Pace Morby Subto Master with $150 Million In Real Estate (Part I)

Speaker 0: Jump on a steep train. We real estate disrupts us.

Steve Trang: Hey, everybody. Thank you for joining us for today's real episode of real estate disruptors. So we have Pace Morby. And although he technically lives here in Phoenix, Arizona, he's pretty much nationwide. As a matter of fact, when I asked him how he's nationwide or what he's doing, he's actually getting his pilot pilot's license so he can fly out to you or potentially your family members.

Yes.

Pace Morby: Are you talking about Steve was I would fly out to your guys' moms.

Steve: Family members. Anyway, today we can talk about how he went from, having bankruptcy declared on him and nearly losing everything Mhmm. To 150 a $150,000,000 in real estate under management. So if this is your first time tuning in, I'm Steve Trang, sales trainer, and every month, we help hundreds of people buy more houses at deeper margins. If you wanna join us on our training calls, DM me the word sales on Instagram.

I am on a mission to create 100 millionaires. The information on this podcast alone is enough to help you become a millionaire in the next five to seven years. If you'll take consistent action, I assure you, you will become one, and this show is brought to you by our sister company, Investor Lift. Get access to over 2,000,000 cash buyers across the country. Go to investorlift.competentdisruptors to get 10% off.

And if you get value today, please tag or fan below. Share this episode right now. That way, we can all grow together. And don't forget, we do have part in the disruption on Thursdays, which is our live debate show. And this is a live show, so please ask your questions or pace the answer.

You ready?

Pace: I'm ready, bro. Fourth time on here, by the way, and I have to tell you that this is my favorite podcast I ever come on. I get so excited. This is the only podcast I get butterflies for.

Steve: Well, I appreciate that.

Pace: Bro, you're the best. Because so first time I came on here, I gave my cell phone number out. K? So that's not a tip for you guys to go look at that episode. But I put my phone number out there.

Not only did I get business partners from that, I got business relationships. I just bought a $3,000,000, multifamily deal, sub two and seller finance because somebody got my phone number from your podcast. Yeah. You have made me millions of not thousands, not hundreds of thousands, millions of dollars since my first episode.

Steve: Well, I appreciate that.

Pace: And you've made a lot of people millions of dollars too, and people need to understand this. Like, my here's my strategy. Anybody that comes on your show, I'm like, oh, that's obviously somebody that's been vetted, somebody that Steve knows is legit. I'm gonna go become friends with that one person, and I'm gonna see how I can make money with that person.

Steve: Really good strategy.

Pace: Simple strategy. Simple strategy.

Steve: And, I mean, I don't really need to get in, you know, too deep with this as far as the social media component. Right? Yeah. Obviously, you're doing really well on social media. But, you know, you're saying just you coming in on and just giving your phone number has made you millions of dollars.

I mean, how what would you say to someone right now that is, like, should I make content?

Pace: Get over yourself. One step one, get over yourself. Like, there you have everybody has something inside of them to benefit somebody else. And I think the biggest reason why they feel like they don't is they think that everybody is looking for a full book and that you're just one step ahead of them. So I'm like, guys, if you're just one chapter ahead of somebody else, like, you've done one deal or you've cold called a hundred hours, you've never got a deal, then tell people that.

Just show people the genuine authenticity. You're one step ahead of them, and that's all they need to know is that one next step. So forget about the imposter syndrome, forget about all that kind of stuff, and post. I I look at it this way. If I'm driving from Arizona to California and I'm hungry, how do I know there's a place to eat in the middle of the desert?

Well, there's a sign Yep. Sticking up maybe two, three miles down the road. I'm like, oh, great. Meanwhile, if none of these hamburger joints or these sandwich shops had any signs, I would just drive right back by them not knowing that they actually had had a phone.

Steve: Let us know they were in business.

Pace: Right. So throw up the damn golden arches, guys, and the golden arches in this business is social media. It is your business card nowadays.

