All right, welcome to this video. I've got my good friend and fellow investor Pace Morby here. Pace, this is really fun. We've got several videos we're going to be working on here, so watch for those videos as they come out on the channel.
But we've got something here I want to really break down, and I would love Pace's expertise on this. I've got a really tricky subject to creative financing deal in Tucson, and this deal's got a lot of hair on it. It's pretty complicated.
So I've asked Pace to help me break this deal down. All that and more, coming up. For a limited time, you can get a free copy of Jerry Norton's Quick Start Kit with everything you need to flip your first house in 30 days or less. Download it now at MyQuickStartKit.com. If you're new here, I'm Jerry Norton and I went from dead broke to millionaire flipping houses and after doing a thousand deals, I created this channel to help you master the art of wholesaling and flipping real estate so you can live your dream life.
Be sure to subscribe and click the bell icon to get notified when new videos are released. Okay, so Pace, I've got this deal. It came to me from one of my students.
So they found this deal. They put it under contract, structured the deal, brought it to me to wholesale it to me. I love the numbers.
I've done my homework on it. It's in Tucson, so about two hours from here. I sent my guy down there to look at it.
So I feel really good about the condition. I feel really good about the comps in the neighborhood. It's basically a $300,000 house, kind of as is. It's really clean. And you're picking it up for how much?
120, 128 I think. No, all you do is hit home runs. Sometimes.
But it's tricky. There's a lot going on here because there's multiple JV partners on the wholesale side of it. There's a seller, obviously. They did a subject to structure at like 56,000 is the subject to, right? And we're going to talk about this if you're unfamiliar with creative financing.
And Pace is the expert in the industry in this area. I love creative financing. I love subject to, I love seller finance. When you learn how to play in that world, you just open up so many.
If you can write it down, you can make it happen. That's right. Just think it through and then get someone like we're going to talk about it.
We're going to get someone to help you put all the right paperwork in place and then you can do it. So if I'm understanding this correctly, it's a $56,000 subject to $15,000 going to the seller. Okay.
There's an agent and they're getting some commission. I don't know who that is. Okay. Right?
So, I think the total number is like 78 with the seller and the wholesaler holding the contract. Okay. So, your student locked up the contract with the sub two loan in place, the 15,000 going to the seller, the agent, and their total all-in contract to the seller for that is like 70...
78, I think. Now... Let's say 78. Now, not totally because the student who brought me the deal is JVing with the contract holder with the seller. Love it. I love it.
This is so great. Yeah, so there's a JV agreement. Okay, so there's an original wholesaler that went to the seller, locked up the contract. That wholesaler then goes to your student and says, help me. Yes.
Your student then goes to Jerry and says, hey Jerry, help me. And now you've got two people that have already gotten paid before it even got to you. Yes, and it's a $50,000 wholesale to me. Now, how they got this deal, I have no idea.
Amazing. Yeah, so here's the one thing too that I want to talk about first place is I have a philosophy in my business where I never count the money in somebody else's pocket, only my own pocket. Meaning, this person, this student, they're brand new. Like, they've gone through my advanced training, but I think this might be their first deal. And there's a JV, so it's a 25-25, I imagine.
I think it's a 50-50 JV, but it's a $50,000 wholesale to me. Now, I'm a dealmaker, right? I'm a negotiator. I want the best price. There's a part of me deep down that's like...
50 grand, I bet you I could beat them up and they would take less. Right, right, right. But again, I try not to count the money in somebody else's pocket. It's a phenomenal deal for me at 128. It needs...
It's a... What do you call it? A subtale. Right. I could be.
Like I could literally just relist this property. Well, the reason I... So, when you were telling me about the deal in the very beginning, I said, it's got to be a subtale because that's so much cash for you to flush into a deal to hold, right?
Because you're really good at making sure your money's working for you. And if you've got all that money tied up into one deal, that money sunk. So for me, the average sub two deal that we're in is maybe $10,000.
Okay. This would be 70 something, right? So you could buy seven cash flowing properties with the same 70,000.
I didn't think about it that way. Right. So the way I look at it is like, okay, there's opportunity costs with that 70,000 being tied up in that deal. Have Jerry turn this into a retail deal.
Meanwhile, you're moving to Puerto Rico. You don't want to buy more rentals right now. You're in a phase where you got to like consolidate and make your life easy. So you take that deal at 120. What are you guys thinking you're going to put into it? If I were to retail it, I'd probably spend five to 10. Oh my gosh.
Probably paint, maybe carpet. Bro. Yeah, it's really clean cabinets are fine.
