Epic Real Estate Investing - Subject 2 and Seller Financing on the Budget | 1280

Episode Date: October 26, 2023

Are you ready for a rollercoaster ride through the world of real estate shenanigans? In this episode, we're diving deep into the nitty-gritty of real estate investing, where wisdom and mischief often walk hand in hand. Join us as we unveil secrets from a recent interview on Glen Sutherland's podcast, "A Canadian Investing in the USA." In this captivating segment, we explore the fascinating realms of "Subject 2" and "Seller Financing." These are the keys to unlocking the art of commandeering properties with barely a dime in your pocket. Yes, you heard that right – real estate glory without the need for a hefty cash stash. If you've ever dreamt of making it big in real estate but found your dreams limited by a minimal budget, this episode is tailor-made for you. We'll walk you through the strategies, tips, and tricks to acquire properties on a shoestring budget. So, what are you waiting for? Your journey into the arcane arts of real estate acquisition begins now. Hit that play button, and let's embark on an exciting adventure into the world of budget-friendly property acquisition. Your real estate dreams are just a click away! P.S. Whenever you're ready to go deeper and further with your real estate investing, looking into my partner program to help you get your first deal might be the move... take the first step here for free 👉 https://epicearnwhileyoulearn.com/ Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. All right, buckle up because we're diving into the deep end of real estate shenanigans. In the next segment, I'll be sharing a slice of wisdom or mischief, you decide. From an interview I had on Glenn Sutherland's podcast, a Canadian investing in the USA. We get into the nitty-gritty of subject to, seller financing, and the art of commandeering properties with barely a dime in the pocket. So if you've been dreaming of real estate glory with minimal cash to flash, you're in for a treat. Let's roll the tape and delve into the arcane arts of acquiring property on a shoestring budget. Hey, strap in. It's time for the epic real estate investing show. We'll

be your guides as we navigate the housing market, the landscape of creative financing strategies and everything you need to swap that office chair for a beach chair. If you're looking for some one-on-one help, Meet us at R-EI-A's.com. Let's go, let's go, let's go, let's go, let's go, let's go, let's go. Let's go. Welcome to a new episode of a Canadian investing in the U.S. This week, my guest is Matt Terrio. Normally I don't give intros to people.

I usually get them to do their own thing, but your name actually came up when I was on another podcast being interviewed just last week. And people were like, how did you get from investing in Canada to investing in the U.S.? And I, like, well, the way my time's story is like, well, it started like, you know, nine years ago back when podcasting was in its infancy. And back then, there wasn't podcasts in Canada. They just didn't exist. Like for real estate. There was no real estate podcast. And really, there was like five big American ones. And Matt Terrio is one of those big five. And that's one of the things that helped me take that jump into the U.S. And the other part about

Matt Terrio is when I was taking that first jump in the U.S., honestly, there was, when I bought the first property. I didn't know how to do finance it because it's completely different from country to country. I didn't know how to do a lot of stuff. So I jumped and got a turnkey property right off the start. And so I worked with Mercedes and we got one of those done. And then once I figured that out, then I started doing renovations. Once I figured that out and we started raising money. Then I figured that it was like a growth. But it all started with just some action and it started back from Matt Terrio. Oh, that's awesome. Thanks for sharing that. I didn't know that. But anyway, maybe give everyone a bit of an intro to yourself.

And you've actually got a guest on the show before I should have remembered the number. But anyway, because for the record, I am the longest running real estate investing podcast on the internet. I was the first one when Mercedes said, you're going to do what? What is that? Because nobody knew what a podcast was. To be fair, I think Jason Hartman was there a little bit before me. But, you know, when it came down to actual strategies and getting your hands dirty and do it yourself, I was certainly the first one. Consistency every week, right?

Yeah. And we're still going. So thank you so much, Glenn, for acknowledging that and sharing that. I appreciate it. And it's funny about a podcast is you just never know who you are touching because before I had the real estate podcast, I had somewhat of a personal development podcast called Do Over. And I've listened to all of those too. Did you really?

Oh, okay. Because, you know, I was doing over in my life at the moment. You know, I just spent 15 years in the music business and I had made this transition over into real estate. and I wrote a book about that called Do-Over. I was 34 years old, so it was a midlife transition. And so I started that podcast first because the only reason I knew about a podcast is because I was reading somewhere is like the top 10 ways to promote your self-published

book. And one of them said to start a podcast. I was like, what is a podcast? So I went and started it. And it was weird because my first 20 episodes, all I did was read the first 20 chapters of my book. And then I got to the 21st episode. It was like, oh, I better come up with something else.