Steve: I saw a clip that you had posted. I'm assuming someone on your team posted. Right? But that was a great clip. It was you and Brandon Turner.

It was some, video event. Yeah. Right? Talking about dating versus marriage. Right.

Can you elaborate on that?

Pace: Yeah. Actually, so first episode I did with you was a little over three years ago. I give my cell phone out, and I said, if you guys need help closing deals, you guys need help with whatever, creative finance deals, going on appointments, just let me know. I'd be happy to help you. So Cody Barton, my business partner, shoots me a text.

Didn't know me at the time. He just saw me on the show, and he's like, oh my gosh. That's exactly what I need. K? So Cody and I go and sit down in a McDonald's.

Ironically, that I'm I'm bringing up the golden arches. We go and sit down in a McDonald's. Literally, he pulls open a laptop, and he goes, Pace, I've got warm leads. I go, prove it. Okay.

So he gives me these leads. I'm sitting there, again, guys, in a in a McDonald's. I fly the next day to a Mark Evans event. And as I'm stepping out and taking breaks from the Mark Evans event, I'm making calls to his leads. That weekend, in two days, Cody and I made $40,000 together because he's like, here's the leads.

I close the deals. Right? And immediately, we were like, woah. This is a great vibe.

Steve: Mhmm.

Pace: We should partner. Yeah. But we didn't do that. We dated for six months because you wanna wait for people and their true nature to come out after about six months because when you first meet people, their guard is way up, and you don't know who the real person is until they get that late that laziness. Mhmm.

So it's why you also shouldn't propose to anybody until you're at least dating six months. So for me, Cody and I dated. We just JV'd on everything that we did. And then after about six months, we looked at each other and said, man, we this is great. Yeah.

This JV has made us both a lot of money. We like working together. We actually look forward to looking or working with each other, and we're constantly in competition to see who can outwork the other person. And here we are three years later. It's the same exact thing.

Constantly trying to outwork each other. He always loses, but he still tries. Yeah. I love Cody. And I got my partner from you, actually, from the show.

Again, Steve Tring has made me millions of dollars. So dating, always, I would say, six months of JVs before you go into a partnership.

Steve: We did an event, a couple of weeks ago.

Pace: Yeah.

Steve: Right? It was, the grand opening for Keeley.

Pace: So it

Steve: was me, you, Jamil, and Brent Daniels. And, there was a couple of different things here. First, there there was a live q and a, and they're asking questions. And, like, you were really, really helpful for with your questions. I was a little bit less helpful with my questions.

And what I really enjoyed in that interaction was when I would answer someone's questions, you were like your jaw just dropped. Like, he didn't just

Pace: say it. It was like one one word answers. Like, somebody goes, I need x, y, and z, and Steve was like, no.

Steve: Well, I was like, go do it. Right? Right. And I think where I want where I wanna go with this is that I'm not here to inspire you. Right?

I'm here to give you clear, direct directions. Right. Here's what I'm struggling with. Here's how you go fix it. You go fix it.

Right? And there was a person that asked a question about, like, I feel like I've lost my inspiration. I've lost my passion. I was like and when he said that, I'm really glad that you went first. Because, like, in my head, I was like, well, that sucks for you.

Pace: Right? Yeah. It was a very it was a stressful question. His question was for everybody out there in, TV land. He says, I've been a fix and flipper for eight years.

I've made good money, but I've lost all my motivation. I don't wanna be doing this anymore. What would you guys do if I were in your shoes?

Steve: Yeah. So for me, I was gonna be like, you need to go find your passion, but you had a much more inspirational answer.

Pace: Do you remember what it was? I remember what it was.

Steve: We'll have you go ahead

Pace: and So what I told him is I said, here's the thing is that you have nobody else to help but yourself. You're basically going out there, and you're an island in this business. You go out and you find the deal. The person that you find the deal with, you're not going to lunch with them. You're not hanging out.