Everything's fine. I mean, this is a home run Yeah, this is a home run So you're gonna I got two comps in the neighborhood for high twos right around three love it So what you're gonna do is you've got? The original wholesaler has contracted with the seller agents getting paid sellers getting 15 There's 7,000 on there going to an agent love it Okay, then that person went to one of your students and said help me find a buyer Your student finds Jerry, one of the best buyers in the nation, and they're going to split a $50,000 assignment fee.
Yes. You are actually going to close escrow, take the property subject to, flush cash, make sure everybody's paid, and then hold that loan for a little bit. You're going to make the monthly payments on that for maybe two months.
Two months. Maybe two months. With this market, maybe not even.
Right. So you'll put $5,000 to $7,000 into it. You'll hold it for two weeks during that time frame.
get an offer on day freaking one. 50 showings and seven offers on the first day. Crazy.
And then you're going to get an exit price of roughly 300 grand after closing cost commissions. Sounds like you're going to make at least $150,000 on a freaking creative finance deal that somebody else is JVing. and they're making 50. Yes.
If, if this is all, so here's the thing, Pace is, um, I was like, it took me a while to get my head around it. Like, cause, because what happens is, is wholesalers, they bring you deals and they try not to give you too much information. Of course.
Yeah. So I'm getting limited information. I'm asking questions, I'm asking questions and they get a little bit more and I'm like, wait a minute, there's an agent getting 7,000. Wait a minute.
There's a subject two for 56. Wait a minute. Who's this other person? Oh, that's your JV partner.
It was like that trying to get, trying to figure this out. So I said, I said to my student, I said, you get all this over to Rochelle, which we're going to call in a minute. I said, if she can make sense out of all this and you guys did this all right, we'll close.
If not, she'll fix it. Yes. But I think I got my head around this whole thing.
So that's a great point. So we're going to call Rochelle here in a couple of minutes. But what I do with Rochelle is that if somebody brings me a subject to deal, I don't trust anybody's paperwork.
Nobody's paperwork. And this paperwork looks a little... Janky?
Yeah. Right. They did it. They did on a napkin. There's handwritten stuff everywhere.
Yeah. So what I do with Rochelle is I will have Rochelle actually call the seller, go back through and say, Hey, I'm the transaction coordinator. I'm the person who's going to make sure you're protected, you're taken care of.
And I might have to have you sign a couple of new documents. And so she'll go through and actually walk the seller, get them signed up with the new paperwork, make sure it's all clean. She'll open escrow and explain it to title and escrow the way it should be explained rather than saying, Hey, The original wholesaler probably didn't know what they were doing and they're opening escrow and explaining it incorrectly. And with deals like this, there's a very likely possibility that this thing never makes it to closing because there could be all kinds of issues. I don't know what's going on on title.
I don't know if the seller that signed is on title. I don't know any of this stuff. Maybe there's liens, maybe there's back taxes, maybe there's not enough money going here and there.
You're going to have to do a part two of this for sure. Yeah, there's so. I'm hoping it's been now, Rochelle's had the deal for, since last week, I think Thursday, maybe.
So there's been a few days here. When we call her, maybe she's got her head around it, but I'm hoping that she's like, I pulled title. I've got, it makes sense to me.
I know what we're doing here and we're good. But guys, I kind of like the philosophy of, you know, never count your chickens till they hatch. Is that how you say that?
Right. So we tend to get super excited. We get this like home run deal.
And then we somehow think like, I'm there. I did it. No, you got to get it to the finish line. And there's a lot of, sometimes there's a lot of moving parts, or at least you got to just start solving problems.
Like, okay, this problem, let's figure it out. This problem, let's figure it out. And then I get people go, what do transaction coordinators do? And I'm like, everything you don't want to look at the yeah so when I've did my first deal with Rochelle's like I want to do it I want to do it send me everything I need so she sends me the file of like all like the power of attorney and all this stuff and I and I was just like no thank you you do this I don't want to do this for the fee that they turn for it's like so worth it yeah and I imagine that code that you have down below, like gives them a discount.
Like 30% off. Yeah. It's really good.
Amazing. Yeah. It's awesome.
So guys do that. There's a, there's, I'll put the link in the code there, but let her do your transactions. This is interesting too.
So for anybody that's paying attention on the constant close side, what I've done is I train people and your audience very simply can understand this. When I do a wholesale transaction, Just regular cash. I have Rochelle reach out.
She does all the paperwork. That fee that Rochelle charges me, my buyer pays it as part of the closing cost. That's what she told me to do.
Right. So I'm not paying anything at all. My buyer's paying for it.
Isn't that awesome? It's amazing. So you want to call her?