And that's kind of how it all started. But yeah, we had. There was another podcast you had way back to, right? Well, there was that we had, I did hold that house with Matt Andrews. Yeah. That was, that came a lot later. We did another one creating wealth. I did that for another company.

So I was just the spokesperson for them. Yeah. There was another one too. Because I remember in like the epic real estate early ones, there was like every once to while you would basically literally steal the episode. that I heard on the other podcast and it would show up on to the other one, which I actually do myself because I have two podcasts too. Every once a while I have a really good one and I steal it, put them on both. Well, I think I was repurposing the do-over stuff.

Yeah, maybe that's- Because there's so much personal development required to succeed in real estate investing. So a lot of it just transferred really well. And I always tell people like, you know, I could teach you how to fill out a purchase agreement in 15 minutes. But why you don't do it every day has to do with, you know, what's going on in your brain. And so those two things kind of go together. So what I wanted to have Matt on here for is I wanted to talk a little bit about some creative strategies. And honestly, I'm pretty sure I probably heard it from your podcast originally. And then, you know, you go take a course, you go read some other books. And it grows, but you really start somewhere. Right now, we're in a weird spot market. It's really

expensive to get financing. Some of these fix and flip loans are hitting like the 12% mark. So even to do refinances are getting more expensive, or do purchase loans getting to be expensive. Or Canadians, just being Canadian, is more expensive than being an American. We usually get a lower leverage, higher interest rate. So where I'm kind of leading down here is the sort of the subject two path. I believe it's like there's a lot of advantages to this. Maybe let's talk about some of that.

And we'll talk in a little bit about what subject two is. And then, you know, we'll see where this leads on other creative strategies. Sir, subject to is when you take ownership of a property, but leave the existing financing in place. So you will end up being on title as the new owner, but the debt is still under the name of the previous owner. And then you just kind of come in and you just make payments on it and keep their loan in good standing. And so that's what subject two is in really simple English. And maybe where you're leading with this based on how you introduce the subject is where everything is so expensive. right now with the interest rates going up, right? And, you know, the last three years, four years,

five years, we've had very, very low interest rates. And if there's anybody that is selling a property that either purchased or refinanced during that period, that debt that they have on their property is as much of an asset right now as the houses. And so that's what makes that really appealing and it makes it a really good creative strategy. Yeah. The most common question I get about when I'm talking about subject too is do you need to tell the lender and this is this is going on well the word need is probably the operative word there's several ways to do it a lot of people think that's being immoral or i've even heard people say it's illegal it's neither right the the agreement is between the owner and the lender the bar the original borrower so you coming and taking that over

you're just go ahead and you're going to make the payments for the person, right? So for the people that would be open to that type of arrangement, the sellers, that would be willing to give you the debt to make the payments and have them still be on the hook for it, so to speak. They're in distressed situations most of the time, right? There's something going on in their world where just selling their property, a conventional way, is just not the best option for them. They got bigger fish to fries, what I always say. And so if you look at it from that perspective, you're actually doing someone a favor.

So they don't go to default. They don't mess up their credit score. And they'll be able to purchase again in the future without having to deal with the foreclosure or bankruptcy or something like that. So do you have to tell the lender? No. Now, there are certain practices where that could behoove you. And then there's other practices where you could conceal it legally. And that might work better.

As we go into this new environment, if the rates continue to go up, I think it's going to be more and more. important to to conceal it. Play that role. Play that card. I had a lender come on the podcast, I think it was a year or two ago. And I asked them this question.

Actually, they asked me to cut it out of the podcast afterwards. But they, with the way they said, they said, we're in the business of lending money. And we're in the business of collecting payments for that.

We're not in the business of owning real estate. Sometimes we find out about it. Sometimes we don't find out about it. But if you make your payment, You keep your nose clean. We have no reason to call this because we're still getting what we plan to get. You know, it's the original terms are still being fulfilled. So the one thing you did say is that it gives them the like almost like a carte blanche.

If you piss them off for whatever reason, they do have the ability to call it alone, but they don't want to unless there's a reason. If you do this right, you shouldn't have to do this, right? And speaking of which, say you do this wrong, what kind of liability issues would, Would the person selling the house have? What kind of liability issues would you have? So if I took over a property subject to and say I stopped making the payments and the bank started calling, the bank is not going to call me. They're going to call the original seller who the debt's still under.

