BiggerPockets Real Estate Podcast - 757: $0 Down Deals, 3% Interest Rates, and Insane Property Purchases w/Pace Morby

Episode Date: April 25, 2023

When you think of creative finance, you think of Pace Morby. He didn’t invent creative finance, seller financing, or subject to investing. Instead, he perfected it, buying deals often with zero dollars down, low (or no) interest, and with terms any investor would dream of. But maybe you don’t know what creative finance is. Maybe the terms “seller financing” or “subject to” have never been mentioned to you before. As Pace describes in this episode, this industry-wide ignorance of creative finance is by design and keeps you from building wealth. To Pace, creative finance is the ultimate key to building a big rental property portfolio. But most sellers, buyers, and real estate agents don’t know about it. Describe creative finance to a regular realtor, and you’ll get laughed out of the listing. But, bring it up to a buyer, and suddenly everything changes. Don’t believe us? Pace brings up numerous examples in today’s show of how he was able to get real estate deals done that agents and realtors alike thought impossible. In this episode, you’ll get a complete intro to creative finance. Pace runs through the definitions, how each strategy works, why NOBODY talks about creative financing, and how YOU can start investing today (yes, TODAY!) with zero dollars out of your pocket and even with limited experience. Ready to start your rental portfolio? Tune in and get your copy of Pace’s new book, Wealth without Cash, today!  In This Episode We Cover: How Pace Morby buys multifamily real estate for NO MONEY out of pocket  Pace’s new BiggerPockets book that’ll help you get your first creative finance deal done  Seller financing explained and using it when a seller won’t budge on purchase price  The “subject to” strategy and how to lock in a rock-bottom mortgage rate even in 2023 Underwriting a real estate deal and seller lies that can often trick an inexperienced buyer Tax benefits of creative financing and how it makes a win-win for you and a buyer  The risks of subject to and seller financing and how to EASILY avoid them  And So Much More! Links from the Show Find an Investor-Friendly Real Estate Agent BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch BPCON2023 Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area David's BiggerPockets Profile David's Instagram David’s YouTube Channel Work with David Rob's BiggerPockets Profile Rob's Instagram Rob's TikTok Rob's Twitter Rob's YouTube Boost Your Knowledge with Pace’s Creative Financing Bootcamp BiggerPockets Podcast 527: 300 Doors, 100% Creative Financing Real Estate Rookie Podcast 236: Creative Financing 101 with No Cash, Credit, or Credentials Real Estate Rookie Podcast 280: How to Buy a Rental Property with NO Money OR Credit Rob and Pace’s Recent Collab Books Mentioned in the Show: Wealth without Cash by Pace Morby Connect with Pace: Pace's BiggerPockets Profile Pace's Instagram Pace's YouTube   Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-757 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show. 7.57. The first step that we do is we will call the agent after 100 days on market. We say, hi, agent. Would your seller be willing to let me take over payments if I could get your commissions paid? And this agent, we called this agent 16 times. Agent said, nope, my seller's not interested. Nope, my seller's not interested.

Nope, my seller's not interested. We waited for the listing to go expired. We called the seller directly. We said, hey, would you be willing to let us take over payments? The seller says, absolutely. I go, did your agent not ever bring this to you? Most of the time, the agent is not even willing to bring creative finance to the table because most agents don't understand creative finance.

What's going on, everyone? This is David Green, your host of the Bigger Pockets Real Estate podcast here today with my good buddy, Rob Alba Solo, coming to you live from the speaker circuit. He is high in demand. He's traveling the country. Rob, thank you for taking some time out of your very busy schedule to bless us, PLEBS, with your presence. Where are you at?

you talking about right now? I'm in Austin, Texas right now. And I am talking, my talk is five ways to pivot your short-term rental business in 2023, so that you don't go broke. It's been really fun, man. And I wouldn't miss this for the world because I, you know, Pace said that he was being interviewed by his two heroes, but I felt like I was in the room with my two heroes. So this is a really, really fun episode. We're actually going to be talking about how to approach creative finance deals, how to source them, ways that you can actually find buyers. potential scripts and things that you can say to basically get them to let you sub to their home or finance it to you. Now, if you're an experienced investor, I think you're going to get a lot out of

this because you're going to hear about what the multifamily space looks like and why you might want to start transitioning into it. You hit a point where you get enough units and you realize, I don't want another one of these. It's going to take a lot of time because either you're going to have to hire more people to manage what you have or you're going to have to sell what you have in 1031 into something bigger so that you can get some of your time back. And we talk about ways that That can be done today, particularly using seller financing options because in the multifamily space, the owners of those properties are much, much, much more familiar with this method. Before we bring in Pace, today's quick tip is you can pre-order Pace's book that he published

with BiggerPockets, Wealth Without Cash, by going to BiggerPockets.com slash Wealth Without Cash. And if you've already pre-ordered the book, we have another quick tip for you. You can use Pace's tool that he uses to find people that own properties and contact them directly. true people search.com. Check it out if you're looking to skip trace and you want a good program to do it. Rob, anything you want to add before we get to the interview with Pace? I got a third quick tip. If you pre-order wealth without cash, Pace actually put together a video companion guide for every single chapter of the book. So when you get the book, you get access to that. And I think he said it's like three hours of content per chapter or something like that. He walked us through it in the show and it sounds very exciting. So be sure to get your orders in.

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My two heroes on the screen. Looking forward to this. Thank you. Yeah. And speaking of that, we were just talking about one of your two heroes bought one of your leftover deals. Would you guys mind sharing that to today's interview? Getting the sloppy seconds over there, Robbie.

Yeah, okay. Okay. So I was on a conference last week. And I was walking back to my room to actually go do our interview with Barbara Corcoran. And I wanted to get there a little early set up. And so this guy was like, dude, please. Like, can I chat with you for a second? I'm like, yeah, walk with me. And then sort of like, more people will accumulate. I was like, all, guys, well, hey, it's great. I got to go do an interview. And they're like, wait, wait, wait. Just give me one more minute. One more minute. I was like,

okay, what you got, man? He's like, I've got a sub two deal for you. And at that moment, I noticed he was wearing the P-Signed hat. And I was like, oh, you want to pay some students. And he assigned me a deal in Austin, Texas, and I was really excited. I was like, man, thanks for coming to me for this. He's like, well, actually, I sent it to Pace first, but he said no, but I thought you'd really want it too. And I was like, I'll take it. Dude, we are not one to turn down Austin deals. That actually is a really good deal that you bought, but we are buying so many deals because of what's currently going on in the economy with interest rates going up and all these sellers that are kind of trapped, that Molly, who you know, Molly has helped do some transaction coordination with you

and your team. She's great. She calls me, she has Pace. You have to start saying no. We have five TCs working full time and we can't keep up. So she made me say no to a great Austin sub two deal. And I'm glad it went to my hero Rob Oswald. Well, and I told him, I said, dude, if I buy this deal, because he was like, we're comping it out like literally in front of an elevator for like 10 minutes. And I'm like, if I buy this deal, I want your next one. And he was like, well, you know who's getting the next one. And I was like, all right. But when Pace says no, I want the next one. Was he going to give it to David Green? Maybe. I'm not going to let it happen. I've already established myself as number two in his heart. Yeah. Rob has fought his way to the front of that funnel. I did it, man. Smart man. It's a good deal. That deal of cash flow. I can't remember the interest rate. The interest rate is like in the threes, right?

