BiggerPockets Real Estate Podcast - 70: From Zero to Hundreds of Deals in Under Two Years with Grant Kemp

Episode Date: May 15, 2014

On today’s episode of the BiggerPockets Podcast, we sit down and chat with a real estate investor who is absolutely CRUSHING IT in a very unique niche. Grant Kemp, from the Dallas Area, got his start in real estate only 2 years ago and already has hundreds of transactions under his belt, and regularly purchases 6-15 properties a month! On the show today, Grant shares with us the dirty details on his business and shows how YOU can start capitalizing on more leads, make more income, and spend less (or even none) of your own money to make it all happen! The best part is: Grant’s strategy relies on generating profits from leads that most real estate investors simply throw away by utilizing subject-to purchases and mortgage wraps! Don’t miss a second of this incredible interview and prepare to have your mind blown! In This Show, We Cover: What “Subject To” investing is, and how you can use it to acquire properties for little to nothing down. What a wrap-around mortgage is How to protect yourself from the ‘due-on-sale’ clause How to use sell to the owner-finance market How Grant uses other wholesalers to grow his network Where to find leads for subject-to deals Clarity on the Dodd Frank from someone who actually read it in it’s entirety The importance of full-disclosure when doing subject to Selling via seller financing to get incredible returns And a lot more! Links Mentioned How to “Hack” Your Housing and Get Paid to Live for Free BP Radio Podcast 002: Starting Out with Karen Rittenhouse – Subject To, Direct Mail, and Investing from a Woman’s Perspective Podio Books Mentioned in the Show Rick Dad Poor Dad by Robert T. Kiyosaki The Richest Man in Babylon by George S. Clason The Bible BiggerPockets Forums Tweetable Topics “I asked myself, “How do I get into real estate with no money? The answer was subject-to.” (Tweet This!) “In real estate you just got to do it… it’s the Nike way.” (Tweet This!) Connect with Grant Grant’s BiggerPockets Profile Grant’s Website: www.texaspridelending.com Grant’s LinkedIn Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 70. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. What's going on, everybody? This is Josh Dorkin, host to the Bigger Pocket. It's podcast here with the man in yellow, Mr. Burr and Internal. What up, Big Bird.

I'm good. I'm good. How are you doing? I'm good. You really do look like Big Bird today. Yeah, I like this shirt. It's one of my oldest shirts, but, you know, I like it. I got some sad news, though. Oh, what happened?

So my cat is sick. He's at the vet. Am I supposed to be upset about that? You should be a sad. Is that a three-chairs moment? No, he's not feeling good. It's a sad moment. but yeah, he'll be okay.

He's got some kind of weird eye infection. So whatever. Oh, I'm sorry. My dog went through that, so I feel your pain, man. I feel your pain. Yeah, I've got, I'm a little sensitive, right? Yeah, you're a sensitive guy. Sometimes you just break down crying during the day for like,

you microwave your food too hot or something. Yeah, whatever, whatever. All right, man. Well, anyway, yeah. This is, this is going to be an interesting show ahead, guy, Mr. Brandon guy. I agree. I actually think today's show is a special.

especially good for people who may or may not ever actually engage in this kind of real estate investing. We're going to be talking about subject too. But it's important because it's something a lot of people throw away most of their leads that come in, whether you're a wholesaler, or flipper, buy and hold, whatever. You throw away a ton of leads. So I know I do. But after this show, I'm definitely re-looking at how I do all that. So yeah. Oh, yeah. I think it gives you a new perspective on some strategies that I'd say the vast majority of real estate investors would never even consider because they they see deals that may not have meat on the bone so to speak but uh in in reality if if you know how to how to structure a deal there's actually meat on the bone so it's it's

cool i'm i'm excited the show the show is uh is going to be a a fairly high level one uh and and there's a lot of phenomenal content but uh before we and jokes there there are some jokes yeah so if you don't like our humor our middle school humor you know we we we we we've gotten quite a few of those comments, haven't we? These guys should just stop talking and joking. This is real estate. It's not funny. It's business. Yes. Just really.

We're going to teach you about cap rates today. Everybody get out your calculators. Yep. That's where real estate is. Yeah. All right. Yeah. Oh, I just got a text. How cool is that? Nice. Way to have your phone off. Yeah. Way to have maybe that was our. Maybe that was

the music for our quick tip. All right. Today's quick tip is this is actually a really good one. We have not yet done this. If you are on bigger pockets to do real estate and to network and do deals and make money ultimately, then I want all of you guys to stop and do this one thing as soon as you're done listening to the show. Collaborate and listen. Are you seriously going to do that?

You want them to do one thing was to stop. Yeah, don't. Yeah, you're done. What's the one thing? Okay, vanilla rice. The one thing is to introduce yourself to somebody that you have been looking up to or who you've seen around the site and you think is interesting or has got value to add. Go out there if you haven't already and introduce yourself to that person and start building your network.

If you've introduced yourself to everyone on the site, then your job is done and you can go retire. Yeah, go home. Well, to add on to that point real quick, and I know we're going to get to interview in a second, but there's a thread going on right now in the forums. And if you're listening to this in the future, you can find it. It basically says, go in this thread, mention somebody who you've learned from on the site. Just go ahead and do an app mention, which tags them. You know, just tag them and tell them what you learned. It kind of is a way of giving back and saying, hey, thank you, you know, whoever for teaching me something new.

So go look for that. I'll put a link to that in the show notes at biggerpockets.com slash show 70. That is, I recommend doing it. That is the link. All right. That's kind of two quick tips, but whatever. Yeah, there you go. All right.

So let's move on to the show. Today's show, we have a great guest for you. We've got Grant Kemp out of, I believe, Dallas, Texas. And Grant is a real estate investor who has not been around that long. But in the short time he has, he's made a significant impact and has done a ton of business, an absolute ton of business. He's doing, what, six to 15 deals a month on average, right? Yeah, yeah.

I mean, he's doing a ton of deals for a lot of business. only been in this, you know, doing it for a short time. But, but, but hey, but before we go on real quick, I just wanted to, uh, to give a quick disclaimer. And that is, anytime you're doing real estate deals, it's important that you're transparent with all the parties involved, including the lenders. That will make more sense later having to do this strategy. But ultimately, we just want to be sure that if you're considering to do real estate deals like a subject to, which is what we're going to talk about today, that you consult a real estate attorney first, because you do not want to accidentally break the law by trying to do something that you

may or may not be illegal in your area. So be smart, do your homework, and talk to an attorney. But anyway, I just wanted to add that because we want you to make sure that you are doing things right and that you're doing it safe and legally. So you can be as successful as Grant because, man, Grant is absolutely crushing it in his business, just crushing it. He's crushing it. And he's wicked smart. So I definitely encourage you to stop and pay some attention to the show. This is show 70, the Bigger Pockets podcast. We've got show notes at biggerpockets.com slash show 70, as Brandon said. And otherwise, if you want to ask Grant anything, definitely link up to him on the show notes

or at his profile on the site, which we'll also link to in the show notes. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed's sponsored job posts help you stand out and hire the right people quickly.

Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored post. The best part, no monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through Indeed worldwide. There's no need to wait any longer.

Speed up your hiring right now with Indeed. and listeners of this show will get a $75 sponsored job credit to get your jobs more visibility at Indeed.com slash rookie. Just go to Indeed.com slash rookie right now and support our show by saying you heard about Indeed on this podcast. That's Indeed.com slash rookie. Terms and conditions apply. Hiring Indeed is all you need.

You've upgraded how to buy properties, but did your insurance get the memo? When investors start scaling, insurance can't be an afterthought. Most policies were designed for. a single property, not multiple rentals, LLC ownership, short-term stays, or properties mid-rehab. That's where blind spots can creep in. NREG works exclusively with real estate investors.

They understand portfolios, how risk compounds as you grow, and why insurance should protect your upside, not just a checkbox. One uncovered claim can undo years of progress. Before your next acquisition, review your insurance. Talk to NREG and get investor-specific coverage from specialists who actually understand real estate at NRE.com slash BP pod. That's N-R-E-I-Y. Did you know, your house gets bored when you leave? I can't actually prove that, but it probably

misses out on the action, the footsteps, the late night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport. while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network.

If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taking care of, and your place is in good hands. You travel, your house works.

Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. With that, why don't we jump in and get this thing started? Grant, what's going on, man? Welcome to the show. Thanks. Thanks for having me on. Awesome. Yeah, we'll go have you.

Let's jump into this, you know, right the beginning. How did you get into real estate? I got into real estate just by kind of wanting to do it. I share a story with many of the people that you have on here, where the first thing I did was read Rich Dad, Poor Dad, and it was just a nice inspirational book. It's not a how-to, which a lot of people kind of expect out of it. But it's a good inspirer.

