The Science of Flipping - Do More Deals With Creative Financing

Episode Date: March 16, 2022

The #1 training and coaching system to launch, grow, and scale your investing business!𝐋𝐞𝐚𝐫𝐧 𝐌𝐨𝐫𝐞: http://www.thescienceofflipping.com Become a 𝐓𝐒𝐎𝐅 𝐈𝐍��𝐈𝐃𝐄𝐑 and get access to exclusive training and resources:https://insider.thescienceofflipping.com 𝐈𝐍𝐒𝐈𝐃𝐄𝐑𝐒 𝐆𝐄𝐓 𝐅𝐑𝐄𝐄 𝐀𝐂𝐂𝐄𝐒𝐒 𝐓𝐎: ✔️ Science of Flipping Academy  ✔️ All the systems and software I use in my business✔️ All the tools you need to run your business ✔️ All my Scripts, Contracts, Spreadsheets✔️ Special Discounts✔️ And Much More... 𝐇𝐚𝐯𝐞 𝐚 𝐪𝐮𝐞𝐬𝐭𝐢𝐨𝐧?Get immediately connected with a team member on messenger:http://split.to/tsof-messenger 𝐁𝐞𝐬𝐭 𝐑𝐞𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐅𝐨𝐫 𝐖𝐡𝐨𝐥𝐞𝐬𝐚𝐥𝐞𝐫𝐬✅ 𝐁𝐞𝐬𝐭 𝐑𝐞𝐚𝐥 𝐄𝐬𝐭𝐚𝐭𝐞 𝐒𝐨𝐟𝐭𝐰𝐚𝐫𝐞: http://bit.ly/tsofsoftware✅ 𝐁𝐞𝐬𝐭 𝐃𝐫𝐢𝐯𝐢𝐧𝐠 𝐟𝐨𝐫 𝐃𝐨𝐥𝐥𝐚𝐫𝐬 𝐀𝐩𝐩: http://bit.ly/tsofd4d✅ 𝐁𝐞𝐬𝐭 𝐒𝐤𝐢𝐩 𝐓𝐫𝐚𝐜𝐢𝐧𝐠 𝐒𝐞𝐫𝐯𝐢𝐜𝐞: http://bit.ly/tsofskiptrace✅ 𝐁𝐞𝐬𝐭 𝐓𝐞𝐱𝐭 𝐁𝐥𝐚𝐬𝐭𝐢𝐧𝐠: http://bit.ly/tsoftext✅ 𝐁𝐞𝐬𝐭 𝐃𝐢𝐫𝐞𝐜𝐭 𝐌𝐚𝐢𝐥 𝐒𝐞𝐫𝐯𝐢𝐜𝐞:: http://bit.ly/tsofmail✅ 𝐁𝐞𝐬𝐭 𝐃𝐚𝐭𝐚 𝐏𝐫𝐨𝐯𝐢𝐝𝐞𝐫: http://bit.ly/tsofdata 𝑾𝒉𝒂𝒕 𝒕𝒉𝒆 𝑷𝒓𝒐𝒔 𝑯𝒂𝒗𝒆 𝑻𝒐 𝑺𝒂𝒚 𝑨𝒃𝒐𝒖𝒕 𝑱𝒖𝒔𝒕𝒊𝒏: “Justin is one of the best trainers in this space. He really gives everything to his tribe.”– Brent Daniels (TTP) “Justin’s ability to connect with people and help them understand what he is teaching, is unparallelled”– Kent Clothier (REWW) “We have been in the trenches flipping homes in Phoenix for over a decade, he is one of the best to do it.”– Sean Terry (Flip2Freedom) 𝐀𝐛𝐨𝐮𝐭 𝐉𝐮𝐬𝐭𝐢𝐧:Justin Colby is the founder of The Science of Flipping Podcast and The Science of Flipping Coaching Program and is an active Real Estate investor having flipped over 1500 homes in multiple markets across the U.S. Justin runs an 8-figure real estate wholesaling business that closes 20+ deals each month in multiple markets across the U.S and has helped 1000s of clients learn how to become successful real estate investors. Justin subscribes to the philosophy of "Wholesaling To Wealth" and is the foundation of his coaching program which teaches you how to get started wholesaling or streamline and scale an existing wholesaling business as well as build long term wealth through wholesaling, flipping, and building a rental portfolio. Subscribe To Justin Colby:http://youtube.com/justincolby View All My Videos:https://www.youtube.com/c/JustinColby/videos