Yeah. So it's a really good deal. It's a 3.3% interest rate. It's a $300,000 mortgage FHA, I believe. The seller is financing $200,000, and it's 0% interest, 0% due for five years. And in, five years at balloons. So I basically have to figure out how to come up with 200K in five years, but that's a problem pace for future, Rob. Here's the great thing about all my balloons with my students. Okay. So you look at the paperwork before you close on it. The contract states that if for whatever reason you cannot refinance at the end of your balloon, your balloon automatically extends an additional term. So you'll get an extra five years. So let's say that there's a market. Oh yeah. Oh, come on, man. We don't let those balloons pop. We keep them going. Interesting. Well, that's new information. And since it's my student, he used my contract, which means if he used my contract, you don't have to worry about the balloon.

Oh, okay. I mean, I was fine with it because I was like, at the very least, I get a property under market or around market, maybe a little bit more expensive for five years. The PITI on it is $2,300. It should gross around, I want to say like $65,000 on AirDNA. According to that, I have to run more comps and stuff. It should gross around $65,000. So net, I'm looking at about $2K a month just on a short term and on a medium term. I actually think I'm going to be doing like 1,500 to 2,000 a month on it. I love it. You had no credit check. Nobody asked for your credentials.

Nobody's going to ask how much money you have in your bank account. Nobody cares about your job history. Nobody cares about your tax returns. And you just took over a 3.3% sub two deal. And they're financing you their equity at zero percent interest for five years. That's pretty dope. Man, so you were saying that the five year balloon reextends if I can't refi out of it. Do any other terms change, like your interest rates or,

any more points. If I can't refi, do I owe the seller or anything? No, the exact term will mirror and it will double again. So let's say that the market fluctuates and you can't get a refinance or whatever the thing is. What it states specifically in the contract and in the note and deed of trust that will get created at the title company is it states that if you can't, if you cannot refinance due to market conditions or get out at the price that you bought it for, it will automatically extend an additional five years. Sellers already signed off on it and you'll get a note and deed of trust recorded at public county recorder that gives you that ability. Wow, that's cool. And so what's really cool about this one Pace, which is like the unicorn that I've been searching for for probably

the last year, it actually cash flows as a long-term rental. The long-term rent is $2,800, and it'll cash flow as a midterm and a short-term. So I've got the trifecta here. No matter what happens in the next five years, I'm going to cash flow. And it's pretty rare to find a deal these days with the interest rates that do cash flow both for long-term and short-term. So it's nice to It might be because everybody's bringing me their first round, and then the second round goes to you. I don't know. Maybe. Hey, for everyone listening, when Pace says no, Rob will say yes.

All right. So let's bring clarity on a couple points there before we get into the show. We mentioned TCs. That is a transaction coordinator. That's a person who's making sure that this thing actually closed for Pace's team. So if you've got five TCs and they're not able to keep up, that means you got a lot of deals coming in. We mentioned balloon payments, which is basically a fancy. lending term to say, I will only give you the loan for five years and then you have to pay it back,

but it will be amortized or paid off as if it's a 20, 25, 30 year loan. You're not actually making payments so that the balance will be due or will be already paid off in five years. You just have to pay whatever is left on it and Pace you mentioned that you set it up so that if it can't be refinanced, you just automatically extend into another five year period. And I'm assuming that you write in there, it will be at current market interest rates or you, a, a, one or two percent, something that's a little bit better for the seller, but isn't going to be completely devastating. So the person owning it. And Rob mentioned that it would cash flow as a traditional rental, meaning just putting it on a lease where they pay a monthly rate to live there

or a short-term rental or a medium-term rental. So that's pretty cool. We got to see behind the scenes what's going on in each of your worlds. Oh, and we also mentioned sub two, which is sort of Pace's deal. That's where the little two on his hat and the peace sign comes from, which means Rob will be taking over the loan that the previous owner already has. That was the FHA portion of it that was mentioned. So he will be buying the property subject to the lending that's already been placed on it or the lien that's already been placed on it. So rather than having to get his own loan getting pre-approved for a mortgage, having to submit all of his documentation going through the root canal that can often be getting a pre-approved for a mortgage,

he will just be taken over what the seller is doing, making their payment for them and then making an additional payment to the owner for the portion of the equity. that they have in the deal. And I think we cover the majority of it. If you guys want to know more about the specifics of what we just talked about, because it may sound like magic to the uninitiated, you could check pace out on the rookie show where he was just interviewed. Episode 280, gets great background info into creative financing, what we mean when we say subject to all these phrases like balloon payments.

They start to make more sense when you get a little bit more into the world. It's not nearly as complicated as it sounds, which is really a thing with real estate. I can't tell you how many times I've been incredibly confused. When I was first trying to learn just about multifamily property and cap rates for years, I just nodded my head, not really ever understanding what the hell was being spoken about. And then after diving into it for a long time, I'm like, oh, that is not nearly as complicated as they're making it sound. I got a better definition of it now. I understand cap rates.

So don't give up if you're one of those people who are hit listening to this thinking, it's too much. Is that something paste that you come across with with some of your students? Oh my gosh, so many things. You know, people, what's interesting is people will go to become doctors. Like, I have an anesthesiologist that, you know, went 12 years to school. And they come to me, and after six months and they only bought two deals, like, oh, my gosh, I'm just, I want to buy more. I'm like, you went to school for 12 years.

I always say that, too. To become a doctor and make $300,000 to $500,000 a year. Put in a couple of years of patients in real estate. It is not a get-rich quick scheme at all. Now, there are strategies that you can utilize to gobble, blew up houses faster, but still you have to digest the terminology at your own pace and pun intended there. But multifamily definitely, when I got into multifamily, I felt like they made up these terms to make it challenging for me to get into. That's how it feels. I was like, wait a minute,

I just learned everything about single family and now I got a whole layer of new terms. And a lot of their new terms in multifamily meant were the same thing as in single family, but they changed the words around. Exactly right. We were just having a session in my group Spartan League and we were talking about these things and everyone was so confused and Pace you're exactly right. I was like, okay, you already understand the concept of cash flow in single family. In multifamily, they call it NOI and they don't include the mortgage payment. It's the same thing. In single family, we use comparable sales to determine what a property is worth. In multifamily, they have a cap rate to determine how much demand there is for an area, and this is how it goes. Like it's the fundamentals when you understand

them, you start to see that they show up in every single asset class and every single way of analyzing. They just have different names. And multifamily feels like it is purposely confusing. And I think it is. I think a lot of these multifamily brokers got in a room like 50 years ago and they go, how do we create another layer? So we keep this all secret. Guys, the good news is you just have to break through the terminology layer and you understand everything. That's it. Just write down notes or words you don't understand, go back on bigger pockets, type in YouTube and you'll get educated. You'll learn it all. And that's what we're going to talk about today. We are going to be talking about creative financing within the realm of single family, multifamily, the risk, the pitfalls,

all that and more. Love it. One terminology, a piece of terminology that Rob, we didn't talk about, but you bought, the deal you bought is actually what I call a hybrid. I created that phrase probably seven or eight years ago. You bought a hybrid deal. So what does that mean? It's part sub two, part seller finance. So people go, well, what do you call that? I go, let's call it a hybrid. You're half and half, right? You're half gasoline, half electric.

