Exploring Seller Financing in Real Estate

Welcome back to video three in this series. We're doing a bunch of videos here. Really exciting. Pace Morby, thank you for being here. All creative financing. In the first video, we kind of did a big overview. Then we talked about some of the instruments and the terminology in video two. Really important that you watch this in order. I think once we get to the strategies, you can jump around there. But you really want to go back and watch video two where we really break down kind of lean position and how notes work and a mortgage or deed of trust. Some of these things. so that you can really put deals together effectively, structure things in the best way possible by understanding the instruments, right? But in this video, we're actually going to deep dive now into the first creative financing strategy. This is one of Pace's favorite strategies, mine too. It's basically where you start with creative financing, right? It's the first one that you really want to learn and understand and do well with, and that's what we call seller financing or owner financing. Sometimes we call it owner carry, or you'll even hear people say a carry back. Or installment sale. Installment sale. So you're going to hear these different terms that are all referring to the same strategy. We're going to refer to it as just seller financing to keep it simple. But let's start at the top. What we want to do on this video is not just talk about what it is, but also what are some of the best ways to find these types of deals? What are some ways to put these deals together? So maybe the analysis part, like, okay, what makes it a good deal? How do I know what I should pay for it? And then maybe some dispo ideas like, okay, now that you've put this deal together, what exit strategies could you implement? Yeah, how do I make money on that bad boy? Right. Well, so I always start with seller finance on the same exact topic, which is what is creative finance as a whole using a very simple story. It's probably the most common story that I use. It's my F-150 story. I love the F-150 story. It makes so much sense because people have this aha moment of like, whoa, that... makes so much sense. This is happening all around me all the time. So I go to an appointment about seven years ago. Wholesaler calls me and goes, hey, Pace, I've got a seller. Her name is Susan, who has a mobile home, three bed, two bath. None of that's really that important. But Susan wants $110,000 for this property. Which we're not going to disclose the address. We will not. But I do own it to this day. I feel like I should be able to still... So Susan wants $110,000. And where do sellers typically get their prices from? Zillow. Zillow. Or a real estate agent. Or an agent or Redfin or something like that. They don't know. They just look online. The online tells them. So that's where Susan got her number was from Zillow. So if I'm a wholesaler, right? and I'm going to offer cash on $110,000 ARV. What do you think I got to offer that? 50. 50 grand. 60 maybe, but yeah. So the wholesaler. Half a Zillow. Right. So the wholesaler who knew I was doing creative finance goes, Pace, I'm paying for all these leads. I've got this lead where Susan says, I'm selling this property this week to somebody. I don't care who it is, but I want $110,000 or I'm going to list the property. Very common scenario. Very common scenario. So I go, I'll go to the appointment with you. So of course, like any other appointment, I record the entire appointment. I put the phone on the counter in the appointment and I meet with Dale and Susan Poyer, amazing people, friends of mine at this point. And I go, so Susan, tell me this, you want $110,000? She says, yes. And I go, where'd you get that number from? She says, I saw it on Zillow. I go, great, I'm glad you didn't lie about it because some sellers say, oh, my neighbor this, my blah, blah, blah, whatever. She goes, Zillow told me. I go, OK, so I imagine with all the other investors, including the person that brought me here, and I called this person out in the meeting, everybody's probably offering you $40,000, $50,000, $60,000. She goes, the highest offer we have is $57,000. I go, it doesn't surprise me, because if I was going to offer you cash-I'd be in the same ballpark. I'd be in the same ballpark. And at that point, it's who's the better negotiator, who can close faster, who do you think is credible. And at that point, that's the only advantage I have in a cash scenario, Susan. And she goes, wait, but you're not offering me cash? I go, no, I'm not going to offer you cash. I said, and write this down. This is the line I use to go from a cash conversation to a creative conversation. It's very simple. And it's meant and structured this way on purpose to trip the seller up very subtly. So I go, Susan, I'm going to offer you terms. I will come up to your price. I will come up to your price. telling her her price is too high. That's a psychological thing. I would be willing to come up to your price if you would give me terms. That's the line. Most sellers don't know what terms are. And so that's where I tell the F-150 story. Okay. So then she says, what are terms? She goes, what are terms? Exactly. So you want to get the seller to go, what are terms? And then give them a very real life scenario that everybody understands. So I go, well, here's what terms are, Susan. I used to own a construction company, and in that construction company, I had an F-150, a Ford. Everybody knows what a Ford F-150 is. It's the number one selling truck of all time. So immediately, she's now painting a picture in her brain of this truck. And I go, this truck hit 320,000 miles. It started having problems, kind of like the house you're trying to sell, right? I'm drawing parallels. And I decided it's time to sell the truck because it's starting to have more problems than what it's worth for me. And she goes, yeah, kind of like the house I have. And I go, so I take it out of operation. My guys are no longer driving it to job sites and whatnot. And I go decide to sell it on Craigslist. So where do I find the value of a vehicle, Susan? And I ask Susan the question. I've done this a thousand times. The sellers replied the same exact way. So I go, Susan, where do I find the value of a truck? And she goes, Kelley Blue Book. I go, so the Zillow for cars. And she goes. Yeah. And I go, so you got your price from Zillow. I got my price from the Zillow for cars, Kelley Blue Book. Kelley Blue Book says my truck's worth five grand. I'm like, I'm not freaking selling this thing for $5,000 because if I put it out there for $5,000, I'll get some wholesaler or somebody coming in lowballing me and saying all cash offer. I go, does that make sense to you, Susan? She goes, yeah, that's what's happening. I tell people I want 110,000. People are coming in and offering me 50. And I go. That's because they're trying to make money. And rightfully so. That guy that's coming in with cash, he can get a deal, right? Because he's got cash. Right. He's got cash. And you want to sell this week, you said. And if you go any other route, you're going to go three, four months with an agent. And you might have to clean up and repair the property. And she goes, so you didn't sell the truck. I go, no, this is what I did. I go, Susan, I'm very similar to you. I'm belligerent. I believe my truck is worth more than it really is. just like you believe your house is worth more than everybody else believes it is. So I go on Craigslist and I list the truck for $10,000, even though Kelly Blue Book told me it was worth five. Did I sell that truck, Susan? She goes, No. I go, I didn't even get a call, a text, a smoke signal. Like, no, but nothing. I didn't even get somebody to text me and go, are you freaking out of your mind trying to sell this thing for 10 grand? Nothing. Like literally nothing. So my wife comes up to me, I'm sitting at my desk and my wife comes up to me one morning and she goes, Hey, sweetheart, I have to keep driving around this F-150 every morning for the last three months. Are you going to sell this thing anytime soon? And I look up at my wife and I'm like, what do you want me to do? I'm not going to just let somebody lowball me. I want the number I want. And I go, Susan, does that resonate with you? And she says, yeah, actually, I totally understand your pain. So my wife suggests to me, Susan, much like I'm going to suggest to you, she says, why don't you let somebody make payments on your truck instead of coming up with cash? And I go, oh my gosh, you're so genius. So I go back on Craigslist. I change one thing on my ad and it was F-150 will take payments. Do you think I sold that truck for $10,000, Susan? She says, yeah, probably. And I go, I sold it for $12,500 with $1,000 down. And Jose, the gentleman who bought it from me, paid me $350 payments every single month. And with interest included, he paid me $15,000 over four years. And she says, wow. And I go, do you think that Jose overpaid for that truck? She goes, absolutely he did. I said, Susan, I want you to remember something. The value is never for me in the purchase price. The value for me is what I can do with the property. So as long as you give me terms equal to the $110,000 high price you're asking for, then I'd love to work something out with you because Jose did not overpay for that truck. He took that $350 payment. He didn't have to get his credit pulled. I didn't have to look at his job history, his bank balance. I didn't have to look at anything. In fact, he was an illegal resident of the United States, and I still seller financed my truck to him. And she goes, oh, it's seller finance. I go, exactly. Because Jose had a use for that truck. He turned into a painting truck. Equal to what he paid. So he didn't overpay. No. Because he had a use for that with the financing he was able to get. He generated $7,000 a month from that truck. Every single month. That truck meant $7,000 to his company every month for a $350 payment. So he didn't care that he overpaid the Blue Book value? He did not care at all. He cared that I didn't check his credit. He cared that he didn't have to have credit. He didn't-Only a thousand bucks down? Thousand dollars down. And I had to turn my ad off in 30 minutes. It was people pouring in. So if you understand what I did there, I took something I owned free and clear. And I created an agreement between me and Jose. That agreement is called a promissory note. I structured a debt and an agreement that says, Jose, you can be the owner of this property that I am now becoming the bank of. I am now the bank of this truck, and you pay me every single month like you would pay a bank. And now I, as the seller, get to either A, have a high purchase price, or B, an interest rate, or sometimes C, both, depending on how it's structured. So Susan goes, oh my gosh, I love this. I absolutely love this. I will sell to you on seller finance. I go, great. What terms do you want? You're my bank, Susan. And she goes, I'm the bank. And she was so excited to be the bank. And I said, here's the reality is I'm going to upgrade you. This is another line I use all the time that gets sellers very excited about seller finance. I go, I'm going to upgrade you from the landlord to the bank. And the lowest person in a real estate transaction is the landlord because you're the one that gets pooped on. everywhere. The tenants poop on you. The bank is making all the money. You have to deal with all the contractors taking advantage of you. But as the bank, you don't have to deal with any of that. You're the one that just brings in the money and it's truly passive. And I use the word passive, passive, passive. So Susan says, I love it. I love it. How am I secured? And I go, well, we're going to do the same thing I did with Jose. We're going to create a promissory note that says, I promise to pay you what's on this note. and then we're going to securitize that or make it secure against the property with a mortgage or in Arizona, a deed of trust, you're fully secured. If I default, you can get the property back. And again, we talked about that. That means that deed of trust gets recorded as a lien against the property in the amount of your promissory note. So in the event you default or what, I don't like to say default, but that sounds really bad. What I'll tell sellers, I'll say, in the event I get hit by a bus. Yeah, I say, I say abducted by aliens. Perfect. Because I had a seller one time go, my brother got hit by a bus. Oh, so you can't use that one anymore. And I was like, oh my gosh. I had to come up with a different one. And you'll see sometimes on my logos, you'll see an alien. That's why the alien. That's where it came from. Because my