instead of me going from a break even situation I would probably end up making about 20 grand a month or 20 grand a year why hey what up I'm on a zoom with Alyssa Allison and Hannah amazing the team is cranking huh yeah I need you know the house on flower we just bought yeah do you can you give me some stats on that real fast purchase price interest rate um interest rated 2.625 hold on 2.65 percent okay um payment p-i-t-i is 12.68 and some change okay and then um rent rate is eighteen hundred dollars okay we paid twenty five thousand dollars to the seller and there was a fifteen thousand dollar assignment plus closing Plus okay 25 closing costs Renault do you want the settlement statement no yeah actually sure send me the settlement statement maybe I'll give that away in the YouTube comments do you want me to take our app I mean our address is on everything the Broadway address oh yeah that's that's the UPS store they can people can have that just tell them we'll tell them to send me cool gifts yeah please send us gifts send us things that are not perishable because we don't go there that often yeah why uh Molly's very much into horses send us a horse to our UPS Store okay cool goodbye all right so today we're going to give you guys a breakdown of a deal this is bothering me I don't know why we're gonna give you a deal a breakdown of a deal on Flower Street this is actually part three of the video so let's go through the full process of buying a house subject too this will be part three but it also will give you guys a pretty good like full flow of how this works so here's where it starts every deal starts with what Eric what does every deal start with a seller oh my gosh it starts with a seller somebody who owns the property that has has what not just a house but what do they have the mortgage okay I like that that's a sub two deal but what if they are what if it's seller finance they don't have a mortgage right 50. they do have a deed oh I'm liking this Eric is getting this okay Eric you got a deed but what else do they have in order for me to buy their house at a discount or on terms what do they have to have it's more of an emotional thing I call them bunnies all right or motivation so when people are starting out in this business they always want to wonder they always where do these deals come from and why would a seller sell to you and let you take over their 2.625 what's your interest rate on your house three two five I got one at 2.625 bro how did I do that the way I did it is because we focused on motivation we'll get to that in just a second so every deal starts with a seller and then what typically happens is you have an agent involved why do you have an agent involved Well because most homeowners don't understand where to find investors this seller had a lot of motivation so let me list out his motivation hopefully this is really helpful if this is helpful then I'm going really slow and I'm I'm really breaking down all these little steps please make a comment down below and more importantly please subscribe on your way down there because 80 percent of our viewers do not subscribe to our Channel that's not cool and I will email you and I will give you the settlement statement of this deal so you can see what a final deal looks like so you know I'm not lying okay I'm probably lying on the number it's probably not 277 500 it's probably 277 512 I don't know don't criticize me and don't ridicule me for that I'm just going to kind of do round numbers on this if you click the link down below we'll give you the settlement statement for this deal okay motivation let's go through number one number one is he had a um a recent job change okay so that's why he wanted to sell that's a good reason or motivation to sell your property but not a motivation to sell on sub 2. he had no equity is a really big one why did he have no equity well because he bought this property in 2021 and the the market was trending upward and now the market is trending downward he bought the property with a VA loan and he put zero dollars down when he originally bought the house okay so let's look at that look look at it this way here I'll take a good good example so I have this raptor r I just bought it okay it's really hard to find vehicle I'm not bragging I'm just telling you as an example I've always had an F-150 just I trade I traded my F-150 I sold it on seller finance if you guys want to see that video click the link down below did a video on how I sold a 22 000 truck for forty seven thousand dollars and I replaced it with this okay I bought this brand new like somebody had to find this deal for me shout out to Alan who finds cars for me he's also looking for a 2023 Prius for me right now because I'm going to upgrade my Prius so um when I bought this truck do you think I have any equity in this truck or if I sold it today would I have to actually lose money yep you guessed it if you buy a brand new vehicle and you drive it off the lot that car is no longer worth what you paid for it in fact it's probably worth less because you paid fees and um you paid all sorts of Transportation tax and Licensing and registration and all those things above the purchase price of the vehicle it's the same thing with a house okay when you buy a house you have all sorts of closing costs and home warranties and all these things you buy a house over what you actually offer for you always pay more and the house immediately if you sell it today for example let's say I buy a house today and I buy it for three hundred thousand dollars and tomorrow let's say I pay cash for it 300 Grand tomorrow I want to turn around and sell that house for three hundred thousand dollars am I gonna get three hundred thousand dollars back no I'm probably going to get about 260 to 275 000 for that house that I just bought