And the recourse is I just have to give the property back or I have to pay it off and get a new loan. Yeah. That's the recourse. I mean, because the liability is still with the original borrower. And that is a risk that they take, right? And people ask, well, what's going to stop you from making those payments? Well, what's going to stop me is I control and own this asset right now and I don't want to lose it, right? I probably fixed it up.

I probably put some money in it myself. This is my business. I collect these properties. This is my strategy. This is what I do. So I would not take this over and not make the payments. That would be a bunch of wasted time and energy for me. But yeah, the debt still belongs to the original borrower.

And like what you just said is the conversation I have with the seller, right? Because I want to make them at ease and like, you know, what are we going to do? What is the renovation that's going to happen or what, you know, we're going to throw on your roof on it. So I'm my risk is that I'm going to lose that. If I don't make these payments, it's going to hurt me as well as it's going to hurt you. And I usually, I don't do these on like the perfect houses because a lot of times they won't want to go. Right, right. There's usually a reason.

It usually doesn't qualify. There's usually some problem with the title, right? Totally. You know, what I'm finding right now is that because if I've come across a loan that's two and a half, three percent, and I have no problem paying them a little bit more than what they could probably get on the open market for it if they left that loan in place. Because in the long run, I'm still getting a better deal. And so are they, or unless they just wait for the market to bounce back.

That's what that's their option. They could take the higher price for me. and leave the loan in place or put it on the real market and take lower money or wait and for that someday when the house is when they could get it on the open market, what I'm going to pay them for it. Yeah. What I'm finding, because there's getting to be more people that are getting good at this, right? Even some of the wholesalers are doing in trying to assign subject to properties, which is,

you know, fairly new for the last few years. A lot of times, they're always just price, right? So they're starting to, you know, if you listen to Matt Terriers, price or terms, right? So they're starting to reduce in terms. at least some of them are getting smart enough, right? And there's a lot of communities teaching this stuff. I'm finding the ones that the wholesalers send out, the, you know, when you add the deposit or the amount of money they want down, plus the loan you're taken over, there isn't a whole

lot left. Like the reason you would do this is just to inherit the terms, but then you're basically almost buying a turnkey property. Like sometimes the value isn't there. Is that kind of what you're seeing as well? Yeah, I mean, wholesalers are, the people that are coming into creative finance. financing now. It's, this is brand new to them. This is the only way I know to do it. And it's how I started because I just came out of a bankruptcy from the music business. And my wife left and I had

all out her debt. And so I was in a terrible financial situation when I started investing in real estate. That was 2006. Golly. It's like 18 years ago. Holy cow. That was 2006. And my only option were creative acquisition strategies. And I got really, really good at it. And with each transaction that you do, it's you got a new layer of creativity for the next one and the next one and the next one. So the way that I approach, I mean, in my strategies, that's 18 years of real world experience.

And so when I'm looking at a deal, I got to make money from it in one of two ways. Either there's got to be a lot of equity in it. So I have the potential to flip it if I needed to. or I have to create a cash flow, a cash stream from it, right? And so if just because someone is willing to sell me a property that's subject to, if it doesn't have one or the other, I don't want it. Yeah. Right?

I'm an investor and my job is to make money. And if this property is not going to make me money, why would I want this? I think wholesalers are thinking, hey, it's a subject too. That's the value. Yeah, but it's the subject too, but I lose money every month. right? So I think that's like that's a little bit of a disconnect in the community of wholesalers that have recently embraced the creative financing strategies. Yep. I agree. And you just mentioned strategies, right? And I know you have a big coaching program. I have a smaller coaching program. But a lot of times I'll have students even come back to me and they'll say, I ask the guy for seller financing or I asked the guy for right off the start for, would you be open to holding the mortgage and giving me the problem? property. Maybe you have some more creative ways to go about this. I'd share a couple of my

ideas too, see if they're this. Well, that's the secret of creative financing. People think you're like, how would you structure this deal? How would you structure that deal? Would this be a subject to? Would it be a rap? Would it be a lease option? How about a contract for deed? Like, that's what people are thinking of creative financing is. Right. Creative financing is in the presentation of the price and terms. It's all in the presentation. And the biggest reason people can't pull the creative financing thing off is, is typically they introduce it too early and they scare the seller, or they confuse the seller,

or they just don't understand it enough themselves where the seller has no confidence in them. And, well, the other thing would be, got there's more is that it actually doesn't solve the seller's problem. So the buyer wasn't paying attention to what the seller actually needed. Or the seller just needs the money for something else and they can't. Right? So there's a lot of. different reasons. Most of the time it's kind of what you just said. They get people learn the

strategy. They get really excited and they go in for the kill way too soon. And I find this, and I'll get, I'll ask your question very, very thoroughly. But I see this with real estate agents too. With real estate agents that want to become real estate investors. Because I did that. I was an agent for four years before I became an investor. And agents will do that too in a different way, though. They'll come in to be an investor. They'll try to buy it. If they get a little bit of resistance, and said, oh, well, I could list it for you. So I'm seeing investors come in and going, well, I'd like to get it a deep discount and they say, no, okay, how about seller financing? Like, they go to it too fast, right?