And just kind of went on there and started looking on bigger pockets, reading the forums on there, reading everything I could researching online. And just kind of took that bit by bit, I was ready to kind of dive in and grab my first deal. Nice. Nice. And what were you doing prior to real estate? I worked IT.

I was an IT for a stock company. I did their kind of automation stuff over there. Gotcha. So decent amount of downtime that I had for it. So it was helpful that I could spend that time researching and figuring things out. Cool. Nice. Nice.

And you talked about why real estate. So why don't we just jump in on that first deal? How did you get the ball moving and just try? jump right in. Sure. So I guess technically my first deal was really my primary residence. I bought a duplex. I live in half, rent the other half out. So, you know, I know a lot of people look to do that as their first thing. So that I did get an FHA loan for and kind of got into it that way. My first true investment deal that was just purely investment was actually from my tenant that I moved into the other side. You know, they moved in here. They had a house that they were looking to sell.

They were unable to sell it because of what they owed on it. And that was the perfect scenario for a subject to transaction. And that's kind of what I had been researching this whole time anyway, because, you know, when I had gone into it looking for how can I get into real estate, my big thing was how can I get into real estate without having any money? You know, I mean, that was kind of the challenge. How am I going to buy a house if I have no cash? So through the research, it was like, okay, well, it looks like owner financing is kind of the way to go on this. subject to being the way to acquire there. So cool.

I know we want to go into subject too, but I want to stop here real quick and go back to what you'd said earlier. You talked about FHA loan, lived in half of the duplex. Can you kind of just explain that a little bit more in depth just for people who might not know what that means? Because I love that strategy. Sure. So FHA, if you get an FHA loan on like a single family residence, you've got to live there for eight, nine, 10 months before they can feasibly allow you to move out and turn that into a rental or something along those lines.

They've got to see that you got FHA as your primary residence. Well, when you're doing a duplex, you are able to get an FHA loan for the entire duplex because that's going to be your primary residence. It just so happens that you're able to rent the other side out of that duplex and turn that into an income for you. So when all is said and done, you can cut your bills down to a third of what they would have been, you know, a quarter of what they would have been, depending on what your rent can be for that other half of the, uh, of the property. And that really serves to, to help a lot.

Yeah. That's cool. I wrote a post a while back called how to hack your housing, and get paid to live for free. It was all in that exact same subject. So if people want to learn more about that, yeah, I'll link to it in the show notes at bigger pockets.com slash show 70. But yeah, I love that. And what's the down payment on an FHA loan for those who don't know? It's three percent. Cool. It, that, that you've got to put down. I believe it, actually, they may go to to one and a half at this point in time. Really? Interesting.

I think I've heard of a program out there, but 3%. And y'all can correct me on that if you know otherwise. Okay. Yeah, I know. I think when a buddy of mine did it and it was three and a half a couple years ago, I don't know if it's still that, but yeah, somewhere right around there. So it's pretty low. So cool.

So you can buy a property for very small percentage down and end up getting the full, like a cash full appreciation benefits of the whole thing, right? Sure. Absolutely. Yeah. And it really helps out, you know, not only from the cash flow side, but even from your tax basis side. You know, if you get a good CPA in your corner and look at things from that way,

you know, you've got some depreciations that you're able to do on investment properties that you're not able to do on your primary residence. So obviously, you wouldn't be able to do those kinds of things for the whole duplex, but for that half that somebody else is living on, you know, there's some tax benefits to that side too. Yeah. What would you say, what would be your advice for somebody who doesn't have deals yet and wants to start the same way you did. They want to buy a duplex. How does they even begin that process? You know, the the duplex that I purchased was the one and only deal I've

actually done off of the MLS with a realtor. You know, everything else that I've done has been completely off market. But, but, you know, those types of things, if you're just trying to get in and do the duplex kind of thing, and this is your first deal, I like to go on that route, you know, talking to a realtor trying to get things handled up there. You know, it was actually surprisingly difficult for me to find an entire duplex for sale. There were not very many when I was looking around. I mean, I had an option of probably less than 10 the whole time that we were looking. But we did find the one that we liked. But, you know, contact a realtor around you. Talk to some investors that you may know that have somebody to recommend, you know, anybody that's going to recommend

a realtor, period. Just go talk to them, see what you can get figured out with it and move from there. You know, obviously, you've got to have some money saved up for the down payment and everything and go into it with an educated mind. But just diving in. I mean, I think that's one of the biggest things that I can I can recommend to anybody for any part of the real estate investing is you just got to do it. Yeah. The Nike way, right? There you go. There you go. Well, cool. Well, okay, so you moved on from the first one and you said that's the only one you've done a realtor with MLS. So after that, that's right. And so why don't we, why don't we, I guess, go into the subject two idea, since that's kind of your current focus.

What exactly is subject two? We haven't talked about it since back. It's been a while long time ago. I think it was Karen Rittenhouse episode two. I think we last talked about that. So tell us what is subject to and how's that work? Yeah. So subject to is a way of saying that you're going to purchase a house subject to the underlying

lien staying in place as is. So in other terms, the way that you'll more commonly understand what's going on, you're taking over payments is essentially what you're doing. Okay. Now, you're not assuming the loan. There's a, there's a slight difference there. You're not actually assuming the loan. An assumption of the loan would mean that your seller is able to talk to the bank and get your name on the loan instead of theirs. What you're doing in a subject to transaction is you're purchasing the house. Title is transferring. You know, you have a deed that goes between you and everything so that you are the true owner of the house, but you leave the bank debt in place. And it's going to be left in the original seller's name. and you will continue to make the payments to that bank on their behalf. Now, is that something you can do in all 50 states? Well, it is. That's something that you can do in all 50 states.

The biggest thing that you've got to know in subject to transactions is you've got to properly disclose everything. So the biggest pushback to a subject to transaction that people are going to have is going to be the due on sale clause, which pretty much every mortgage is going to have a due on sale clause in it. And what that clause says is that if you sell the property, that the bank has the option, not the obligation, but the option to call the entirety of that loan due at the time of sale or any time after that if title has changed.

Realistic, oh, go ahead. I think you're going to probably clarify, so I'll let you finish up. Sure. Realistically, that's not really a real world problem. It is there, and it's absolutely something that needs to be disclosed to the seller, as well as if you turn around and do, you know, do an owner finance transaction to your buyer. That needs to be disclosed as well. But our office has seen 10,000 properties go through it over the last 25 years doing owner finance transactions. We've had the due on sale clause called, but it's only been called three times in that entirety. And all three of those times, we were able to fix the situation without a refi having

to occur or, you know, basically without anything, anybody actually having to come up with any cash to solve that. Why would a bank actually call the due on sale class versus ignore it? Right. So, and that's actually a good question. You know, one of the things that whenever we're talking to our sellers, we commonly talk about is, is we just ask them, point blank. You know, what does a bank want? Money, right? They want their payment. If they call a due on sale, likely they are getting that property back. And my joke that I always say is that they are not in the real estate business. If they were, they would be called Caldwell Banker, not Bank of America, right? They want their money. So the bank has the right to call it. The only times that we've

seen it become an issue has been in non-payment scenarios. So we've seen other investors that had come through that were not doing things the right way. I shouldn't say the right way. They were doing things in a way that set up this failure to where instead of paying the bank directly, they were paying the seller, right? And the seller was supposed to turn around and pay their monthly payment for them. Well, the seller is saying, hey, I'm getting $1,000 a month. It's not my house anymore. I don't need to turn around and sell and pay the bank. So they just weren't paying the bank. And essentially, the bank is going to foreclose on it. But a foreclosure, due to some of the foreclosure loss, takes much longer than getting a house back through due on sale. So they chose to go that route,

regardless of that being, it was still a due on sale clause being called. So the risk, you know, I think a lot of people look at it as a risky venture, getting into the subject to because there is a chance that a bank could call it do, right? So the risk there is really the challenge. Is there any way to mitigate that risk and reduce the chances that they're going to call it due? Yeah. So, you know, there's certain things that can be done. You know, at the end of the day, if it walks like a duck and looks like a duck, it's a duck. You know, and we don't always go this route.

But the route I'm speaking of is due to the Garnes St. Germain Act that occurred, I think it was 86, I want to say somewhere in there. Garned St. Germain says that you are allowed to put a property into an estate planning trust, and that trust will not violate the due on sale clause. Okay. So what a lot of investors do to mitigate the risk is they say, well, I'll just put this house into a land trust, which is essentially. just a fancy way of saying LLC. I mean, it's just all paperwork. There's, there's nothing really behind it. But they feel a protection level on their side because what they'll do is they'll transfer the property into a trust and then transfer the beneficial interest of that trust over to them and their subsequent buyer. That transfer into the trust does not violate the due on sale clause. However, if the bank did any kind of digging and they saw that the beneficial interest was changed, they still have the right to call that note due. So our outlook on this is proper disclosure.