for 300 and I sold for 300. so people at 300 that are selling for 300 are actually going to lose money that's how real estate works because you have all these people involved lots of people that are involved in these transactions age agent agent broker um escrow officer title company right um inspector home warranty all sorts of expenses get taken out of that 300 Grand so if you're a homeowner you bought the property in 2021 Market was going up now the Market's going down you didn't put any money down on the property and now you're going to sell it through an agent the agent failed to sell the house okay because the agent I'm I'm gonna be really honest with you somebody please send this to your best friend that's an agent agents don't understand the basics of this most of them don't okay 99 of Agents are what I call undercover agents because they're not really agents they don't really understand real estate and there's about one percent of Agents I call them the Unicorn Realtors okay they do they survive and thrive in real estate they understand that if a homeowner bought a house for 300 today and wanted to sell it tomorrow for 300 they're writing a check and losing that this agent that this seller hired did not tell the seller he was going to have to write a check out of his pocket to sell the property this just barely happened guys like barely barely just happened so what happens is after five and a half months of trying to sell the house one of my students Kevin Cho Okay Kevin show 12 on Instagram shout out Kevin Cho one of my students Kevin Cho I told him about a year ago I said start reaching out to agents um who have listings over 100 days or later and the agents are going to be more motivated to do deals with you because they're having a hard time selling the house on the market so Kevin Cho starts reaching out we call this the Kevin show list so um purchased in 2020 to 2022 and it's currently on the MLS with an agent over a hundred days okay the way you can get that list by the way is you can go to start with privy.com and you can get that list so Kevin calls the list talks to the agent guess what the agent says agent says no and loses the listing so what does Kevin do Kevin then says well I'm not going to wait for you so he calls the the seller directly what do you think the seller says seller says yes I'll let you take over my payments subject too and I'll get to the process of subject two in just a second so Kevin gets the deal 2020 to 2022 on the MLS over 100 days agent turns him down says no agent gets fired and what's so funny about this is that guys if you're a real estate agent you're not using creative Finance subject to seller finance Novation agreements tell your broker that you're leaving them and you're going to go to a broker that is not broke her than you okay that's why they call them broker it's because they're Broker Than You and they're definitely Broker Than Me Okay so stop working with brokers who are Broker Than You that don't have any money and they're not actually buying real estate stop it okay so you go to start with privy you get the you get a list like this there's a thousand different lists but this is a really really good sub 2 list I'm going to give you the name the type of list again 2020 to 2022 purchased okay VA loan is even like a bonus and it's on the MLS with an agent over a hundred days do not bother agents on listings less than 100 days old they're not going to talk to you agents are proud they think they know everything and you should wait until the market beats them up okay so Kevin reaches out to the seller and explains to the seller hey I can take over your payments why is that such a big deal for the seller well because the seller remember this seller right here for five and a half months had a vacant property because he had a recent job change out of state so seller leaves the property vacant to let the seller to let the real estate agent sell the property and for five and a half months is not only making the rent payment where he currently lives but he's now making the payment on of 1268 dollars a month at 2.265 interest whatever it is he's got pain and motivation here okay this is one of the best opportunities in all of real estate right now is expired listings okay so what what is an expired listing right here an agent got fired how many agents in the last 30 days in Maricopa County that's where I live Maricopa County how many agents got fired from failing to sell a house in the last 30 days by the way send this to David Green on Bigger Pockets because he needs to know this because he he criticized wholesale on one of his YouTube videos recently and I'm not a big fan of that so let me point out to the licensed real estate agents right now that in Maricopa County alone we had 600 plus homeowners fail to sell their homes because their agents did not educate them on the price of their home and what was going on in the market and on top of that the agents don't understand subject to and seller finance and I'll get to this in just a second seller says yeah really you would take instead of you saying why would a seller take let me take over his payment subject to look at the reasons why he went through five and a half months of making payments kind of changes your Paradigm a little bit for you to say go from why would a seller do it to oh my gosh I totally understand why a seller would do this do you want to make two payments a month after you just took a job change that's supposed to upgrade and um drastically change your life in a positive way but then just find out you have five months of payments on a house that the seller the agent said he could sell for you but he couldn't no a lot of pain here okay seller says Absolutely I'll let you take over my house payment but I want 25 000 is what the the