So first thing is when you'd mentioned earlier, the way that I would purchase property is one of two ways, by either my price, the seller's terms or the seller's price of my terms. I just need to control one of those and I can put the deal together. But I got to go in understanding that the seller, they don't know what terms are. they only know price. So you got to start with the price and you got to go, you got to keep going back and forth on price until you reach an absolute impasse. And then if you're going to introduce the seller financing or a subject to,

you got to introduce it in just layman's terms like a fifth grader could understand it. If you step in with real estate investor jargon or industry jargon, the someone doesn't know what that is. They think you're pulling a fastie and now they feel inferior and they're embarrassed. and they're embarrassed or they're confused, and all they can think of is in their defense is just to say no. So if I reach an impasse with the seller on price, and I'll ask five or six different ways on price

before I ever go to anything creative. And then it'll be like, well, you know what? It doesn't look like we'll be able to pull this off based on what we've discovered here together. The market might allow me to maybe give you a little bit more, or maybe even get all the way up to your price, if you could take some money now and the rest later, how much do you actually need right now?

And all I'm doing is I'm just closing for a down payment. That's all I'm doing. Tell me what you need down. So there you'll get the resistance. Well, I never thought of it that way. But at this point, you've got rapport built. You've gone back and forth. They know the price thing isn't going to work out.

So let's look at the alternative. And so that's the introduction to the conversation where a seller is actually starting to like consider it. But anytime before then, I mean, if you go to, you're on the date and you go for the kiss too soon, you're getting kicked out of the car. Yeah. And oh, yeah, that I love this stuff. And so I know, because I listen to your show a million times, free option letter of intent.

So you like to do that for the start when you're just negotiating, you're just talking. That's not coming in. Do you use the letter of intent when you're trying to do the creative stuff? Or do you just use that for when you're just kind of get different? prices. Yes, so I will use the three option letter of intent again once I've reached an impasse on price. And I will show up with one basically filled out on where I really wanted to be. And I use it as a negotiation piece to keep the thing alive. And so it'll typically, in this context, I use the three option letter of intent in two ways. If I'm going back and forth with the seller for face to

face and we just can't come to us, well, you know, look, Mr. Seller, Mr. Seller, Ms. Seller. Seller. It doesn't like the market's going to both let us get what we want. I'm going to take a look at another property down the road. Hopefully you get back to me before, before I buy that one. But in the meantime, what I can do is I can leave you with this letter. It's three different ways of how I'd be prepared to purchase your property. But just you got to have to call me back before I get to that one because I can't buy both houses. All right.

It's nice talking to you. And that's it. So I just kind of leave it that way. And I mentioned the other house to kind of create their urgency, not like some people will do. Well, here's my three option letter intent. It expires tonight at midnight. You know what I mean? That's like, it's just a little bit of hardball.

You can't lead up an urgency that doesn't necessarily mean anything to anybody. Yeah. But if I say I can't buy both of them that people understand that. Okay. And so I use that three options and a percent because now they can actually see, wow, I can get this price if I take all cash. I can get this price if I'm a little bit lenient with when I get the cash. And then if I want to go long term, I can get this price.

So those are like my three different options. And so I'll use it that way. way and then it makes the follow up really easy. So the next day is, hey, Mr. Lella, I'm talking to Emma. I don't know if that's going to go through or not, but I left that three option letter of intent with you. I'm just curious, what did you like best? Option one, two, or three.

So it makes a very easy follow-up conversation without feeling awkward, without compromising your negotiating position, without sounding desperate. And they'll say one, two, or three. And or a lot of times they say none of them, right? I'll say, okay, okay, I understand. So which one was closest, though? Now I get them to say the one, two or three, and then they'll say one, two or three, and say, great, if we chose that one, how far apart are we?

