guys welcome back to another video maybe the final video we might have some more videos that pace over time I think we can kind of add to the library but pace and I have been putting together an entire uh series of creative financing strategies Pace has been been willing to share all of his strategies the techniques how he's putting these deals together stories just really the way that this works in today's market super valuable again we have a playlist the link is in the description be sure that you're learning all of these creative financing strategies this is kind of one of the really uh it's really kind of sexy right now super hot strategy it's been around for a while but it's been really kind of underground not very many people know about it and that's Novation Novation agreements yeah so Pace tell us what is innovation and how is this important right now okay it's uh really important right now because um so here's Innovations novations are never something you hold you don't you can wholesale Innovation you can flip Innovation which are the two primary strategies the only strategies you cannot buy and hold a Novation okay Novation is a temporary strategy or I'm sorry a short period of Time strategy you're not going to hold them so you wholesalers and flippers are going to love that they're going to love it right but buy and holders it's not a good option for you so here's what a Novation is okay agents you might guys you might know them as a net listing okay if you're an agent you know what a net listing is um as a wholesaler a Novation is this okay and I'll break it down in terms of a car okay so let's say that I I go on Craigslist and I see like a Honda Civic 1990 just throwing out a car that has that holds its value pretty good it needs a new paint job maybe a clean whatever and they're selling it for like 1500 bucks I go in there and I go 1500 bucks man I could do a couple things of this Honda Civic and I could sell this thing for like 5 000 bucks okay so I go to the owner of the Honda Civic and I go hey would you be open to me uh cleaning that Honda Civic up and you know making it really nice and selling it at a higher price and giving you the fifteen hundred dollars when I find a buyer at a later date at a later date that's an ovation so you take the Honda Civic you bring it to your garage you clean it all up you sell it for five new tires new this yeah clean it up maybe cost you a thousand two thousand dollars so you're all into it Thirty thirty five hundred bucks you take 1500 for yourself you pay off your expenses and then you give the rest to the seller and you give the seller what they need that is an ovation agreement in regular everyday life okay you can do this with anything you want okay in housing here's why it's Advantage there's an advantage if I'm a fix and flipper and somebody's going to let me fix and flip their property without actually having to go get a hard money loan or a private money loan or whatever else I can go flip a house without having acquisition fees closing costs on the front end points when I get when I get a lender and my payments if any most of the time we acquire Innovation I don't make any payments to the seller we just go renovate it and we put on the market and that's a Novation agreement now a lot of times you don't even need to know you don't even need to renovate it you can literally go to the seller and go I can get you that number and you don't close on it you clean it out and you go through it on the market it's very similar to a hotel deal Hotel okay it's a hotel deal but you get the majority of the upside and you never had to close on it okay where I found them really popular and really helpful in my business was in metro Detroit I was doing a lot of starter homes first-time buyer homes and FHA has an anti-flipping rule oh this is so good yeah so FHA says you have 90 days from not from when you bought it but 90 days from the new contract that's so messed up so think about this if you're a fix and flipper you go buy a property you acquire it with hard money right and private money to pay for the renovation you go through the renovation you then list it on the market hoping to get a buyer your buyer is an FHA FHA buyer FHA has a rule that says okay you guys get into contract but you can't close escrow on the on that deal or that agreement for 90 days from the day you get into contract so you're hemorrhaging hard money costs and there's a possibility that FHA buyer even falls out yeah where this became a problem for me was I'd buy a property and these are like little starter homes right little thousand square foot brick ranchers we call them brick ranchers and I'd go in there with my Crews and we would we would knock out the rehab in two three weeks and be back on the market well my buyer is an FHA buyer because it's 150 000 house they're doing a three percent three and a half percent down loan and now I gotta wait all this time to be able to close on that buyer and it was a major issue that was really delaying my flipping business so this is where a Novation really can come in handy because what you're saying is you're saying we're not changing titles so we're not triggering the FHA anti-flipping rule right so creative you gotta you gotta love the creativity and here's the thing too is where I started doing Novation agreements is where I would go in to a seller and I wanted to buy a cash the seller couldn't do it sub 2 or seller finance or whatever we're walking down the line and I'm like okay seller finance no sub 2 no okay hybrid no okay this no lease option no this isn't working okay great I'm going to Novation which says I'm going to get you the price you need on cash but you're what you're going to let me do is renovate or clean up the property and sell it okay I would go in and compete now on cash with other wholesalers but because I don't have to have acquisition fees closing costs and payments along the way I could pay 10 grand sometimes 15 grand above a wholesaler's price and beat out all the wholesalers all day long and then ironically I would take that Novation wholesale it to a fix and flipper you can wholesale Innovation yeah and then the fixer you could tell the fix and flipper you go you're a cash buyer you go funding already secured on 123 Main Street hit me up if interested you're gonna get a gazillion coffee wait hold on you got 50 Under the Sun yeah and to the to the seller what's great about it is you're saying you're not you can't pay as much as you would on maybe a seller carry or a sub too because that's a long play they're staying in it a long time this one you're telling the seller you're saying hey a couple months yeah like you know 90 days I'll get you cashed out with this Novation because your plan is still short-term it's to it's to get in there make some improvements or not and then resell it very quickly so they're not waiting very long so when you come in and you can pay 10 15 000 more than the 30-day close guy you're gonna win because you're telling that seller I'm still getting you paid out in full shortly just not that short so how's another 10 or 15 000 sound to wait another month or two longer and they'll take it ecstatic so you met a student of mine last night DJ Martin I mentioned to you last night I said on the first day of our mentorship he did the first Novation agreement in the sub