Epic Real Estate Investing - Watch Us Close This | Subject-to Seller Financing (Live Call) | 1249

Episode Date: December 8, 2022

Creative financing strategies like subject-to and seller financing are working better than ever in the shifting housing market, but it takes a certain approach to getting motivated sellers to see the value of creative options like these. Listen to this live call with a motivated seller and an REI Ace client. Are you ready? Let’s go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Hey Matt here. I've got another live call for you today. It's a sub-to-deal with seller financing. Welcome to the all-new, epic real estate investing show. The longest running real estate investing podcast on the interwebs. Your source for housing market updates, creative investing strategies, and everything else you need to retire early. Some audio may be pulled from our weekly videos and may require visual support. To get the full premium experience, check out Epic Real Estate's YouTube channel, Epicorei.tv. If you want to make money in real estate, sit tight and stay tuned.

If you want to go far, share this with a friend. If you want to go fast, go to rei-Ase.com. Here's Matt. It'll likely turn into a wrap. Now, this deal today, it belongs to an REI-A's client, JR, and he found a frustrated investor who finished a flip recently and has been unable to sell it due to his contractor not pulling the correct permits. Therefore, the property isn't qualifying for conventional mortgages. No one can buy it unless they've got cash, and it's kind of an expensive property.

And so I was on the phone with this seller because I extend to my clients an open invitation to bring me in on a three-way conversation to close the deals that they just can't quite get across the finish line. JR, though, he was essentially there, but the seller just needed a little bit more information on how a sub-tube and seller finance deal would play out. We get a lot of deal done this way while my clients get some in the field training. If you'd like to take a look at what being an REIACE client is all about, just head over to REIACE.com. Now, this deal, JR deserves all the credit for this.

I mean, he's crushing it. He might not think so yet, but he's on his way. And he's just following the steps that we lay out over here at Epet on how to find motivated sellers, how to talk to them, and how to get a signed contract all the while having that offer being the seller's idea. You see, we do that because the best way to win a net. negotiation is to want what the person you're negotiating with wants. So JR has been following the steps and he's not afraid to ask questions when he gets stuck and when he gets his answer, he keeps

the ball rolling, as he should, because he knows you can't steer a parked car. So listen closely to this conversation how I positioned the offer or how I positioned the conversation to be the seller's idea. All right, let's dive in. Hey, Matt, are you there? I'm here. Hey, can you hear me? I can hear you just fine. Right, yeah, I'm a senior partner, Matt on the line. Hey, Matt. How are you?

Good, glad to hear it. J.R. called me, wanted to connect us, and J.R. and I worked together. And I write the checks over here, and he's brought me a few deals in the last week or so. And he thinks there might be a good fit here, so that's why we're here. And he kind of brought me up to speed a little bit, but can you, it's really important that I understand where you stand. Can you kind of bring me up to speed and how you understand it? To a carryback and he said that they're with a kind of a drop, just wanted to touch base and see kind of wet. For sure. What did you do in real estate? So you operate as an agent then or a broker?

Got it, got it. Yeah, you need both sides, don't you? Sweet. All right, so did you guys, did your wife ever bring anything like creatively to you like this? Got it, got it. All right, sweet. So based off what JR has told you, do you have some concerns about it or specific questions? Perfect, perfect. Okay, good. So as far as timeline, what do you want the timeline to be? Got it. Well, I mean, we could, it would treat it just like a traditional real estate transaction with the traditional closing.

So it'd go through the, go ahead. Okay, so it'd go through just all the same traditional channels that you're probably already familiar with. It would go through a closing agent. you're up there. Do you guys use title companies, I think, in Oakland? Are you in Northern California? Or use escrow officers? I think, Jared, that he has a title company he uses.

Okay, good. So, yeah, it'll go through title. Everything will be above board. JR would buy the property subject to the existing mortgage. So everything would be the same, but that would be there. And what would happen is once we've gone through our normal inspection process, our normal due diligence, we went ahead and looked at title. we'll probably do a little bit more research on the permits and what's necessary to get that rectified.

And then sounds like based on what Jarrah shared with me, everything is nothing insurmountable, nothing that we haven't dealt with in the past. So we'd move forward and then we would close. And at close, you would get your proceeds. And then we would take over. We'd be transferred to title. So it would be the official owners of the property. And then we'd start making payments on your existing mortgage and taking care of the property for you. And how long do I hold the mortgage for?

So you said you don't want to be there for a long time. So six to 12 months would be something that was acceptable to you? Okay. If it went longer than that, what would be your biggest concern or objection to that? What? Sure. So we're probably looking at it very much in the same way that you were looking at it as an investment property. So we have two ways of which we can make money off investment properties.

We either have to have the equity in place so we can flip it and make our money there, or we have to create some sort of situation where we can create a positive cash flow so we can make our monthly profit that way. Of course. So it's always one of those two. I'm not sure exactly which one it's going to be. We'd have to discover all that inside of our due diligence. But it would be one or the other.

Okay. Okay. So let me understand this correct. Your long-term goal would be to eventually have you guys have me off the mortgage at any time in the future. Right. So ideally when the seller comes off the mortgage is when we resell the property or we refinance the property. Right. Okay.

