NEVER Disclose THIS Information to Your Lender…

does my lender really need to know that I'm doing a morbid method never I'm going to say that again never should your lender ever need to know that you're doing a mortgage [Music] teller has a house yes in what Market uh Orlando why do I care about the market is because I immediately start thinking about who else can help me yeah that probably isn't something you currently need but I just for me it helps me right okay Orlando perfect and your guys exit strategy is what all right stretches can be buttonhole okay short term not mid-term midterm rental right so like traveling nurse okay you said rap that's not a midterm rental but it's not even remotely close to that it's not a rental a wrap is you're not even the owner anymore okay you were there for this morning forever there's money from their app Zoom right yeah if I buy something from somebody else and I add my own thing and I sell it to them I'm the bank you're the bank you're not the owner of that property anymore okay yeah that's probably where we're gonna go with it okay so you want to wrap this I think so thank God these I think so things are going to make it really hard for when you ask A lender these questions first and foremost don't ever ask A lender if you anything that has anything to do with your exit strategy all you want to do is you want to buy this thing on the Mormon method which means what what's the seller want what's the purchase price 37 370 okay cool 370. seller will carry how much money you have two options option one isn't seller will carry forty percent okay option two is solid okay 875 to 80 basically the lowest I can get on the dscr okay you probably won't get 25 on a dscr they'll tell you that but they won't get it for you okay okay they all they all say they can this but right now the debt situation is pretty gnarly so I would imagine your seller what's the difference between the two just based on what he can get you all right yes okay cool so this this is one of the most important things in a morbid method okay you have to understand this so step one in a mortgage method is the seller needs to say yes okay no contract okay you then tell the seller in the morning method I'm going to talk to my lenders and my partner and I'm going to come back and see what kind of loan terms I give you I just did a whole Zoom about this you need loan terms okay that comes from him right so you don't need to tell him I'm doing a morby method you just need to say hey I need the loan terms for purchasing this property in Orlando I'm buying it for 370 000 sure what terms can you give me what's he going to tell me he's going to tell you I can get you 200 000 dollars on a loan and you need to bring 170 000 to the table plus five thousand dollars in closing costs okay I don't know what those numbers are that's why how are you going to get a contract with the seller if you don't know the loan terms from like right now it's all going to change does my lender really need to know that I'm doing a mortgage method never I'm gonna say that again never should your lender ever need to know that you're doing a mortgage I'm going to say that third time never should your lender need to know that you are doing a morbid method it convolutes and over complicates everything seller says yes I'm interested in selling to you at 370 I'm willing to carry a portion of the balance what how much are you thinking Joe you go that's a great question as long as you're in alignment with this I'm gonna go to my lender and I'm gonna see what kind of loan terms I can get based on this property once I have that I'm going to come back to you and we can then negotiate put in everything on paper right so right now you guys are trying to negotiate you don't have any ammunition to go to Battleground yet right so you're sitting here going I don't know what to do and hey with my lender will you help me hey lender I want to buy this house cash not morby method you will do morby method okay but the thing that people don't understand about the morbid method because there's a very clean line here this is called escrow being closed okay what you're trying to do with with the dscr loan is you're trying to purchase a property close escrow transaction's done okay so let's just imagine that all you're doing here is you're going to buy this property cash for the seller right seller says I'll sell to you for 370. sounds like that's the number he wants okay cool I'm not going to be good at the 360 363. okay cool let's be let's be real quick 360. say 360. okay so I gotta I got I don't know what the loan terms are but he's gonna tell you that after a couple of days you're gonna go back to your seller and say hey it looks like I got I'm going to be able to get 200 000 from my lender that means I got to bring 165 000 from a Parker or private money lender when would you like to close escrow on this deal seller goes wow really that fast yeah I got my loan terms as long as long as you're good with all of this I just I'm gonna need you to sell or finance a portion of that money back to me at a later date don't but don't worry about that all I want to do is buy the house cash right now that's all we're in it okay forget about the Mormon at some point you're gonna sell our finance portion of this but forget about all that the problem is people take the morphe method which is actually a second transaction in a silo and they mix them together thinking it's the same transaction it is not the same transaction Okay so where am I getting this money hypothetically let's let's talk about this let's say he gives you only two hundred thousand where are you gonna get that 165. 