students have heard me talk to so many sellers. And I say, well, in the event I get abducted by an alien. Because I know no sellers have ever been abducted by aliens. Yeah. So I won't offend you. That you know of. That I know of. You'll have to change it once you meet someone that does. I will. I mean, there's a lot of sellers I think are aliens sometimes. But if you get abducted by an alien, Susan can then liquidate the asset, take back the asset, sell it, and be made whole on her loan to you. So she's protected. Right. That's what's special about this. So here's what Susan says to me. She goes, I will do seller finance to you. I go, great. You're the bank. I'm applying for terms. What terms would you like to give me? This is usually what I say to people. And I always put myself in a position where I get to say no. Never send out an offer to a seller in seller finance in my world. I want to be the person that says no. And what's brilliant about this is you're letting her set the terms first because maybe her terms are amazing, better than what you would even suggest. Right. I love that. So give them the opportunity to give you something. You're like, okay. Yeah. And that's happened a lot of times. A lot of times. I'm sure it's happened to Jerry a ton where you're like, really? It's better than what I would have suggested. Right. Yeah. He who names the price first loses. So let her name it first, and then you take that. So either A, they're going to give you something that's way lower than you thought they would accept, or B, you now have the power to say no, and you're the person rejecting them. I always hate on a transaction where I'm sending out an offer, and they get to say no. And I'm like, OK, well, what would work? And they just ghost you, right? So I like to be the person in that position. So Susan goes, I want $110,000. I want $110,000. $20,000 down and I want 8% interest. So my reply, this is another, this is a recorded trend. The reason why I pointed out this was a recorded conversation is because there's a lot of things I've said in this appointment that I've shared this recordings millions of times. I've heard it. It's amazing. It's a good one. And I go, I go, well, Susan, I'm probably not your buyer. That's another line I use all the time. Probably not. I'm probably not your buyer. And she goes, well, what do you mean? I thought you said you'd pay $110,000. I go, yeah, I'd pay $110,000. But the reality is I'm already paying $50,000 over the price of everybody else. Your next best offer. Right. Your next best offer is $50,000 lower than me. This is, again, why we start with cash first. We ascertain or obtain the information. We then can utilize that when we need to. And she says, well, where would you be? And I go, man, at $110,000, you're already winning. You're getting full retail. I'm going to take over a tenant. This is important for this transaction. I'm going to take over a tenant and I'm paying you top price. And she goes, okay, well, what would work for you? And I go, at that price, I'd have to have a principal only payment. That's 0% interest, by the way. I never say 0% interest to a seller. I always say principal only payment. And I would need you to pay for the closing costs. And she goes, I would do that, but I at least need $10,000 down payment. I go, great, no problem. This is one of my really famous deals, by the way. So I go, okay, so I, perfect, let's agree to that. Principal only, 110, I'll take over your tenant, and the tenant thing becomes really important in a second, and you pay closing costs. She goes, great, as long as you give me 10 grand. I'll go, perfect. Will you now sell or finance my down payment? The 10 grand. Bro, when I threw this out here, it was the first time I did a deal where the seller asked for a $10,000 down payment. And I said, well, I'll pay you the $10,000, but I got to pull it from the rent I'm receiving. So I took over a tenant that was paying $1,600, the payment to Susan, and I'm going to tell you how I came up with the payment here in a second. Most people go, what spreadsheet or bankrate.com or whatever, where did you come up with the payment? And I go, here's how I came up with the payment. I found the bunnies. Her bunny, Dale and Susan, they wanted to go on an RV trip every single, all over the country. And they said their average cost to rent out a park for a month was $375 a month. And so I said, what if my payment to you covered the cost of your RV trip every single month, your rent? So essentially this house pays for your RV spots for the rest of your life. She was like, I love that. So that's where my payment came from. $375 principal only payments. Find the bunnies. Found what the need was. Right. By listening and understanding what the seller needs in their life. It's not just about some formula or whatever. It's about the sellers. She looked at it like, this house is a coupon for me to never have to pay for another RV spot in the whole country the rest of my life. And I'm like, holy moly, I can't believe that I just pulled that off. So what happened is her tenant's paying me $1,650. I pay her $375 on a monthly basis. Then I have insurance and some maintenance and whatever. My net cashflow on that property is $1,000 a month. So six months later, I paid her five grand. Another six months later, I paid her five grand. So my cash flow from the property she seller financed me is what paid for her down payment. So just to recap this, make sure everyone's following this. She wanted 10 grand. You said, great, but I'll give you five and six months and another five and six months. And then the way you paid that five was through the thousand dollars a month cash flow. Right. So essentially you got back to zero, zero out of pocket. Yeah. And I've done a lot of deals like this. And this is where, you know, Jerry and I, uh, talked in the previous video about understanding how to structure a deal is that I gave her $110,000. She paid for closing costs. I took over a tenant. So I had no money. I had no requirement for money whatsoever. And then when she wanted the down payment, I go, no problem. Let's figure out where that down payment's coming from. I looked at the cash flow and I go, oh, I could pay her $1,000 a month essentially. And when she asked me for $10,000, I go, Okay, would you do it over the course of a year? She goes, yeah, no problem. I don't care when I get it. And I go, let's do it for a year. So, and you guys can, maybe what I'll do is I'll give Jerry a Dropbox link for that note. So you guys can actually see the note. You'll see Dell and Susan's name on it. You'll see the structure, the 375, 20 years of payments, principal only. And you'll see how I structured the down payment on the actual note. And you'll go, it's that simple? this brings a really good point up. Really for me, and I'm sure you're this way too, I just come up with the high level terms. And then there are so many people that can then put all the paperwork in place. Like you really shouldn't be stressing yourself out about that part. Learn how to put the terms together. And then there's transaction coordinators or title people that really understand. Transaction coordinators are huge. Title companies, closing attorneys, escrow officers. We have a list of about 300... escrow companies and closing attorneys across the country, all 50 states that do sub two seller finance, novation agreements. That's one of the older ones we missed was novation, but they do all of this stuff. You just got to go to the companies that do it. They do literally all the paperwork except for the purchase contract. So don't get tripped up on, oh my gosh, how do I put a contract together that has everything I need in there? That part's easy. In fact, I don't touch paperwork anymore. Me neither. I haven't touched paperwork in five, six years. And I rely on other people to do all that. I literally like, here's my bullet list. Here you go. And they put it all together. And yeah. And I see people trip up about this kind of stuff. Like I've, hold on, hold on. I've never, I don't know how to do all the paperwork. I'm like, okay, but you also don't know how to drill your own teeth, but you go to a dentist. Like you also don't change your own oil, but you go to Jiffy lube. Like, why do you feel like you need to do the physical paperwork? You're a business owner delegated. Right. So that that's seller finance. And What I like about what's cool if what I love about this story and maybe you were gonna say this but I just want to make sure you point this out this was a few years ago and You you like to hold so you held this asset. Not only is it cash flowing? Not only did you get? Depreciation right off which is amazing. I know you're looking it up right now That thing's appreciated like three times over. Yeah, hasn't it not quite three times, but it's pretty big and the property What was funny about it? is that people were criticizing me that I overpaid for the property. And I was like, I'm not overpaying because the value of a product for me is not the purchase price, it's what I can do with it. And okay, let's see the Zillow price. But just for funsies, what's the Zillow today? Okay, you can see, ooh, you can see what I bought it for. And we can't. Sold for 110. Boom. On 4-120. Yeah. Okay. This was, yeah, so this is roughly three years ago. Yeah. Yeah. This was, now my sales price, what's it worth? 233.6. It's more than doubled in price. 233.6. But the great thing about that property is that my-In three years. In three years. Here's the greatest things about that. Remember guys, there's five things that benefit us as buy and holders. Okay. Buy and holder, buy and holder. I mean, he- We both do everything, but we also buy and hold. I get cash flow. That property makes me $1,000 net cash flow every month. The second thing I got was appreciation. I made $120,000 in three years on that deal, just sitting there. The third thing I got was tax benefits of owning the property. The fourth thing I get is the pay down. So that $375 I pay Dale and Susan every month. It pays down to the principal only. Principal only. There's no interest. And then the fifth reason we buy property is so that we can leverage property in the future. And that's a whole other conversation for another day. But this thing knocks it out of the park for the first four. Kills it. And you overpaid according to normal logic. This is the thing that people need to understand with seller finance, okay? Seller finance is not a painful situation typically. It is a gain. Full situation. Sellers want gain. So in sub two, they're looking, there's pain. In seller finance, it's typically the sellers are like, I have the property paid off. That's not really an avatar of somebody in distress. That's somebody that's like, I just want a higher number. And so you give them a higher number and you structure it so it cash flows and it pays down. You can be in a powerful position. Here's the thing. I paid the wholesaler on that deal five grand. I would have paid the wholesaler on that deal 50 grand, literally, if they structured the deal and brought it to me. But because I had to structure the deal, I paid them five. So understanding how to see a seller that wants too much money and go, are you sure that's how much you want? Are you sure? Are you sure? Are you sure? OK, great. If I could come up to 110, could we do terms? What are terms? Well, let me tell you a story about an F-150. Now what terms do you want? Oh my gosh, that makes so much sense. And then they tell you the terms. And what you've got to do is look at it and go, does it cash flow? OK. That's it. So here's a question inside of seller finance I get. People go, how do I know if it's a good deal? Here's how I know if it's a good deal. OK. Number one. are they better terms than I could get if I went down to a bank? That's number one. If you go to a bank or if I go to a bank right now as an investor to buy a property, how much are we putting down? On investment property, 30%, 40% a lot of times. 