You're not becoming friends. Then you go and you fix and flip the project. You don't care about your crews. You're not becoming friends with them. And then you're doing the same thing.

You're selling this house through a real estate agent. Again, not becoming friends with anybody.

Steve: Entirely transactional.

Pace: Entirely transactional. And I can tell you, I wake up in the morning so excited, especially four or five years ago here in Phoenix, Arizona. I would I was collaborating with Steve a lot. All of us were collaborating, and I looked forward to hanging out with my competition Yep. As much as I possibly possibly could because we are collaborating and having a lot of fun.

So I said, do that, but here's something more important, is you need to find other people to help, and you need to see how that actually changes their life, and they come back to you and go, dude, I took something you told me. I went and made 20,000 with it. You changed my family's trajectory. That is what I call emotional income, and it's way more addictive than a $10,000 check.

Steve: Right. It's a lot more fulfilling, and it's a lot more rewarding. So, we're talking about, you know, portfolio, but I wanna take a step back here. Mhmm. Right?

Yeah. Yeah. Because I still remember back when, you know, you and I used to go run at Discovery Park.

Pace: Right.

Steve: And we had Eric Sage on the show. Mhmm. And you're like, this creative thing, this is interesting. Might have some legs. Yeah.

Right? So I wanna talk about your journey into the creative world. Okay. So step one

Pace: Step one, I was born in a creative finance household. A lot of people don't actually know this. My parents moved 26 times before I turn I turned 19, and all of the houses my dad bought for our family was a seller finance, a subject to, or a lease option purchase. The problem in the challenge with my dad is my dad never looked at creative finance as anything other than a way to buy a house for his family. And, and why was my dad buying houses for his family with creative finance, but not going out and doing real estate investing?

Well, my dad, as an accountant, was making $6,070,000 dollars a year with 12 children. Obviously, not enough money. So he goes and starts a painting company, making money under the table for an extra $2,300,000 a year. So that income that's nonreportable, or he's not reporting it, but it's nonbankable income, which means no bank's gonna give him a loan based on that income. My dad's like, I gotta figure out how to buy houses big enough for my family.

Mhmm. So he would go find 5,000, 7,000, 11,000 square foot houses for my 12 kids and my parents to live in. And he would find seller finance subject to an in lease option opportunity. So I've always known what creative finance was, but I always thought it was a way to just buy houses for yourself. Mhmm.

Right? So, when the Eric Sage episode came, I sat down with Eric, and I would go, look. I've done a handful of creative finance strategies, but I wanna understand how do you create a massive, like, business. And I became friends with Eric. We spent a whole year together, and I spent a lot of time with Eileen Brown who's done creative finance strategies for forty eight years.

I paid for a couple of creative finance mentorships that were absolute trash. You find out that the mentors hadn't done deals in fifteen years or so. And I am like, alright. Like, I gotta figure this out. So Eileen Brown, Eric Sage, my dad were were the three peep main people that helped me out.

Steve: Yeah. So, I guess, for you then, with your dad already having done it, there wasn't as much hesitation. No. So there was not, like, you know, is this gonna work for building your portfolio? Greg, because, like, at that time, you know, you were, you were home investors.

Right. You were my contractor. I was a realtor. I was a broker. Right.

Right? And then we were you were wholesaling, and then I got more active in the wholesaling. And then you pivoted to creative.

Pace: Right.

Steve: Was there any doubt whatsoever? Like, is is creative the way to go? Or he's like, alright. This is it. I'm all in.

Pace: No. It was actually really similar. It was kind of a I was a four it was forced on me. So before I really pivoted full time to creative, I'm now to a point, bro, that I'm, like, somewhat aggressive with people that go, hey, Pace. I've got a deal.

I go, I don't buy cash deals. I don't even want a cash deal. I don't I don't even want them sent to me unless they're here in Arizona. I'll buy cash deals in Arizona. All other 49 states, I won't touch a cash deal.