You know, can a seller who has had everything explained to them from top to bottom make that decision for themselves that says, yeah, you know what, I'm comfortable with this being a possible risk, but I have to offload this house or else I'm going to foreclosure for sure. Can that seller make that decision on their part and go forward with it? And I think absolutely yes. You know, the side of it is there's nothing illegal about the due on sale clause. people feel like you are breaking the due on sale clause. And it's very important to understand that the due on sale clause is a trigger. It's not a rule to be broken. So once you've, once you've sold that property subject to, you have triggered the due on sale clause. And at that point in time, the bank has the option to call the loan due. But it's not like it says, if you sell this property

without paying it off, you have broken this clause and we will call the note due. It says if you sell it, we have the option to call the note due. Okay. Yeah. So it's so it's not illegal. Now what about telling the bank. I mean, like, let's say you want to talk to a seller who wants to sell and they're agreeing to subject to. Now, you're not going to just call up the bank and say, hey, by the way, I'm taking over payments now, correct? Right.

That's correct. Because you don't want to push the thing. But I guess, I mean, how does that work? And I'll just kind of piggyback on that. Yeah, we talk about disclosure, but you're not disclosing, right? So, you know, we're disclosing on the seller of the buyer, but we're not disclosing to the bank. So I think that's the other issue that I think, you know, people would hear this and say,

well, that's kind of unethical, right? I mean, I'm not calling you unethical. I'm just saying, like, in general, you know, is that unethical to leave the bank out of the picture and just kind of pretend like, you know, apologize instead of asking for permission? Sure. Well, I really don't feel that it is an unethical venture here because, you know, the bank went into this, again, wanting to get their payments. they put their loan out.

They say, hey, I'm going to give Josh this loan. I'm going to ask for, you know, three and a half percent. And I want to get that for the next 30 years. And that's what they're planning to get. At the end of the day, after a subject to transaction, that bank still has Josh liable on the loan. Okay. Josh understands that Josh is still liable on that loan. So the bank still has the same recourse that it always would have, regardless of what that

transaction is. Yep. So where does Josh get caught up then? I mean, because there's, there's, I'm now, I'm, I, I, I, Josh, no longer on this property. I've sold it to Brandon, but I owe, I owe money to the bank. If Brandon screws up and stops paying the bank, I'm in deep poop, right? So how, how do I, as, as, uh, the seller of the, the property over,

that issue. Sure. Well, and it's all a case-by-case scenario, you know, and it's all what is, what is any quote-unquote Josh out there going to feel is their risk aversion. So, you know, here's the thing. Let me let me start by saying that, you know, most people that are in the scenario that are going to be selling with subject to, this is pretty much their only option to sell, you know, a good percentage of these sellers. That's it. It's either that or foreclosure, or being stuck with this loan where they're having to pay two mortgage payments. You know, I've sold it or I'm sorry, I bought a house in I guess December of last year that was from a gentleman who got transferred to a job that was hundreds of miles away.

And he had been paying two mortgage payments for a couple few months. And he just couldn't do it anymore. It was killing it. You know, this mortgage payment was $1,500 a month on top of what he was having to pay for out there. And he just didn't care. He said, look, I just need to get this thing off of my books. I don't want to have a foreclosure on my record. You know, I don't care what happens in the future because worst case scenario,

if he's left back into that situation where he has to take back over the payments, he's just where he was when he started. And, oh, by the way, we've been paying the equity down now for two, three, four, five, six years, however, you know, however long away that was. So usually it's going to leave the seller in a better scenario at the end of the day there. Gotcha. Gotcha. So in either way the seller is in a position where they're probably going to lose the property due to foreclosure or something bad is going to happen.

And, you know, the risk, it's risk or reward. I give it to you. If you screw up, I've still lost the property. But at least I might have gotten some cash from you up front. Right. Absolutely. You might get some cash up front. And you don't know what that's going to be, what your situation is going to look like if it ever did.

come back to you. And I should say, you know, our default rate in this owner financed world is very low. We're at about a 3% default rate. That's not terrible. So, all right, so you get these properties. You're buying them with subject to. I'm assuming mostly with no money down, correct? Right. Yeah. Yeah. That's the goal is to get it with no money down. Okay. And typically, do you ever put, I mean, I mean, what would be a typical amount down if you did have to do it down? moving costs? It really, again, it depends on the equity. It depends on the person. Houses with more equity, we're more willing to put money into as a down payment, you know, but it's very rarely going to be above $5,000. You know, I'm closing on a house. Actually,

there's a house closing right now as we speak that we paid $750 for it. You know, and we already actually have that house sold. The sale side is going to close tomorrow morning. But, you know, out of my pocket right now, it's only $750. buy that house and it'll get recouped for me in the morning. Okay, cool. Well, and I'm going to just jump back on on this one. So this one where there's 750, what, what's the case? You know, what's the situation that the actual seller is dealing with? Are they at zero, you know, do they have any equity in this property? Where are they? Yeah, no, they had no equity in the property. Unfortunately, they did a refinance in the middle of just a bad time to do refinances. I think they refinanced in 06,

you know, and they have since moved and gotten another property. This is another one of those scenarios where they're living in a house right now. They were going to have to pick up the payments for the house that I ended up buying from them. And it just didn't make sense for them anymore. They needed to get rid of it. Now, this particular house was in terrible shape. You know, I went through there and there's just garbage everywhere. Half of the kitchen tiles are missing.

The toilet is sitting in the hallway instead of in the bathroom. It's been, you know, taken off of the floor. and it's just sitting there. There's foundational issues, those kinds of things. So in order for them to sell this as a retail sale, they would have to put in a solid $15,000, $20,000 to it and holding costs and realtor commissions. And there's just not room for that.

So again, it's one of those things where it's, well, do I let it go to foreclosure or do we go to one of these investors that can take care of it? Yeah. So who are you then selling it to? Because now you're selling a house that has very little or no equity to somebody that needs a lot of work. Who's buying that?

Right. So there's a whole demographic for that. There's actually a ton of buyers out there. And about 95% of my buyers here. Now, I'm in Dallas. So I'm in, I'm in Texas. We have a heavy Hispanic population. Most of my buyers are Hispanic family members that, you know, they may have their business is a construction business, you know, and their wife's business is a cleaning business. That's about 65 to 70% of our buyers, that's that. So you look at these people and you look at them with Dave Ramsey eyes and they're phenomenal buyers. These are people that have absolutely no debt. They've been saving their cash. They live well beneath their means. But because of, oh, and they're self-employed.

But because of that, you look at them from a bank's perspective and the bank sees strike one, self-employment, you know, strike two, no credit history. You know, and so they go through these. And these are people that can't get traditional lending and they want to be homeowners and they have this pride in ownership and they don't care a lot of times they don't care if it's in terrible shape because they do that all day anyway they would rather get that house own the house make the repair uh repairs and guys you know this one that i sold it on uh this particular house is sold on a 15 year note you know these people are always doing 10 15 year notes and uh they're just fantastic buyers so i mean so regardless of the demographic of the buyer,

we're talking about people who aren't afraid to get their hands dirty, who are potential, are you selling to a lot of investors? I mean, I would consider those folks some kind of investors anyway, because they're putting money in, you know, but are you selling to traditional flippers or wholesalers or

buy and hold investors who are renting it out? Or is it really mostly folks looking to live as a primary risk? residents. Yeah, it's all owner occupants on the, on the subject to and on our financing side. Now, I do wholesale properties and I do flip properties, and those will go out to investors commonly. But when I've taken a property down with subject two, and I'm turning around and doing a rap mortgage on that and doing owner financing, that's all owner occupied. What's a wrap mortgage? A rap mortgage means that I've purchased a house with subject two, which we've just spoken about. And then what I'm going to do is I'm going to turn around and I'm going to try and find a buyer who needs

owner financing. So let's take a let's take some numbers here. Let's say that I buy a house for $90,000. They owe $90 grand on it. And my payments to that bank for that house are going to be $8.50 a month, P-I-T-I. A rat mortgage would mean I'm going to turn around and I'm going to sell that house for $10,000. I'm going to get a $10,000 down payment. That's going to be my profit up front. So now I'm financing a $95,000 note. And I'm going to finance it as such to where their payment is, $1,000 P-I-T-I. So now I've made $10,000 up front and I'm making $150 a month for 10, 15, 20, 30 years. That's a wrap mortgage. Gotcha. All right. That's cool. So what would be the difference in your mind?

So let me actually give an example. I've got one of my best friends bought a house a few years ago. Ended up, you know, moving into it. He owes roughly 60,000 on it. It's probably worth 80, maybe 70. I mean, not enough for him to make a good chunk of money off of it. He wants out really bad right now. He wants to buy a new house, doesn't like the neighborhood, needs out, doesn't want to deal with it, doesn't want to list it, whatever. So he said, Brandon, will you buy it from me? And I said, well, I don't have it. I mean, I can't really do anything with it.