30%, 40%. So is my down payment less than that? Because that's part of your terms. Part of my terms. Second thing is what's my interest rate, right? And then the second thing I look at is, so number one, is it better than bank terms? That's number one. Number two, what is my cash on cash return? Okay, and that's such a simple thing, but nobody's ever heard that word. Okay, cash on cash return. So if I put $10,000 into a house and at the end of the year, I not only got my $10,000 back, no, I'm sorry, I put $10,000 in and it gave me $10,000 in net income that year, that's 100% cash on cash return. So think about this. If I put $1,000 on this table and I walked out of the room and I came back in and there's $2,000 in here, that's 100% cash on cash return. I don't know where the money came from, but damn, I got 100% cash on cash return. So typically a buy and hold investor is looking for a minimum of 12% cash on cash return. For me, because I have so many opportunities, just like you, I won't look at anything unless it's 30% or higher. And where creative finance is amazing is the lower my down payment, the higher my cash on cash return is. So it's not so much about the purchase price. It's how low can I get that down payment and how good can I get the cash flowing? The purchase price is really not that significant. So as long as you can hit a 12%, you'll get buyers that will look at it that you can assign these deals to. But if you're at 30% or higher, you're going to get just about every investor in the world goes, wait, hold on. I could put 20 grand in and I could get 7,000 or $8,000 a year spitting out cash flow. I'm a buyer all day long. OK, so and then how do I determine an assignment fee? Do you have a rule for this? No. OK, what's your rule for this? OK, so my rule of thumb is for every seller finance or subject to deal that cash flows $100 a month net, I pay a $2,000 assignment fee. Per hundred net. Yep, per hundred net. So that means after all my expenses, after all my things, if I'm cash flowing $100 a month in my pocket, I'll pay you a $2,000 fee. But my average cash flow on a sub-two or seller finance deal is over 500 bucks. So the average assignment fee I pay is over $10,000. So for every $100, I pay a $2,000 assignment fee. If the interest rate, like on this one, is 0%, I will pay a $5,000 per 100 cash flow. $5,000. So if you sell me, because what is the value in that deal is not just the cash flow, it's the fact that I'm paying no interest on that deal. You're paying down, you're building equity really fast, so you'll pay out more on your assignment. Yeah, so it's the interest. Very cool. It's very cool. It's very simple. It makes it simple to understand too. Yeah, so somebody goes, hey, Pace, this net cash flow is $500 a month. I go, great, that's a $10,000 assignment fee. OK, the guy I paid $210,000 to, here's why I paid him that. I paid him 10 times my cash flow. The reason being is because I had no down payment. So again, you compress my cost to get into the deal, I will pay you a higher assignment fee. So lower entry to get into the deal is going to give you a higher assignment fee. It makes total sense, right? Because if you're taking a deal to someone, the less capital they have to come up with, the more valuable that asset is. Right. I think something that's interesting about seller finance and creative finance in general is that a lot of wholesalers hear stories about you and me doing these no money out of pocket deals, that they believe that that's... actually what they should be looking for. That's not always what you should be looking for. Those are probably 20% to 30% of the opportunities out there. But the majority of seller finance deals are going to require capital. Yeah, some capital. So where do we get that capital from? We get the capital from either a, like, if I find a really great seller finance deal, I could go to Jerry and go, Jerry, do you want to be my partner on this? You bring the 50 grand I need. I'll bring the deal. And we'll go 50-50, 40-60, 70, whatever it is that we work out. I don't have to be in that deal out of pocket. You could also go to your uncle, your cousin, your uncle's cousin, your blah, blah, blah, blah, blah, whatever, and bring in a private money lender and still be out of pocket. No money if you decide you want to buy and hold. But my suggestion for people when you're jumping into creative finance, wholesale the first five creative finance, sub two, seller finance, novation, whatever. Wholesale the first five. See how it works. And then what I would do is for every 10 deals you wholesale, start acquiring one every 10 or so. I think that's really smart. I tell people do the same because in the beginning, wholesaling can be so instrumental in growing your business because it provides needed cash and the cash will allow you to bring on your first hire or do more marketing or whatever it is that you need to do. So in the beginning of your real estate journey, cash in your bank account tends to be more important than cash flow. But like Pace is saying, what if... Every 10 deals you kept one you kept one or every one out of five or whatever it looks like for you Now you're building a portfolio and you're bringing in that cash. That's gonna pay the bills It's gonna allow you to expand and grow and market and all those things It's a smart way to do it at some point you may transition and say I'm gonna keep four out of five When you know whatever it is, yeah, you could there will be an inevitable transition where you'll start acquiring a little bit more You'll start flipping a little bit more. But the other thing that there was a big transition for me was When I realized I could buy a seller finance deal, bring in a private money lender for the down payment, the Airbnb costs and stuff, and actually pay myself out of that private money lender. So let's say that I need 40 grand. I call this finance your financing. Finance your financing. I love that. That's really, really good. So finance your financing. Over borrow, right? So think about it. If I want to pay myself $10,000 on a seller finance deal, I decide to buy and hold in my portfolio. My average private money lender in second lien position is between 8% and 12%, depending on the deal, depending on the person. So let's say it's 10%, and I borrow $10,000. All that really is for me every month is 80 bucks out of my cash flow that I preloaded and paid myself right today. So I can get today money right now as long as I sacrifice $80 a month on my cash flow. That's it. Another example of that is I did this flip in Chandler, Arizona, and it was a luxury. It was a 1.5 sale price. And I borrowed hard money and private money to get 100% financing. And because it was luxury, these were big payments. So my total of And they required a payment every month. So my total payment to do, and this deal took a year, my total payment was like 150 grand in interest between paying the hard money lender and the private money lender. So the private money amount was 300 that hard money didn't cover. I borrowed 450 from private money, took the 150, put it in basically an escrow account. and then use that money to make my payment every month. So not only did I fund it 100%, I even financed the interest payments. Yeah, and you could even finance a payment to your, you could have borrowed 500 grand and paid yourself 50 Gs upfront as like pay for whatever. Yeah, supervision or my time or whatever. Just paying yourself. Like I'm gonna take a salary from the company. I'm gonna pay myself a management fee. So that's where like in the previous video, we're saying, If you understand the instruments, you become powerful because not only can you flip a house and make money tomorrow, big chunks of money, but you can make money today by financing your financing. Yeah. And that deal made me, I forget how much, a couple hundred thousand dollars with literally zero out of pocket. Not even making the payments was my own money. People just don't understand how freaking powerful that it really truly can be. So with seller finance, where do we find these opportunities? I would say first opportunity you want to look for is high equity. People that have a lot of equity in their properties. And as Jerry mentioned earlier, what was the percentage of people have seller like 30% of 30% of all real estate owned is free and clear. So 30% of the houses you drive by are paid off free and clear. Those are opportunities where you can buy on seller finance, right? Work out whatever the terms are. And here's the main four terms that you're going to work out. You're going to work out purchase price. That's usually what the seller wants, right? So seller wants purchase price more than anything else. Then the other ones you got to worry about are down payment, interest rate, and length of term. Because some sellers go, I'll sell or finance to you, and I'll give you a payment that's based on a 30-year payment, but I want you to pay me off in 10 years. Or five or whatever it is. Whatever it is. That's called a balloon. That's called a balloon. We didn't mention that in our, but that's really important. It's very important. Because you will get agents. that you work with and sellers that go, I don't want you to make payments to me for 30 years. And you go, okay, well, let's at least base the payment on 30 years, but then let's make a drop dead date that I have to either sell the property, refinance the property, or pay you off at the end of 10 years. So I'll just make those 10 years of payments and the remaining 20 years of payments I owe you, I'll pay them all on the 10th year. Which is fine because at that point, you've paid down so much equity. You could do a refinance. You could sell it. You've got options because you built in a big enough window of time to then exit that asset however you want. Here's an interesting thing, too, about balloons. Hopefully, you guys are getting tons of value from this because-Oh, this is a-By the way, guys, holy crap. This is so good, Pace. This is so valuable. I hope you guys appreciate the content that you're sharing here, Pace. Here's an amazing bomb I didn't learn until about seven years ago. is that I would get sellers that would come to me and they go, I love the way you are going to, I love the seller financing, but I don't want to give you payments for the rest of my life, right? Okay, so there's two things that I'll do. One, I'll put in the promissory note that it states that if the seller passes away, because you'll get a lot of people later in life that are willing to do this because they've accumulated assets and stuff. So you go, I'll put in the note that says if you pass away, the payments will go to your state or your children or your children's children or whatever it is. And they go, okay, cool. Right? So the Mario deal I told you guys about where I bought it for $3 million, that seller's 55. He goes, he gave me 50 years. He gave me a 50-year payment with no balloon. So it doesn't have to be 30. It can be 40, 50, or whatever. Whenever you want. Yeah. And when I realized that, I was like, I could literally do a thousand-year term if I really wanted to. Nobody will. But 50 years is perfectly fine. Why did Mario do it for 50 years is because he knows he built those assets for his kids to live off in the future anyway. So that's the first thing I'll do. Second thing I'll do if a seller requires a balloon, I will put a balloon extension clause in my agreement. Meaning, let's say that I bought a deal in 2022 at the beginning of the year. Market's hot, interest rates are low, I buy the deal, the seller then gives me a five-year balloon. I go into 2022, 2023, the market crashes, now the property's no longer worth what I bought it for. It's still cashflow, so there's still a lot of value to me. And the mortgage is still being paid down. But now when I go to refinance or sell the property in five years, it's worth less than what I originally bought it for. So in my documents, it will automatically renew a five-year balloon if the property doesn't appraise for the original purchase price. So I automatically can extend the life of my balloon in my documents. And that's an easy sell to the seller because you're saying, listen, It's not that I don't want to pay it back right now, but if the value isn't there, I'm still in the asset. I'm still where everything's fine, but just I need more time. I've never had a problem with a seller extending a balloon because they all believe their property is worth way more than it is. And that it will always be worth more and continue to go up. You're getting a great deal. Even Susan was like, you're getting a great deal at 110 grand, even when everybody else, and I did, I got a great deal at $110,000. Because of my terms, right? Not because of the 110, but because of the structure of the terms. Right. And so if a seller is going to sell to you on seller finance, they will always believe you're getting a great deal and they'll never believe the property is going to go down in value. But you should protect yourself with a balloon extension and just say, look, just to protect me and you, if the property doesn't appraise in five years for the original purchase price, it will automatically extend another five years. The seller's always like, yeah, that's always going to happen. Another strategy I'll do, Pace, is, and again, this requires some capital, but I'll do it. I'll tell them, hey, I'll do another extension and I'll agree to do a lump sum pay