When Should I Say No to a Real Estate Deal? | Morby Method Breakdown

you're gonna go get a loan and all that money will go to and what you'll then do we call this the morbi method what do you got Tyler good morning bro is that a new bash Brothers hat this isn't your bash Brothers hat I freaking love it what do you got for me so it's in Ohio and numbers are 260. he's gonna get 180 000 down and then we want to go in and renovate it with no money out of our pocket is that possible yes it's possible but the place you have to get that money is from the seller okay what if he doesn't have the money well how would he not have the money when you gave him 160 000 down because 90 is going towards a mortgage and then 90 is going towards a new house okay so what's your exit strategy are you gonna hold this yeah the Mori method I've got a couple of deals right now where on the more we met the seller is kicking back my construction costs so not only am I getting the down payment or the transactional money refunded back to me but he's actually the one of the sellers is giving me more than enough money on top of that for the construction and to pay ourselves up front this other idea was ran by me a guy A lender said why don't you make the purchase price 180 go get a loan with my investor loan go get money to renovate it okay then refinance and after you refinance then put the second note on there so you're basically doing in this situation you're doing the Burr with a second note placed after after your refinance So you you're saying let's go do the Burr and the seller then we would put him in a second lean position after I've refinanced it on my second loan but then because they're going to make the purchase price 180 instead of 260. I just want to make sure that he knows he's secured somehow so you've got a seller that you're buying at a property from for 260 000 uh we call this the morbi method it meaning the seller is like yeah I'm I'm fine with seller financing the property too but only a very small portion and you're like okay well if I can only get a portion of that seller finance well where am I going to get the rest of the money well we use a company called my investor loan other people have used other companies successfully I'm doing a deal I sponsored another student on a different lender I can't remember the name but you are going to go get a dscr loan from myinvestor loan.com my investor loan is going to give you a loan for have you guys gotten a quote from them yet or not yet yeah for 180. uh I was like 182. okay so they're going to give you 182 000 probably somewhere around seven percent is that seven percent yep sorry guys that's just interest rates have gone up so freaking High that's where they're at everybody's at this number right now so you're gonna go get a loan 182 000 you're also going to go get a loan for 78 000 right so you're gonna have to go get another loan from a private money lender so this one is my investor loan this one is a private money lender so you'll get a 78 000 loan and what you'll then do is you'll give all that money to the title company and all that money will go to essentially to the seller okay in a normal cash transaction so normal cash transaction you would close the first deal or the first leg of the transaction and then the second leg starts where that seller instead of receiving that seventy eight thousand dollars that seller says hey Tyler you such a cool guy I'm going to refund you guys and instead of me receiving that 78 000 you get it and the way I will get my 78 000 is in the future I will put a note in second position against the house so essentially because Tyler went and got this loan and uh he only borrowed money from a private money lender basically for one day that private money lender gets their money refunded back to them and in a second lien position your seller sits there for how long what's the structure of the second lien position uh 250 a month for 15 years and a balloon at the end of that okay is there interest on that or no interest no okay no interest dope kind of levels out that you know seven percent situation here right kind of nice no interest on that 78 000 are you sure that wouldn't have already paid off let's do the math on that 250 yeah it wouldn't have paid off but it's 30 something thousand I think forty five thousand forty five so you'll pay him forty five thousand dollars over that was 15 years at 250 bucks a month now here's what you're suggesting you're saying well pace the problem is the house needs a renovation if the house needs a renovation and you're trying to do the deal with no money out of your pocket the way that you do this is either one the seller gives you some of the money through the DSR dscr money for those of you that are wondering well what's a dscr loan a dser loan it's a it's an acronym and it stands for debt service coverage ratio it's a stupid word okay but it is a loan that requires no tax returns which is nice for those of you that don't pay your taxes um you def also don't need any employment which is nice for you guys that don't have jobs there are multiple options here and one of the options is you can actually get an interest only loan for 12 to 18 months usually okay it's kind of nice and they're lower like this interest rate's like maybe eight percent nine percent if you go interest only so why would you go this route there's a lot of people in here that are like I have no idea what we're even talking about I don't know the morbid method is no idea what you're saying right now I'm gonna have a piece is gonna have to backtrack into what the mortgage method is I will do that guys in this situation okay your seller Tyler and Eddie say hey we want to buy this property from you for 260 000 couple of problems problem a we want to do this with no money problem B seller wants a big down payment problem C is the house needs to be renovated okay and that's a problem and you guys again you guys keep going back here because you're you're with me a year and a half ago you wouldn't have even thought most of this was possible you thought you'd have to go get all the money and borrow money and do all that kind of stuff okay on the deals that I've done morby method where I need money for renovation I get my money from one A dscr lender okay the one I use is my investor loan okay dscr loan again I told you guys what a dscr loan is it's a debt service coverage ratio loan which means they're not it's not a traditional Loan in the sense that they're going to go through your tax returns your employment history all the things that you normally have to go through to get a loan so I would go get usually 70 percent of my money needed for this deal is going to come from my investor loan.com then the other portion the thirty percent is I've got to go get private money so you need temporary money and you need thirty percent of it does everybody understand where the money's coming from on this deal can you repeat the question a hundred percent of the money is coming from someone else you've got a private money lender and you've got a dscr loan so you take this money you only need this temporarily because my investor loan will not give you their 70 percent unless you show you've put skin in the game does everybody understand why I have to get 30 from a private money lender and do you guys understand even if let's say that I've got my my loan my purchase price at 260 000 and my investor loan okay they say we'll give you 182. so you go oh I'm smart you know what I'm gonna do I'm gonna change the purchase price from that contract to 182 and