Mhmm. And so people DM me. They text me. They whatever. And I'm like, if it's not creative, I don't wanna look at it.

Yep. Yep. In fact, I've got a text message with somebody in Houston who's like, I just sent you a big portfolio deal. I go, not looking at it because I'm sure it's not creative. He goes, no.

No. No. It's creative. I go, perfect. Then we can have a conversation.

But what happened to me is in 2000, I don't know, four years ago, I had a gentleman, that's to put it very politely, owed me a million or so dollars. He files bankruptcy on me and 16,000,000 other dollars worth of debt he owed. Mhmm. He was running a Ponzi scheme here in Phoenix, Arizona. And I've always been a creative person.

So the way I got myself in this really shitty situation is I go, how do I accelerate my construction business? Well, the way I'll do it is I'll fund home renovators or fix and flippers renovations upfront.

Steve: Mhmm. And

Pace: then they can pay me when their buyer comes and pays them. Right. So, dude, my business lit up on, like, fire. Like, went crazy, and I was making great money working for Opendoor, Offerpad, Zillow. I was the big contractor here in town.

But then one guy got his hooks in me and decided, I'm gonna file bankruptcy on you and everybody else I owe money to. And I'm sitting there going, wow. I invested all my time and energy into this guy for basically two or three years as I was building his business and doing all this stuff, and all he had to do is wipe me out with one filing of bankruptcy. Mhmm. So that commitment, which was about six months before I came on the show the first time, that commitment forced me, unfortunately or that I'm sorry.

That situation that I went through forced me to sell my house. I was in the middle middle of building and 40 rentals at the time. I had to sell everything just to keep my construction business afloat. Yeah. So I had to sell everything.

And I rebuilt everything from scratch. And when I went to go buy another home for myself, guess what, bro? I had no cash. I had no credentials because I was a a contractor, and I you know, we try and ride as much as you can't cut off.

Steve: Nearly zero. Forced

Pace: into a situation where I'm like, how do I build a massive portfolio without cash, credit, or credentials? And I just looked at what my dad had done. I looked at what other people done. I said, I'm committing to this. So I had hesitation, but I also had no choice.

Steve: Yeah. The first deal I'm aware of

Pace: Yeah.

Steve: Is one that you bought with Jamille.

Pace: No. That was the first deal I I bought I bought That's something

Steve: that I'm aware of. Right?

Pace: Yeah. That I bought for multiple sub two and seller finance deals before that. But that was the first deal I bought subject two, and I sold on a wrap. Mhmm. And so, So

Steve: then walk me through your very first creative deal.

Pace: Bro, my first creative deal, I it was horrible. I thought I thought what I was doing, so I go and pay for a mentorship. And I'm told, oh, yeah. You can just go and get a a house on the MLS. And what you can do is you can buy it with a hard money loan, and then you can wrap that hard money loan to an end buyer.

Steve: I mean, that's creative.

Pace: It's creative, but it doesn't work because the end buyer is not expecting to take over an interest only loan. Yeah. And so that was a Well,

Steve: not just interest on an only loan, but a hard money loan.

Pace: A hard money loan. High rate with 11%, and I sold it to the buyer at, like, 11 and a half percent. And I was like, I'm really not making money on this. What's going on? And that forced me down a path of, like, figuring out and and discovering all the things that I needed to to discover.

Yeah. Like, taking action and making mistakes.

Steve: Right. So did you actually go through with that plan?

Pace: Yeah. I went through that. Yeah. I went through it, and I I ended up having to restructure the underlying debt. I had to go and get a private money lender named Alex here locally, a guy that's a Tile dealer.

He came in and gave me a 7% amortized loan. And so I still, to this day, still have that note. So I have Alex in first position, and I have my buyer, my wrap buyer at 11 and a half percent. Mhmm. And I make, I don't know, $500 a month or so on that first deal.

Steve: And for you guys that are watching right now, the reason why I'm asking Pace these questions I mean, this was not intentional. Like, Pace and I have had this scheduled for months now.