down. So maybe you say five grand or 10 grand or whatever. And a lot of sellers like that because you're not paying all the equity off or all the remaining balance off, but you're giving them something to then continue into the loan. So that one I use sometimes too. Seller finance is so powerful because think about this. Okay. So I did a deal about seven years ago and I worked out an agreement with the seller. right? So I bought their property for a hundred grand. We had a promissory note for a hundred thousand dollars. It said 30 years is how much time I had to pay them off at four and a half percent interest. So the seller comes to me two years ago and they go, Hey, I need you to sell the property. I need you to do whatever. And I go, I, that's not our agreement. You're you're, you can't change the terms on me, bank. You're the bank, right? Chase doesn't come to me and go, Hey, pace, we need you to pay. I have an agreement. It's a legally binding agreement. You can't change the terms of this. And I go, but I still owe you about $85,000. If you're willing to take $40,000 today, I will pay you off. And they go, done. I'll take the $40,000. And so that's the amazing thing here is I worked out the deal with the seller. The seller goes, I need the $40,000. They had a wedding to pay for. And they needed cash right then. So cash became more important. Right. So what did I do? I brought in a private money lender, did the $40,000, refinanced it. And I still own the deal. I didn't sell it. But now I owe like $45,000 on it when I originally bought it for $100,000. Amazing. If you can understand how to play this little game, you're like the Monopoly guy. You're just like, holy crap, I can do anything. So going back to what you were saying, where to find these deals, you know, like... High equity. High equity. So if you take like your list, you get wherever you're getting your list. If you do like in Flipster, we actually have a field that's the equity. And you can say, I want to look at the data that's got the highest equity all the way down to the lowest equity. Well, normally everybody looks at 60 percent or more equity as their filter. And then everything that's got less equity than that, they discard like this. Like, oh, that's bad data. That's great. That's good for sub two. Right. But if you go to the 100% equity, meaning they owe it free and clear, that would be a great list to go to for seller finance. Right. So here's the other thing too is like, did you buy either one of your Montana houses on seller finance? No, both of them I bought. You bought, okay. With new debt. With new debt. Okay, cool. So if you go on landwatch.com, right? Like I want to live up by you and Kalispell and there's... probably 25 or 30 houses in Kalispell right now that are all on seller finance. Seller finance is commonly known in the agent world, in the seller world. In multifamily, you want to get into multifamily? Seller finance is predominant. It is huge in multifamily. And a lot of commercial because sellers are investors. And so I do this a lot, which maybe is another topic. I'll sell on creative financing because I understand now how I can leverage my existing debt. by selling it really high to someone who has a better use of it than I do. Yeah. And you realize also as the buyer or as the seller, how much time banks and the underwriting process and processors and agents and the escrow, all this stuff takes so much time and energy and everybody else is getting paid all these fees and just whittling down everybody's profit. So if you understand all of that, you can work a deal with people directly and make way more money as the seller. So this is where seller finance dominates is because it... For every dollar a seller makes doesn't mean it's a dollar coming out of my pocket, right? Whereas in wholesaler, it is a direct correlation. I have to get the seller down. For every dollar they take off their equity is a dollar I make. So it's a zero-sum game. It's not equal. In seller finance, I go, OK, you want a higher price? No problem. Let's lower the interest rate. Oh, you want a higher price? No problem. Let's put a zero down payment. Oh, you want a higher price? Let's do zero interest. So you can still win and you can play this amazing game where you can meet in the middle, just depending on what you're looking to accomplish. Yeah. I have a deal right now, Pace, where I bought it cash, my cash, and I'm all in at 69 and I'm selling it seller finance for a hundred and you can rent it out and it'll cash flow. And the reason why I'm doing that is I'm looking at, well, if I, if I spend 69 of my cash, but I sell it on, uh, for a hundred and I get some down payment money, what is my cash on cash return? Am I willing to let my cash sit? A lot of sellers are willing to do that exact thing. So not only does this apply to sellers you're talking to, but it's also an investment strategy that you could implement as an investor when you go to sell, right? So there's really a lot of use around this, how to do seller finance. Yeah. And that's the thing you got to understand is seller finance is both an acquisition strategy and a disposition strategy. Whereas in other strategies like a wrap, you'll hear people talk about wraps. A wrap is not an acquisition strategy necessarily. Wrapping is a disposition strategy. And we'll talk about that in the sub two video coming up next is acquiring and then wrapping your own terms. It is literally, it's very literal. We'll get into that, but seller finance. So We talked about what seller finance and creative finance is. We talked about where you can find them. For me, here's where we find them, on market. We find a lot on market. Me too. You actually had one on market just a couple months ago on Lemon that I was like, bro, this... So Jerry, this is what I love about Jerry and this channel, is there's very few people that are actually practicing what they preach. In fact, you never did a video on Lemon. You didn't talk about Lemon. This guy's doing 25 times more deals off camera than he is on camera. And I'm looking on the MLS and I'm like, hold on. That looks like a Norton design. That looks like a, oh, it is a Norton house. He's selling a 1.5, what was it, 2.5? Yeah. $2.5 million house on seller finance because you can get more money on the exit than you could if you sold on cash. And I had great debt on it. So I was willing to subtue it. Oh, yeah. Love it. So anyway, seller finance is powerful, commonly known to agents, commonly known to title companies, commonly known to brokers, commonly known to closing attorneys. And I'm like, oh, yeah. You're not going to have a lot of pushback in the seller finance world. The biggest downfall of seller finance is that you'll have sellers that will want way high purchase price and you just have to figure out what are the terms that you need to equal equalize that high purchase price. It's because they don't have distress, right? They own it free and clear. There's no debt on it. Usually there's not this pressing issue. So they tend to want a higher price. So that's where what Pace is saying is now you got these other terms. That you can play with to now make that high price worth it. Yeah. And the last thing I'll say about this, this is really, really important, is that I'm not actively going out and looking for seller finance opportunities, right? So although we did talk about pulling a list, go to LandWatch, go to MLS, there are deals everywhere, seller finance. There's even owner finance websites. If you guys type in buy a house owner finance, there's people that aggregate all the owner finance deals and put them all on one website. So if you're looking for a house to live in. You're looking for a house to rent out. You're looking for an asset to purchase. You can go find those readily. But for us, we cold call and we text. That's our main marketing strategy. We generate leads from all sorts of places. And what happens is when a cash price doesn't work, we simply ask the same question I asked Susan, which is, hey, Susan, if I could come up to your price, would you be willing to give us terms? And the sellers go, I don't know what that means. We then tell them a small story about an F-150. It takes about four minutes. They go, totally makes sense. And then what we do is we take them from our cash department and we put them in our terms department, even though it's the same exact people. There's a psychological thing that now the seller goes, okay, we're not talking cash anymore. We're talking about terms and structuring where the seller is going to become the bank. I love the two-step process because we do the same thing. We always lead out with cash and then we come back with terms because what it does is when you create that baseline of here's the cash number and then when you come back and say, okay, well, I can come up to your price. All of a sudden now, the seller's seeing you come way up from this low cash offer, and it just opens their mind up now to be creative with you on those terms. And they understand the reason you're going up to that number is because you're asking them for something in return. They're giving something back. You're saying to them, it's what you always say. I'll give you the price you want. You give me the terms I want. And so that allows you to do that, especially when you create that baseline low cash offer. Yes. So that's really powerful way to do it is first, first low cash offer, create the baseline. Now talk. Well, what if, what if I came up to your price? Right. And so here, here's, here's where you're going to dominate in this market. I know this is a long video. Tyler, Tyler's like, yo, just so you know, this is really long. I, let's say I acquire a deal on seller finance. Okay. What's amazing about this right now, interest rates are six and a half to seven and a half percent interest. Now I have this asset. that I've created this debt with the seller. I'm now the owner. I can now go out and I can seller finance it to a buyer who's being disqualified or whatever, like that Jose on the F-150 story, is I can go create that situation. So think about it this way. I'm gonna be doing a lot of this. Think of, yeah, exactly. Think about this. This is gonna be the number one strategy is selling and you acquiring debt and you then creating new debt with your buyer. So think about this. Jerry has an F-150. He sells it to me for $10,000, $1,000 down, $350 a month, let's say. I can take that same truck that now I have an agreement with Jerry, and I can go and I can sell it to Jose for $15,000, $3,000 down, and $550 a month. So I bought on seller finance. I sold on seller finance to my buyer. And what's great right now in this marketplace is that we bypass banks. There's no interest rate. So Jerome Powell and the Fed can do whatever the crap they want. We just dominate because we are the ones understanding the paper and creating these debts between the parties. Love it. Isn't that amazing? It's so fun. Guys, it makes me want to go do a deal right now. So much value in this video. I know it was long, but man, so many good nuggets. Guys, I'm going to put Pace's information below if you're not already in his world. Pace talks about this day and night. He teaches how to do this. Be sure to click on some of those links so that you can learn more about how to really do this at a high level and make a lot of money and really change lives. Creative financing has always been like this niche within a niche. And you've now taken this and you're allowing people to... Even new investors, like if you're watching this and you haven't done your first deal, you can start to do some of these strategies. My current life mission, and somebody asked me like, why are you working so hard on creative finance? And I go, if I knew what creative finance was when I first started, I'd be worth an extra $20, $30 million easily if I just knew that. But why didn't you know about it, Pace? Because the conversation was never normalized around creative finance. It was always looked at as like this. crazy strategy. Well, it's always been an advanced strategy for like advanced type of investors and you're normalizing it, making it so that people, everyday people can understand and implement these strategies. So, and you're really good at that pace. So thank you guys. I hope you found a lot of value. Leave a comment and let us know what you, what your biggest takeaways were. Any questions you might have, we'll try to answer those as well. And be sure to follow this series because in the next video we're going to do is subject to, which is really fun. because it's now there's existing debt in place. How do we leverage that? So that's the next video, guys. Thanks again, Pace. We'll see you on the next video.