Yo, yo, welcome back to the Science of Flipping. I'm your host, Justin Colby. What is up? I am fired up. If you did not either watch virtually or attend my Wealth Accelerator event this last week, it was on fire. The speakers were on fire. The people, the attendees were on week. It was on fire. The speakers were on fire. The people, the attendees were on fire. I was on fire. So next time that comes around, make sure you are in the seats and or minimum watching virtual. It was unbelievable. There will be an opportunity to

get the recordings if you so want them. Let me know if you want them. But obviously, you can see my energy. I'm on fire. It was unbelievable. So many incredible lives were changed. So super happy. My team crushed it. Everyone just really was dialed in. It was just awesome.

And the key to that event was helping people understand how you need to make a whole lot of money. You need a wholesale. You need to flip. You need that transactional money. But you need to be able to build wealth while doing it. And one of the biggest reasons why I put that event on, and this was my very first wealth accelerator event, was because one of my friends, one of my mentors, I should say, actually told me, I think like a rich person, but I don't think like a wealthy person. And it was like a gut punch. And so I decided to start thinking, moving, acting like a wealthy person. And

here we are. And things are really moving in that direction. But the key was, I didn't want people to make the same mistake I did for the better part of 10 years, a decade, which is just worrying about making a whole lot of money and showing off in the watches and the cars and all the other stuff. That is also great. So I'm not discouraging you from that. I'm just saying you can have both, right? And it's really important to build wealth over time. So if this is your first episode of the Science of Living podcast, welcome. You can see I'm jazzed up. If you're listening on iTunes, I would love a five-star review. If you're watching this on YouTube, make sure you are liking the video. If you're not watching this on YouTube, you should be over there, youtube.com forward slash Justin Colby. That is my YouTube channel. I have hundreds

and hundreds and hundreds of videos on the best practices, processes, tools, and systems as a real estate investor. Now, my goal for you is to make all of you well-rounded real estate investors. I see too often everyone goes straight into wholesaling, which is amazing. I still wholesale 10 or 20 deals a month each and every month across the nation, but they forget that wholesaling is all-encompassing. You want to be a well-rounded, I'm sorry, real estate investing is all-encompassing. You want to be a well-rounded real estate investor. You want to be a well-rounded, I'm sorry, real estate investing is all-encompassing. You want to be a well-rounded real estate investor. You want to wholesale. You want to wholetail.

You want to flip. You want to buy and hold long-term. You want to buy and hold short-term. You want to do novations. You want to do creative financing to hold properties and you don't even have to come out any money. You want to do all of that, not just one simple thing. So my goal is to make you the best well-rounded real estate investor I possibly can.

And it has been my goal since this podcast came out in 2014. So that's, you know, eight years now I've been trying to help you guys. And so hopefully you guys are listening and working on the processes, tools, systems, strategies, formulas to do that for yourself. One of the biggest takeaways that I found was the people's interest in creative financing. I love my guy, Pace Morby. I love him just as much as everybody. And so what happened is he turned on a fire for a lot of people at my event. And I wanted to talk about creative financing here because this is one of the things that I don't talk about enough, quite frankly. I do hundreds

of creative financing deals over my career. I've done hundreds and I'm actively doing some. So I want to give you some case studies, the last two that we actually did. Actually, they're set to close hopefully either this week or next week before March is over as I'm recording this. So the first case study that we did is in North Carolina. We basically, this is a funny story, so bear with me. We actually had the seller who had a squatter. The squatter was an 80-year-old man, great little city called Asheboro. And the numbers really kind of worked for what he wanted, right? He wanted about 160-ish, 165, which is not bad for the area. But the challenge was he had the squatter. So what my team did, and by the way, how I'm built, right, is my team brings in the