then that way I need no money out of my pocket and the seller is gonna just put a second lien position against the property okay that's a problem because my investor loan will say wait a minute I'm not giving you 182 000 they're going to give you a loan based on the purchase price okay so they look at two things they look at one What's the total value of the home and then two they look at your contract price you'll never get a dscr lender to give you a hundred percent they want to see skin in the game and so what you do is you bring in that money that they're looking for and you bring in all that money through a private money lender I'm sure Tyler you've been in here long enough you probably have a couple million dollars at your disposal I imagine yeah we gotta we got a good amount if I said hey Tyler you've got a deal of a Lifetime on your plate but it's going to cost you two million dollars in private money do you think you could raise that inside of sub tube within 30 days I could raise that in like five days there you go boom there's some value for you guys for any of you guys that are sitting here going wait how do I go raise private capital I don't know maybe go join a private Capital raising mentorship for twenty five thousand dollars and go ask those losers because we got it right in here now we've solved the problem of not having any money okay and we've also solved the problem of the seller wanting a big down payment because what's going to happen is out of your 260 000 okay the dscr lender is going to give you 182 000 without tax returns without a job good thing because you have no job you're you're homeless then you're going to get 78 000 from a private money lender this money does not go to the seller goes to a title company the title company collects this 260 000 and once everything is clear to close that 260 000 gets then distributed to who any lien holder okay so in this situation it sounds like Tyler seller actually has a mortgage on the property of how much 90 grand 90 grand 90 000 okay so the lien holders get paid first so you distribute the 260 90 grand goes to that person then the second person goes uh to the seller I imagine how much is he getting uh he's getting 90. okay so the seller's getting also 90 as well and he's using that money for what he's buying another house these things are important for you guys to know know why a seller wants the money is because there's only three reasons why you can't get the seller to just give you all the money okay the three reasons are a you suck at explaining okay you need to get more into the daily dial in nightly dial come into my zooms more B the seller needs the money right now okay sellers needy and then uh C the seller has no motivation so why is the reason that this seller needs that ninety thousand dollars and he won't kick that back to Tyler because he's needy he needs something he's buying another house and he's putting ninety thousand dollars as a down payment on that other house this is where the money's getting distributed now whatever's left over goes to what who's the third person the money goes to it goes to your private money lender remember you guys borrowed seventy eight thousand dollars from the private money lender the private money lender gets their money back because the first leg of the transaction is completed now because the seller I don't know who this private money lender is I imagine it's going to be a sub 2 student and wow my my whole setup down here is just so amazing right now it's probably a sub 2 student I imagine but that sub 2 student is going to get their 78 000 back which is great but that means the seller did not receive that 78 000 that means that the seller is going to say hey I will let you give that 78 000 That was supposed to go to me I'll let you send that to your private money lender and reimburse them so Tyler is into the Tyler and Eddie the bash Brothers Tyler and Eddie are into this deal zero out of pocket okay so now they have two payments they have one payment to their dscr loan okay my investor loan.com and they have a second payment we've already established where this what this payment was way up here so kiambu is going to say wait how why is it 250. now they've got a payment now they own it the problem is you need to do a renovation right we talked about this this is not solved so the house needs renovation and Tyler and Eddie um just like me they pretend like they're broke all the time to make sure that things are structured to a point where they have no money out of pocket now what they're going to do is they've completed the first leg of the transaction they now own the property and they're into it zero dollars out of their pocket 0.0 you guys are gonna hold this as a rental Airbnb Airbnb love it so now they've got an Airbnb Mor B method strategy with no money out of their pocket the problem is it's not renovated and they probably want to get some furniture in there do you know what the renovation is going to be probably 50. do you say 50 is like really it's 50 or if you think it's 50 because just so you know I just bro I've done seven thousand Renovations in my life more and I had a project that we thought it was going it costs 50 000 how much do you guys think we spent 150 000 you know why because it was everything you could imagine went wrong the thing that costed the 150 000 the biggest problem with it was it was probably forty thousand dollars in hard money costs because we sat there for five months waiting for the city of Mesa to give us a permit and it just kept racking up racking up and so we sat there and I every time I drove by the house oh my gosh we were gonna flip it we planned on making like 80 90 000 flipping it but you know what I'm doing with it now because if I was planning on making 80 90 000 flipping it in January it was supposed to hit the market when we originally bought it here we are now August city was our biggest problem cities so backed up it's ridiculous so um now what am I gonna do on that deal Tyler refinance refinance it I'm just going to do the burst strategy pull our money out have a high interest rate hold it for a couple of years I'm not there ain't no way I'm losing money on that deal now Tyler you now have to do a burl Burr deal okay so what I would do is instead of getting that money refunded back to your private money lender I would have that private that money come back to you okay because you've already got the private money lender all right and then what I would do is I would do the burst strategy the problem is here is your problem if the properties arv is the house worth 260 or what's the house worth what's the arv probably three 300 yeah okay you're gonna have a challenge here brother there's not enough margin there well there was a property actually that was there's not very many comps but there was one that sold for 350. that was decked out no it was 400 square feet smaller so why would it be why would you have an arv of 300 when you had one that was smaller for 350. I'd say it's closer to 350. okay so what I would do is I would get a quote on this okay I would tell my investor loan what your purpose is so tell them that you're doing the Burr because they're going to be giving you two different loans at 300 this is not a deal I wouldn't do it [Music] foreign

Channel: Pace Morby

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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, investment strategies, hidden in plain sight, the buffalo strategy, Strategies

Id: EJqC8XcPwCg

Length: 15min 40sec (940 seconds)

Published: Fri Nov 04 2022