pay you 225 for those and you go okay I'll make 25 bucks like that and I go about one caveat I'll just pay your credit card payment for you I just subject to your grocery bill okay so the credit card payment and the ownership are not the same and so people don't understand that I can just go and transfer a deed 25 000 times in two days but the debt just stays in one place the American Express Bill stays in the same place nothing Alters nothing changes nobody does anything to it it's just whoever is currently holding the deed makes the payment to the mortgage right so a subject to deal is the seller's name stays on the mortgage your name stays on the deed you're the owner nobody can take the deed from you without a legal transfer I actually did one subject two deal and it was actually before I even learned who you were and we had a guest on the podcast who had kind of taught us a little bit about it but I wish I would have found you because it would have been made the process a lot smoother it took I think like over a year to actually close on the property just because my attorney wasn't familiar with it and get everything all the ducks in a row but as I I did it I it was a farm so there was like lots of pieces moving with it and dealing with this farmer he didn't really know a lot and it was answering his questions so like some of the common questions that he had and I had um for so the first one is how do we know that the mortgage isn't going to be called because of the change okay so she was talking about she's talking about the do on sale Clause so the do on sale Clause happens about one out of every 5 000 sub 2 transfers so it's going to happen and if you do a lot of sub 2 deals you will run into a do on sale Clause there's very typical reasons why the do on sale Clause gets called number one improper paperwork up front you use the wrong paperwork number two you didn't transfer the insurance properly and number three you're a knucklehead and you stop making the payment those are the only three reasons you'll ever get the do the due on sale Clause called okay then when a due on sale Clause call gets called which it does happen it's happened to me five times you need to know how to handle it okay so why did the due on sale Clause get called it's because you transferred the receipt or the farmer me I transferred the ownership the receipt of my farm over to you I gave it to you and the bank sees that we transferred ownership and they go hold on you just took ownership of this Farm but there's a loan in that Farmer's name still you need to pay that off okay legally you don't have to pay it off the bank has the right to call it due not the obligation but they have the right to say hey we want we want Ashley to pay that now so how do you handle it when you run into it how do you handle the due and sell Clause how do you get rid of it so easy okay so I don't know the answer okay so the way you get rid of the do on sale Clause is one make sure you did your paperwork up front right two make sure you did your insurance properly and three make sure you make your payment but if it does still get called which is very incredibly rare what do you do the deed is what triggered the due on Cell Clause right so what do we have to do transfer the deed back to the farmer and repurchase it on a lease option where your option price is the mortgage balance the day of your execution does that make sense yeah it does so it's technically it's still a sub 2 deal but you haven't transferred the lease or you haven't transferred the deed so my second question I got that from a bank by the way so I'll tell you how this happened so I had a property on Lost Dutchman Trail the seller was in foreclosure okay and we reinstate the foreclosures behind like twenty thousand dollars but we reinstate the Foreclosure the day before we transferred the deed and why is that a problem well because the bank that had the loan they're a small Bank Johnston Bank shout out Johnston Bank they only had five branches so the president of the brand all the branches was the person actually handing the handling the foreclosures so we reinstate the loan we closed the deal the next day and the following Monday he goes to his stack of manila folders and he goes oh Lost Dutchman is now no longer in foreclosure so he goes to reinstate it it's just a slow process for them they did a couple days after we had already closed on it and he goes to reinstate the loan and he sees that we transfer the ownership so he physically manually saw nobody's calling do on Cell Clause unless it's like a situation like that so he they send out a ladder letter we get the letter two three weeks later I call the guy myself the branch owner and I go dude we caught up the mortgage payments why are you calling the do do on sale Clause we're making the payments he goes oh it's just Bank policy I go okay well and he sounded like nonchalant like he ran into this a hundred times I go okay well what do you suggest I do because I bought the subject too and I caught up the payments he goes oh yeah easy all you do is just deed it back to them and then rebuy it on a lease option with and the option price is the mortgage balance the day you execute the option I was like done thanks have a good day pretty simple yes it is okay so that's one of five ways to overcome the due on Cell Clause we can talk about another day okay but that one's really simple so follow Pace if you want you want yeah but if you want to get nitty gritty and this is not rookie stuff but the reason why don't I just originally Buy on a lease option with the option price being the mortgage balance I want the deed because if when I have the deed I get the tax benefits and the tax benefits allow me to not pay any taxes every year so my second question for that would be on the seller's side is okay the mortgage is still in their name how do they go and get another mortgage so DTI coverage right this is actually how I found you because this was the last piece of the puzzle like the last question I needed love this okay so how does any investor go and get another loan when we go get loan multiple loans on when you guys are going and getting airbnbs and you're investing how do you get more loans you have to show that there's income on the other property there you go so