Welcome back to video three in this series. We're doing a bunch of videos here. Really exciting. Pace Morby, thank you for being here.

All creative financing. In the first video, we kind of did a big overview. Then we talked about some of the instruments and the terminology in video two.

Really important that you watch this in order. I think once we get to the strategies, you can jump around there. But you really want to go back and watch video two where we really break down kind of lean position and how notes work and a mortgage or deed of trust. Some of these things. so that you can really put deals together effectively, structure things in the best way possible by understanding the instruments, right?

But in this video, we're actually going to deep dive now into the first creative financing strategy. This is one of Pace's favorite strategies, mine too. It's basically where you start with creative financing, right?

It's the first one that you really want to learn and understand and do well with, and that's what we call seller financing or owner financing. Sometimes we call it owner carry, or you'll even hear people say a carry back. Or installment sale. Installment sale.

So you're going to hear these different terms that are all referring to the same strategy. We're going to refer to it as just seller financing to keep it simple. But let's start at the top.

What we want to do on this video is not just talk about what it is, but also what are some of the best ways to find these types of deals? What are some ways to put these deals together? So maybe the analysis part, like, okay, what makes it a good deal?

How do I know what I should pay for it? And then maybe some dispo ideas like, okay, now that you've put this deal together, what exit strategies could you implement? Yeah, how do I make money on that bad boy? Right.

Well, so I always start with seller finance on the same exact topic, which is what is creative finance as a whole using a very simple story. It's probably the most common story that I use. It's my F-150 story. I love the F-150 story. It makes so much sense because people have this aha moment of like, whoa, that...

makes so much sense. This is happening all around me all the time. So I go to an appointment about seven years ago. Wholesaler calls me and goes, hey, Pace, I've got a seller.

Her name is Susan, who has a mobile home, three bed, two bath. None of that's really that important. But Susan wants $110,000 for this property.

Which we're not going to disclose the address. We will not. But I do own it to this day.

I feel like I should be able to still... So Susan wants $110,000. And where do sellers typically get their prices from?

Zillow. Zillow. Or a real estate agent.

Or an agent or Redfin or something like that. They don't know. They just look online. The online tells them. So that's where Susan got her number was from Zillow.

So if I'm a wholesaler, right? and I'm going to offer cash on $110,000 ARV. What do you think I got to offer that? 50. 50 grand. 60 maybe, but yeah.

So the wholesaler. Half a Zillow. Right.

So the wholesaler who knew I was doing creative finance goes, Pace, I'm paying for all these leads. I've got this lead where Susan says, I'm selling this property this week to somebody. I don't care who it is, but I want $110,000 or I'm going to list the property. Very common scenario.

Very common scenario. So I go, I'll go to the appointment with you. So of course, like any other appointment, I record the entire appointment. I put the phone on the counter in the appointment and I meet with Dale and Susan Poyer, amazing people, friends of mine at this point.

And I go, so Susan, tell me this, you want $110,000? She says, yes. And I go, where'd you get that number from?

She says, I saw it on Zillow. I go, great, I'm glad you didn't lie about it because some sellers say, oh, my neighbor this, my blah, blah, blah, whatever. She goes, Zillow told me. I go, OK, so I imagine with all the other investors, including the person that brought me here, and I called this person out in the meeting, everybody's probably offering you $40,000, $50,000, $60,000.

She goes, the highest offer we have is $57,000. I go, it doesn't surprise me, because if I was going to offer you cash-I'd be in the same ballpark. I'd be in the same ballpark. And at that point, it's who's the better negotiator, who can close faster, who do you think is credible. And at that point, that's the only advantage I have in a cash scenario, Susan.

And she goes, wait, but you're not offering me cash? I go, no, I'm not going to offer you cash. I said, and write this down.

This is the line I use to go from a cash conversation to a creative conversation. It's very simple. And it's meant and structured this way on purpose to trip the seller up very subtly.

So I go, Susan, I'm going to offer you terms. I will come up to your price. I will come up to your price.

telling her her price is too high. That's a psychological thing. I would be willing to come up to your price if you would give me terms. That's the line. Most sellers don't know what terms are.

And so that's where I tell the F-150 story. Okay. So then she says, what are terms? She goes, what are terms? Exactly.

So you want to get the seller to go, what are terms? And then give them a very real life scenario that everybody understands. So I go, well, here's what terms are, Susan. I used to own a construction company, and in that construction company, I had an F-150, a Ford. Everybody knows what a Ford F-150 is.

It's the number one selling truck of all time. So immediately, she's now painting a picture in her brain of this truck. And I go, this truck hit 320,000 miles. It started having problems, kind of like the house you're trying to sell, right?

I'm drawing parallels. And I decided it's time to sell the truck because it's starting to have more problems than what it's worth for me. And she goes, yeah, kind of like the house I have.

And I go, so I take it out of operation. My guys are no longer driving it to job sites and whatnot. And I go decide to sell it on Craigslist. So where do I find the value of a vehicle, Susan?

And I ask Susan the question. I've done this a thousand times. The sellers replied the same exact way.

So I go, Susan, where do I find the value of a truck? And she goes, Kelley Blue Book. I go, so the Zillow for cars. And she goes. Yeah.

And I go, so you got your price from Zillow. I got my price from the Zillow for cars, Kelley Blue Book. Kelley Blue Book says my truck's worth five grand. I'm like, I'm not freaking selling this thing for $5,000 because if I put it out there for $5,000, I'll get some wholesaler or somebody coming in lowballing me and saying all cash offer. I go, does that make sense to you, Susan?

She goes, yeah, that's what's happening. I tell people I want 110,000. People are coming in and offering me 50. And I go. That's because they're trying to make money.

And rightfully so. That guy that's coming in with cash, he can get a deal, right? Because he's got cash. Right.

He's got cash. And you want to sell this week, you said. And if you go any other route, you're going to go three, four months with an agent. And you might have to clean up and repair the property.

And she goes, so you didn't sell the truck. I go, no, this is what I did. I go, Susan, I'm very similar to you.

I'm belligerent. I believe my truck is worth more than it really is. just like you believe your house is worth more than everybody else believes it is. So I go on Craigslist and I list the truck for $10,000, even though Kelly Blue Book told me it was worth five. Did I sell that truck, Susan?

She goes, No. I go, I didn't even get a call, a text, a smoke signal. Like, no, but nothing. I didn't even get somebody to text me and go, are you freaking out of your mind trying to sell this thing for 10 grand? Nothing.

Like literally nothing. So my wife comes up to me, I'm sitting at my desk and my wife comes up to me one morning and she goes, Hey, sweetheart, I have to keep driving around this F-150 every morning for the last three months. Are you going to sell this thing anytime soon? And I look up at my wife and I'm like, what do you want me to do?

I'm not going to just let somebody lowball me. I want the number I want. And I go, Susan, does that resonate with you?

And she says, yeah, actually, I totally understand your pain. So my wife suggests to me, Susan, much like I'm going to suggest to you, she says, why don't you let somebody make payments on your truck instead of coming up with cash? And I go, oh my gosh, you're so genius.

So I go back on Craigslist. I change one thing on my ad and it was F-150 will take payments. Do you think I sold that truck for $10,000, Susan?

She says, yeah, probably. And I go, I sold it for $12,500 with $1,000 down. And Jose, the gentleman who bought it from me, paid me $350 payments every single month. And with interest included, he paid me $15,000 over four years. And she says, wow.

And I go, do you think that Jose overpaid for that truck? She goes, absolutely he did. I said, Susan, I want you to remember something. The value is never for me in the purchase price.

The value for me is what I can do with the property. So as long as you give me terms equal to the $110,000 high price you're asking for, then I'd love to work something out with you because Jose did not overpay for that truck. He took that $350 payment.

He didn't have to get his credit pulled. I didn't have to look at his job history, his bank balance. I didn't have to look at anything. In fact, he was an illegal resident of the United States, and I still seller financed my truck to him. And she goes, oh, it's seller finance.

I go, exactly. Because Jose had a use for that truck. He turned into a painting truck.

Equal to what he paid. So he didn't overpay. No. Because he had a use for that with the financing he was able to get.

He generated $7,000 a month from that truck. Every single month. That truck meant $7,000 to his company every month for a $350 payment.

So he didn't care that he overpaid the Blue Book value? He did not care at all. He cared that I didn't check his credit. He cared that he didn't have to have credit.

He didn't-Only a thousand bucks down? Thousand dollars down. And I had to turn my ad off in 30 minutes. It was people pouring in. So if you understand what I did there, I took something I owned free and clear.

And I created an agreement between me and Jose. That agreement is called a promissory note. I structured a debt and an agreement that says, Jose, you can be the owner of this property that I am now becoming the bank of. I am now the bank of this truck, and you pay me every single month like you would pay a bank.

And now I, as the seller, get to either A, have a high purchase price, or B, an interest rate, or sometimes C, both, depending on how it's structured. So Susan goes, oh my gosh, I love this. I absolutely love this. I will sell to you on seller finance.

I go, great. What terms do you want? You're my bank, Susan. And she goes, I'm the bank.

And she was so excited to be the bank. And I said, here's the reality is I'm going to upgrade you. This is another line I use all the time that gets sellers very excited about seller finance. I go, I'm going to upgrade you from the landlord to the bank.

And the lowest person in a real estate transaction is the landlord because you're the one that gets pooped on. everywhere. The tenants poop on you.

The bank is making all the money. You have to deal with all the contractors taking advantage of you. But as the bank, you don't have to deal with any of that.

You're the one that just brings in the money and it's truly passive. And I use the word passive, passive, passive. So Susan says, I love it. I love it.

How am I secured? And I go, well, we're going to do the same thing I did with Jose. We're going to create a promissory note that says, I promise to pay you what's on this note. and then we're going to securitize that or make it secure against the property with a mortgage or in Arizona, a deed of trust, you're fully secured.

If I default, you can get the property back. And again, we talked about that. That means that deed of trust gets recorded as a lien against the property in the amount of your promissory note. So in the event you default or what, I don't like to say default, but that sounds really bad.

What I'll tell sellers, I'll say, in the event I get hit by a bus. Yeah, I say, I say abducted by aliens. Perfect. Because I had a seller one time go, my brother got hit by a bus.

Oh, so you can't use that one anymore. And I was like, oh my gosh. I had to come up with a different one. And you'll see sometimes on my logos, you'll see an alien.

That's why the alien. That's where it came from. Because my students have heard me talk to so many sellers.

And I say, well, in the event I get abducted by an alien. Because I know no sellers have ever been abducted by aliens. Yeah. So I won't offend you.