seller wanted twenty five thousand dollars okay here's the challenge this house was purchased for 277 thousand dollars I would have happily paid an agent a three percent commission by representing us but the seller got fired because he the the I'm sorry the agent got fired because the agent was told or told Kevin show no the agent told Kevin Cho no because the agent doesn't understand creative Finance this is the number one thing that you will run into with agents is they will not follow through with their fiduciary responsibility with their clients yes if you're an agent and you're listening to me you're a broker you're listening to me you are not fulfilling your obligation working with your seller if you are not presenting all offers to your seller and what's going to happen this is happening two three times a week for me just me my portfolio is growing two three four times or two three four houses a week and the majority of the deals that we're giving right now are expired listings because agents failed to utilize creative Finance because they don't understand it because their broker who's broker than anybody I know I don't know any wealthy Brokers do you know any wealthy Brokers Eric says no I don't know any yeah there you go well I don't know any wealthy Brokers unless they own real estate themselves so if you're an agent you're like damn you're right pace like I don't understand creative Finance well first off why don't you I'm explaining the process to you secondly switch over to a different broker that is not Broker Than you go to a broker who has real estate and invests and understands these things okay so this is the pain and the motivation these are the bunnies that the seller is experiencing the seller I actually do do we have that remember when I called the agent or the seller with Kevin Cho at in front of the house we're going to cut to that recording for just like 45 seconds you can hear me ask the seller what was the process like was subject to cut back guys we're calling a seller right now that we just bought this house from hi Hey Joe my name's Pace I'm Kevin's partner I just want to call and thank you for the house brother and just and just say how much we appreciate you for doing business with us how did the process go how did our team treat you how'd the title company treat you all that stuff well if we could have gotten everything if we could have gotten the gotten it off the market when it was supposed to be yeah but that was the agent right yeah how what where why didn't that agent present this type of like creative offer to did they not know how to do it I I don't know I don't know please Floyd's father-in-laws he wanted money he want to get paid for doing nothing yeah typical Agent Man well we're happy we're happy it got all done we're here at the property we're gonna start getting it all cleaned up just wanted to say thank you again for doing business with us I taught Kevin how to do all these kind of real estate strategies how did he do how when he explained subject two to you how did he do you're good all right we're back so hopefully that was helpful for you guys to see this is real this isn't just some story I'm telling it is a real story with a seller so let's talk about the numbers on this let's break down the financial break did I explain this properly did I do a good job is somebody going to go you didn't break it down enough for me you didn't explain it enough how dare you spend all this time and energy on your YouTube channel and not explain anything to me you just wasted you just did a bunch of blah blah blah blah blah blah blah as you saw Molly give me the numbers let's break down the numbers and how I'm going to make money I gave you the lead type okay um Kevin came in and the agent gets fired so no more agent sorry agent you missed out on roughly eight thousand dollars in commissions you could have made but you are not learning and expanding and growing and and truly truly understanding real estate so agent gets fired Kevin gets involved Okay Kevin is one of my young students he's 22 years old this year Kevin will probably make six hundred thousand dollars okay just assigning wholesaling a subject to deal so here's how subject two works Kevin takes one of our contracts that he gets from my mentorship yes I have a mentorship no I'm not trying to sell you I'm just telling you where he got stuff takes a contract he has a transaction coordinator somebody from my mentorship no I'm not trying to sell you on a mentorship I'm just letting you know where these resource sources are located he hires a transaction coordinator transaction coordinator calls the seller walks the seller through the sub 2 paperwork yes it's a separate contract I know I will never give you a sub 2 or seller finance contract I see Jerry Norton giving his away go get his okay mine are private I do so many transactions subject sub 2 and seller finance they change so frequently I only give them to my students so if you want to sub to or seller finance transaction or a purchase contract go to my students okay or go hire your own attorney they'll cost you at least ten to twelve thousand dollars to get a proper contract written with the proper disclosures this purchase contract a sub 2 contract okay you have a purchase contract and then you have seven other documents okay it is not just a purchase contract there are seven other documents attached to this that all need to be signed okay so this purchase contract then gets sent over to where does It Go Eric I don't know idle company okay so the girls inside the title company they received the paperwork and then they call the seller and they go hey seller we see there's a purchase contract just want to verify that you're in contract with Kevin Cho and his team seller says yes they have now officially opened escrow