So then I started thinking, what if I did a lease option or a subject to? So first of all, why should I do? I mean, like, what would you recommend in that kind of case? Why would I do a subject to? Or would I? You know, what are your thoughts? Sure. Sure.

Yeah, no. I mean, I think that's a great subject to scenario. And one of the things you brought up there was the lease option. And just to kind of side rail on that for a second, in Texas, lease options are somewhat largely illegal. You know, you can do a lease option for up to 180 days before that lease option has to die. So that's kind of where the subject two side comes in and allows a little bit longer term solution for it. But absolutely, that's the kind of deal I buy all day, you know, one of those where they are just pretty much you know, I say at water, you know, they're not underwater, but they couldn't sell that without

bringing money to the table. Yeah. And, uh, and especially with the work because it needs, you know, five, 10 grand with the work. Yeah. Yeah. Absolutely. And so with that work and everything being taken account or being accounted for, you know, could you sell that house? Because here's another thing, you know, a lot of the owner financed market, when you buy an owner financed house, the, the price is going to typically be a little bit more than retail. Most of the investors out there are going to charge maybe 10% more than what the retail price would be on it because the financing is built in. And that's just kind of where things are. You know, you could just charge the straight retail price at this case. You're saying it's about 80 grand. You know, if you took that house that he owes

60 on and you sold it at $80,000, you could collect a 10% down payment. Heck, you could probably get $10,000 as a down payment on that. And then you're holding back a note of 70 grand. So now, not only have you accepted $10,000 as your profit up front, but you also have an equity spread in the property between that 60 he owes and the 70 that your buyer owes you. And the owner financing interest rates are going to be in between 8 and 10 percent typically. So you're playing arbitrage on the interest that he's paying to his bank underneath as well. So there's a lot of profit centers in owner financing that you just don't get out of some of the the other investing strategies.

And what kind of like as kind of playing the middleman there, you're collecting $100, $200 a month in cash flow on each property, what kind of responsibility, I guess, do you have as a, as the person doing that? For example, if the second guy, the guy who bought it doesn't pay, he gets late or whatever. Do you, I mean, are you in charge of working that out or is that between those two people at that point? Or where do you play into that? That's a good question.

It is a good question. And it depends on how you structure your deal because there's actually a couple of different ways that you can do it. Now, my preference is to go into the deal with a subject to, which means that I am actually going to take title of that property and then I'm going to turn around and then I'm going to sell it. So I'm actually standing right in between the transaction. If my end buyer stops paying, then the next responsible party is going to be me. And I make that decision and I say, okay, well, I'm going to pay the underlying lien off because here's a thing. Let's say that I do have a default that occurs. right, on that property. And let's say that it takes me two months to foreclose on that person and get a new buyer in there. So I've got two months worth of debt servicing. That's $800 a month. So I'm out $1,600, right? But if that means that I foreclosed on my first buyer, I pay $1,600. I get to put a new buyer in there for a new 30-year note with another $10,000 down. Well, that's a $8,500 profit right there in two months off of the same asset that you already made a profit on. And now, you know, who knows how long it was before you're in buyer defaulted, you may have four years worth of equity that's been paid off. So now, instead of owing 60 to the bank, maybe you owe 50,000 to the bank. And so now your $70,000 note, all of a sudden has a $20,000

equity spread in it versus the $10,000 that you had before. So help me out here on the equity spread because I'm, I'm pretty much unfamiliar with this until this discussion, these wraps. And I'm sitting here and thinking, okay, so you've now purchased this property subject to from the first guy, right? The first guy owes the bank money. Let's do an easy, easy number. So $100,000 is the mortgage. The property is worth, say, $100,000, right? Just keep it simple. Sure. So you've got to make these payments to the bank for $100,000, you know, $100,000 to pay off. You now own the property itself, which is worth $100,000. It's worth zero because you owe $100,000.

I mean, you're at net zero. You've now sold the property for, say, $105,000. So you make the $5,000 spread. And just to make the numbers, this is going to get really complicated. But I'm trying to simplify it, which is why I'm kind of stammering here. who as the note gets paid down who's who's actually incurring

that paydown is that you or is that the new buyer that's where I'm I think I need this in writing so I can see it here and get myself I can't even get it so everybody who is listening who might actually be confused you're not alone there's there's a lot happening there's a lot of moving parts Josh is always confused that's okay

yeah that's fine anyway so what Where are we, who's seeing the gains? Are you seeing, are you seeing gains on that? That's a fantastic question that you've got there. And I do want to touch on the point that you said that there's a lot of moving or a lot of moving parts on here because there absolutely are. I mean, the owner financing world, if you notice, I mean, even on bigger pockets, there's not a lot of people out there that are specializing in this, in this niche because there's just so many more moving parts than there is for a wholesale property or for even a fix and flip. So to answer your question,

more directly. So you've got a $100,000 mortgage that you owe Chase. Okay. And now Brandon comes in and he buys the property for 105. He gives, you know, he gives a $5,000 down payment. He now has a mortgage for $100,000. Okay. So we are completely matched up. Yep. From what's owed to the bank and what's owed to me, right? I'm going to make profits by assuming that that, let's say that you owe that bank, or you owe Chase $100,000 at 6%. Well, I'm going to charge 8% to Brandon. Okay. So there's where my money is going to come in.

I have no spread in equity, but it's arbitrage, which I have more interest being paid to me. So as Brandon pays that note off, it will actually be simultaneously paying the bank and my side of things off. I'm not getting any kind of equity differential there because those, numbers are going to be going down at the same time. We've got basically one mortgage on this to Brandon, $100,000. And as that's being paid off, so is the underlying lien. I'm just collecting the interest in between. Gotcha. Gotcha. So, I mean, essentially what's happening is, I mean, as I sit and I think about it, the person who's who's actually benefiting isn't you, it isn't Brandon, it's me. I'm the guy who's the seller. It's the seller. It's the guy who sold

the property to you because you guys are wiping out my debt to the bank. And I say this all the time to sellers because it is a win, win, win scenario. So, you know, Josh, you need it out. We're going to preserve your credit because your payments are getting made on time from this point on, right? So you actually have some payments getting made on time. Brandon's going to get to buy a house that he would have never had a chance to buy the house up before.

And I get to run a business and make a living. Right. Yeah, it took me a minute to kind of sift through all the moving parts. But yeah, no, that makes perfect sense. And that's pretty obvious. So, well, it's not obvious. Clearly, it's not obvious. Yeah.

But I'm just, that's so obvious. I'm just the guy who's not afraid to say I didn't understand it. And I absolutely appreciate that. And now I do. Huge proponent of questions is unreal. I love to sit down with sellers because, and I think that's one of the things that makes us successful as well is because I encourage the questions. I want a seller to know exactly what they're getting into whenever they get there.

And I want a buyer to know exactly what they're getting into when they get there. Because otherwise, you get this, you know, I don't, in other words, I don't, in other words, I don't want to be the guy that's perpetuating that investor theme. You know, people have this idea of what an investor is and they're trying to snake everything away that they can. Every one of my sellers knows exactly where I'm going to make money. I tell them right up front, hey, this is what we're doing. I'm going to buy it to you from you for this.

And I'm going to turn around and sell it for this. Yeah, I think that's great. I mean, you know, my issue always comes, comes into when folks are leaving, leaving things out and, you know, being somewhat less than forthcoming. I think in this case, you have to because really it is complicated. And those people who are probably involved in the situation need somebody to hold their hand before they're willing to dive in. So, you know, I think that's great.

Right. There are two kinds of real estate investors, those who have reviewed their insurance and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs, short-term rentals, or LLC held properties. These gaps surface only when filing claims. That's why investors work with NREG. They specialize exclusively in real estate investors, understanding portfolios, risk at scale, and cash flow protection.

One claim can erase years of returns. If you own a rental property, don't assume you're covered. Have NREG review your insurance with someone who gets investing at NRE.com slash BP pod. That's N-R-E-I-G.com slash BPPod. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action. the footsteps, the late-night fridge raids, yeah, when you're gone, your place is basically on

unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-hosts with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip.

You can relax, knowing guests are taken care of and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. Tired of traditional lenders holding you back, host financial is here to change the game. They've ditched the DTI restrictions and they zero in on what really matters, your property's income potential. So no more chasing papers for tax returns or personal income statements. Think about it.

A lender that values your property's worth over your paycheck. That's the host financial difference. Approved in 47 states, they are ready to help you make your, next big move. Curious if you qualify, just head over to hostfinancial.com and find out. Stop letting outdated lending practices hold you back. That's hostfinancial.com where your property's potential meets unlimited financing. New Year, clean slate, and maybe a vacancy that needs to get filled fast. That's where a veil comes in. With avail, rental listings can be published to 24 top rental sites with one click, completely free. That includes places

renters are already searching, like realtor.com, apartments.com, redfin, and more. No copying and pasting. No juggling multiple platforms. Just one listing that shows up everywhere. If getting rentals organized and filled fast is on the list this year, start with Avail. Sign up for free at Avail.co slash bigger pockets. That's AVAI-L.com slash bigger pockets. Hey, how are you finding the people to sell? Like, what's your lead model look like? Yeah. So, hey, hold on. Can we find, how are you finding the properties to buy before we go? Oh, wait. You know what I just said? Yeah. How do you find sellers, right? Is that what I said? Oh, how are you finding?