That you know of. That I know of. You'll have to change it once you meet someone that does. I will.

I mean, there's a lot of sellers I think are aliens sometimes. But if you get abducted by an alien, Susan can then liquidate the asset, take back the asset, sell it, and be made whole on her loan to you. So she's protected.

Right. That's what's special about this. So here's what Susan says to me. She goes, I will do seller finance to you.

I go, great. You're the bank. I'm applying for terms.

What terms would you like to give me? This is usually what I say to people. And I always put myself in a position where I get to say no. Never send out an offer to a seller in seller finance in my world.

I want to be the person that says no. And what's brilliant about this is you're letting her set the terms first because maybe her terms are amazing, better than what you would even suggest. Right. I love that.

So give them the opportunity to give you something. You're like, okay. Yeah.

And that's happened a lot of times. A lot of times. I'm sure it's happened to Jerry a ton where you're like, really?

It's better than what I would have suggested. Right. Yeah.

He who names the price first loses. So let her name it first, and then you take that. So either A, they're going to give you something that's way lower than you thought they would accept, or B, you now have the power to say no, and you're the person rejecting them. I always hate on a transaction where I'm sending out an offer, and they get to say no. And I'm like, OK, well, what would work?

And they just ghost you, right? So I like to be the person in that position. So Susan goes, I want $110,000. I want $110,000. $20,000 down and I want 8% interest.

So my reply, this is another, this is a recorded trend. The reason why I pointed out this was a recorded conversation is because there's a lot of things I've said in this appointment that I've shared this recordings millions of times. I've heard it.

It's amazing. It's a good one. And I go, I go, well, Susan, I'm probably not your buyer. That's another line I use all the time. Probably not.

I'm probably not your buyer. And she goes, well, what do you mean? I thought you said you'd pay $110,000.

I go, yeah, I'd pay $110,000. But the reality is I'm already paying $50,000 over the price of everybody else. Your next best offer. Right.

Your next best offer is $50,000 lower than me. This is, again, why we start with cash first. We ascertain or obtain the information.

We then can utilize that when we need to. And she says, well, where would you be? And I go, man, at $110,000, you're already winning.

You're getting full retail. I'm going to take over a tenant. This is important for this transaction.

I'm going to take over a tenant and I'm paying you top price. And she goes, okay, well, what would work for you? And I go, at that price, I'd have to have a principal only payment.

That's 0% interest, by the way. I never say 0% interest to a seller. I always say principal only payment.

And I would need you to pay for the closing costs. And she goes, I would do that, but I at least need $10,000 down payment. I go, great, no problem.

This is one of my really famous deals, by the way. So I go, okay, so I, perfect, let's agree to that. Principal only, 110, I'll take over your tenant, and the tenant thing becomes really important in a second, and you pay closing costs.

She goes, great, as long as you give me 10 grand. I'll go, perfect. Will you now sell or finance my down payment?

The 10 grand. Bro, when I threw this out here, it was the first time I did a deal where the seller asked for a $10,000 down payment. And I said, well, I'll pay you the $10,000, but I got to pull it from the rent I'm receiving.

So I took over a tenant that was paying $1,600, the payment to Susan, and I'm going to tell you how I came up with the payment here in a second. Most people go, what spreadsheet or bankrate.com or whatever, where did you come up with the payment? And I go, here's how I came up with the payment. I found the bunnies.

Her bunny, Dale and Susan, they wanted to go on an RV trip every single, all over the country. And they said their average cost to rent out a park for a month was $375 a month. And so I said, what if my payment to you covered the cost of your RV trip every single month, your rent?

So essentially this house pays for your RV spots for the rest of your life. She was like, I love that. So that's where my payment came from.

$375 principal only payments. Find the bunnies. Found what the need was. Right.

By listening and understanding what the seller needs in their life. It's not just about some formula or whatever. It's about the sellers.

She looked at it like, this house is a coupon for me to never have to pay for another RV spot in the whole country the rest of my life. And I'm like, holy moly, I can't believe that I just pulled that off. So what happened is her tenant's paying me $1,650.

I pay her $375 on a monthly basis. Then I have insurance and some maintenance and whatever. My net cashflow on that property is $1,000 a month. So six months later, I paid her five grand. Another six months later, I paid her five grand.

So my cash flow from the property she seller financed me is what paid for her down payment. So just to recap this, make sure everyone's following this. She wanted 10 grand.

You said, great, but I'll give you five and six months and another five and six months. And then the way you paid that five was through the thousand dollars a month cash flow. Right. So essentially you got back to zero, zero out of pocket.

Yeah. And I've done a lot of deals like this. And this is where, you know, Jerry and I, uh, talked in the previous video about understanding how to structure a deal is that I gave her $110,000.

She paid for closing costs. I took over a tenant. So I had no money. I had no requirement for money whatsoever. And then when she wanted the down payment, I go, no problem.

Let's figure out where that down payment's coming from. I looked at the cash flow and I go, oh, I could pay her $1,000 a month essentially. And when she asked me for $10,000, I go, Okay, would you do it over the course of a year? She goes, yeah, no problem. I don't care when I get it.

And I go, let's do it for a year. So, and you guys can, maybe what I'll do is I'll give Jerry a Dropbox link for that note. So you guys can actually see the note. You'll see Dell and Susan's name on it. You'll see the structure, the 375, 20 years of payments, principal only.

And you'll see how I structured the down payment on the actual note. And you'll go, it's that simple? this brings a really good point up.

Really for me, and I'm sure you're this way too, I just come up with the high level terms. And then there are so many people that can then put all the paperwork in place. Like you really shouldn't be stressing yourself out about that part.

Learn how to put the terms together. And then there's transaction coordinators or title people that really understand. Transaction coordinators are huge. Title companies, closing attorneys, escrow officers.

We have a list of about 300... escrow companies and closing attorneys across the country, all 50 states that do sub two seller finance, novation agreements. That's one of the older ones we missed was novation, but they do all of this stuff. You just got to go to the companies that do it. They do literally all the paperwork except for the purchase contract.

So don't get tripped up on, oh my gosh, how do I put a contract together that has everything I need in there? That part's easy. In fact, I don't touch paperwork anymore. Me neither. I haven't touched paperwork in five, six years.

And I rely on other people to do all that. I literally like, here's my bullet list. Here you go. And they put it all together. And yeah.

And I see people trip up about this kind of stuff. Like I've, hold on, hold on. I've never, I don't know how to do all the paperwork.

I'm like, okay, but you also don't know how to drill your own teeth, but you go to a dentist. Like you also don't change your own oil, but you go to Jiffy lube. Like, why do you feel like you need to do the physical paperwork?

You're a business owner delegated. Right. So that that's seller finance. And What I like about what's cool if what I love about this story and maybe you were gonna say this but I just want to make sure you point this out this was a few years ago and You you like to hold so you held this asset. Not only is it cash flowing?

Not only did you get? Depreciation right off which is amazing. I know you're looking it up right now That thing's appreciated like three times over.

Yeah, hasn't it not quite three times, but it's pretty big and the property What was funny about it? is that people were criticizing me that I overpaid for the property. And I was like, I'm not overpaying because the value of a product for me is not the purchase price, it's what I can do with it. And okay, let's see the Zillow price.

But just for funsies, what's the Zillow today? Okay, you can see, ooh, you can see what I bought it for. And we can't. Sold for 110. Boom. On 4-120.

Yeah. Okay. This was, yeah, so this is roughly three years ago. Yeah.

Yeah. This was, now my sales price, what's it worth? 233.6.

It's more than doubled in price. 233.6. But the great thing about that property is that my-In three years.

In three years. Here's the greatest things about that. Remember guys, there's five things that benefit us as buy and holders. Okay.

Buy and holder, buy and holder. I mean, he- We both do everything, but we also buy and hold. I get cash flow. That property makes me $1,000 net cash flow every month.

The second thing I got was appreciation. I made $120,000 in three years on that deal, just sitting there. The third thing I got was tax benefits of owning the property. The fourth thing I get is the pay down. So that $375 I pay Dale and Susan every month.

It pays down to the principal only. Principal only. There's no interest. And then the fifth reason we buy property is so that we can leverage property in the future. And that's a whole other conversation for another day.

But this thing knocks it out of the park for the first four. Kills it. And you overpaid according to normal logic. This is the thing that people need to understand with seller finance, okay? Seller finance is not a painful situation typically.

It is a gain. Full situation. Sellers want gain. So in sub two, they're looking, there's pain. In seller finance, it's typically the sellers are like, I have the property paid off.

That's not really an avatar of somebody in distress. That's somebody that's like, I just want a higher number. And so you give them a higher number and you structure it so it cash flows and it pays down. You can be in a powerful position.

Here's the thing. I paid the wholesaler on that deal five grand. I would have paid the wholesaler on that deal 50 grand, literally, if they structured the deal and brought it to me. But because I had to structure the deal, I paid them five.

So understanding how to see a seller that wants too much money and go, are you sure that's how much you want? Are you sure? Are you sure?

Are you sure? OK, great. If I could come up to 110, could we do terms? What are terms? Well, let me tell you a story about an F-150.

Now what terms do you want? Oh my gosh, that makes so much sense. And then they tell you the terms. And what you've got to do is look at it and go, does it cash flow? OK.

That's it. So here's a question inside of seller finance I get. People go, how do I know if it's a good deal? Here's how I know if it's a good deal. OK.

Number one. are they better terms than I could get if I went down to a bank? That's number one. If you go to a bank or if I go to a bank right now as an investor to buy a property, how much are we putting down? On investment property, 30%, 40% a lot of times.

30%, 40%. So is my down payment less than that? Because that's part of your terms.

Part of my terms. Second thing is what's my interest rate, right? And then the second thing I look at is, so number one, is it better than bank terms? That's number one.

Number two, what is my cash on cash return? Okay, and that's such a simple thing, but nobody's ever heard that word. Okay, cash on cash return.

So if I put $10,000 into a house and at the end of the year, I not only got my $10,000 back, no, I'm sorry, I put $10,000 in and it gave me $10,000 in net income that year, that's 100% cash on cash return. So think about this. If I put $1,000 on this table and I walked out of the room and I came back in and there's $2,000 in here, that's 100% cash on cash return.