So you took over the payments of the $300,000 loan, and the seller had a bunch of equity that they seller finance you in second lien position. You therefore did a hybrid deal. So there's a new one for you guys, write your notepad. Okay, I'm writing this down. I was literally looking for a notepad, actually.

I refer to this hybrid. It's a common question I get all the time. People go, well, if a seller has a lot of equity on a sub two deal. What do you do? And I go, it's called a hybrid. You ask the seller to seller finance their equity to you in a second lien position and you call it a hybrid. Well, I could talk about this deal all day pace. And I probably will. I'll probably text you after this. But today, I think we want to talk about some of the key differences in creative financing as it pertains to single family residences and commercial slash multifamily properties. It seems like you can be the

guy to answer a few questions that we have. You know, what was interesting is when I started branching into multifamily, I realized the biggest key difference between multifamily. and single family was the intelligence of the seller, the savviness of the seller regarding creative finance. The majority of sellers in the multifamily realm that we negotiate with know what seller finance is right from the get-go. So I'm not playing the game of education and educating the seller. The seller, a lot of times have acquired property and already sold property on seller finance for tax reasons or, hey, I want a higher purchase price than the market will bear. So when you branch into multifamily, you'll get a lot of savvy sellers.

So for example, I've got a 256 unit multifamily in Illinois. Seller was trying to sell for $16.9 million. Couldn't get that number. It was on the market for a long time. Fires the broker. Broker after six months becomes an expired listing. We call the seller. We go, what were you not able to get on the market when you were with your broker?

So I couldn't get my purchase price. Well, I wasn't going to tell the seller he was a little bit out of his mind and gave the broker almost an impossible job to sell that property. So I just said, well, would you be willing to seller finance it to me? Now, when I say that to a seller on single family, I have to tell a story about my F-150 or bunnies or the orange tree, if you guys have ever heard these stories, in order for the seller to understand things. I'm not as good at analogies and metaphors as David Green is, but I'm like, I'm a solid three out of ten. But with sellers in single family, I spend a lot of time educating them. This seller on the 256 unit deal goes, yeah, I'll seller find it. finance it to you? What are you thinking? What are your terms? Immediately in 10 seconds, we're

negotiating. So that was the biggest difference. I was actually caught off guard when I jumped into multifamily and realized, oh my gosh, this is going to be a lot easier than I thought. Pace, let me just say there's nothing wrong with being a solid three out of ten because that's exactly how I see myself on the dating market. So we have something else in common. Just to clarify, when we talk about commercial real estate, we are talking about five units or or more. When we talk about residential real estate, we're talking about four units or more. That is confusing because we often use a phrase multifamily to describe to anything more than one unit. But there is a difference in the financing for two, three, and four units and then five and up.

And that becomes relevant because the way that we've, the formulas that we use to value what a property is worth are different when they're five units or more because that's what the lending is based on than they are when they're four units or less. So what you're describing with commercial there, because the lending standards are different. You don't get 30 year fixed rate loans. the value of the properties are not based purely on a comparable sale. So most of our listeners are used to, I bought a house, the house down the street was worth this much. This was my comp. It was this much.

Well, it's different with multifamily because you're using the net operating income and a cap rate to determine the value of the house. So many times, like you just said, people that are operating in that larger multifamily space, five units or more, they're a little more financially sophisticated. They understand these terms. They talk about vintage balloon payments and agency debt. They like to swirl their glass like this or drink. their cappuccinos with their pinky up. Oh yeah, and they smell their, smell their drink before they drink it.

It's very tanning forward. Yeah, we had a seller about a year ago, his name's Mario in San Angelo, Texas, 43 unit I bought on seller finance. Similar situation, expired listing. So guys, taking notes, if you're somebody saying, how do I find these deals, expired listings. For me, I go after listings that agent wasn't able to get the deal done, for whatever reason. It's a variety of something. Sometimes the sellers are nearly impossible. They just want really high purchase prices. Sometimes it's other things, right? Okay, really fast-paced.

I've heard you mentioned this before. When you say you go after expired listings, can be a little bit more specific. Like, do you, are you finding it on the MLS and you're looking at, like, is there a section on the MLS where you can find expired listings? And then are you skip tracing the owner and then calling them? Okay. So if you're a licensed real estate agent, a lot of licensed real estate agents don't even know that they have this.

But if you go into your MLS, I'm not a license agent. my wife is. So you go into the MLS and you can go to an expired listing section and go to the last 30 days. In Maricopa County, where I live, 680 failed listings in the last 30 days. Houston, Texas. Do you know how many are in Houston, Texas, Mr. Robilt? I do not. About 900 houses have failed a listing with an agent. So we then take those from the MLS. You can also get those on other websites like PropStream or, you know, Batch leads and other places I'm sure there's a dozen other places to go.

And then, yes, we skip trace those. I actually use True People Search. It's free. And True People Search gives you four phone numbers. So if you're just starting out and you have more time than you have money, then start with True People Search. We call the seller directly and we say, hi, my name is Pace. Just notice that your house went off the market today.

Was there something you were trying to get that your agent wasn't able to obtain for you? And then you let the seller talk. And the seller says, well, they couldn't sell the house at the price. Actually, right before this, I had a notary come in, just bought a sub two deal exact same way. I probably buy four or five deals in Arizona every week, just that exact way. Calling a seller after the agent is no longer the agent on that deal. I had six months to sell it, couldn't sell it for whatever reason. We called the seller directly, and I work it out with the seller. The challenge here, because I do both on market and off

market. I believe in both. The challenge here on this house on Anderson is we typically, the first step that we do is we will call the agent after 100 days on market. Okay. So I know after 100 days on market, the agent is starting to sweat just a little bit. And the market has already told the seller and the market has already told the agent, hey, this probably isn't going to go well. Okay. Days on market are climbing.

More expired listings are happening, which is more opportunity for this specific niche. I could tell you 100 other niches that we do, but this is a really good one. and we call the agent and we say, hi agent, my name is Pace, I'm an investor. Would your seller be willing to let me take over payments if I could get your commissions paid? And this agent, we called this agent 16 times. 16 times we called this agent on market. Agent said, nope, my seller's not interested. Nope, my seller's not interested.

Nope, my seller's not interested 16 times. We waited for the listing to go expired. We called the seller directly. We said, hey, would you be willing to let us take over payments? And the seller says, absolutely. I go, did your agent never bring this to you? Most of the time, the agent is not even willing to bring creative finance to the table because most agents don't understand creative finance.