40 of the seller would carry right this is what you don't understand the mortgage method you haven't watched any minority methods otherwise you would understand this because you've got to buy this couch first let me say that again you have to buy this cash first in a first transaction you know you close escrow all the money's been dispersed this money has to come from somewhere yeah like this right Peter this is why Gator lenders are so important right okay private money lender or in your situation if you are still working your job which we talked about you could then loan money to your partnership for a day or two and then you could get that money back you don't need a private money well and so that's what we're thinking about you okay cool yeah but you need this money why because your lender the dscr lender will not let you close that alone with them without seeing the other portion of the money come from somewhere right you are satisfying the dscr lender by showing by showing them we're going to close the transaction so do I need to tell the dscr lender I'm going to do any creative Finance at all with this no never never ever ever I'm buying this house Cash For 360. What loan terms are you giving lender says I'll give you two hundred thousand dollars at six percent interest 30 years you're cool I'll bring the other 165 000 They Don't Really Care where that money comes from in a dscr thing usually a partnership or maybe your own cash or a private money lender okay is where Gator lending becomes cool is that you can borrow that money for a day okay so you get the loan terms we'll get there third thing is we're going to get a contract okay contract says I'm buying this house for 370 000 I'm closing escrow on let's say December 31st done that's a cash transaction that's all the only thing that you need to worry about at this point done we're good okay so here's what happens four close escrow okay this transaction is done here's what ends up happening in this transaction are we good there's a clean line you own this property okay here's what ends up happening here's the title company the money comes in right 200 000 from your dscr lender and 165 000 from your private money lender whatever 365 000 why because it's five thousand dollars proposal cost right so what's going to happen is the title company is going to disperse money and things to people okay the first person that's going to get something dispersed to them is called the lender lender is going to get a dsdr note they've now created a note with you they they walk they give you the 200 Grand and what they get in return is a note so they've walked away from the transaction with a note and that no is the 30-year no right that's what they got in return for how does the lender make money interesting interest right or sometimes they'll sell that note and make a fee cool seller walks away with three hundred and sixty thousand dollars in cash let's try cool you walk away with maybe a financial partner I'll call it an FP are you a financial partner right and I told you guys this in your partnership anytime one partner is lending money to the partnership always treat that money as a separate entity okay so here's your company here's your financial partner and then what you guys are walking away with right here is a note because remember you guys have a note between the two of each other and you also have a deed you now own the property everybody walks away from the transaction it's completely done debt gone okay so a morbi method that's a cash transaction we all agree this is how you buy houses cash dscr right cool Don I'm hitting this point hard really really hard because people get really confused and they think the morbid method has anything to do with The Upfront acquisition it doesn't it doesn't okay so you go down the road and your financial partner says don't get hung up on the six months I'm just going to give you this as an example this financial partner says hey I'm willing to be in this deal for six months where I have this hundred sixty thousand dollars tied up and at some point in the next six months I need you to pay me Al this guy's this financial partner says Hey I want my money back in six months okay okay cool that's a problem okay but where are you gonna get that money from where's an obvious Source where you could get that money from the seller right the seller received three hundred and sixty thousand dollars so whether it's six months down the road right let's say it's six months down the road does the lender need to know about any of this stuff no okay as far as London knows we're paying them off every month well they're happy so the 360 000 I call the seller hi this is a fake story call the seller hey you know the house I bought from you months and months and months ago they go yeah how's it going I go yeah it's pretty doing pretty good but I got a financial partner that wants me to pay off and I'm wondering out of that 360 000 if you'd be willing to give me some of it and essentially be my private money lender on the deal that you sold me right and the seller goes yeah what do you mean I go I need this 165 plus is let's say ten thousand dollar return that he probably would want so would you kick back 175 000 to me and your seller goes yeah no problem I'll do that all day long so he then gives you the money and what do we do right right we know wipe out your original partner the notes content you create nope nope didn't first note is with this lender it's always there right and the second note is then created between you and the seller and you still have the deed so now you replaced one your partner with a note between you and the seller got it okay does this make sense yes 100 absolutely okay 100 do I need to do it at six months do I need to wait six months or could I literally wait six minutes exactly okay so that's what Morgan method is it's just taking that time out and shortening it it's just shortening it to the next day so what instead of position do you offer to the seller to actually make that happen why don't they want to just keep their 360 cash and tell you this is where I I'm reluctant to teach everybody anything I gave you this example of the six months to separate in your mind that these are so far away from each other transactions that they're not even remotely close to each other just because they happen next to each other one day after another doesn't mean they're the same Transaction what people do is they go oh well you didn't realize neither one of you realize is that it's a cash transaction we close escrow right right there's a private money lender that needs to