I don't know where the money came from, but damn, I got 100% cash on cash return. So typically a buy and hold investor is looking for a minimum of 12% cash on cash return. For me, because I have so many opportunities, just like you, I won't look at anything unless it's 30% or higher.

And where creative finance is amazing is the lower my down payment, the higher my cash on cash return is. So it's not so much about the purchase price. It's how low can I get that down payment and how good can I get the cash flowing? The purchase price is really not that significant. So as long as you can hit a 12%, you'll get buyers that will look at it that you can assign these deals to.

But if you're at 30% or higher, you're going to get just about every investor in the world goes, wait, hold on. I could put 20 grand in and I could get 7,000 or $8,000 a year spitting out cash flow. I'm a buyer all day long. OK, so and then how do I determine an assignment fee?

Do you have a rule for this? No. OK, what's your rule for this? OK, so my rule of thumb is for every seller finance or subject to deal that cash flows $100 a month net, I pay a $2,000 assignment fee. Per hundred net.

Yep, per hundred net. So that means after all my expenses, after all my things, if I'm cash flowing $100 a month in my pocket, I'll pay you a $2,000 fee. But my average cash flow on a sub-two or seller finance deal is over 500 bucks.

So the average assignment fee I pay is over $10,000. So for every $100, I pay a $2,000 assignment fee. If the interest rate, like on this one, is 0%, I will pay a $5,000 per 100 cash flow.

$5,000. So if you sell me, because what is the value in that deal is not just the cash flow, it's the fact that I'm paying no interest on that deal. You're paying down, you're building equity really fast, so you'll pay out more on your assignment. Yeah, so it's the interest. Very cool.

It's very cool. It's very simple. It makes it simple to understand too.

Yeah, so somebody goes, hey, Pace, this net cash flow is $500 a month. I go, great, that's a $10,000 assignment fee. OK, the guy I paid $210,000 to, here's why I paid him that. I paid him 10 times my cash flow. The reason being is because I had no down payment.

So again, you compress my cost to get into the deal, I will pay you a higher assignment fee. So lower entry to get into the deal is going to give you a higher assignment fee. It makes total sense, right?

Because if you're taking a deal to someone, the less capital they have to come up with, the more valuable that asset is. Right. I think something that's interesting about seller finance and creative finance in general is that a lot of wholesalers hear stories about you and me doing these no money out of pocket deals, that they believe that that's... actually what they should be looking for. That's not always what you should be looking for.

Those are probably 20% to 30% of the opportunities out there. But the majority of seller finance deals are going to require capital. Yeah, some capital.

So where do we get that capital from? We get the capital from either a, like, if I find a really great seller finance deal, I could go to Jerry and go, Jerry, do you want to be my partner on this? You bring the 50 grand I need.

I'll bring the deal. And we'll go 50-50, 40-60, 70, whatever it is that we work out. I don't have to be in that deal out of pocket. You could also go to your uncle, your cousin, your uncle's cousin, your blah, blah, blah, blah, blah, whatever, and bring in a private money lender and still be out of pocket. No money if you decide you want to buy and hold.

But my suggestion for people when you're jumping into creative finance, wholesale the first five creative finance, sub two, seller finance, novation, whatever. Wholesale the first five. See how it works. And then what I would do is for every 10 deals you wholesale, start acquiring one every 10 or so.

I think that's really smart. I tell people do the same because in the beginning, wholesaling can be so instrumental in growing your business because it provides needed cash and the cash will allow you to bring on your first hire or do more marketing or whatever it is that you need to do. So in the beginning of your real estate journey, cash in your bank account tends to be more important than cash flow.

But like Pace is saying, what if... Every 10 deals you kept one you kept one or every one out of five or whatever it looks like for you Now you're building a portfolio and you're bringing in that cash. That's gonna pay the bills It's gonna allow you to expand and grow and market and all those things It's a smart way to do it at some point you may transition and say I'm gonna keep four out of five When you know whatever it is, yeah, you could there will be an inevitable transition where you'll start acquiring a little bit more You'll start flipping a little bit more. But the other thing that there was a big transition for me was When I realized I could buy a seller finance deal, bring in a private money lender for the down payment, the Airbnb costs and stuff, and actually pay myself out of that private money lender. So let's say that I need 40 grand.

I call this finance your financing. Finance your financing. I love that.

That's really, really good. So finance your financing. Over borrow, right? So think about it. If I want to pay myself $10,000 on a seller finance deal, I decide to buy and hold in my portfolio.

My average private money lender in second lien position is between 8% and 12%, depending on the deal, depending on the person. So let's say it's 10%, and I borrow $10,000. All that really is for me every month is 80 bucks out of my cash flow that I preloaded and paid myself right today. So I can get today money right now as long as I sacrifice $80 a month on my cash flow. That's it.

Another example of that is I did this flip in Chandler, Arizona, and it was a luxury. It was a 1.5 sale price. And I borrowed hard money and private money to get 100% financing.

And because it was luxury, these were big payments. So my total of And they required a payment every month. So my total payment to do, and this deal took a year, my total payment was like 150 grand in interest between paying the hard money lender and the private money lender.

So the private money amount was 300 that hard money didn't cover. I borrowed 450 from private money, took the 150, put it in basically an escrow account. and then use that money to make my payment every month.

So not only did I fund it 100%, I even financed the interest payments. Yeah, and you could even finance a payment to your, you could have borrowed 500 grand and paid yourself 50 Gs upfront as like pay for whatever. Yeah, supervision or my time or whatever. Just paying yourself. Like I'm gonna take a salary from the company.

I'm gonna pay myself a management fee. So that's where like in the previous video, we're saying, If you understand the instruments, you become powerful because not only can you flip a house and make money tomorrow, big chunks of money, but you can make money today by financing your financing. Yeah. And that deal made me, I forget how much, a couple hundred thousand dollars with literally zero out of pocket. Not even making the payments was my own money.

People just don't understand how freaking powerful that it really truly can be. So with seller finance, where do we find these opportunities? I would say first opportunity you want to look for is high equity. People that have a lot of equity in their properties. And as Jerry mentioned earlier, what was the percentage of people have seller like 30% of 30% of all real estate owned is free and clear.

So 30% of the houses you drive by are paid off free and clear. Those are opportunities where you can buy on seller finance, right? Work out whatever the terms are.

And here's the main four terms that you're going to work out. You're going to work out purchase price. That's usually what the seller wants, right? So seller wants purchase price more than anything else. Then the other ones you got to worry about are down payment, interest rate, and length of term.

Because some sellers go, I'll sell or finance to you, and I'll give you a payment that's based on a 30-year payment, but I want you to pay me off in 10 years. Or five or whatever it is. Whatever it is. That's called a balloon.

That's called a balloon. We didn't mention that in our, but that's really important. It's very important.

Because you will get agents. that you work with and sellers that go, I don't want you to make payments to me for 30 years. And you go, okay, well, let's at least base the payment on 30 years, but then let's make a drop dead date that I have to either sell the property, refinance the property, or pay you off at the end of 10 years.

So I'll just make those 10 years of payments and the remaining 20 years of payments I owe you, I'll pay them all on the 10th year. Which is fine because at that point, you've paid down so much equity. You could do a refinance. You could sell it.

You've got options because you built in a big enough window of time to then exit that asset however you want. Here's an interesting thing, too, about balloons. Hopefully, you guys are getting tons of value from this because-Oh, this is a-By the way, guys, holy crap.

This is so good, Pace. This is so valuable. I hope you guys appreciate the content that you're sharing here, Pace.

Here's an amazing bomb I didn't learn until about seven years ago. is that I would get sellers that would come to me and they go, I love the way you are going to, I love the seller financing, but I don't want to give you payments for the rest of my life, right? Okay, so there's two things that I'll do.

One, I'll put in the promissory note that it states that if the seller passes away, because you'll get a lot of people later in life that are willing to do this because they've accumulated assets and stuff. So you go, I'll put in the note that says if you pass away, the payments will go to your state or your children or your children's children or whatever it is. And they go, okay, cool.

Right? So the Mario deal I told you guys about where I bought it for $3 million, that seller's 55. He goes, he gave me 50 years. He gave me a 50-year payment with no balloon. So it doesn't have to be 30. It can be 40, 50, or whatever. Whenever you want.

Yeah. And when I realized that, I was like, I could literally do a thousand-year term if I really wanted to. Nobody will.

But 50 years is perfectly fine. Why did Mario do it for 50 years is because he knows he built those assets for his kids to live off in the future anyway. So that's the first thing I'll do. Second thing I'll do if a seller requires a balloon, I will put a balloon extension clause in my agreement.

Meaning, let's say that I bought a deal in 2022 at the beginning of the year. Market's hot, interest rates are low, I buy the deal, the seller then gives me a five-year balloon. I go into 2022, 2023, the market crashes, now the property's no longer worth what I bought it for.

It's still cashflow, so there's still a lot of value to me. And the mortgage is still being paid down. But now when I go to refinance or sell the property in five years, it's worth less than what I originally bought it for.

So in my documents, it will automatically renew a five-year balloon if the property doesn't appraise for the original purchase price. So I automatically can extend the life of my balloon in my documents. And that's an easy sell to the seller because you're saying, listen, It's not that I don't want to pay it back right now, but if the value isn't there, I'm still in the asset.

I'm still where everything's fine, but just I need more time. I've never had a problem with a seller extending a balloon because they all believe their property is worth way more than it is. And that it will always be worth more and continue to go up.

You're getting a great deal. Even Susan was like, you're getting a great deal at 110 grand, even when everybody else, and I did, I got a great deal at $110,000. Because of my terms, right? Not because of the 110, but because of the structure of the terms.

Right. And so if a seller is going to sell to you on seller finance, they will always believe you're getting a great deal and they'll never believe the property is going to go down in value. But you should protect yourself with a balloon extension and just say, look, just to protect me and you, if the property doesn't appraise in five years for the original purchase price, it will automatically extend another five years.

The seller's always like, yeah, that's always going to happen. Another strategy I'll do, Pace, is, and again, this requires some capital, but I'll do it. I'll tell them, hey, I'll do another extension and I'll agree to do a lump sum pay down. So maybe you say five grand or 10 grand or whatever.