This happened to me about a month or two ago. I was channeling my inner pace. And I would try to reach out to the realtor. They wouldn't answer the phone after all the calls. So I decided to text and then they answered that. I prefer not to do it over text, but I did. And I said, hey, would your seller be interested in seller finance? and it was like instantaneously.

She was like, no. And I was like, let me clarify. We would pay your commissions and blah, blah, blah. And she was just like, well, yeah, but the seller is going to pay my commissions no matter what. That's irrelevant. And I was like, all right. Yeah, kind of felt like there's a dead end.

So I kind of moved on to the next deal. It's tough. I think the big thing that we have. And same thing in like comparing multifamily to single family going back into it. The multifamily brokers are a lot more intelligent and savvy in terms of terminology and seller finance as well, whereas single family agents, this is good news for the the top 1% agents, because the top 1% agents, like the ones that David probably has in his brokerage, they understand things. And you guys have the advantage versus the other 99% that are not

willing to learn anything. I feel like right now, if you're an agent struggling, ironically, you want to know how to make twice as much, three times as much, four times as much money. Just call failed listings from other agents and go get sub two and sell their finance deals and assign them to me or assign them to Rob or assign them to whoever else or buy them yourself for sakes. Or if you're in the commission mindset, I'll pay you a commission. Represent the seller. I would love to pay your commission. The problem is we had to learn about a year ago, Rob, just so you know, I couldn't get through to a lot of these agents. And a lot of times I would make a YouTube video and go, hey, this house right here that I just closed on, an agent missed out on $10,000 of commissions

because they blocked us from, you know, submitting a creative finance offer. Then I started getting agents calling me and going, well, would you just do a real estate agent class? I go, yeah, sure, I'd do that. I'll do that. Then I realize, here's what, here's a little hack. So now we reach out to agents on market after 100 days on market. And we say, hey, would you and your seller be open to me pitching creative finance to you over a Zoom so you could see me and I could present some numbers to both of you? And what the agent here is in there is, oh my gosh, Kate, you're on Zoom so you don't have my seller's phone number direct. So you're not going to go around me to my seller. Right. Protecting the client. They all. also here, oh my gosh, I don't have to present this to the seller and look silly, because I don't know about creative finance. This guy's going to do it for me, and we have the ability to end the Zoom and say, we'll get back to you. So there's really no pressure. And so we're getting a lot more on market sub two and seller finance deals with agents represented because I broke the system

and just said, let me educate or let me present the offer to both of you, Shark Tank style. And you can tell me yes, no on the Zoom, or you can just end the Zoom and then call me back three or four days later after you guys talk about it. Yeah. Okay. So let me ask you one thing. And then I want to move into the timeline of this and kind of talk about the key differences here. But one of the things that I hear you say in your script often is when you're approaching like a single family seller or a single family owner, right? And you say, hey, would you be willing to sell on terms? Yeah. I feel like, you know, obviously in real estate, I understand that what you mean by that, but that seems kind of like a confusing way to word it. Do you ever have issues with like,

yeah, it's purpose. If that's on purpose, I purposely tee that up. I say terms, knowing that the seller doesn't know what that means. Got it. And it causes, causes them to pause and then it causes them to actually perk up and go, terms. And then I tell the story about my F-150. And 100% of the time when I tell them the story about my F-150, they go, oh my gosh, yes, I would sell to you on terms. How as soon as you describe this stuff using a car instead of a house, all of a sudden the brain can accept it? Oh, yeah. Well, it's interesting. Like I was listening to a podcast the other day with you guys, actually, you, Henry Washington, you guys were talking about the death of Burr.

Yeah. And David Green had such a great analogy. He said, I was playing musical chairs and all the chairs got taken away. And I had to sit in a chair that was at 10% interest on my refinance. And the way you described that and the way you told the story, it's one of the great things about David Green is the storytelling and the ability to tie in analogies, you have to be good at these things to overcome objections because people are not going to seminars like we are. They're not watching hundreds of YouTube videos. They're not collaborating and hanging out with other

investors. So you have to condense all of that experience into a very quick story or analogy or metaphor so that that seller or that agent can understand it very quickly. Yeah. And I would add, you don't understand something unless you can describe it without just regurgitating information. That is like a pet peeve of mine where someone in my community will regurgitate what they heard someone on the news saying or what they read on Reddit or somewhere. And then they'll start talking about inflation in terms of CPI, which all sounds great. But if you actually understand inflation, you realize the CPI is easily manipulated. It's not a measure of real inflation.

The minute you hear somebody just stating information that someone else said, They probably don't understand the concept as well. If you can restate it in different words or using an analogy like you just mentioned with the truck, the person you're talking to probably gets it and pays that's a great point. When you're trying to get a deal like this, there is a natural apprehension from the person who's selling it. Agents don't like it. They haven't heard of it. Their first thought is, you're ripping me off.

The owners don't like it. They haven't heard of it. Their first thought is you're ripping me off. You're going to have to overcome that initial fear, hesitation, mistrust. These stories can help you. you do it. And that's one of the reasons we're talking about it today. So everyone listening gets a better grasp of what's actually happening. You don't want to just go in there and throw around the word like creative financing or subject to when they haven't heard it. They don't

know what you're talking about. You'll never hear me use the word creative finance subject to seller finance, novation, Morby method. I'll never use any of these to a seller or an agent direct. It's always a story that I would tell my four year old daughter. So before we move on from multifamily, single family comparison, I just want to say something really kind of cool. I had this seller, San Angelo, Texas, 43 unit, okay? He had it listed, 2.7 million. I called Mario directly after the agent wouldn't present, wouldn't present, wouldn't present, and called Mario the seller directly.

I said, hey, you know, anything you can get on the market that you're trying to obtain, he goes, yeah, I want my purchase price. I go, great, would you let me, you know, buy this on terms? He says, absolutely, right? Immediately multifamily is kind of cool. But this was an amplified version of it. This seller, he says, I listed it for. $2.7 million for cash, but I really want $3 million. I go, okay, great, I'll give you, I'll go up to the

$3 million, but that just means I need really great terms. He says, how about zero down and three percent interest? And I go, yeah, that'll work. That would be great, right? He gives me zero down. I then compute the number and my payment compared to what it's bringing in on the property, cash flow comparison, right? I go, oh, man, my payment's a little high. compared to what it's bringing in. He says, no problem. Why don't we, instead of doing a 30-year mortgage, why don't we do a 50-year mortgage? Your sellers in multifamily are not just savvy. They are also creative. And they will bring options to you. You didn't even know existed. You know the balloon thing, Robert, that we talked about on your deal in Austin? I did not create that. That was given to me from a

seller eight years ago. I had a seller. He says, yeah, I'll sell to you on a balloon. If you want terms, I have to have a five-year balloon. I go, ooh, I'm kind of worried. I feel like, you know, market's been going up and, you know, I'm, da-da-da-da-da-da-da-da. If the market falls down, what do I do? He goes, oh, no problem. We'll put a balloon extension into the deal. I go, what's a balloon? I'm like, here my seller's now educating me on what a balloon extension is. And he drafted it. And I go, do you mind if I steal that? And he's like, yeah, that should be in every one of your contracts. What are you doing? You should never agree to a balloon without a balloon extension. So you get sellers that will educate you, especially ones that have

been in the game for a while. And multifamily, what I find is multifamily investors, you know, especially the ones that own units between 12 units and up to 150 units. That's the mom and pop size. These guys are really willing to negotiate and wheel and deal with you. So if you're trying to get into multifamily, I'd focus on that pocket of investors. Don't go after the 500 units. Don't have to go after the 600 A plus. That's not going to happen. Go after. the ones are between 12 units and 150 units, and you'll get seller finance deals all day long. Okay. All right. Yeah, that's, and then in terms of sourcing those multifamily deals, same method, methodology, going to the MLS and waiting for them to expire?