it's the same thing so when I get a seller so I had one of my favorite deals I ever did Dave biarsky okay so here's what happens Dave barsky um driving home one day he gets a um he gets a wild hair and he's driving home one day from work and he sees a new home development across the street from his development where he's lived for 19 years and he turns in there he goes in gets suckered into a twenty thousand dollar non-refundable deposit on a brand new build drives back over to his house and his wife's like hey sweetheart where you been I haven't seen you you usually home on time he goes babe I just bought us a brand new house and she goes oh my gosh this is amazing can we turn this one to into a rental or something and he goes no the lender over at the new home build said we have to sell this house in order to qualify for the new house we can't have two houses she goes okay no problem let me call my friend who's a real estate agent and let's have them list the property it'll sell in two months and that house will be done in six months it'll be perfect we'll rent for a couple months it'll be perfect timing you following me okay so five and a half months later they still haven't sold the house and it's coming time to close on that new house they're gonna they're gonna lose their 20 000 non-refundable and they're going to sell that house to another person the agent on that listing calls me up and goes Pace I saw that you do this creative Finance stuff what do we do wait and you'd never have you ever met this agent before do you have a relationship I saw her at a meet up and I was like hey if you ever have it yeah their power of networking so she I go up to people go hey have you ever ever have a seller has a hard time selling their listing because they have lack of equity come to me the seller had lived in the property in 19 years why doesn't he have Equity because he refinanced pulled out all his Equity out of the deal okay so he has no equity now you're telling a homeowner that just put twenty thousand dollars on a new home build that he's going to have to write a check to sell this house is that the only money he's going to have to pay to close out on that house no he's got an the rest of his down payment he's got Furniture because everybody when you get a new house you're pumped about your furniture right he's like I got a barbecue thing I got all the stuff I want to do and now she's telling me I gotta cut a check to sell my other one I go well what if you didn't have to write a check what if you just walked from the property let me take over the the deed he goes no I can't do that I go why not Dave it solves every problem in the book and he goes because my lender on the new house says that I have to sell this house in order to qualify go no she doesn't know what she's talking about I was a loan officer for years let me call her and talk to her underwriter so I got on the phone with the underwriter I've done this 400 times by the way get on the phone with the underwriter not the loan officer if you're talking to loan officer they don't know their sales people I was a loan officer we're salespeople talk to the underwriter so you talk to the underwriter and you say hey underwriter I'm buying this house subject to I'm going to be making the payments what do you need to see from me in order to wipe this off their debt to income ratio to qualify for their loan she goes oh he never told me he was going to do that no problem so we write up a we write up our agreement um by the way you should always use a Servicing Company when you do SUB 2 and seller finance stuff West Star is the kind you define Servicing Company so a Servicing Company is let's say that you and I create a financial arrangement and we want to make sure there's a non-interested third party like watching what we're doing making sure you're receiving it I'm paying it on time we would hire her as a Servicing Company to make sure so there's companies like Westar Loan Servicing that um they pay you pay them 17 a month per house and they are the sheriff of every creative Finance deal you'll ever do okay so I worked this out with Dave and Dave goes holy crap you solved every single problem in the book for me I thought I was going to be in a world of hurt so debt income ratio needs to be wiped out by the underwriter on the deal so Pace I mean first dude thank you so much man this has been like a a crash course on everything subject to oh yeah I could talk about this for 20 hours so I mean last question for you brother so I just want to know so given where we're at uh with the economy with inflation with you know there's a lot of people filming the skies falling now it's a terrible time to invest in real estate does subject to still make sense in this environment my average deal I'm acquiring is 3.25 percent my average Burr deal that I do is about seven and a half to eight and a half percent so I don't I honestly don't know a market we're subject to hasn't made sense will not make sense subject to is and will always be a strategy that will dominate right now it is winning big time I'm being overwhelmed where people are like oh my gosh our listings went from 10 days on Market to now 70 days on Market please whatever you got to do so here's a really good example for like brand new people um I will randomly do this once a month or I'll go in my local market in Arizona go anybody in Arizona come to my office today we're going to go um we're going to do a group activity for seven hours today where I'm going to teach you guys what creative finances and then we're going to do a contest at the end of the day for 45 minutes and we're going to get everybody on the phone and we're going to see how fast we can get a deal so we just did this two weeks ago first where you go as you go um listings have been on the market for longer in 90 days call the agent say hey agent if you're having a hard time with that listing I'm okay just taking over the payments would you pitch that to your seller so in 45 minutes a group of 100 people got six written contracts signed back from the agents done in 45 minutes this Market is incredibly easy you'll be pouring in with properties so when they're doing that are you guys looking up on Prop stream or any other software that's where we got the list what the the paint