Yeah, like house sellers, the leads. Okay. How are you finding the purchase end versus the where you're getting? How are you finding properties to buy? Yeah, there you are. The way that we differentiate that, we say acquisitions and sales, right? So if you're looking for your seller, that's your acquisition side and then you're going to turn around and sell it. One of my biggest lead models right now for acquisitions is dealing with wholesalers and other investors out there.

Wholesalers are routinely throwing away leads that are perfect subject to transactions all the time. Because a wholesaler looks at it from the perspective of this house is at 80% and it needs five grand in repair. There's no way anybody's going to buy this from me and they throw it in the trash. Whereas we're able to turn around and say, holy cow, there's 20% of equity there. Heck yeah, give me that deal. And we turn around and we make that work. And in turn, we pay that wholesaler out. Our wholesalers love us because, you know, like a couple weeks ago, I closed on a property that was, they got $2,500 for something that they were, they literally pulled out of the trash can.

Yeah. Is that a typical fee that you pay the, the wholesalers about. I try to get everybody at least $500, even on things that I'm upside down on. Yeah. Because there are going to be scenarios where like I buy a property. For instance, I closed on one last week. And this will just, this is some of the stuff you run into sometimes. So I had this house.

It was on the market. I'd been trying to sell it for an inordinate amount of time. It was about two months that I had this thing on the market, which is very abnormal for owner financing. Finally got a buyer for it. We were set to close the next week because there's a you have to wait seven days, at least in Texas, you have to wait seven days from the time you disclose that there's an underlying lien to the time that you're able to close on the property. And even on top of that, due to RESPA, the Real Estate Settlement Procedures Act,

you have to wait seven business days from the time you give them there like truth and lending and those kinds of disclosures before you're able to close. So we got our contract on a Thursday. We were set to close the following Friday. Thursday night, somebody broke in and stole all the copper. Oh, nice. So, you know, yeah, so that was just one of those kind of things that you run into. Well, the buyer ended up backing out, but I did have a backup offer from one of these gentlemen

like I was talking about that was just willing to do the work. So they came in, they had a $10,000 down payment. But there were actually a rearage is on this property that I had to, pay. This was one of those properties where the, where the seller hadn't made their payments for several months. So I actually had a $10,000 reinstatement fee. And that was with the bank itself. Yeah. That was with the bank itself. Right. So that's, that seems to me like a situation where the bank might have been borderline like, oh, well, why the hell are we going to take this money from you? We're so close to taking this property back. And I'm guessing you probably had to go in to make the

argument, hey, bank, you know, do you want to hold on to this property or do you want to start getting payments? Well, not even because it's just a, it's just, it's just, just a simple reinstatement fee. You know, it hadn't gone to, it hadn't gone to the attorney's office or anything like that. We hadn't gone through foreclosure proceedings. It was just arrearages. Okay. So I paid the arrearages. I paid the buyer's agent, you know, which was another three grand. So there, right there, I'm down by three grand. But this was brought into me from somebody. So I was sure to pay, they still got 500 bucks on this, right? I mean, it was a deal that that shouldn't have worked. We made it work. I went under, I'll make that money back eventually.

you know, so that's okay with me. And this was something that they weren't going to be able to capitalize on. So they're happy to get the 500 bucks out of it. Yeah, that makes sense. All right. So you, I think it's probably a good transition too. What about selling the property then? How are you finding the disposition?

Yeah. What's your word you said? It's the disposition and... Disposition. That what he said? Oh, no. Acquisition and sale. I was like disposition.

Yeah, the sale. So... Now, Josh. Now I'm going to go Google it and make sure I'm not crazy. Sure. Yeah, how are you finding the person to sell it to? So the person, the, the buyer, you know, that's going to come in and buy this property. That's going to be somebody that, you know, honestly, the biggest, the biggest way of finding those people is a, word of mouth, and B, the sign in the front yard. Okay. By the way, just to clarify, I just want to make sure

that we're all on the same page here. According to Google, disposition is the action of distributing or transferring property or money to someone in particular by bequest. Therefore, I was correct. I didn't expect to be so schooled today. Thank you. No, I wasn't schooling you. I was school on Brandon. He would call me out.

Yeah, yeah, yeah. All right. So, Grant, I've got a follow up here. Sure. To me, this sounds like you're doing a couple things. There's an acquisition strategy, which is the sub two, and there's a disposition strategy, which is self-reasing. the note. He's going to use that word as many times. Yeah, that's pretty much what's happening. Yeah,

yeah, yeah. But listen, so you're, I mean, you're selling the note. I mean, that's ultimately what you're doing. You're selling the note to an owner occupant. That's the big trick there, because owner occupant, uh, uh, owner financing, there is a ton of compliance issues that you have to abide by when you do owner occupied stuff versus when you're selling to an investor, when you're selling to, well, an investor of any sort, whether that be through notes or through like wholesaling. You don't have to worry about compliance. You don't have to worry about compliance. issues that are wonderful, you know, Dodd-Frank laws have put into place. Yeah.

Well, why don't we get into that? Because that's an issue. Dodd-Frank is something that confuses me. It confuses a lot of people. What is Dodd-Frank and why should we care about it? By the way, I just, you know, want to point out here that while I was confused previously on the show, Brandon has just explained how confused he is right now. And I just, you know, I just want the 25, 50,000 people listening to the show to, to, to, to, for all the sportkeepers out there.

Yeah, you know, because that's, in my defense, I'm searching Google right now. Dodd-Frank has how many pages, 9,000 pages. And you haven't read them yet? And I have not read them yet. Come on, man. There's a little. This morning. Yeah, on page seven.

Morning coffee. I'm a little confused on page 7,643 paragraph four. On the third link or. fourth. Yeah. Tell us about Dodd-Frank. Dodd-Frank is one of the single most misinformed things out there right now. We have so many people saying so much stuff that they have never read before with Dodd-Frank,

which is really unfortunate. Well, how many pages have you read? I've actually read the entirety of the Dodd-Frank Act, along with the entirety of the Safe Act and RESPA and Truth in Lending. That puts you at the 1% of the 1% of the 1% of the 1%. So we should protest you right now. I'm pretty sure that's more than Dodd or Frank have read. I'm positive.

Absolutely certain. Right. Yeah. It's some good, exciting reading there. Yes. So, yeah, the thing is, is that there are a lot of caveats that, you know, and actually mark this on the calendar because it will be the day that I am giving our government credit, that they have given the small time investor ways to continue to do business

and just guidance on how to do it the right. right way. Okay. So a lot of people saw Dodd-Frank come out, which is a reform. The section that's applicable to us is mortgage reform. Okay. It is what can happen. Who can you sell a house to and provide a mortgage at that same time. Okay. So what they were trying to do, this was a, I don't necessarily want to say a knee-jerk reaction, but this was the reaction to the housing crash. It was a new jerk reaction. Yeah, thank you. I'll say it. And I'll put emphasis on jerk. Yeah, there you go. So what they saw is they saw the housing crash occur.

And they said, what can we do to make people feel like we did something? And they came out with the Dodd-Frank Act. And this was Barney Frank and Chris Dodd, and they got together. And they wanted to put as many guidelines in place so that they're trying to put buyers into houses that can afford it. Which I get, I understand, and I'm on board. that. One of the things that many, many, many investors out there doing this don't understand is that we are actually considered what's what is what is laid out as a small creditor, which means that well, and I'm assuming that 99.9% of our audience will fall under this. If you don't,

you need to contact Josh and talk about lending some money. But this small creditor is somebody somebody else there, buddy. Small creditor is somebody that has less than $2 billion in assets and did under 500 deals, 500 originated loans the previous calendar year. So I'm guessing that's pretty much everybody listening. A small creditor is allowed to do much, much more than the big boys are, than the Chasets, than the Bank of America's, those kinds of things. One of the common Dodd-Frank items that we hear get brought up is people say,

you can't put a person into a property with more than 43% debt to income ratio, meaning that they owe bills, including housing, that their debt would be 43% or more of what their income is. And that's actually inaccurate. For a small creditor, there is no debt to income ratio cap, period. You can put somebody in there at 80, 90%, if you wanted to. Would it be ethical? No.