information. If they feel like it's a little more creative than myself and my manager, Anthony will kind of review and help structure this. And Anthony really structured this well. So what Anthony told my team to do was see if he's willing to take a little bit less, right? So in negotiations, it's always a give and take, right? So if we're willing to deal with this squatter, I need a discount, even though his number initially at 165 wasn't a bad number. I think he was actually reducing his number thinking that, you know, we were going to inherit a squatter, but we needed a little bit more of a discount. So what we did is we talked to the seller and said, Hey, I'm happy to inherit this squatter, but I really need a number that can work

because this might take a while and it might cost me a decent amount of money. So first and foremost, are you open to maybe getting a little bit more creative on this deal? And obviously the seller says, well, what do you mean? And you say, well, listen, if we can make you the bank and I take over being the homeowner and the headaches and the hassles of this squatter, would that make sense for you? And instead of giving you closer to a 125 offer, I could probably meet you somewhere in the middle around 150. But again, you would actually end up being the bank. You would become a lender in the transaction. I would become the homeowner and I have all the responsibility of dealing with this tenant. How does that sound? Well, the number one key to the homeowner wanting to sell this property was the squatter, right? So what we did is we listened. And I think one of the biggest

components of being a successful creative finance deal architect is listening to the seller, understanding why are they actually interested in selling. And if you can provide the value to their interest, a lot of times you can structure something creative. Not every deal, but a lot of the deals that we do is just because we listened to what the pain point was. Well, we actually agreed on 150. He agreed to be creative. And then we started thinking about the terms. And we said, listen, now, in my opinion, every deal we go into for the creative finances is where I get involved. I want to shoot for the moon. I want to go to our best case scenario that the seller feels like is still a good win win. So I don't want to start out and trying to make everything like see if they would like it.

Like I want to go to my best case. And so for me, it was like, well, if I have a squatter, it might take me six months, eight months, maybe even a year to get the squatter. I just don't know because, you know, this obviously is all changed now per COVID. So I said, well, listen, this first year is going to be really, really difficult on me. And, um, you know, this may take six months. It may take eight months. The whole reason you're selling is because you don't actually want to deal with this, Mr. Seller. So why don't we do this? Why don't we have no payments at all for the first year? I will own the home. You will have $150,000 note against the home, just like a bank. In the first year, there are no payments. And every year after that, we will make interest payments, or I'm sorry, we will make principal payments

moving towards that 150 for the next five years. And in five years, we will refi your loan out and you will be done. You'll have all your money in hand and I will have dealt with all this. How does that sound? Well, that actually really helped the seller. He was on board. So we structured the deal where quite literally this entire first year, there are no payments to him. And even after that, there's zero interest, zero interest, right? So while we are getting the squatter out, while we are remodeling the home, while we're doing all that, there's no payments for a first year, and there's going to be no interest in every payment for the next four years, is actually principal payments only. Now, how huge is that? Because if I'm keeping this as a rental,

then every payment for the next 48 months is going to go to paying down principal. So for my ability to have equity in this property just drastically was higher because every payment goes down to paying down principal. So you can imagine it's going to be a very easy way to build in equity and refinance out. Now, that being said, my challenge personally for that deal, I wanted to keep it, but my challenge was I didn't know the North Carolina laws well enough. I didn't have the bandwidth right now to kind of manage the eviction of this individual. So I said, listen, I want to keep this as a rental portfolio. Remember I told you guys, cash, making a lot of money, but building well simultaneously. So I told my team, hey, I a lot of money, but building well simultaneously. So I told my team,

hey, I think I'm going to keep this one. But you know what would be interesting to see and where I would maybe not consider keeping this is if I actually sent it out and made a pretty decent wholesale fee on it. So as a matter of fact, we sent it out for $35,000 above, right? 185. And I said, listen, if I can get this number, I would be willing to wholesale this seller finance deal because that's a big number, right? I mean, that's not a five or $10,000 fee. That's quite literally 35 grand. And that's enough money to make me move forward, right? Because again, I'm going to have hundreds and hundreds, if not thousands more of these opportunities.