And a lot of sellers like that because you're not paying all the equity off or all the remaining balance off, but you're giving them something to then continue into the loan. So that one I use sometimes too. Seller finance is so powerful because think about this. Okay.

So I did a deal about seven years ago and I worked out an agreement with the seller. right? So I bought their property for a hundred grand.

We had a promissory note for a hundred thousand dollars. It said 30 years is how much time I had to pay them off at four and a half percent interest. So the seller comes to me two years ago and they go, Hey, I need you to sell the property. I need you to do whatever.

And I go, I, that's not our agreement. You're you're, you can't change the terms on me, bank. You're the bank, right? Chase doesn't come to me and go, Hey, pace, we need you to pay.

I have an agreement. It's a legally binding agreement. You can't change the terms of this. And I go, but I still owe you about $85,000.

If you're willing to take $40,000 today, I will pay you off. And they go, done. I'll take the $40,000. And so that's the amazing thing here is I worked out the deal with the seller. The seller goes, I need the $40,000.

They had a wedding to pay for. And they needed cash right then. So cash became more important. Right.

So what did I do? I brought in a private money lender, did the $40,000, refinanced it. And I still own the deal.

I didn't sell it. But now I owe like $45,000 on it when I originally bought it for $100,000. Amazing.

If you can understand how to play this little game, you're like the Monopoly guy. You're just like, holy crap, I can do anything. So going back to what you were saying, where to find these deals, you know, like...

High equity. High equity. So if you take like your list, you get wherever you're getting your list.

If you do like in Flipster, we actually have a field that's the equity. And you can say, I want to look at the data that's got the highest equity all the way down to the lowest equity. Well, normally everybody looks at 60 percent or more equity as their filter. And then everything that's got less equity than that, they discard like this. Like, oh, that's bad data.

That's great. That's good for sub two. Right.

But if you go to the 100% equity, meaning they owe it free and clear, that would be a great list to go to for seller finance. Right. So here's the other thing too is like, did you buy either one of your Montana houses on seller finance? No, both of them I bought. You bought, okay.

With new debt. With new debt. Okay, cool. So if you go on landwatch.com, right? Like I want to live up by you and Kalispell and there's...

probably 25 or 30 houses in Kalispell right now that are all on seller finance. Seller finance is commonly known in the agent world, in the seller world. In multifamily, you want to get into multifamily? Seller finance is predominant.

It is huge in multifamily. And a lot of commercial because sellers are investors. And so I do this a lot, which maybe is another topic. I'll sell on creative financing because I understand now how I can leverage my existing debt. by selling it really high to someone who has a better use of it than I do.

Yeah. And you realize also as the buyer or as the seller, how much time banks and the underwriting process and processors and agents and the escrow, all this stuff takes so much time and energy and everybody else is getting paid all these fees and just whittling down everybody's profit. So if you understand all of that, you can work a deal with people directly and make way more money as the seller. So this is where seller finance dominates is because it... For every dollar a seller makes doesn't mean it's a dollar coming out of my pocket, right?

Whereas in wholesaler, it is a direct correlation. I have to get the seller down. For every dollar they take off their equity is a dollar I make.

So it's a zero-sum game. It's not equal. In seller finance, I go, OK, you want a higher price? No problem.

Let's lower the interest rate. Oh, you want a higher price? No problem. Let's put a zero down payment. Oh, you want a higher price?

Let's do zero interest. So you can still win and you can play this amazing game where you can meet in the middle, just depending on what you're looking to accomplish. Yeah. I have a deal right now, Pace, where I bought it cash, my cash, and I'm all in at 69 and I'm selling it seller finance for a hundred and you can rent it out and it'll cash flow. And the reason why I'm doing that is I'm looking at, well, if I, if I spend 69 of my cash, but I sell it on, uh, for a hundred and I get some down payment money, what is my cash on cash return?

Am I willing to let my cash sit? A lot of sellers are willing to do that exact thing. So not only does this apply to sellers you're talking to, but it's also an investment strategy that you could implement as an investor when you go to sell, right?

So there's really a lot of use around this, how to do seller finance. Yeah. And that's the thing you got to understand is seller finance is both an acquisition strategy and a disposition strategy.

Whereas in other strategies like a wrap, you'll hear people talk about wraps. A wrap is not an acquisition strategy necessarily. Wrapping is a disposition strategy.

And we'll talk about that in the sub two video coming up next is acquiring and then wrapping your own terms. It is literally, it's very literal. We'll get into that, but seller finance. So We talked about what seller finance and creative finance is.

We talked about where you can find them. For me, here's where we find them, on market. We find a lot on market. Me too. You actually had one on market just a couple months ago on Lemon that I was like, bro, this...

So Jerry, this is what I love about Jerry and this channel, is there's very few people that are actually practicing what they preach. In fact, you never did a video on Lemon. You didn't talk about Lemon.

This guy's doing 25 times more deals off camera than he is on camera. And I'm looking on the MLS and I'm like, hold on. That looks like a Norton design.

That looks like a, oh, it is a Norton house. He's selling a 1.5, what was it, 2.5? Yeah.

$2.5 million house on seller finance because you can get more money on the exit than you could if you sold on cash. And I had great debt on it. So I was willing to subtue it. Oh, yeah. Love it.

So anyway, seller finance is powerful, commonly known to agents, commonly known to title companies, commonly known to brokers, commonly known to closing attorneys. And I'm like, oh, yeah. You're not going to have a lot of pushback in the seller finance world.

The biggest downfall of seller finance is that you'll have sellers that will want way high purchase price and you just have to figure out what are the terms that you need to equal equalize that high purchase price. It's because they don't have distress, right? They own it free and clear.

There's no debt on it. Usually there's not this pressing issue. So they tend to want a higher price.

So that's where what Pace is saying is now you got these other terms. That you can play with to now make that high price worth it. Yeah.

And the last thing I'll say about this, this is really, really important, is that I'm not actively going out and looking for seller finance opportunities, right? So although we did talk about pulling a list, go to LandWatch, go to MLS, there are deals everywhere, seller finance. There's even owner finance websites. If you guys type in buy a house owner finance, there's people that aggregate all the owner finance deals and put them all on one website.

So if you're looking for a house to live in. You're looking for a house to rent out. You're looking for an asset to purchase. You can go find those readily. But for us, we cold call and we text.

That's our main marketing strategy. We generate leads from all sorts of places. And what happens is when a cash price doesn't work, we simply ask the same question I asked Susan, which is, hey, Susan, if I could come up to your price, would you be willing to give us terms? And the sellers go, I don't know what that means.

We then tell them a small story about an F-150. It takes about four minutes. They go, totally makes sense. And then what we do is we take them from our cash department and we put them in our terms department, even though it's the same exact people.

There's a psychological thing that now the seller goes, okay, we're not talking cash anymore. We're talking about terms and structuring where the seller is going to become the bank. I love the two-step process because we do the same thing. We always lead out with cash and then we come back with terms because what it does is when you create that baseline of here's the cash number and then when you come back and say, okay, well, I can come up to your price. All of a sudden now, the seller's seeing you come way up from this low cash offer, and it just opens their mind up now to be creative with you on those terms.

And they understand the reason you're going up to that number is because you're asking them for something in return. They're giving something back. You're saying to them, it's what you always say. I'll give you the price you want.

You give me the terms I want. And so that allows you to do that, especially when you create that baseline low cash offer. Yes.

So that's really powerful way to do it is first, first low cash offer, create the baseline. Now talk. Well, what if, what if I came up to your price?

Right. And so here, here's, here's where you're going to dominate in this market. I know this is a long video.

Tyler, Tyler's like, yo, just so you know, this is really long. I, let's say I acquire a deal on seller finance. Okay. What's amazing about this right now, interest rates are six and a half to seven and a half percent interest.

Now I have this asset. that I've created this debt with the seller. I'm now the owner.

I can now go out and I can seller finance it to a buyer who's being disqualified or whatever, like that Jose on the F-150 story, is I can go create that situation. So think about it this way. I'm gonna be doing a lot of this.

Think of, yeah, exactly. Think about this. This is gonna be the number one strategy is selling and you acquiring debt and you then creating new debt with your buyer. So think about this. Jerry has an F-150.

He sells it to me for $10,000, $1,000 down, $350 a month, let's say. I can take that same truck that now I have an agreement with Jerry, and I can go and I can sell it to Jose for $15,000, $3,000 down, and $550 a month. So I bought on seller finance. I sold on seller finance to my buyer. And what's great right now in this marketplace is that we bypass banks.

There's no interest rate. So Jerome Powell and the Fed can do whatever the crap they want. We just dominate because we are the ones understanding the paper and creating these debts between the parties.

Love it. Isn't that amazing? It's so fun.

Guys, it makes me want to go do a deal right now. So much value in this video. I know it was long, but man, so many good nuggets. Guys, I'm going to put Pace's information below if you're not already in his world. Pace talks about this day and night.

He teaches how to do this. Be sure to click on some of those links so that you can learn more about how to really do this at a high level and make a lot of money and really change lives. Creative financing has always been like this niche within a niche.

And you've now taken this and you're allowing people to... Even new investors, like if you're watching this and you haven't done your first deal, you can start to do some of these strategies. My current life mission, and somebody asked me like, why are you working so hard on creative finance? And I go, if I knew what creative finance was when I first started, I'd be worth an extra $20, $30 million easily if I just knew that. But why didn't you know about it, Pace?

Because the conversation was never normalized around creative finance. It was always looked at as like this. crazy strategy.

Well, it's always been an advanced strategy for like advanced type of investors and you're normalizing it, making it so that people, everyday people can understand and implement these strategies. So, and you're really good at that pace. So thank you guys. I hope you found a lot of value. Leave a comment and let us know what you, what your biggest takeaways were.

Any questions you might have, we'll try to answer those as well. And be sure to follow this series because in the next video we're going to do is subject to, which is really fun. because it's now there's existing debt in place. How do we leverage that? So that's the next video, guys.

Thanks again, Pace. We'll see you on the next video.

Transcript for:Exploring Seller Financing in Real Estate

Transcript for:
Exploring Seller Financing in Real Estate