Let's call her. Let's call her. So we're going to call her and see if she's got her head around this complicated deal and what we might need to do.
I'm going to hold it next to the mic if that's all right. Perfect. Hey Pace. Hey Rochelle, how you doing? Good, how are you?
What did you have for lunch? Nothing, I haven't eaten in like a day. It's been like a crazy...
It must mean you're handling a lot of transactions. Well, I'm sitting here with Jerry. We're talking about this deal in Tucson and we wanted to highlight Constant Close and how you're getting involved in this deal and so I'm going to pass the...
phone to Jerry and Jerry's gonna ask you a couple questions about the deal and just see how far along you are if there's any hiccups snafus or anything like that so far in this deal okay cool hey Rochelle how are you good I know I know I owe you some earnest money but do you have everything do you have all of the paperwork Yes, I have everything right here. I don't think I need anything else at this time. Okay, so you've opened escrow, pulled title, and waiting on that? Yes, absolutely.
But do you have your head around all the parties involved? Because it took me a minute to figure it out. Yes, I did, but can we run through it just really quick and then I can make some notes?
Okay. So I could tell you the way I think I understand it and tell me if you understand it the same way or do you want to do it the other way? Nope, that's perfect.
Go ahead. ahead okay so there's there's the seller and then there's the so there's the original contract with seller and I think ebony is the wholesaler yes okay so there's that contract and my understanding is that's there's there's 56 subject to there's 7,000 going to an agent and then 15,000 going to the seller cash to the seller I don't know if that seven is on top of everything, I forget. or if that's come where that on top of it i think it is so it'll bring the purchase price up just a little bit but yeah okay so that takes that that makes that total what 80 something yes yep you're exactly right so i can add it up really quick we have the 56 plus the 7k to the realtor and then we have the 15k right that's going to the seller cash to the seller what is it okay perfect that's what that's the number i had 78 okay so there's 78 there then there's um Um, co-wholesaler. And so there, I think you might have a JV agreement, or if not, you might need that. But there's a, there's a, there's another, there's another party that's partnering with Ebony.
I don't have a JV agreement, but I can draw that up. Okay, perfect. So we'll need to fill that hole so that they get on the HUD or whatever.
Okay. And should I contact Ebony in regards to what their agreement is? Yes. Yes, because I don't know that I've seen that.
I mean, I don't really care about that, but there's going to be two parties that want paid out on the wholesale. So there's those and then the price to me is $50,000 on top of that. So what is that $128,000? $128,000. Yeah.
So then I'm the end buyer at $128,000. $128,000 end buyer. But I don't know anything about this seller because I never had any conversations. So I don't know why they're letting it go at that number.
I don't know if there's... Back taxes or payments behind on that 56 loan, nothing. I don't know the interest rate. I don't know PITI, nothing. Okay, I'll gather all that information, but that was kind of what I was anticipating.
So we're just waiting for the prelim to come back in and then we'll gather, right, if there's any memorandums, liens, anything of that sort. And then I will call the seller, just build a rapport with them and just kind of see if I can get other information. Just like our other deal that we did, right?
We don't want to lose any of those pieces for some reason because what I'm finding now when they're, you know, sometimes the forbearance, they're no bad. there's things that we need to like dig a little bit deeper that won't basically show to us like on a mortgage statement or things like that. So I'm just gonna call the seller and have a really good conversation with them.
Perfect. Gather the PITA, gather all the information, do the JV agreement, get everything set up and then I will let you know as soon as we have the title report. And for now, this is just gonna be a flip.
So just so you know not to, so that you can structure things like short term. Okay. You know what I mean? Like we're going to be paying off that 56 in a month.
Do a hold open at title. Yeah. Yeah, yeah, yeah.
So I'm not going to carry it as a rental or anything like that. okay yeah so i wouldn't even switch out insurance i would just keep the rights in place keep that all simple rochelle okay just keep it all in place we could just okay got it like what like a builder's risk or something like you went on a rehab i would do a builder's risk and i would do a hold open policy so you don't have to close that you don't pay for a closing uh cost twice and then tell on your listing just say you're required to use my title perfect yeah you're gonna need to explain that yeah We just don't give them an option either. They'll just go and use our title, make it a lot easier.
Yeah, especially since there's so much underlying stuff. Now that title company already has everything. They pulled the... So much easier than a different title trying to close it.
Right. That's how we did our last one too, because I flipped it. Didn't we? I think we did.
Anyway, yeah, you were involved on the clothes. Yeah, she helped me buy it some sub 2 for 110. I sold over 155 retail. Yeah Yeah, it was cool. Yeah with a 78 sub sub 2 carry So, okay, well that's awesome, Rochelle.