And so now they're creating their own offer right now. And so typically I need a little bit more money down. I don't want to wait as long to get the payments or I need a little higher interest rate, stuff like that. And so that works as a really good follow-up piece. Now, the second way that I will use it is I will drop it in the mail for every single person that says no. Call it the rejection letter. It's customized a little bit for that specific purpose. I have a student that actually, as I was teaching him how to use this three-optional letter

of intent, he's like, cool, I got it. I love this. And then 155 deals later in 18 months, his results were not typical, but he was a total rock star with it. And I was like, so, wow, goes, yeah, I just put an automated system. So every time a lead said no and they hung up and we didn't have a deal, I just sent them a letter. So he sent out 1,155 of those letters, and 55 of them came back as deals. You're half percent. That's okay. Well, yeah. I mean, as deals, not a response rate, you can't even get that response rate on your postcards right now. Right. So these are the people that said no to him. So these were 55 deals that most, I mean, everybody else on the planet would have been like thought that was a lost deal. But they called back and said,

okay, we'll take this one. We'll take that one. And so that's why I said, well, wow, I never used it that way before. So my own student, he became the teacher in that respect. And I adopted it as a regular practice here now for our business. I do the same. Like, we don't know everything.

Everyone comes up with new ideas, new ways to apply the same information. It's awesome. We're talking like about doing subject to, do you find people are more likely to do this or less likely than even a year or two ago? when things were really hot. Probably more likely. It's always been kind of the same, but logic would say it's going to be more likely because,

I mean, there's fewer buyers out there, right? And the mortgage rates, people are kind of waiting for that, the payments and all that kind of stuff. And people can't get the price for their house that they could have got a year ago. And they still want that price or something close to it. And so proposing that,

hey, What if I just, what if I got really close to that price? The market allowed me to do that. And I just babysat you alone for a little while, right? Yeah. They're like, what do you mean, babysit? Well, you know, go ahead and we'll get your price so you can get on to your next location. And then I'll go ahead and I'll just kind of take over the payments.

I'll take over the maintenance on the property. I'll take care of everything for you. And, you know, and we'll just kind of cash you out until or cash out when I sell or refinest the property. So that now it doesn't sound threatening at all. So I like to use the word babysit. I think it sounds so. It sounds so harmless. So with this, unless you had more stuff to talk about with the sub two,

I originally were going to go into all the creative strategies, but we don't need to. We really covered subject too really well. And I think this was an awesome, awesome interview. If people need to learn about doing, you know, seller financing, sandwich leases, option outs, wholesaling, all this different strategies. Those are ones that are popping my head right now. Let's guide them to your show.

Let's guide them to where they can get this. information where you do this all the time and help educate people. He also has a coaching program. Tell us a little bit about where to find out. I know, I've got a great YouTube channel that covers it all all the time. And that's eight years of information. I got the podcast, which I think we're going on almost 13 years of episodes. And I'm kind of retired from the education business and this massive coaching thing that I used to do. But I'd have set something up. I have like kind of Thursday's reserve for my that so I get to work with the people that I want to work with. So I get to be really selective now. But I made it really, really easy if you wanted to

look into this. We have something called the creative closers club. Creativeclosersclub.com. And you can go and you just, you get a weekly lesson and a weekly coaching call. And you don't have to pay for it until after the lesson and after the coaching call. And so I don't even take the money up front anymore. So you just kind of pay weekly, but you pay after it. So if you said this one was worth it. I'll take it. This one was it. I want to stop. Right. And so just something doing a little bit different. And that way I just, I don't want to deal with the stuff that comes with a big giant coaching business anymore. And we're back 100, well, not 100%. So I guess we'd be 80% into full-time real estate investors. And then I recall about Thursdays

for coaching. So if they wanted to learn that and work with me once a week, that's how we do it at creative closers club.com. Well, but yeah. You know what? I was going to say to Let's get the websites and stuff for the turnkey stuff and that. But you know what? Maybe I'll reach out to Mercedes and have her on too. Oh, yeah. She'd love that. Yeah.

Yeah. We were actually working on some deals with her in St. Louis. Oh, super. I mentioned that the last time that we were on, I said, I'm all with Glenn. I know, Glenn. He was a customer. And I said, oh, really? I had no idea.

Yeah. Cool. Back in the day. Yeah. So anyway, Matt, like always, thanks for coming on the show. Tons of value. Tons of value. I think this one will get shared around a lot.

Anytime there's like an actual learning, everyone loves, loves learning, right? It's so awesome. We'll be back with more right after this. Boarding for flight 246 to Toronto is delayed 50 minutes. Ugh, what? Sounds like Ojo time. Play Ojo? Great idea. Feel the fun with all the latest slots in live casino games and with no wagering requirements.

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