okay here's what happens in sub 2. this is where sub 2 is very it's so much I'm telling you listen to me cash transactions are so much more challenging than sub 2. you guys think sub 2 is more challenging sub 2 is way way way easier I can close a sub 2 deal in two to three days max okay if I have a lender involved which we're not getting a lender involved we're just taking over payments here okay the deed okay the certificate of ownership the title company is transferring that to the end buyer so Kevin Cho my student assigns this contract to me okay that assignment contract also goes to title so the deed goes the title the purchase contract goes the title the assignment contract goes to title and the title company Cooks up and works up the entire purchase contract okay or not the purchase contract but the whole transaction their job is for me the buyer to take all my money and I wire it to close it I wire it to the title company out of my money that gets wired let's let's add up what it is 25 Grand 15 grand 5 grand so 45 so 55 000 is what it took to get this deal done iwire fifty five thousand dollars to the title company where does that 55 grand come from Eric private money so let's break that down too somebody's going to say I need to start to finish I need to you please tell me the whole start to finish and they're gonna criticize me for not and then they're going to say some like this video is too long Man start your day with gratitude and by the way click the Subscribe button show me some gratitude please okay so I go find a private money lender you guys have seen my private money lenders in fact in video number one and video number two Wesley Grant underscore 21 is one of my private money lenders I go to for money like this so private money lender where do I find private money go in the link in the description down below I have a whole private money training free on YouTube just for you okay private money where do you find it link private money gives do they give me the money Eric no where does the money go title title does the private money letter ever wire money to me no so that money only goes to title and the agreement that I have with that private money lender is called a note and a deed of trust okay which is a mortgage in Arizona so I have an agreement between me and my private money lender that agreement for me is eight percent interest only let's do eight percent interest only I would say the payment's probably like 425 something like that you think you're faster than me don't even try it Eric's trying to do it faster than me right now guys he's so full of it okay four forty four hundred divided by okay so my payment guess the payment monthly 1300 1500 are you kidding me it's 366 bucks okay so 366 dollars I'm gonna borrow the 55 grand at 366 dollars a month the title company sets up my agreement they set up servicing they set everything up they pull the money out of my bank account in the future everything's automated okay the person who does all of that is the title company and the transaction coordinator okay I can see why real estate is complicated for people there's a lot of moving Parts there's a lot of people involved making a lot of money okay so who gets paid well here's what happens once my money hits the title company 55 grand they decide hey we're ready to close escrow all right so what ends up happening the title company received my fifty five thousand dollars okay they received the 55 000. then the title company wires 25 Grand to the seller they wired fifteen thousand dollars to Kevin they wire uh they take five thousand dollars for their closing costs and then I keep ten thousand dollars in their escrow account for future Renovations so my fifty five thousand dollars did not come from me I'm zero dollars out of pocket the deed or the ownership the title company make sure it's put into my name okay so pace is now the owner of the property and the payments are coming out of my bank account and paying for this 1268 dollar payment plus by 366 dollar payment every single month okay now you have questions make a comment down below I'm trying to go fast because Eric's trying and we got a super duty guy trying to back into us I don't know what's going on over here now I own the property here's the house okay the house the ten thousand dollars is gonna go and renovate the property I'm then going to continue to have a 1260 Eight dollar monthly payment and then we're gonna have a 366 dollar monthly payment where does that go Eric that goes to private money lender why would that go to Kevin because Kevin's a great guy Kevin's been paid a hundred percent Kevin has been paid all right um so Kevin's been paid his fifteen thousand dollars he's out of the transaction he has signed the deal he's gone make sense you now you've shocked me you've shocked me Eric okay so 1268 monthly payment where does that go goes towards the loan it's one of those obvious questions where you're like wait is this a trick question okay so uh goes towards the loan that I just took over subject to right who's the owner of the property you me whose name is on the loan seller perfect so I know I have a payment every single month of 15 let's just say it's uh 1500 1600 let's say it's 1650 bucks okay I don't care about the math being perfect some Engineers losing his mind right now you heard what Molly said right Molly said in the very beginning she says we know we can rent this house right now for eighteen hundred dollars a month okay cool so I'm into the deal no money my private money lender is making 366 per month my loan pay down is happening right now okay so this is what we I call the delta 277 500. right now the house has no equity I bought basically bought it for 277 500 plus 55 grand I paid 55 000 over what this property could not sell for does that make sense