Pace: Right.

Steve: But at this exact moment, I don't think they could have better time for you to be on the show.

Pace: There's no there's I tell everybody right now, if you're all you're doing right now is you're trying to learn wholesale, I'm gonna start a creative finance I'm not I'm gonna create a wholesale mentorship called good luck mentorship. If you're just trying to learn wholesale right now, good luck.

Steve: Yeah.

Pace: Good luck. You're you're gonna get left behind. I've been screaming this from the the mountain tops for years, and, I've even created strategies along the way that weren't didn't exist in the last couple years knowing that this was going to come. Yeah. Knowing that what we're going through right now, inflation hit 9.1% this morning.

Steve: Mhmm.

Pace: The report just came out 9.1%. Yeah. The Fed is gonna raise the rate where it's at right now, which is roughly six to 7%. If I go out and get a mortgage right now, it's gonna be 8% by the end of next month. Listings have tripled.

So it doesn't mean the market's going to crash? I don't know. But all I know is that these buyers who are now not qualified to buy these houses because they can't afford this stuff and sellers who are refusing to sell because they're sit sitting here saying, well, I acquired my house in the last three or four years at 3% interest. If I sell my house on the market, how am I gonna go replace this thing

Steve: Right.

Pace: And get a 7% or an 8% mortgage? So you're still going to have a major demand issue.

Steve: Mhmm.

Pace: And so what's going on is I'm getting, I'm getting for the first time ever, bro, first time ever, I had a seller reach out to me and say, how do I sell my house subject to? Yeah. And I brought them in on a Zoom with 700 of my students, and I ex I talked to a seller, and they go, dude, I need to get rid of this property. It's happening right now. We're getting multifamily sellers.

We're getting single family sellers, mobile home park sellers, land sellers saying, take my property on terms. Take it. Mhmm. Because people are fearful and they and interest rates are gonna eat people up for the next thirty six months.

Steve: Whenever you're not talking about this, I wanna say two years ago.

Pace: Mhmm. I was

Steve: talking about this inflation problem is gonna be coming.

Pace: Right.

Steve: And it sucks if you're a w two. Right? Yeah. Because you can't improve you can't compete against the rate of inflation that's coming.

Pace: Right.

Steve: But, yeah, going back to this. Right? Like, I'm gonna be asking some very specific questions because I think the people that are listening, again, timeliness Right. Is that I can't think of a better time to have you on the show talking about creative financing and so on. So that's the reason why I'm asking all these questions.

Pace: So Yeah.

Steve: Your first one, right, was disaster. You had to do a refi out with someone else.

Pace: I learned from I learned from somebody who didn't know what they were doing. Right. Yeah. So And and also somebody that wasn't actually active in the business. I I've learned from, the wrong person.

Steve: So I think with that, right, let's discuss some questions that you wish you would've asked Mhmm. The first guy or first couple guys you invested with. Right.

Pace: I think when you look at creative finance, let's break down what creative finance is real quick for a lot of people. Because some people might be brand new. Maybe they're listening to to this for the first time. Creative finance is a way to buy anything, anything without cash, credentials, or credit. And credentials, I mean, w two tax returns, bank statements.

And you guys can see all this stuff on my YouTube. I break down deals, call sellers all the time. But it's anything. So let's let's talk about it in a in very simple terms. When I was young, going back to my parents, I remember my mom, she's a seamstress.

So she would sew. She'd make dresses. She'd make stuffed animals for people. And my parents had a lot of kids. And so there were moments in my parents' life where my mom didn't have enough money to go buy materials to then create a product and then sell.

So what my mom would do is my mom would go and ask somebody in her church, hey, do you have a credit card that I can use to go buy materials? Because I went to Michael's, and they told me I I don't have enough credit to get a Michael's card that I can buy, like, materials to go turn like, make teddy bears and dresses, stuff like that. So my mom goes and finds somebody and says, yeah. No problem. Here's what I want.