But there's no law saying that you can't. and there's just line item like that over and over and over again that gives us guidance of who we can and can't put in there. But at the end of the day, what they're trying to do is give us, afford us protection in court. If we ever got sued by our buyer, and that buyer was able to say,

hey, at the time I went into this house, I was unable to afford it. Dodd-Frank has given us a way to say, actually, I obeyed everything that Dodd-Frank told me to look for, so side with me and the court will do so. So really quick, Do you guys then ensure that they're at the 43.5 or whatever it was and not go up to 44%. I don't.

Not at all. I put people in there routinely that are well above 44% or 43%. And here's the example I use. You run into somebody, let's say, because I've had this, they make $15,000 a month. Can they be at a 50% debt to income ratio and still have enough money to live? Heck yes. Yeah. You know, are you telling me that you can't live off of $7,500 a month for groceries and gas, right?

So in that case, 50% is absolutely fine. Now, what about the guy that works at Burger King, you know, and he makes $1,000 a month? Can you put him into a house that costs 50% of that income? Probably not. I would say no. I mean, absolutely not. I'm not going to put somebody in there that's going to only have, you know, $400 to live on, $500, dollars to live on and they've got two kids.

Yeah. Yeah. So percentages matter less than common sense in this scenario. Yeah. And you're not biased against Burger King workers in general. I love me some whoppers. Don't get me wrong. I'm just saying.

All right. So Dodd-Frank, I mean, we can dig a little bit deeper on this too, but the main thing from what I've learned is like Dodd-Frank affects people who are originating mortgages, which is what you are doing, correct? When you're subject to you are originating. So not when you're doing subject to when you're doing the rat. When you're doing the Rapp. It's the sales side.

Acquisition side. Correct. And then the Rapp would be the sales side. All right. So does that mean that are you licensed then to do that? I mean, do you have to be a mortgage originator? I'm a licensed Armolo, a residential mortgage loan originator. And I also have a mortgage brokerage, which we operate those things through.

All right. So if you. Oh. You have to have that. You go ahead, Josh. We're so excited. We can't even figure out who's talking. So my question was, do you then, do you have to be licensed to originate these loans or can

Yeah, that's a good question. So due to the SAFE Act, it says that if you originate five or more loans in a rolling 12-month period, you must be licensed to originate that loan. The flip side of that is many investors feel like that means that they can't do more than five deals a year, which is also inaccurate. it. We actually, you know, recommend going to an RMLO, finding an RMLO to originate that for you. And that is one of the big reasons I am an RMLO is that I process the loans and originate the loans for the other investors around town that are doing that kind of stuff. An RMLO stands for residential mortgage loan originator.

If you were listening, Josh, you would have heard of say that a second ago. It's repetition. It takes a little while to dig in here. So just, you know, talk to me like a three-year-old, then I'll get it. A lot of them from getting out there. But yeah, you don't have to be licensed to be in this business, but you have to have somebody licensed originating the loan for you in the long run. So if you were to buy these with subject to and then rent them out as a landlord and not wrap them,

you don't need a license. But if you're going to do this like you are doing it off and you need one, correct? Not necessarily because I... Oh, and see you as somebody who is. Unless you use an RMLO, correct. Okay. Some of my clients do five, six, seven of these a month, and they are unlicensed. But I am the licensed person that is taking care of the licensing issues and compliance issues for them.

Okay. So they didn't want to read Dodd-Frank in its entirety. So what are they doing? Are they then calling up and trying to just looking up in the book or online RMLOs and basically saying, all right, this is what I, this is the deal. I found this property. I got this property subject to. I want to dispose of it.

and sell it, disposition it, and, you know, can you originate the loan for me? You get your fee, presumably, and they do it for free. I'm just a good guy. I'm kidding. I don't do it for a reason. I was like, oh, you're going to get a lot of phone calls after this. So, Grant, how's it going, buddy? So they pay you to do it.

Right, exactly. So my fee typically comes from the buyer is who's going to pay, basically all the closing costs are going to be paid for by the buyer. You know, we work very hard in our office to keep as much money in the investor's pocket as possible to keep them from having to pay for anything, and that works on the law firm side as well as on the mortgage broker side. But the closing costs do come from that person, from the buyer and the investor just tells me, hey, I want to get this loan at 8%, I need a $700 payment a month, that kind of thing, because negotiating the terms must be done by a licensed individual. So the investor tells me, I talk to the buyer, we get it all settled

out that way. And what does it take to get licensed? Is it, is our MLO, is that basically the same as a mortgage license? Or is it? Yeah. So RMLO is basically the new designation for a loan officer. Okay. So, so there's a 23-hour course here in Texas, different states are different ways. And then you do have to take a test that goes along with that. And it, In my case, there's both a state and national test. So, you know, there's 39 states in the nation that have tagged on to the national test. So, like, for instance, I can originate in 38 other states around the nation. And similarly, if anybody's there, they can originate in our state.

But yeah, it's a 23-hour class and then lots and lots of reading and studying before taking the test. And then you go from there. So really quick, the national test, allows you to be an originator in 39 other states. It's interesting. I wonder why that's acceptable, but on the real estate license side, an agent, for example, I mean, there's state by state.

It's kind of interesting something I never really thought about. Well, and the reason behind that is that if you look at the job that they're doing, largely real estate law is a local law, right? Sales, selling and that kind of thing. Well, we're dealing with Dodd-Frank here, which is a federal law. And most of the compliance issues that you're going to be dealing with are federalized. So that's why I'm able to originate in other states, whereas like an agent would have to learn more state-specific laws for these other ones. That makes sense.

That makes sense. Cool. All right. Cool. All right. Go ahead, Brandon. Okay, I have a question. This is going back maybe too far.

You know, we move past this part of the conversation. But when you're actually closing these deals, are you closing them at a title company? or does everyone need to do that or can you just sign a piece of paper with a notary? Yeah, that's a good question. Yeah, you do need to go through a full closing. You know, typically these kinds of closings are going to be done through an attorney's office rather than a title company. However, you can do title closings. The thing is, is you actually don't usually get title insurance on the sale side of a deal like this.

There is already title insurance on the underlying lien. That's to the bank. and then you do that obviously your abstract of title or title run or whatever you do or whatever you choose to do from the time that your your seller, the acquisition side, has bought the property to this point in time. A couple of caveats, you are actually unable legally to do a title policy on top of an FHA loan or a VA loan, anything government related. You cannot do a title policy on the wrap.

However, if it's conventional or something else, then on the sale side, you would be able to let your buyer purchase a title policy if they so chose. Can you still do a wrap on an FHA loan? Yeah, you can still wrap it. You can still wrap the mortgage. And like I said, pretty much all of my buyers do not choose to go with the title policy because the title policy is going to be, you know, upwards of $1,000, $2,000, something like that, depending on the value of the house.

And again, the title policy does exist on the underlying lien from when your original seller purchase the property. Cool. So walk me through this. And this is something I wanted to ask a while ago, but we kind of got into Dodd-Frank. And now that we've jumped back, let's talk about the length of time for a transaction. You find you identify a property that you want to acquire via a subject to. How long does that typically take before you've closed? So what I do when I go under contract with all of my buyers is I go under a 60-day option period. I'm sorry, with all of my sellers on the acquisition side. I go under a 60-day option period that gives me two months to market the property for sale while my seller is still paying the underlying lien. Got you got you.

I was going to say, okay, so now you've just introduced something else complicated into the mix here, an option. And so what does that look like and how does that work? Okay. Well, well, the first, to go back and answer your... question more directly on that last question. It typically takes two or three weeks to get something from start to finish close. Okay. Perfect. The option period, that is the method that we use. So here's the thing is I put under, I put a lot of houses under contract, you know, every month. We're doing between six and 15 houses a month. And when you put a house under contract, if you were to have to close on it

right then and start debt servicing right then, that gets really expensive. You know, let's say that it doesn't take two or three weeks, let's say it does take two months to sell this property. Well, there's two months worth of house payments that I would have had to made. And let's say that it doesn't sell for two months. Do I still want to try and sell that property or not? So what we do is we go under an option period, which gives us the right to end the transaction at any point in time within that 60 days. And during that point, we have a written agreement that allows us to market the property.

So we're going to put signs in the yard. We're going to put ads up on Craigslist. We're going to go to postlets.com and put ads up there. Try to find a buyer for that property. When I find a buyer, that's the point in time that I go back to my seller and I say, hey, Josh, I have now found a buyer. Brandon wants to buy this property from me. So let's close tomorrow.

Josh, you say, okay, cool, I'll be there tomorrow at 11. And then I call Brandon and I say, okay, we're ready to close and you be here tomorrow at 12. And we just kind of go A to B, B to C. Okay. And with this option, they're not just. just giving it to you for free, right? So you've got to put some cash down in order to secure the option. Is that correct? Yeah. I mean, although minimal, you know, here in Texas, it's, I mean, it's like a $10 fee that you hand them. Wait, so you're literally giving somebody a $10 option fee,

tying their property up, getting it under contract for two months. At any point in that two months, you can walk, which is pretty much the benefit of the option. And that $10 is giving you the right to get out there, market it, hopefully you find them a buyer, find a buyer for the deal. You find the buyer. You close with them. And it almost feels like a wholesale. Yeah. I mean, it's in that way, it's very similar to it because you put no money into it.