You can go on, like, LoopNet and all these things when the listings expire, and you can start tracking. But one thing that I really like doing on multifamily is I go for length of ownership. So what I find, right, you find out demographics and understanding of sellers, especially after doing so many deals, you'll find that. a lot of these sellers that bought multifamily were not ever they were like accidental investors right they go man i made a bunch of money my cpa firm i was a dentist a dog i was doing all this stuff and my cpa told me or my financial advisor told me start buying up real estate right and um they buy real estate without the intention of ever creating a scaled multifamily operation with asset

managers and people that know what the heck they're doing and so what they do is they suck out all the cash flow out of these deals for like 20 years and then it comes to time to go roofs, hot water heaters, all these things. They go, yeah, I don't have any money. I've sucked it all out of the property. So what we do is we find, we go on like MLS is a good one, and we look for length of ownership. If somebody's owned an asset, 150 units or less for over 20 years,

and they have a large amount of equity, those are sellers that are high probability of selling on seller finance because they also get to mitigate their capital gains tax. There's so many benefits to them. And they don't have to do the repairs. They don't have to do that stuff, depending on how you structure the deal. So for me, 20 years or longer, they've owned the property,

which means they've probably not taking care of the properties. That's the 256 unit I just bought in Illinois. The guy would like hodgepodge and fix one roof every other year. So all his roofs on 41 buildings were different colors. Like that is the typical demographic of a mom and pop multifamily investor. Got it. And so I want to talk about the timeline of closing on both of these. But before I do, we've talked about the truck story a few times.

just want to tell everyone at home to go check out episode 527 to hear the in-depth story, how creative finance came to fruition with pace. It's a really, really great story. But with that, can you just tell us really quickly, how long does it typically take to close a sub two deal or creative finance deal with a single family home versus a multifamily home? Okay, so single family, multifamily, you can close. A lot of people don't know this. I own a title company. We close in all 50 states. We own a transaction coordination business. we do a lot of deals. You don't need a title company to close a deal. You don't need an closing attorney to close a deal. Now, do we use them? Yes, 99% of time. But if you told me,

Pace, your life depends on buying a house today and closing escrow today, a sub two or seller finance deal can be done in less than four hours. In fact, if I go knock on somebody's house, get a contract, I can walk down to the county recorder's office, transfer deed into my name, and I can own a sub two or seller finance deal today for $17. Like, that's how how inexpensive it can be at the county recorder's office. Do I advise you go that route? No, but it's possible. We pull title, so that takes a couple of days. We always get a clear title report. We order title insurance. We do all the things that anybody would do in a traditional deal. And so I would say that seven to ten days, if I get a contract, seven to ten days,

is more than enough time to close on a transaction, get full title insurance, and go through a title company or a closing attorney or an escrow office. What's the fastest you've ever closed? Oh, one day. Oh, okay. You've actually done it in a day. Oh, yeah, a lot of times. Here's what happens, right? Back in 2018, 2019, where we were, I had a big door knocking team before COVID hit the scene. We were doing probably about 20 sub-two deals a month. Where were we doing those?

Knocking pre-foreclosures. In Maricopa County, we foreclose every day, Monday, Tuesday, Wednesday, Thursday, Friday, every day. Texas is different. You guys have Texas Tuesday or foreclosure Tuesdays, right? Here you have foreclosures every day. So what we would do is we would get the foreclosure list and we would knock on people's door the day before they were getting foreclosed on, right? Because they've already gone through agents.

They've gone through wholesalers. Everybody in the sun has tried to solve their problem. So I know that's a ripe deal for me for a sub two deal. So we go knock on the door and go, hey, we can postpone your foreclosure and we can buy your house today. We can let you stay in here for a couple of weeks until you figure this out. Or tomorrow you're getting foreclosed on and the sheriff's going to come pull you out the house.

We stopped two, three foreclosures every single week just by knocking on doors, running down the county courthouse steps and fixing the process. problem the day of that was our bread and butter for 2018 2019 then when what was it march 2020 hit my door knocking team went away right wow that's crazy okay so it can be as fast as a day for a single family residence what about multi multi family is a larger beast what I tell people is that single family is real estate multifamily is not real estate to me this is my own description multi family is a business like you are acquiring a business you they have employees that are there a lot of times they have employees that live on site you you

have a lot of moving parts in multifamily, your due diligence period. Like you can, you can screw up due diligence on a single family property a little bit and you're going to be okay. Multifamily, it's a, it's a bigger target. You got to make sure you spend a little bit, it's a smaller target, I should say. You've got to spend a lot more time doing your due diligence. It's a lot more moving part. So to be safe, you can close a multifamily in a couple of weeks. I was a contractor for 10 years. So we don't do, I don't do inspections on single family homes. My team, team does. We don't hire an inspector for that. And I'm not using the strategy that a lot of wholesalers do, that they'll order inspection the day before close of escrow and then retrade the

seller or renegotiate last minute. It is what it is. I'm acquiring your property. I'm taking over your payments. Thank you so much for that value. We do our own inspections on single family. Multi-family, we're ordering surveys and we're ordering inspections. So it takes more time, and there's a little bit of cost associated with it. So it's a larger animal to attack for sure. So let's talk about the difference between due diligence on single family versus multifamily. Can you give me like a, you know, if we had a table here on the left column, you got single family due diligence on the right. You've got multifamily, what some of the differences are. The biggest difference is that one of my most famous things on some of my T-shirts we put is buyers are liars, sellers are worse.

And what do I mean by that? Oh, I know what you mean by that, but I appreciate you sharing it. Oh, you've been in the game. And you'd be amazed that some of the sellers that we work with that are 80, 90-year-old. old grandma Smith are the most gangster liars of all time. Right? Oh, that's good. Like you, you get sucked into this. I'm like, they've had their whole life to perfect the sweet act and like how to use it properly. Never thought about that. Oh, bro, it's the best. And I know it. So what's funny is when I'm talking to my students about their deals or I call my, I'll call my student sellers for

them live. And I go, I think the seller's lying to you. No, I have a great rapport with the seller. everything's great. And I go, in 30 seconds, I'm going to unearth this lie that they have going on. And you do, right? After a little bit of time, you guys get David Green, Rob Abasolo, you guys become really good at unearthing the lies. So what you find in multifamily, the number one thing that they lie about is their income. Okay? So what they're doing is they're not keeping good books. They're keeping some of the money off the books. And then when you ask for a T-12, now, again, going back to multifamily versus single family, all these multifamily people have to come up with acronyms. It's a trailing 12, which is also in regular human language. It's called a profit and loss.