This is interesting. I've known this since I was a kid. They said, whatever you make on the back end, I just want 5% of your net, and I'll let you use my credit. So my mom was using arbitrage to make dresses. So, like, she would sew bears and all sorts of tchotchkes, you know, little odds and ends, and she would sell them at local schools, and she would sell them at hospitals as, like, gifts in the gift shop.

She would do that all by leveraging somebody else's credit.

Steve: Right.

Pace: So my mom was arbitraging or utilizing somebody else's stuff to go make something with her hands and then go sell it.

Steve: So on top of other people's money is other people's credit.

Pace: Everybody's credit. Yeah. Right? And so that's creative finance. Yep.

Another piece of creative finance, I you wanna know my actual first deal? My first deal was not even a real estate deal. Mhmm. My first deal was my f one fifty, and I've told this story a lot. I tell this story all the time when I talk to sellers that they have a hard time.

In fact, I'm closing today on two properties, 0% seller finance that's gonna cash flow like crazy, and the mortgages are gonna be paid down. And everybody else is all worried about these 7% interest rates, and I'm gobbling up 0%, 2%, 3% deals, and building my portfolio. I'm paying a wholesaler right now today, not today, but next week, $200,000 assignment fee on a multifamily seller finance deal that he brought to. I had to restructure it, but he's making $200 assigning a multifamily creative finance deal to me. Guys, creative finance will dominate.

And what Steve and I are gonna talk about here in a minute is special. So when I've always known creative finance, but I didn't understand it as how to be an investor. So I'd watch my mom, I'd watch my dad, all that kind of stuff. I used to be a contractor as we talked about, and I had this f one fifty Ford hit 320,000 miles. K?

Dude, that thing started having overheating issues, all sorts of problems. And I'm like, I don't wanna deal with this thing. I would get calls from my guys. They'd say, hey. The truck is overheated again.

I'm like, gosh. Damn it. Call triple a. Tow the thing. Whatever.

So I go, where do sellers go when they wanna verify, what their property is worth? Zillow. What's the Zillow of cars?

Steve: Kelley Blue Book.

Pace: Kelley Blue Book. So I do what every damn seller does. I go to Kelley Blue Book. I go to the Zillow of cars, and I see that my truck in its as is condition with the miles it has is worth $5,000. Like, $5,000, the four door Ford f one fifty, this thing, if I just fix it up, I can make way more money just keeping it in the rotation with my crews.

Right? Well, I never fixed it. It was too much of a problem. Sound like a home seller. Mhmm.

Like, I want this much money. I'm not willing to sell it for this. I wanna demand this thing, but it needs to be fixed up. I literally was a dis like, a distressed seller.

Steve: Mhmm.

Pace: So I go to Craigslist in a belligerent fashion, and I go through my f one fifty on Craigslist for $10,000. Did I sell my f one fifty for $10,000?

Steve: Probably not.

Pace: No. I did not. I didn't even get a call, a text, a smoke signal, nothing. Nobody reached out to me. And so my wife comes in, you know, and she goes, well, you know, you understand, like, how your mom did things and your dad did blah blah blah.

You're you you know creative finance. Like, what look what I was doing with construction. Mhmm. Now with construction, they got me in trouble. I would front people's, you know, finances, and they ended up robbing me.

Steve: Right.

Pace: In real estate, it's great. That really can't happen, which is nice. But she goes, why don't you just take payments on the truck? It's my wife's idea. Right?

This is, like, eight years ago. Maybe not maybe nine years ago. I go, oh my gosh. This is brilliant. So what I do is I go back to Craigslist.

I literally change one thing, and I said, f one fifty will take payments. So what happens? Did I sell that truck for $10,000? Of course. I sold it for $12,500, and the buyer who bought it from me, Jose, gave me a thousand dollars down, and he made a $350 payment to me until that thing was paid off.