I paid 15 grand to Kevin 25 Grand to the seller I didn't buy the house that's the thing that people don't understand about subject to I didn't buy the house yes technically I did but really what I bought is this 2.625 interest that's what I really bought that's what I cared about the value of that will far outweigh what I paid in renovation and assignment fees on this house so this is what I owe today here's what's great is over time this will pay down to let's say in 10 years I'll owe 180 000 on this well guess what in 10 years this property will also be worth 425 thousand dollars and this is called the delta okay this is how Real Estate Investors make money okay yes cash flow is cool and yes I can cash flow which I'll get to that in a second but really what I care about is the future Delta but this is where wealth is okay this is where I have a silent savings account now Eric if I rent this property today for 1600 I I have a total payment of 1650 a month and I rent this for eighteen hundred dollars a month do I have a net cash flow of 150 per month no no why not we call we call this capex or we call this the um vacancy and repairs so think about think about if in one month let's say I rent this property out for 12 months right so I've got January February March April May Ginger all the way to December and I have a tenant all the way through here okay hundred and fifty dollars a month equals eighteen hundred dollars ironically I did not mean for it to do that but that means eighteen hundred dollars right in cash flow fifth 150 I'm making every single month if January comes and that tenant moves out and I can't get a tenant back in there until February did I actually make any net cash flow for the last 12 months no this eighteen hundred dollars actually now has to go back and pay these payments I didn't really make any cash flow so that is not a great cash flowing property it's more of a break even property okay especially what happens if in a year I have carpet I have a new air conditioning unit I have Roofing repairs I have all that kind of stuff I want to make sure I'm cash flowing for 500 every single month so what can I do to make more money here Eric no I would never do a cash out refi why would I get rid of that that's my prize Joy I would never get rid of that so what would I what would I do different than maybe a rental different exit strategy right so if I'm not going to be able to if I can break even on a rental I'll buy the deal which is this is kind of a break even I would change my exit strategy to maybe a lease option we know we don't talk about at least options as much as I used to these do a lot of those I could do it on a wrap if I did it on a wrap I would not need to spend the ten thousand dollars to renovate the property which is kind of cool okay um that's a whole other conversation for another day sorry [Music] what's another what's another strategy I could do I could do Airbnb right I could do um what else midterm rental I could do sober living or let's just say group Homes corporate rental or Insurance rentals yeah there there you go so I can amplify my cash flow on this deal let's say I do a group home this this property will bring in about fifty five hundred dollars a month on a group home lease option instead of it being 1800 I probably get twenty one hundred on a wrap I could get 2100 as well corporate and insurance probably get closer to like four thousand dollars Airbnb 3500 midterm rental price 3 500. so you can make more money on these strategies all right how do you determine which strategy to use well it depends on what resources what relationships what what your passions are personally I'm not a big fan of group homes unless I have somebody to operate them for me so that's a good example of do I have a resource to rent this out I have a guy named Patrick that every time I get a house like this I call Patrick and I go do you want this as a group home and if he says yes I rent it out to him I sublease it for double my average payment so he could bring in 5500 but I would take my 1800 rent rate and double it to him so I'd bring in about 3 600 bucks a month I'd make a really good amount of money all right instead of me going from a break even situation I would probably end up making about 20 grand a month or 20 grand a year why because eighteen hundred dollars that's what I could rent it for I would double that and I would give it to Patrick okay so now I'm cash flowing eighteen hundred dollars a month instead of 150 a month multiply that by 12. you're going to be somewhere around twenty thousand dollars that makes a lot more sense right in the long term but what if you're one of these people that's buying a lot of properties and you can't find enough people to rent them out from the group home or Airbnb there's a lot of positives and negatives of each exit strategy and you have to make a determination so um if you guys want and you guys want to learn exit strategies go to wealth without cash okay wealth without cash biggerpockets.com forward slash wealth without cash I have a whole hour maybe two hour breakdown in this book about exit strategies the pros the cons Etc and it's actually that's actually not in the book the real value of this book guys I'm going to be honest with you is the video companion guide I broke down each chapter gave about two hours about each chapter in this book in a video companion guide go check that out wealth without cash um on Bigger Pockets go to biggerpockets.com forward slash wealth without cash so was this in-depth enough almost to the point where it's probably too fast like I probably need to dumb it down even more and I need to make it slower like this then actually no I did a damn good job if I did a damn good job then tell me in the comments down below and we'll see you in the next video