Well, within one phone call to a buyer I know in North Carolina, he took it. He's in North Carolina. His team's in North Carolina. He has all the processes down. He's done plenty of evictions, specifically in Asheboro. So his reasoning to keep this, even at a higher price than I had it,

made a whole lot more sense for him because I'm not physically in North Carolina. I'm not in Asheboro. I would have had to kind of deal with that remotely. And so for me, I was like, well, $35,000 is hard to pass up. So I actually wholesaled that seller finance deal. Now, two takeaways here. First, you can wholesale creative finance deals. You can absolutely wholesale them.

I'm literally telling you a deal I'm doing right now. Secondly, there are always measurements of, do I want the cash now or do I want to build the wealth? And for me, it's just, it's dependent upon how many deals do we have going? How big are the profit margins? And then, you know, what are the issues with the said opportunity to build wealth? So for me, the issue of the vacating an actual squatter, this is not a tenant, this is an actual squatter. That issue outweighed my desire to deal with it. Also, having $35,000 worth of a fee in two weeks, we closed, which is I think this week or next,

well, this week. In two weeks, it just really motivated me to say, hey, I'll take the cash now and I'll move on to the next opportunity that I can possibly have. So that's case study number one. Case study number two is even more interesting. Very similar conversation. There was no squatter involved, but the seller needed out now because they basically knew they were moving for another job. They refinanced. There was very little to no equity, right? They just recently refinanced a year ago.

And so what my team came to me with was this idea that if we could sell the seller on potentially bring some cash to the table, it could still be a very viable deal, right? Because they just refinanced. So there wasn't a whole lot of equity. Essentially, it was going to be like a short sale. So we talked to the seller and we said, hey, here's how we can get this done. Here's how we save you from kind of going to foreclosure. We know, um, you'd have to bring some, um, money to the table and it stops this whole having to list it and try to go do this. So we negotiated the right price, which made them bring roughly $13,000 to the closing table. This is the one that closes not this week, but the next week, $13,000. They're going to bring to the closing table. Um, the number is a high number. It's like 92% of value. Um, we immediately started making calls to agents in the area to find if we had

any, you know, kind of more retail type buyers and an agent immediately said, I'll take it. I want it. Right? So we're doing a creative finance subject to the loan's going to stay in place. The seller's bringing the back payments into the deal. So $13,000 in back payments. The agent is actually going to take over the home and get the deed, keep the loan in place, everyone wins, and we make a $7,000 wholesale fee. That is really creative, meaning the seller literally had to bring money to the table to get the deal done, but he knew based around his need to move for his new job, his back payments that were owed on the home, that the bank was already giving him notice of defaults, that this was the only way to get this deal done.

He believed in us. He trusted us. We were making calls to realtors to find the right buyer because there really wasn't, it's not a flip property or anything like that. One of the realtors said, no, I don't have a client. I'm the buyer. I want it. And we're going to make seven grand as a wholesale deal. So guys, why I really impress upon you is I do, and I got to talk more about this because I do plenty of these each and every year. I probably do 50 to 75 creative finance deal structured wholesales and buying holds and flips. And so I want you guys to understand it's about the exit strategy, which helps you get creative on the acquisition strategy. If you know how you're going to exit, you can also go into the negotiations way smarter, way ahead of where you would be

if you just are trying to do an 80% cash offer. So keep listening to me on my episodes. Make sure you're watching my YouTube channel. I give away a ton of content for absolutely free just so I can help you guys, again, be a full, well-rounded real estate investor that you're wholesaling, you're flipping, you're buying and hold, you're novationing, you're short-term rentals, long-term rentals. You're doing all of that as your business model. I got

you. Again, give me a five-star review on iTunes. Make sure you're liking this YouTube video. If you're not yet subscribed, make sure you subscribe. YouTube.com forward slash Justin Colby. I'll see you on the next episode. Peace.