So that's what we'd be looking for. So based off of your mortgage, do you know what the interest rate is on your mortgage at the moment? It's low. It's like three-something. Yeah. Sure, sure. Yeah, it makes your mortgage almost as good of an asset as your property is, really. Right.

So we won't really, I mean, we'll let you know right away what our intentions are, and you can make that decision before we close. I'll give you that opportunity. But we're probably going to flip the property. And so that would have you out of there in six to 12 months. Yeah, I mean, because that's, yeah, I mean, we're thinking from last year or the year before, it. Praise it like $7.99 or something like that.

Okay. Okay. So if we had $4.80 there, $7.99. And then as far as the condition goes, I understand you just rehab it. It's all good to go. Got it. Got it. Work so been done already.

Yeah, yeah. And, gosh, with the state of California, you never know. Because we've had several rehabs in California, and they like to pull fasties on us all the time. So we're going to have to try and take that as far as we can during our due diligence to try and get some sort of confirmation from them. I don't factor in what those costs would be. But, yeah, so that would be our intention. That would be our plan.

And, you know, I don't foresee anything here that would be a major issue. But like I said, for some reason, it's California and New York seem to have the pickiest inspectors, building inspectors, when it comes down to this type of stuff. But like I said, nothing insurmountable. I don't see any issues with it if we move through it. and we see something that's going to cause some sort of alarm or have to cause us to come back to the negotiating table,

then we'll certainly do that. But I don't really foresee that based on what we're looking at right now. Did you have any other questions? Okay, so what do you guys thinking as far as, when they... Sure, what did you two discuss? Well, I mentioned, like, I remember you saying, Neil, that you said you wanted to maybe get 20% out of it, and I was thinking that maybe initial, like, start the process.

Right. Okay, so that puts in a five, it would be, uh, see, he said, what's going to, if I can't kick it over itself, a bad connection. Okay. So if, um, I think J.R. had shared with me, too. I just wanted to confirm with, uh, with doing 100 on top of the existing mortgage. I don't, as long as the, the, we don't get any pushback from city or county inspectors,

then I don't see any issue with that. That should be pretty doable. Um, I would ask, though. I mean, that's going to, that, that, if that happens. That'll be a nice little profit for us. Why don't you just do it yourself, Neil? Napa. Okay.

Yeah, I just don't. I do not want to deal all that anymore. Got it. Busy my business up here, I don't have time. I mean, it's a nice house and wife. I just don't have to deal with it anymore. All right, I understand. But yeah, I mean, it is gone.

My pocket. So do you want just, J.R. to put this in writing and send it over to you then? Okay, what did you notice? What did you learn? I'm going to point out a few things that I did do intentionally. You know, number one, I asked a lot of questions in a way that whatever the seller's answers were, was helping me put the offer together. Also, whoever is asking the questions is in control of the conversation. So if you find yourself answering a lot of questions, recognize that you're not in control. But no worries, really easy to get back on track. Just follow up your answers with a new question, and boom, you're back in control. And here's where the real magic is, though.

If you're listening genuinely to the answers, you're building amazing rapport. And that's really important when dealing with motivated sellers. Because more times than not, they choose to do business with the buyer that they like. And that's how you get people to like you. You listen to them. You'd be interested in them. And you could tell JR has been listening because you could tell that this seller likes JR. And that made it really easy for the seller to like me.

And number two, I took the pressure off the seller by letting him know this isn't a big deal because we've seen this type of situation before. You see, when they recognize, this isn't your first rodeo that you've got everything handled, you're in control. They tend to trust you more. And if it is your first rodeo, really simple. It's always no problem. That this happens all the time. This is totally normal. That's what your disposition should be. Hey, no big deal. If I don't know, I'll just ask my partner. They know everything. And that's how I ended up on this call. J.R's following the plan perfectly. And number three, I let the seller know that I didn't see any

major problems with the deal. It's no problem. We see it all the time. But I did leave it open to come back and renegotiate later. You see, by introducing this up front, it makes additional negotiations much easier if they need to happen. Sometimes they don't. It's a preemptive strike at a price reduction should you need one after your due diligence.

And number four, the last thing I did that was very intentional, you see, sometimes when calls are going too smoothly, when it's feeling too easy, somewhat like this one was, and I give JR the credit for getting it to this point because it was easy for me to just step in and answer a few questions for the seller. But oftentimes, if it's feeling too easy, That can be a red flag that it's going to bite you in the butt somewhere else down the road.

So I just wanted to test it to confirm that the seller was serious. So how I did that was I laid it out for him, how there was a pretty big profit in the deal for us. And I asked him, why don't you just do it yourself and keep all that money for yourself? I wanted to see if I could pinpoint the pain. Like, what's going on that's more painful than a potential $200,000 profit? That's the size of this deal. And he told me, I don't want to deal with it anymore. It's apparent that it's more painful for him to proceed with this fix and flip than it is to not.

And that's how sellers become motivated. You see, a lot of stuff happened before J.R. ever met him. And that's how it is with all the motivated sellers that you're going to meet too. You're there now to pick up the pieces and exchange some equity for peace of mind. That's how you find deeply discounted off-market deals. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would.

And when their name comes to mind, please share it with them. And ask them to click the subscribe button when they get here and I'll take great care of God loves you and so do I. Health, peace, blessings, and success to you. I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow. You didn't know home for us.

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