Of the last 12 months. Yeah, of the last 12 months. So what happens is a lot of these mom and pop investors, 12 units to 150 units, they're not keeping straight books. And they don't keep straight books on purpose because they can avoid showing the IRS that they're bringing an income. But when it comes time to sell to you, and they have to make the property look as appealing as possible, they lie about their numbers. They're like, oh, yeah, this tenant, he, sometimes that tenant pays me double. Sometimes that tenant's never legal. Sometimes that tenant pays me double. Exactly.

That's my old lady impression. I thought that was pretty good. You should do an old lady impression with Nicholas Cage intermexed. We'll save that for the, the Patreon. That is such a branded thing you just did. You can't say it was pretty good if you had to qualify what you just, we're trying to impersonate. If you have to tell us, Rob,

then it didn't come out that good. All right. Back to you, Pace. So multifamily, that's the biggest thing I get in the due diligence phase. You are underwriting or, I also, you got to do the comparison. In single family,

like David Green said, we comp, typically you're comping. In multifamily, you are underwriting. And what does underwriting mean? For me, it means under,

what are all the things underneath the foundation, underneath all the lies the seller is saying, I got to underwrite. I know underwriting means something different, but that's how I remembered it. And that's how I learned it. So we actually get a lot of sellers that will have literally handwritten.

They'll print out an Excel sheet. They won't type in it. They will print it out, and then they'll fill it in with pencil and go, here's my T12, right? So you really have to get there and understand who's paying, who's not paying,

what does this look like? You have to get access to the bank accounts a lot of times. I have a bookkeeper, thank goodness now. And my bookkeeper does a lot of that stuff. But that's the number one thing is that their financials, 100% of the time, are muddy on purpose. And so that's the biggest one. You've got to spend the time because you're not acquiring real estate.

You're acquiring a business, something that's operating. That's a great point. Then the next thing you've got to underwrite and look at is their current management team. What are they doing? Who are they? Are they stealing things? Are they actually showing up to work? because the second you take over this property,

you now have employees that you've inherited, not just the real estate. You've employed and culture of their company, right? Whether it's okay for them to show up late or not, is it okay for them to yell at their tenants? We had to go into a property two years ago and we had to fire the whole team because they were yelling at tenants

and telling them to not walk through the grass and tenants didn't feel comfortable at the property. Guys, multifamily is a business, and you are acquiring employees. So you have to go through and understand and interview some of the employees as well part of the due diligence process. I'm really glad you said this. So I was actually talking to somebody yesterday who they were partnering up with somebody

on a multifamily deal. And they told me that they were giving them 50% equity in the deal because they were underwriting it. Oh my gosh. No. And I thought that was really, I mean, that person's also bringing like capital raising as well. But she I was just like. 50% is a lot. It is.

But I think so one of them was going to be the operator. The other one was going to be. the underwriter and they were going to be equal capital raisers. Okay. But at that time, I was kind of taking underwriting as analyzing the property, right? And that's really important what you just said, comping versus underwriting. Because comping, like if you're doing a single family residence, you're really just running numbers and there's not too much below the hood, right, past the inspection.

But it sounds like for underwriting on multifamily, you're literally, you're basically auditing every single aspect of the property, right? Yeah, like we're buying a, we're acquiring a C. company right now on seller finance. This is a cool thing. We're buying businesses on creative finance as well. We've got a CPA firm. This happens all the time. There's tired landlords also in businesses. And it's down in Tucson, CPA firm. The guy who's running the business has 14 CPAs underneath them and they go out and bill hours and do all sorts of consulting and CPA work and whatnot. Well, guess what? Now the head of the organization is retiring. If the head of the organization is retiring, guess what he's taking with him? He's taking the culture, the leadership.

He's taking the babysitting. He's taking everything with him when he leaves that building. So he tried to retire two years ago, couldn't. The company started crumbling. He had to reinsert himself. And then his business broker goes, dude, you just need to sell or finance this. And you need to stay involved like 10 hours a week until you kind of bridge that gap. So I go in there and I'm underwriting the whole company.

I'm interviewing the employees. I'm auditing what time they're showing. showing up. When are they leaving? They didn't have, none of them were showing up on time. They're showing up at 11 and leaving it too in the afternoon every day. And it's because the owner wasn't showing up anymore. He was semi-retired. So the rest of the company became semi-retired. So there's all these things that are the intangibles when you're buying a business and multifamily is very, very similar to buying a business. There's employees. There's numbers. There's moving parts. There's contracts. That's the other thing, too. There's contracts with the landscape company. These are

big properties with big landscape contracts. You'll find that the landscape company will bill you four times a month to show up, you know, every week, but they only show up one time a month, right? There's all, there's hundreds of little things in multifamily that take time for you to really digest and understand. And you got to have a checklist and go through them one by one. It's almost, when you're underwriting a multifamily, I'd say you got to put in 30, 40 hours of making calls, checking on things, getting contracts, all that kind of stuff. So, so then if someone's partnering up and they're like, hey, I want you to be the underwriter on this deal. Does it make more sense to pay them a fee for that service?

Or do you think equity would work in that type of partnership still? If somebody brings me a deal in multifamily, last year I paid one guy a $210,000 assignment fee for bringing me a deal because it was such a great seller finance deal. I had to restructure it. He didn't structure it properly, but it was really, really great the deal he brought me. And he's like, can I have equity? I go, look, I love you, man, but here's the problem.

At some point, let's say something goes wrong on this property. the only person that's going to be able to, you know, financially withstand an issue is me. I can't come to you and go, hey, you're 20% owner of this. Give me 20% of the roof costs that we don't have sitting in the bank account. And they go, yeah, you're right. And I go, just let's, let me give you an assignment fee. If somebody's going to bring something to the table and they're willing to participate in the deal long term, then I'm more than happy to bring them equity.

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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. Got it. Got it. And you know, funny enough, you're talking about this CPA firm that you went and you audited. And that actually triggered a lot of questions that I have in the world of taxes because I sort of want to understand, I've heard you say it, but the tax benefits of real estate also transition over when you sub to where you create a finance a deal, right? Yeah. There's some. There's so many amazing things that you get in creative finance. So a couple of things.

It's kind of the same thing with anybody. Most wholesalers don't know what they're doing. Most real estate agents don't know what they're doing. And thank goodness for that. It's the 1% that are out there being consistent and doing the things they need to do to continually educate themselves. Guess what? Most CPAs actually don't know that much. I find a lot of CPAs that don't even know what the word depreciation is.