Yeah. But, but oh my gosh, you look at the upsides versus wholesaling and it's just tremendous. Well, you got cash flow, right? Well, yeah, yeah, cash flow on top of it. Because here's the thing, a typical wholesale deal, a typical wholesale deal, you're going to get, what, $5,000 for right around. at least locally, that's how it is. You know, whereas with an owner finance deal, you know, we get 10, 15, 20, sometimes $30,000 down payments right up front.

Well, that already blows out what you were getting on the wholesale side, but my average cash flow is $350 a month. You know, I've got some that are cash flow in 600. I've got some that are cash flow in 100. But I'm doing that for however long is left on the underlying lien. So let's say that Josh, you only had 15 years left to pay Chase Bank. right but I've sold my house to Brandon for 30 years. Yep.

So for 15 years, I'm only going to make $150,200. Right. But after that underlying is paid off, your entire job or Brandon's entire payment is going to be my profit. Yep. That's a beautiful thing. So that's cool. All right.

Let's, we got to kind of start wrapping this thing up, obviously. We're getting, you know, we're at about an hour mark. So what I want to ask you kind of my last question is, how long have you been doing this? When did you start this process? because you're doing six to 15 deals a month, you said, right? Yes. So, I mean, how long did it take you to build up to that point where you're doing, you know, literally hundreds of transactions?

Yeah, whenever I bought my duplex, that was January of 2012. My first subject to transaction was July of 2012, and then it's kind of moved forward since then. You know, it was third quarter of last year that I started bringing on what we call our acquisitions team, you know, where we have other investors that we were training how to do that kind of stuff and then letting, you know, having their their deals kind of funnel through and we would work together on those. And it's just kind of been growing and growing exponentially from that point. You know, that was, that was really when things started to kick off whenever I changed the strategy

over from, okay, I'm going to send out all these letters. I'm going to put stamps on and I'm going to try and get this deal to. I'm going to work with wholesalers and other investors. So how big is your team today? I have about 20 people. of acquisitions team members. Of that, truly active members, I've got probably seven or eight that are truly active bringing consistent deals in. The other ones, we'll get one-offs here and there. But, you know, we're a resource for everybody. So how does that work? You go out and say, hey, I'm going to train you, investor number B, investor, you know, Brandon here to do this. And if you find any opportunities, you send them our way and we'll give you a fee, you don't have to

work, but if you do and you bring stuff in, is that right? So yeah, what we do is we go under an agreement where it says, um, you know, we will train the full ends and outs of subject to owner financing wraps, all that kind of stuff. And even, you know, with the, with wholesaling and, and cash deals and rehabs and all that kind of stuff, because we, we still do that sort of thing. But we go on an agreement that says all of their owner financed deals that they pick up, uh, we go under a two year agreement with these guys that, all the under or finance deals that they pick up, we'll funnel through triple equity and we will work together and partner up on that. If they get a wholesale deal, they can wholesale whoever they want or cash deal, you know,

whatever. That is all kind of inconsequential. However, we do typically work. I mean, I've gotten a lot of cash deals from my acquisitions team because, you know, because we do have the buying power. We are able to buy these houses with cash and turn around and flip them. And so, you know, all the better for them to not have to go out and find that buyer's list that everybody is always looking forward to just know, hey, this guy that I'm working with every day all day already, would be the one that's going to buy this property and then we'll partner up on profits there or we will buy it from them as a wholesale. Okay, cool, cool.

Yeah, I mean, it's definitely an interesting, you know, model is to empower other people to go and, you know, work with you. And you're not just, I mean, you're training them, which is helping them with their future. And it obviously helps with your business. And it's right. One of my favorite things about the whole idea of subject to, and along with lease options too that I love that it's you can structure them in such a win win win win win win way like more than almost any other strategy out there every party can benefit if you do it correctly right if you

you know cross your teas and dot your eyes correctly so I'm definitely a big fan and I mean another thing too is a lot of people might think they might listen to the show and think you know well I don't I don't want to do a hundred houses you know a year of subject two I don't want to be you know do this full time but the thing I think is important is to pick up on these skills or like in a toolbox, right? So you set out marketing, you do whatever you do to get deals. I mean, I throw away nine out of ten deals that I get because I'm not a subject to investor. I don't, I don't focus on that area. But I should at least consider it. And I need to do more of that because, yeah, why am I throwing these deals away when I could actually find a use for them?

Well, and that that realization is exactly why we work with so many wholesalers, because the way that we structure it with wholesalers is they literally just shoot us a name and a number. And we take it from there. And then closing day comes and they get a check in the mail. That's cool. You know, so for those nine out of ten people that you're throwing away, that's a pretty sweet way to pay for your marketing budget. Yeah, that's great. Yeah, that's awesome.

Very cool. So we all need to find our grants, grant camps or become the grant camp for our areas and, you know, fill that gap. There you go. That's great. Well, cool. That's great. Well, why don't we move on to our favorite sound effect of the show, the Manly sound effect?

It's time for the fire round. All right. They fire around. These questions come from the Bigger Pockets Forum. So, Grant, I know you're pretty active on there. So you've probably seen some of these and maybe even jumped into those conversations. But for the benefit of everyone listening, let's fire them at you. Number one, do you think a college education is beneficial for investing in real estate? I would answer that with no. I don't have a college education. I did not go to college. I've taken courses here and there that I felt were applicable for what, you know, I took a Spanish course. And whenever I was working at, IT, I took some programming courses, but that's all I've done in college. I think more than a college education is determination and just going out there with a bullheaded viewpoint of, hey, I know that this is something that can get done. I'm going to get it done. Yeah, yeah. Well, under the discussion of education here, what's the factor that makes the difference in, say, a good, in your case, acquisition specialist?

or student of some sort, somebody that a mentor would want to take under their wing, for example, on a bad one. So, you know, you have these guys who come in and some say, yeah, well, train me, train me. And you say, well, yeah, you don't have the chops. What is that? What I'm looking for in people is somebody that's not afraid to go out and just do it, but somebody who's also not afraid to say, I don't know the answer to that, right? So my number one candidate is somebody who will ask the questions, but then isn't afraid to go act, right? So actually, and this would be a good time for that story. I mean, like I said, you know, third quarter last year is when I started doing the acquisitions team members. When it came time for me to scale triple equity into a larger, larger

operation because of the acquisitions members and, you know, and I've since hired a W2 employee and those kinds of things, I needed to bring on another partner. And, you know, the first place that I looked was who's performing in my acquisitions team. And so now Ronnie Walker is our third partner in Triple Equity who started out as an acquisitions team member. But he was the guy that he would call me. He would say, hey, man, I've got this deal. What am I supposed to do with it?

I would walk him through it. And then he would go get it done. You know, he wasn't afraid to talk to the buyer. He wasn't afraid to keep calling me. If I wasn't able to answer the phone call, he would call back. He would shoot me an email. And that's what you need to do to get this to work. Yeah.

Gotcha. That's good. Gotcha. All right. So if you, well, that was my question. So I think it's yours. I got, I got excited and was going to take Brandon's question. That's all right. I don't mind. You know, I share. All right. If I were to, if you were to give one tip to someone just starting out regarding partnerships, this actually flows really nicely from last one. Regarding partnerships. What would it be? Somebody looking for a partner. What would you be your best tip? It would be to know your strength and use it. Too many people. that I see go out there and say, and they look in their mind and they say, well, in order to be a good investor, I need to have, you know, money or I need to have the knowledge or I need to have this. And they forget to say, what do I have and how can I use that to become a good investor?

So most of the, most of the people out there and one of the things that Ronnie did is he looked at himself and he said, what do I have? He had the ability to follow up with people and stay consistent. he had time. And so he brought those and leveraged them with me and said, hey, I've got time and I'll follow up on leads. What can we do together? Right. That's great. That's really good. That's really good. Can I go now? You can go now. I'm done. Here we go. All right. So do you have any suggestions for part-time or on the side income sources while you're first starting out in real estate? Yeah. I mean, the subject two thing was my was my side job. at first. I mean, that was what I was doing. It made it to where I had to spend little to no money of my own to get the deal done. I spent a little bit in marketing budget. I used Jerry Puckett, who's a user on here for my first marketing deals. He was able to put some great lists together for me and really get things going there. So I do recommend talking to him. But set things up like, so when I was working full time, I talked to Jerry, got him to handle the marketing. I started with an answering service. So my phone number routed to an answering service and they would take all of the.

calls. They created the email. They shot the email to me. I would take my quote unquote cigarette break, even though I didn't smoke and then I would go and follow up on some, some of those calls and get the deal done. Set up an appointment. You know, most of these sellers are going to work nine to five anyway, so their appointments are going to have to be after work in the first place. So don't let the fact that you're working a job hinder this kind of stuff when you can set up a virtual assistant and, you know, outsource these things to get it done. Cool. Nice. That's great advice. Great. Yours. No, it's mine? No, that was, that was That was my, but thank you know what.