So we still don't know, I mean, will this thing get to closing? I don't know, I've got some suspicions that there's maybe things going on, I don't know. It just feels really weird to me that the seller would let this thing go for 78. It's worth 300. Right.
Oh my goodness, yeah. Yeah, for sure. That's a lot. A deal's a deal, right? I think that we're going to pull in some pieces in regards to the preliminary title report and a conversation.
So if there's anything interesting that I find out with the seller, I'll let you know. And then we'll look over that title. to report really good just to see if there's anything else.
Are you going to have time to close? They want to do it May 1. That's 10 days from now. I'm good to close.
OK. We'll do everything to just be on top of it. of it so I'll rush like I put a rush on the title report everything like that so we'll do everything to meet that date call me as soon as title comes in because I'm dying to know what's on that title okay sounds good hopefully it's just alone just a lien payoff on a mortgage is all that's showing okay very good you're the best Rochelle thanks Jerry appreciate you guys okay see ya so here's an interesting thing too and we can touch on the hold open and interesting I want you to explain the hold open what I would have have done not to complicate this video any more than it already is.
Hey, it's called complicated subject. Yeah, I love it. You could do what I call a novation agreement as well, where you don't pay off the seller.
You don't pay off the agent. You don't pay off anybody in between. You tell them, I'll pay all of you guys an extra $2,000 each, but you'll get paid after I go and refinance you out.
Right? So then that way, you don't actually have to come up with the $50,000 to the wholesalers. You don't have to come with the $15,000 to the seller. You don't have to come with the $7,000 to the agent.
Because a lot of times, people that are watching this video, they're going to go. They don't have that kind of cash. They don't have that kind of cash. So what I do. Because what am I coming out of pocket?
Well, $128,000 minus $56,000. Right. So you're going to come up with probably $70,000.
In cash to close. Right, to close. Whereas in a Novation agreement. Which is why they're wholesaling it to me, because they clearly don't have the cash to close.
100%. Or you could. don't release this video before you buy the deal.
But you could-Edit out the address, Tyler. Yeah, there you go. So what you could do is you could go to the seller and say, hey, I know you want 15, but I'll pay you 16,000 and I'll pay the agent 8,000 and I'll pay the co-wholesalers 52,000, but I need two months to pay you that money.
Right. They don't get paid out until you get your buyer to come in and buy the property from you, close everything out and close that out. And the novation will allow all of that to get paid off with their retail loan.
100%. So their retail loan, right? Jim and Mary Smith bring their loan to title.
For 300. Title disperses to everybody else. They make a little bit more money and you never actually had to come up with $70,000 in cash. So a lot of people ask me, how are you fixing and flipping with creative finance without bringing in a private lender?
And I go, dude, all you have to do is get a credit card for the renovation. And then everything else is no money out of pocket. You could go that route, but I know a lot of times the co-wholesaler who's bringing the deal to you, what they want is, I need my $25,000 right now. I would, because there's two people getting $25,000 each.
I would rather, if I'm a brand new newbie, I would rather take $25,000 now than $27,000. $26,000, $27,000 in 60 days. But there is a way to structure that deal that you don't ever actually come out of money.
Now, I love that. For the hold open policy. And Rochelle can put all that together. Yeah, yeah. I taught her an ovation agreement.
She does. We have done. In the last 12 months we've done five million dollars in net profit and novation agreements. Love it. So here's a really cool thing.
So a hold open policy means when Jerry closes escrow on this sub 2, everybody gets paid out. Okay? Including the title company. Okay?
There's a title policy, there's all these little... If you ever look at a HUD or a settlement statement... Courting fees... Oh my gosh, it's like 15 things that get charged from the title company to Jerry. Yeah.
What's great is if you do what's called a hold open policy, when your new buyer comes to the table to buy the house from you, you have to close escrow again. Therefore, all these charges get paid and the title company makes a freaking ton of money by doing this. So what you do is you pay about a $300 hold open policy fee, which means all of these charges that got charged the first time, they're only $300 versus 2,000 or $3,000 for the next time. So the 300 basically allows you to, Apply all of that a second time, you know, 30 years.
Is there a time frame? Like, do you have to do it in? 365 days. Oh, you got a year? You got a year.
You got a year to hold it open? Yep. Okay, so you're going to flip it in a couple months.
What's funny is that we even have lease option houses that I've closed escrow on sub two. I do a hold open policy. And I give them a five-year lease option.
And I'm extending that one year by paying $100 a year for a hold open. To keep it open. And I'm doing it not because it saves me a tremendous amount of money and it's necessarily worth it. But I'm doing it because I'm always trying to push the boundaries of what's possible so that I can go, Hey, guys, this is possible too.