It blows my mind that they don't know what depreciation is. It's crazy, right? But again, we all, we learn on the job, right? you go get a degree. You don't learn any of the stuff that you're getting a degree for. You have to go learn it on the job. So if you are a CPA for school teachers, well,

then you're probably not going to learn about the tax benefits of real estate. I totally get that. So make sure you find a CPA that knows what they're talking about. If you are hiring a CPA that does not own real estate, you hired the wrong CPA. Hire a CPA that's also investing in real estate. His mind is constantly thinking about these things and researching IRS and blah,

blah, blah. So a couple things. Cool thing about creative finance is I can put little money down. Like the deal you're buying, Rob, is you're putting very little money down and you're going to get a $500,000 property that you can do bonus appreciation on. Right. You'll probably get a $50,000, $60,000 tax benefit. I call it the IRS bonus, but you'll get a tax benefit this year. Here's the cool thing for the seller's part.

The seller can mitigate their gains on that property as they receive the money. So they don't have to take all that capital gains in the first year. they sell the property, they take the gains as they receive the money, which is cool. So that five-year balloon that you have where they receive no payments and no interest, that $200,000 gain they're going to have on that property, they don't have to worry about that for five years, which is great. You just have to have the right people that are exploring these things and creating these opportunities. There's all sorts of things with trusts. And, you know, I tell everybody at bigger pockets, I'm so grateful for the ability to be on this platform. I said, why don't you guys let me bring in

some of my CPAs and let me, you guys bring in some of my attorneys so we can talk about some these things and the IRS code and how this benefit sellers. Sellers mitigate a lot of taxes and you get the tax benefits of owning the property year one. It is a win-win for both parties. I think the challenge is most people with creative finance, they go, but how did you, how did you buy the property and the seller's name is still on the house? I'm like, no, no, no, the seller's name is not on the house. It's not on the house. It's on the mortgage. Your name is on the deed. And I think a lot of people don't realize there's a deed of trust, right, and a deed. The deed is, this is what I tell people.

I go, have you ever used, I'll do it with you, Rob. Rob, have you ever gone to a grocery store and used a credit card? I have. Okay, like a credit card, not a debit card, but a credit card. Correct, a credit card. Okay, cool. So you have gone and used somebody else's money to buy groceries, correct? That is correct.

Okay, cool. So when you go to the cash register and you're checking out, they tell you the total, you use somebody else's money to buy those groceries. At the end of that, that transaction is over, who owns those groceries? Me. Are you sure? Because you didn't use your money. How can we guarantee you are the owner of those groceries? It's really simple. Like some kind of bill of sale maybe. A receipt maybe? Yeah, there you go. Okay, so the receipt of real estate is called a deed. So whoever has the receipt is who owns that property. So all you're doing in a sub two deal, Sub 2 is so simple.

It is five times easier than a cash transaction, 10 times easier than a BERT transaction. There's no lenders involved. There's no appraisals involved. There's nothing involved. Take out five people out of the transaction. All you're doing in a sub two deal is you're transferring the deed from the seller's name into your name after a title report. That is a sub two deal.

That's it. Yeah. Yeah. And if anybody who wants the visual explanation of this credit card story, go check out me in Pace's collab on YouTube. that's a good one. Yeah, I'm glad you mentioned it because the credit card company also has proof of your debt to them, right? And I don't know what the equivalent of that would be in the credit card space, but deed of trust within real estate, right, exactly. There's a mortgage. There's a lien on a

property. There's a way they can prove what I own is the note. And what the buyer owns is the property, right? Each side has something, but I'll often hear this on social media where people will post. if you have a loan on a property, you don't own the property. The bank does. Like, no, that is. Oh my gosh. It makes me want to reach through Instagram and choke somebody just a little bit. Yeah.

And everyone hears it and just takes it at face value. Like, unless you're buying it free and clear, then it's not paid off. And I'm so glad that this got brought up because it is not, it's absolutely not true. You gave me chills, David. That's the best thing I've heard all day long that you and I are on the same page about that. Because I think Pace, we also understand inflation. We understand how gnarly is. it is and that when that is the case, if there is a lot of inflation, it's better to own the

asset that appreciates and it's worse to own the note. So if I give you $500,000 so you go buy an asset with it and you're paying me back with money that gets cheaper every single year I lost. Don't tell everybody our secret. This is, that's why the owner of the real estate makes more money than the lender, right? And that's why they have to set things up where loans are amortized to where a majority of it is, is interest and not principal, and they know that they're going to get that money paid back. Yeah, yeah, they front load it. Yes, they have to do something to give themselves some kind of an advantage because

the natural way that money works, it values the person who owns the asset. Here, just on that point, I'm glad you brought this up. Man, I could talk to you guys like literally five hours about this stuff. This is the stuff that we hang out at dinner and talk about guys, just so you know. So you guys, if anybody's going to BPCon, this is the kind of stuff that we talk about in the hallways. It's true. So even, David, think about this.

The knuckleheads that say, I'm going to go buy a house. cash so that I own it and the bank doesn't own it, which is so illogical. It tells you me you don't know anything about real estate. Very smart real estate investors say this kind of crap. By that argument, do you still actually own that property if you have to pay property taxes on that for the rest of your life? Or does the state own it? Yeah. Or does the state own your house? Right. What about the insurance company? How about we just tell people, don't buy real estate because you're always going to have expenses associated with it? That's dumb. It's illogical. It's, It makes a good case towards why paying your property off is not a guarantee that you're never

going to have a problem because there's other expenses associated with it. Those of us that own real estate know, mortgage is a big one, but it's often not even as big as capital expenditures as a tenant trashing the place when they move out, as repairs that need to be made. Or how about in Texas? Your guys is, I think Texas, they misspelled it. It should have said taxes. Because of the two and a half to three percent property taxes.

Because your guys is freaking property taxes. insane. Like some of my properties I own in Texas, the property taxes are as expensive as the mortgage. It's a great point. All right. So on that topic, I'm glad that we're bringing this up. Basically, what we're talking about are some of the risks associated with real estate ownership in general. What are some of the risks pace specifically with subject to financing that people need to be aware of? Okay. So actually, this is really good. So I have in here, I have a due on sale clause disclosure to my seller, right? So I tell the seller, hey, just so you know, we've done over 10,000 sub-two transactions as somebody who's invested and somebody who owns a title company.

We know the equation. We know how many loans get called due. We've had 10 loans called due total across 10,000 transactions, 10. And guess how many of those people in a due on sale clause? All you agents and brokers out there, listen to me, 10,000 sub-two deals, 10 of them got called due. Zero of them actually got called. Okay?