with the estimated payment is yeah so you'll have the estimate estimated mortgage here's how you know when you said structure right last thing guys so sorry have them have me come back because I will come back and I'll talk forever here's how we know if it's a good deal okay I don't care about purchase price people send me stuff like Pace I got a four bed three bath with three car I'm like I don't care about any of that what can I bring in on the property what's the highest and best value of that that amount same thing like I go to air DNA if it's going to be an Airbnb if it's a sober living facility I call a sober living company and I find out what I could bring in on that property and then I reverse engineer with the seller and I go okay if I can bring in three grand a month the most I can pay the seller is two thousand dollars a month because I've got blah blah blah blah expenses and whatever else so you reverse engineer and a lot of that information before we get to the negotiating part of the conversation a lot of it we find on Prop stream yeah yeah because I think that's such a are you finding that too with the seller finding their motivation to or like what they want out of the deal so like if they purchase prices important to them um or interest rate like they just know they want a high interest rate but maybe you amortize it over 50 years or things like that are you sellers typically variables sellers typically don't want a high interest rate unless they're already a creative Finance guy like me when somebody goes yeah I'll sell or Finance it to you I want 20 down in eight percent interest I know he's already he's probably already taken my course or whatever always been in the game for 20 years yeah but if they go oh yeah what does that mean I go great you care about purchase price it's kind of like a teeter-totter I'll give you a high purchase price but you got to give me low down payment low interest and they go okay no problem they care about the the purchase price more than anything else we've literally barely touched the surface of this a week ago okay no I feel like I'm gonna be laying tonight just like there's so many more questions oh my gosh the thing is like I can't go out and get a cash deal I could get a cash deal pretty quickly but I could guarantee you if you guys had me back I could show you how we could get a deal under contract within an hour on the rookie show start to finish agent selling us sending us a contract signed like it's that simple yeah we should definitely do that well guys less information more implementation we will I would love to implement some of this stuff and do it like live if you guys would have me back I think that's like part of our the problem with the show is we get a lot of stories and what people are doing and stuff we're gonna do it the step by step like doing a workshop like that would be so fun I would love to that's what I I just you get and I know you guys are the same way you start talking about these strategies you're like okay great let's go let's go fight let's go buy something so um if you guys have me back I'd love to do that it doesn't have to be in person but if we even if we do it virtual it'd be great we could do the same thing yeah cool well um one question I do have because I think this would be for everyone that's listening were you getting the proper steps in like the proper documentation so like my when I bought the farm it was my attorney had no idea where to even start with documentation so I went and paid um an attorney in my local state named Sean Saint Claire I have an attorney actually brought him here to bpcon I had him on my panel my attorney who I learned from for years and years is actually was on my panel today um so I just go to an attorney that's been doing creative finance and I had them draft documents and then I great the documents were great but really you need somebody when you run into a specific situation especially with a farm there's all sorts of weird things that go on with Farms you need to have somebody that knows what they're doing and the way I found these people was not working at meetups and that's cool the answer is basically just asking what their experience is if they have experience yeah have you ever closed this up to a deal we have a list actually because we my job or my goal years ago with creative finances I said My overall goal is I want to normalize the conversation around creative Finance that's my goal if I if I accomplish that I could die I'd be happy I want to normalize the conversation one thing that we've done is we've found five title companies or title attorneys in every single state across the country and we've put them on a Google sheet so if you guys want I'll give that to you guys you can give it to your your audience yeah we would love that so we'll put that into the show notes there's not a single state in the country you can't do SUB to seller finance Novation agreements wraps Lisa like you can do anything in all 50 states it is so not just legal has been getting done for hundreds of years well thank you so much Pace this has been awesome also thank you for sponsoring uh this media room we've been really taking advantage of it this is our third podcast we've done today here so thank you yeah but where can everyone find out more information about you go to BiggerPockets episode whatever I was on it was the first one I was on in November of 2021. we also link that number in the show notes there you go go watch that well thank you so much for joining us today I'm Ashley at welcome rentals and he's Tony at Tony J Robinson on Instagram thank you guys so much for listening and we will be back on Wednesday with another episode [Music]

Channel: Real Estate Rookie

Views: 94,280

Keywords: pace morby, creative financing, seller financing, owner financing, subject to, subject to deals, creative finance, interest rates, mortgage rates, real estate investing, real estate, real estate market, housing market, seller financing strategies, seller finance pace morby, subject to pace morby, pace morby subject to, rental properties, rental property, income property, passive income, sub to, the federal reserve, biggerpockets, real estate rookie, podcast

Id: dp3pITjnUlk

Length: 39min 52sec (2392 seconds)

Published: Sat Nov 19 2022