And this is possible. And I've done this. And you do the same thing.
It's like, why don't I do it? Like double closings and escrow. People are like, you can't do that. You can't do that.
Well. You can do that. Watch me. Right.
In fact, when people say something is not possible, I go, I'm going to figure out who will make that possible. And so what's cool is that you found a deal that seller's making their 15 grand, which is super important. When you watch Jerry's videos, remind yourself that you're not giving the seller a number all the time. Sometimes you're asking, what do you want in your pocket? Because you're going to get a seller goes, dude, I just want 15 grand.
Meanwhile, you're giving them exactly what they wanted, so you didn't take advantage of them. You're actually solving their problem. They're willing to let you have the underlying financing, which is great, so you don't have to go get a hard money loan or anything else. For 56, yeah.
For 56. Yeah. Then your freaking co-wholesale group, your students are making 50 Gs. And because you're gonna make a hundred and forty to a hundred and sixty thousand dollars net in your pocket Because somebody was smart enough to ask the seller. How much do you want in your pocket, right?
Genius three people removed from us or whatever. Yeah crazy and they probably watch a video of yours to learn that So here's an interesting thing, too So guys that are watching this when you're brand new to wholesaling people think you only can wholesale a cash deal You can wholesale sub to sub seller finance, novation agreements, guys like Jerry. These options.
Dude, Jerry's coming to the table with $70,000 to put this deal together. If you're a brand new wholesaler, there's no reason you can't assign a sub two to a real buyer like a Jerry, like a Pace, or somebody else in your own market. And you'll get a premium because you're offering your cash buyer now less cash to get into the deal. Right, I always tell them when we advertise a sub two, when I'm assigning a sub two, I always advertise funding secured. Yeah.
Right, so people are like, wait, what? The funding's already secured. Yeah, you don't even have to go get a loan. Just come to the table with this. When they brought me this deal, they told me the number 120. I comped it.
I looked at it. I'm like, this is a sick deal. Then I find out there's a 56 sub two.
And I'm like, even better. Now I got less cash to get into this deal. This is awesome.
Less burn, too, along the way. For people like Jerry, are you using all cash to flip? Are you using private money for anything?
Private and hard money. OK, cool. So same thing for me. I was just on the Wolf of Wall Street's podcast the other day. And he goes, But tell me why.
Why would you use somebody else's cash? Why not just use your own cash to do a fix and flips? You don't want to give that money away. I'm like, Wolf, like having hard money and private money allows me to buy more than one or two deals at a time.
It also allows me to let other people make money. money and build relationships with private lenders so that at one day I decide I want to go do a big multifamily. I want to do a big RV park.
I can then go to my private lenders who I'm constantly doing business with. Those relationships are critical, especially with you with like the guys, nobody even knows what this is, but this is a $7 million home you guys are going to build, right? It's nice to be able to go to private lenders and go, Hey guys, let's put this money together and make this money.
Mostly financing. Yeah. Right.
Yeah, exactly. Yeah. I've got my, one of my lenders, a private lender in Metro Detroit where I've done deals now for 17 years it's literally a phone call and an address and he's like done because I built a relationship right now he doesn't fund me a hundred percent but it's a phone call and you know if you were deciding to do everything with cash okay this is a big paradigm shift for people if you were to deciding to do everything with cash your growth would be slower and you wouldn't have those relationships that you could call up anytime and you know whatever they're invaluable relationships to have and one of the best Guides I've ever downloaded was your private money lending guy. Oh, it's like 80 pages, incredible information, well produced, amazing. I don't know if you want to give that out but that is one of my favorite things.
Since this is all about creative financing, I've got a really, really well produced creative financing guide that goes through some of the main different ways to do creative financing. I give it away for free. Pace, I know you've got some resources if you're up for it, we'll put the link to that as well and you guys can you guys can download those and I think this definitely warrants a part two because I want to hear about your deal.
Dude, if you're in Puerto Rico when this is happening, I'll drive down there to the house and I'll walk through and I'll do a video and give it to you guys. That'd be sweet. Yeah, that'd be cool. Yeah.
Okay. So stay tuned for part two. Pace, it's so fun to do this with you. I love.
My favorite thing would be to just talk about deals with you all day long. We'll turn the camera on and we'll throw it on and people can get what they can out of it. But guys, thanks for joining us on this video.
Be sure to check those links below. Definitely with Rochelle and her team at Constant Close, they're going to help you with all your transactions. There's a code there to get an awesome discount on that and those other resources. And if you haven't yet, be sure to subscribe to the channel.
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