Zero. Zero. point zero. Have you ever actually met somebody that's ever had a loan called due and lost? No. It's like the big, it's like the big foot. Some people are like it exists. Yeah, we have had the loan called due. The way you fix that is through an executory contract, which I will not go in today. It's another thing in the weeds. But do on sale clauses, a, um, an ongoing risk to the seller. It's not really a risk to me so much because I can refinance if I really want to. I can sell it if I really want to. But we use executory contracts and keep the property. Um, so,

that's another topic for another day. So do on sale clause is one. Let's see, owning property with creative finance. I would say going back to the balloon, I would say a balloon is sometimes an issue where maybe the market will trend downward and you bought the property at, let's say, 89 to 95% of the value originally

and the market goes down and you have a balloon. This is why I tell people balloons are for clowns unless you have a balloon extension. So make sure you have a balloon extension in your purchase contract so that you don't get caught holding a balloon when it pops. What about you mentioned that at the early on days of your sub two door knocking days that you would say, hey, I'm going to take care of this. You'll have a couple weeks to stay here. And then, you know, then you can move out and this is my home. I imagine that those people would

just say yes, out of desperation. Like, okay, yeah, sure, I'll do that. What about evictions? Is that kicking people out? Is that ever like something that you have to do? Or is it always, like, kind of feeling a contract? So we haven't talked. We haven't talked about. a lot of exit strategies, right? We've talked a lot about acquisition strategies. So I acquire on sub two, seller finance, hybrids, like you just bought that one in Austin. We buy on Morby method. We buy lease options. I try and stay away from lease options because I want to own the real estate. You can technically buy on arbitrage, but you're really not even buying. I'm not a big fan of arbitrage either. I want to own the real estate, but there's a lot of acquisition strategies.

One of the disposition strategies, we already know, like, I can Airbnb, I can do sober living, I can do Section 8. I can do all these hundreds of things. But one of the, you know, the most magical exit strategies in creative finance is I can sell on a rap and I can be the bank to my buyer, which is pretty cool. You should have me come back in six months and we talk nothing but wraps. That is a deep dive. Guys, if you're on the YouTube channel watching this, make a comment down below, tell Bigger Pockets, have Pace come back for wraps. We may know a couple guys that can help make that happen. Okay, cool. Me and David. So sometimes, like right now I have a house that I bought subject two, actually from a deceased person. I bought a house from a deceased person. They

had already passed away. I bought their house subject two. I sold it on a wrap, a hundred grand over what I bought it for. And I am currently now four years later foreclosing, because I'm the bank in the situation, I'm foreclosing on my buyer. So in some creative finance scenarios, you do have to end up foreclosing. Guess what? This is not unlike traditional real estate. A lot of the bird deals I own, a lot of the traditional stuff I own, I still have to evict. I still have to evict. I still have to deal with all that kind of stuff. It is not specific to creative finance to have these issues. You have all the same issues in traditional stuff that you have in creative finance. So Pace, I guess my last question is, I mean, we talked about so much. Really, we covered

everything from risk to taxes to the basic definitions of creative finance. Is there anywhere at all where a lot of this information maybe is compiled in like one place in word, perhaps, written out. Yeah, we have, I just collab with bigger pockets like David Green has and wrote a book called Wealth Without Cash. Comes out in a couple of weeks. We have been told, I don't know if this is officially yet, but we've been told it should hit bestseller list, which is pretty cool. That's amazing. That's so cool. Amazon just ordered like 10,000 books of it because the pre-orders are so popular. Here's what's cool about the book. The book is great, but I think the book is an appetizer, it's there to give you the definitions and give you kind of a flow of things.

But what I also did for people that pre-ordered the book is I created a video companion guide. So I have three hours of video on average for every single chapter giving nuanced and whiteboard layouts, things that I can't do on a YouTube video, which is giving addresses. I actually check this out. First day I decide I'm going to record the video companion guide, right? You get this with the book. I do a live audience in my studio, and I'm about to press record, and I get a text message from a seller. And a seller says, hey, Pace, the seller or not, he lives in Boston.

I'm buying a deal in Boston. It's a duplex. And we're negotiating with him on a cash deal. He says, Pace, I'm in Phoenix right now. I think your offices are here. Can I stop by, meet you, and hopefully, you know, finalize this negotiation? I go, yeah, I'm about to record, but you can come over to the student. He comes into the studio and live for an hour and a half in front of a live studio audience,

I negotiate and buy his property subject to, go through all the risks, go through every, go through a live seller appointment on how to buy a property subject to. That is in the first chapter of wealth without cash video companion guide. You get to see how it's done live. And the seller sitting here like, is this, is this something normal? You go, no. This was like all the stars aligned. I don't know how this was possible.

but everybody that buys that book's book gets that video companion guide. That's amazing, man. So if people want to go in order or pre-order that book, they can head on over to biggerpockets.com slash wealth without cash. And I'm going to put it out there right now, pace that. I'm going to read this book. When I get it, when I get my hands on this, I'm going to read this.

And this is a particularly big deal because the only other real estate book I've ever read was the Burr Bible by my good friend David Green. Wealth Without Cash will be the second book that I read in the last five years because I know that it's pure gold. Are you an audiobook guy? Is that what it is? You know, I'm more of a podcast guy. Honestly, I like to hear people talk versus like kind of the stale, I don't know,

VO of an audiobook. I've tried it. I'm the same way. Yeah, I'm too ADHD, man. I was working in my studio today and listen to you, Henry and David for about an hour and 20 minutes this morning. And I'm like, I learn every single day. I learn from all of you guys.

It's why I'm so grateful to have you as friends and collaborators. You guys are amazing and love listening. to you guys. And this podcast is, by the way, the best podcast in real estate. Thanks. All right. Well, Pace, this has been fantastic. Tell us again, Pace, where can people get a copy of this book and where can they find out more about you? I'm sure in the YouTube comments, I'm sure there's going to, or YouTube description, there's one. And you can go to biggerpockets.com forward slash wealth without cash. All right. And what have people want to find out more about you? Guys, go to my YouTube channel. I do a lot of stuff there. I think we have 1,600 videos,

all the crazy things that you can imagine with creative finance. And then I also personally answer all of my DMs. Typically with voice memos, I do probably two or 300 of them a day. As you can tell, I like to talk. So if you have a question about something, DM me. If you have a deal, send it to Robert first and then send it to me second. And I will look at the deal. I appreciate that. Rob, what about you, David? I asked you first. Dang it. You can find me over at Rob Bill on YouTube, but specifically I mentioned this a little bit earlier. Me and Pace actually did a YouTube collab, one of my favorite, I think it actually is my favorite collab I've ever done on the platform, always getting views. People are always commenting, firing up the comments and saying,

what about the do on sale clause? And Pace actually went and literally answered every single question on that video. So go check it out. It's a really, really fun one on the Rob Belt channel. What about you, David? Find me at David Green24.com or social media at David Green 24, wherever you like it, the most including YouTube. Or you could just search bigger pockets because I'm all over there, much like Pace and much like Rob. This has been great. Everyone, please go check out wealth without cash if you're interested in the stuff that we are talking about and add this to your arsenal of weapons available to help you build wealth through real estate.

And if you'd like to check out a boot camp on this topic by Pace Morby himself. You can find it at BiggerPockes.com slash boot camps. Pace, this has been fantastic. Can't wait to have you on again. And everybody, if you want to hear Pace in more detail, you can check them out on the Bigger Pockets episode podcast number 527 or the Real Estate Rookie Show number 280. This is David Green for Rob and Nikki Cage, Abas Solo. Signing off. Thank you all for listening to the Bigger Pockets 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. On the host, an executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico Contest. 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.w.com. 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.

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