tube mentorship yeah so DJ Martin gets a seller that he goes to for seller finance the seller goes I can't sell or Finance it to you because I have a debt okay DJ goes to sub 2 and then he finds out that the underlying mortgage is like six point five percent so DJ's like that's not a good opportunity so he then goes down the line and then he goes to a Novation and the seller's like okay yeah I could do the Novation he goes and opens Escrow because we I actually open escrow on novations right it's like open escrow even though it just sits there open we want to make sure we do a title report right up front so very important because there could be problems on title and there was you're wasting your time the seller was in arrears eighty thousand dollars this is the other time a Novation agreement works really really well is because I don't have to come up with those arrears before I buy the property right I can keep those arrears there what we did Is We I just taught DJ how to postpone a foreclosure so we postponed the foreclosure in 90 days it gave DJ the time and energy to renovate the property and then sell it retail the retail buyer came in paid off those arrears paid off the underlying mortgage and DJ made like a hundred and eighty thousand dollars so still tons of spread for him to make a big profit hanza spread all it's amazing so you can postpone a foreclosure on Innovation which is awesome I mean you can postpone a foreclosure on any transaction as long as you have a contract but um he postponed the Foreclosure got the seller everything they needed plus the arrears and he walked away with like 180 000 bucks on his first freaking deal and if you're really into zero down the the money that wouldn't be covered would be your rehab money but then again private money you can cover your rehab money now you're doing that whole deal zero out of pockets you're 100 funding you just flip the house or wholesaled it to a flipper and so there you go this is this is the downfall The Innovation agreement so let's say that I go to um the seller right in DJ Martin situation he didn't have he was a brand new person in the in the industry so he didn't have the money to pay for the renovation pretty common so he goes and does what Jerry says which is he borrows money from an aunt an uncle a cousin a church leader of whoever it doesn't matter private money lender and that private money lender says well how can I be secured against a property that you do not own DJ so you just have to have a document okay where the seller will allow you to attach your private money lender as a lien against the property so that your private money lender is secured and make sure that your private money lender gets paid when the buyer comes in and buys off pays off the problem yeah so then it's just a payoff at closing just like any other lien yeah it shows up on the HUD shows up on the settlement statement and they make sure they get paid now here's another way to protect yourself as a tip on a Novation whatever your projected profits are what we do is we always um whatever projected profits are so let's say I uh seller wants 200 000. my I have to renovate the property for 50. so I got to go get a private money lender I put a second position in at 50. and I'm gonna go sell the property for 400. I got a massive spread here what I do is I have the seller and I work out an agreement that says anything above the 250 is my profit okay and we write an agreement and I lean the property for the remaining 150. okay why do I do that protect your your profit protect my profit I make sure I show up on the settlement statement they have to do a payoff to me for that that lien most important thing is let's say that the seller who still owns the property decides to go refinance sell do anything in the process you are protect is protected yeah you are protected very smart make sure you're definitely definitely make sure you do that because there's nothing that would prevent him from doing that and out from underneath you and you not know yeah very smart now another way to do this um going back to and I don't think we did this a better way to do that would be an executory contract okay so an executory contract so a lot of times I used to do Innovation agreements and I'm like man I don't have a lot of security here because I'm not the owner but the Novation agreement is amazing because I don't have to transfer title have acquisition fees and I'm like I know what I'll do I'll do an executory contract where I actually am the owner even though the deed hasn't transferred okay you have legal lawful ownership of that property even though the deed is sitting in in limbo then that way the seller can't do anything the seller can't refinance do anything you're fully secured it's not the seller's property they have no say over it so in my opinion most of the time this is where the Novation people the guy the guys that are talking about Innovations a lot where their the Folly is I would probably say 50 percent of the time or more I would rather do an executory contract like even on your deals in protected more yeah you're protected more you have more say you have a legally binding contract says you're the owner it's just the deed sitting in lieu in your situation in Detroit on the acquisition side when you did novations and all the hundreds of novations I did you probably would have been better off just acquiring on an executive yeah like a land contract yeah less risk less risk you're the owner so just thinking about this have we done exactly no we need to do that we should do that yeah we'll definitely do that Tyler's like please wrap this up bro guys executory contracts are one of the most powerful acquisition strategies ever and I think that we would be remiss and pissed off if we didn't do it let's do it let's add that to the suite of create a financing strategy so here's here's my suggestion to you guys there's so many questions that have got to be coming up from all of these strategies what I would be doing Jerry and I see each other twice a year three times a year sometimes in person put the questions down below and next time we're together what Jerry and I can do is do like a rapid fire Creed of Finance video where it's like let's go through reorganize the order of what questions we should answer and we'll go through and do two-minute answers on 50 different questions perfect based on these videos that you guys are watching right now we could even do a zoom if we needed to yeah that'd be great yeah awesome or it could come out to uh Puerto Rico stay in your freaking hotel and we could shoot some content out there and I'll sell you on why Puerto Rico's so amazing I I believe it let's do it okay guys awesome thank you Pace that was really great way to explain the novations guys uh again we're going to add this into the library there's a playlist that's got all these videos be sure to check that out again if I forgot to say make sure you're following Pace I'm going to put his link below as well to his YouTube channel and and so really if you really want to learn these creative financing strategies at a whole nother level Pace not only teaches it but he actually does it live with his students it's really amazing and you'll get hands-on experience to be able to do this so thank you again pace for all you do and guys we'll see on the next video