You could have taken it so easily, Josh. Let me take this one because, you know, I mean, you know, you gave me an opportunity and I feel so blessed. Take it. Take it. All right. My question is, do you ultimately recommend people get their mortgage license, real estate license, or neither? That's a hard question to answer. It really is because it is such a case by case basis.

You really have to look at your scenario and don't look at the license as the answer. look at the license as a step and say, does my ladder go higher if I get this license? And if the answer is yes, then get it. If the answer is, well, I get this license and then I've got to have a license, then don't get it. There's no need for it. Okay. So in my case, in my scenario, we were turning and burning a ton of owner financed deals. I'm having to pay out money to another RMO. And I saw a market opportunity. So I took it. I became licensed. And that has since stepped things up for us and we've really grown there. But there was never a need for me to become a real estate agent because I was, I'm not working off of the MLS. I'm not taking any deals down there. I'm not selling any deals down

there. So it's not, there was no need for that. All right, Maverick. Goose, are you going to churn and burn? Churn and burn, baby. Wasn't that a Top Gun reference? I have no idea what you're talking about. Last question of the fire round. Do you not know Top Gun the movie? I have not watched Top Gun the movie. Oh, I thought you just didn't know it. No, I just, well, that too, but I don't I don't, I don't, I have never watched Top Gun. It's on my list of movies to watch, you know. There you go. All right.

Do you have a suggested software to help organize your real estate business? Absolutely. Potio. Potio.com is excellent. If you guys have not looked at using something of that sort, you should. It's an excellent way to stay organized. Some of their, their views that you're able to use there are fantastic. You can hook up with, you know, we hook up with a lot of our wholesalers that have

Podio and they're able to just send us leads directly out of there. So we've already got pictures. We've already got everything. They just say, hey, share this with Grant. And everything pops over to us. Fascinating. That's great. We've tested Podio as I.

Podio, sorry. As I would call it. The gentleman with his pinky out over here. I've been testing Podio late. And it's going on. Oh, yeah, I'll test that patio thing. Yeah, it's that redneck thing, man. So, yeah, let's see.

and I just lost half my audience. Yep. No, I've tested it. I mean, I think it's all right. We haven't fully figured out how to best use it for our needs, but I think that the UI is pretty good. I encourage people to check it out as well. Absolutely.

And for free software, too. That's the other thing because I'm cheap. And I like free softwares. And when they can offer me a benefit for being no money, that's a good day. Them cheap softwares is real good for my business. Awesome, man. Well, Grant, so we really thank you. Lots of, lots of good topics. Before we move, before we get out of here, let's get to the Famous Four here. And with that, Famous Four. All right. So, Famous Four, these are the questions we ask everybody. And hopefully you've prepared a adequate answer. First question. I'm being graded over here.

Our first, it depends on your choices. First question is, what is your favorite real estate book? You know, I'm such a non-reader. I actually don't. I think the only two books, and I say this literally, the only two books that I've probably ever read, including school, would be Rich Dad, Poor Dad, and the Bible. I think those are probably the only two books I've ever gotten through.

There you go. So rich dad, poor dad was great. I also actually really liked the millionaire next door. I got, you know, in- Halfway read it. I halfway read it. But I really liked some of the, just principles behind it. I'm a nerd on studies.

I like seeing studies and actual numbers go behind things. So that was really interesting to see. So you're saying Dodd-Frank wasn't your favorite book of all time? That was not my favorite book of all-time. If you could call it a book, I don't know what you call it, but it's Cyclopedia, Bill. Right. All right, cool. Well, I guess then that kind of overlaps with our second question, but do you have a

a business book. Yeah, again, I just, I'm not a big, you know, and here's the thing. It's not that I hate reading. I'm just, I'm not a big book reader. I learn, uh, through things like bigger pockets. I learn through things like, uh, like, uh, you know, Reddit.com has a, has a real estate subreddit in there, um, which is not largely friendly to investors, but it's still there and there's still, you know, information to be had. So I'm one of those that I go out and I pick up bits and pieces here and there. And that's really where it comes from. And I ask questions, questions to the people that know what they're doing. So I can't answer a favorite business book, but I'll say bigger pockets for you. How about that? That's a good book. It's a best business book right there. It might have to be. All right.

So what about hobbies? What do you do for fun while you're not doing 7,000 deals a year? Oh my gosh. Yeah. On what time, right? It's a, you know, I play guitar. I play guitar for my church. do that on the weekends. I really enjoyed that. Oh, boy, you guys could do the bigger part. Let's get the church, I'll go in here. There we go. All right, moving on. What else do you? Sorry, I don't have the talents that you two guys have. Apparently not.

To play an instrument. Oh, my goodness. This has devolved seriously. I'm kidding. I'm kidding. No, you know, I like doing that. I like, you know, we have a group of our friends over every week. It's really hard. I said it half jokingly. It is really hard to find time. I mean, this is a 12 to 14 hour day, six to seven days a week business. I'm not that guy that sometimes comes on and says, hey, I'm in here for financial freedom and I get to sit on the beach all day and just make money. That's not how this works for me. I do work 12 plus hours a day. So, you know, we kind of plan and every week we have friends over and we, during Game of Thrones

seasons, we'll watch the Game of Thrones night and cook a big meal and just kind of hang out there. What's Game of Thrones? Oh, come. It's a cartoon. Oh, cool. Maybe I'll get to see it someday. Yeah, maybe someday. I'll tell you this much. Just fall in love with every character you ever meet.

Yes. I've fallen in love with the two that I'm on the air with right now. Your character is you. Thank you. All right. All right. Final question. Final question.

Who is your favorite Game of Thrones character? Oh, gosh. Seriously, that is not the final question, Brandon. Okay. Final question. What do you think is the thing that sets apart successful? investors from those who give up and fail? Stupidity.

Forget when this. Being able to forget your failures. That's one of the things that I don't believe in failures. I believe in learning experiences, right? And I think that a lot of people get wrapped up and if something doesn't go to the way that they expected, that it's a failure. And they're done with it. And they don't want to do that again.

So I think the successful investors that I've ever known are the ones who, who can just move on with it and who are bullheaded and get out there and actually act versus just get into that learning loop and be afraid of being afraid of actually succeeding. So, you know, just kind of that ability to act when it's time to act and learn when it's time to learn and just forget what's gone wrong and only focus on what's going right and move forward. Well, don't forget. Learn from the experience, I should say.

I got you. Oh, let me forget and do it again. Yeah. Nice. All right, man. Well, listen, it's been a real pleasure. Where can people find out more information about you? You can go to my website, either Texaspridlending.com or tripleequity.net. And you can always email us at mail at triple equity.net. And that'll make sure that we can get back with you on anything that you've got questions about. Prepare for the onslaught. I'm ready. There you go. And also, presumably, you've got a profile over on that. Bigger pockets. Sorry, I should mention that. Bigger pockets is a great way to get a hold of me too. You can message me on there as well. We can go back and forth there. All right. Cool. And otherwise, just for those listening, Grant, I'm going to ask the question. You are not an attorney. Is that correct?

I am not an attorney. All right. So Grant is not giving out legal advice in this show. And I am certainly not giving out legal advice, nor is Brandon. So we definitely encourage you to. I can't. No, you can't. It's probably a bad idea. I can tell you that now. I mean, because we do cover some heavy topics here that, you know, none of us purport to be lawyers. And I definitely encourage any time there's anything that you're curious about, particularly in real estate, to have a good real estate attorney on your team and pass everything, everything past them. So don't, you know, don't just assume that the information you're getting anywhere. is correct. Always pass it through to your attorney because that's going to be your C-Y-A.

And I can't agree with that more. That's actually why my first partner was a real estate attorney. So you've got to consult with an attorney that knows what's going on in that topic. Yeah. Grant, listen, thanks so much. We appreciate it. And for anybody listening, you can check out the show notes on this episode at biggerpockets.com slash show 70. Otherwise, you know, jump in, get involved in bigger pockets, join us, participate, engage, read up, and, you know, just do some learning, do some networking, and build your business. That's what we're here for. Otherwise, of course, we'll see you out on the other social nets, the Facebooks and Twitters and G++s, interact and join us there. And until next show, we'll see you. I'm Josh Dorkin, signing off. You're listening to Bigger Pockets Radio.

real estate for investors large and small. If you're here looking to learn about real estate investing without all the height, you're in the right place. Be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. All right. Do you have a suggested, do you have a suggested? Let me try this one more time.

Yeah, all right. Do you have a suggested size? to help organize your real estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calicoe content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter,

please visit www. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.