satisfy the dscr loan so we hammered that coffin nail done you understand that okay cool the way you're you've incentivize your sellers you've told the seller up front hey will you sell or Finance this house to me okay I just had to compartmentalize this because you guys were not understanding it you're mixing everything all together right it needed to extract them away from each other hey seller would you sell this house to us for 360. yeah I would great here's what we're going to do I'm going to ask you for seller finance okay no problem what does that look like well I don't know yet let me go talk to my dscr lender maybe remember I gave you the list and I'll come back and I'll let you know those loan terms seller you come back to the seller and go okay here's what's going to happen my dscr lender is going to give you 200. I'm going to come in with 165. I would love for you to reimburse me that 165 the day after we close escrow you've brought it up from the beginning it's not been asking you haven't you guys not have this conversation with us yet and there you go you don't need to ask me that you've already done that you got zero percent are we talking are we in the are we in the freaking Matrix like we're in the same room I just already had the conversation with the seller yeah you're you're I'm thinking of the what if sin of bad sense yeah you would always you I this this remember I said this is a fake story it's never happened the only reason I did this six month time frame and I acted as if the seller didn't know you were gonna ask him for the money back is to show you that there's a pure disconnect between the two transactions yeah of course you're going to tell the seller up front you're right yeah thanks for yourself right it's just so people oh yeah I guess you could do that because that's where the money comes from what people are well where does the money come from the seller received 360. what do you mean where the money came from you got 200 000 from the lender the lender walks away with the note this seller walks away with I got my 360. but he already told you up front I'd be willing to sell a kickback 40 percent yep where you negotiate that final percentage right is all based on what what the tscr mode in this case Austin all right the only thing you say to Austin is you go what loan terms can you get me I'm sorry I'm buying this house cash so would you say something like hey we could do 40 we could do 20 so and I can say give me the best you got like whatever is going to be the best for him yeah yeah look a lot of it's going to be continued upon that seller right so you go to the seller and go hey look I'm going to get three or four different options from my lender when I get those three or four different options for my lender I'm going to come back to you that we're going to work out what's best for both parts that is how I set it up even though I didn't know what that actually yes yeah right so again are we doing it six months after each other and we're doing six minutes we're doing six minutes it's two different transactions yeah the seller actually never receives the 360 000. here's what happens okay this is the part that people don't understand the title company has the money we close escrow in a normal cash transaction everybody would receive their life right here's what actually happens is that first transaction truly does close escrow you're real everything I told you really does close escrow it's recorded the seller in an escrow account and instead of the seller receiving the 360 to their name the title company has a second leg of the transaction you've never even heard what some of these words before okay they have an escrow account where all this stuff is coming in the 200 Grand and the 165 goes into an escrow account it's literally an account with an escrow name could be Synergy one two three escrow account literally that's what that's what they look like the one the 365 sits in there in that first transaction the dscr lender wants to see that money disperse and leave that account okay so where does that money leave if it doesn't go to the seller it goes to a secondary escrow account so it leaves the first transactions bank account goes to the second transactions bank account at the same title so it's showing the dscr lender that the money dispersed from that account sellers been paid everybody's good boxes checked so does that seller actually ever receive that 360. no the seller receives whatever the amount of money they need to receive what their seller finances the title company actually takes that second escrow account and disperses let's say 191 000 blah blah blah amount to the seller and seller walks out with 191 you guys walk away with all the money to pay off your private money lender plus maybe a couple of Morgan method deals we do is I've taken enough out of the seller side that pays for my renovation and I can pay myself up front even have that you can pay yourself up front on a mortgage method like Logan manzanaris his first morphy method daily ever did he's like dude I put the whole thing together Renovations got paid for and I got seven thousand dollars that I paid my bills with in the morning you're essentially just the seller doesn't receive it it goes into a second escrow account transaction we talked about is all the way complete dscr lender is gone they don't know anything's happening blah blah blah blah that money the next day the title company Bobby Joe she goes okay cool let's create the second note and did of trust and disperse the money according to the way that the agreement was set up it's really it's simple when you really understand it the thing I get frustrated I'm like guys it's two separate transactions it's not the same transaction you're buying a house cash closing escrow the next day you go hey I know you just got 360 Grand can I just get some of that back and you sell your finances to me does that make sense [Music]

Channel: Pace Morby

Views: 34,971

Keywords: real estate, real estate investing, pace morby, pace morby creative financing

Id: Fe1ACjEqJXc

Length: 17min 55sec (1075 seconds)

Published: Thu Jan 05 2023