So I paid it. I sold it for two and a half times more than what Kelley Blue Book told me it was worth Mhmm. Because I was willing to give somebody seller finance. Yeah. And so that was the first seller finance deal I ever did, and I always understood that the value of something remember this, everybody out out there right now.

The value of anything is not the purchase price. The value is always what you can do with it. So if I can turn that truck like Jose this is what Jose did. Somebody's like I I would ask him, did Jose overpay for that truck? Answer is hell no.

Jose did not overpay for that truck because he took that truck. He got into it with really favorable terms, and he went out and made 6 or $7,000 a month using it for his own painting company. And he's a Hispanic dude, so you know they fixed that truck up real good.

Steve: Yeah. You know? And the other thing you guys may not know about this about Pace is that he's a truck kinda connoisseur. Maybe a little bit of a snob.

Pace: Yeah. A little bit.

Steve: Because, I thought I mistaken his truck. I saw an f one fifty Raptor. Yeah. Yeah. Like, is that your truck?

And he took complete offense.

Pace: I was

Steve: like, mine's a platinum. Yeah. He gave me a twenty minute lecture on trucks. I was just like, step into my truck. Let me explain to you.

Pace: Yeah. We actually sat in his truck outside the gym and talk I and and talked about the all this stuff. So your question was, what would you what do you wish you knew before you got into creative finance and what people need to understand?

Steve: What did you wish you had asked the people that you pay for for mentorship? What questions you would ask them?

Pace: I I wish I understood why people sell on Creative Finance and what to do if you are a buyer on Creative Finance.

Steve: But, I mean, like, before signing with a mentor Oh,

Pace: I would wanna know that they're actively doing deals. Yeah. I would wanna know they're actively buying real estate. I would wanna see settlement statements. I would wanna see how they're funding these deals.

I would wanna see basically, that's it. That's all I would have need to see. I don't even care if you're buying a deal a day. But are you buying one a month? Are you buying one a quarter?

Are you buying at least one a year?

Steve: Have you bought one in the last twelve months?

Pace: If you bought a property in the last twelve months, then chances are you got a little bit of momentum that I could learn a couple of things.

Steve: Yeah. So alright. Your first deal. Right? You had to refi out of it.

What were some other things you learned along the way, when you started acquiring properties through creative?

Pace: I would I learned, a couple of things that people need to understand. There's there's two trains of thought. There's subject to and seller finance, and people don't quite understand the two difference between them. Even me, I didn't quite understand. It seems silly, but I didn't understand the difference between subject to and seller finance.

Steve: I mean, I think we've all been there. Right? I don't think there's anything to be ashamed of.

Pace: In fact, I've had to make six or seven videos on it on my YouTube channel because it commonly comes up all the time.

Steve: I mean, I think, team, if you guys are paying attention, hell, let's us make a video about that.

Pace: Alright. Yeah. You should. So the difference we I if I understood the difference between subject to and seller finance, I would also then know the difference between the two sellers of subject to and seller finance because they're not the same type of demographic. No.

Right? In, subject to, it means I'm taking over somebody else's debt. So think about it as, like, I wanna buy your car. I can just take over your car payments. That's called subject to.

Mhmm.

Steve: But what

Pace: if your car is paid off and you don't have payments? Well, I just say, let me make payments to you, and you just be my bank. That's seller finance. Mhmm. So seller finance means the property is paid off free and clear.

Subject to means there's a debt that I need to make payments to and take that over. It's pretty simple. I didn't know that. K. So I would rack my brains like, oh my gosh.

Oh my gosh. And I would think and confuse the buyers in seller finance and subject to as the same demographic that you talk to them polar opposite.

Steve: Mhmm.

Pace: A subject to seller typically is going through pain. A seller finance seller only wants gain. Yep. K. So you're gonna get a lot of sellers.

If you're a wholesaler, you're a real estate agent, bought a

Steve: lot of deals from wholesalers, bought a lot of deals from agents where I have to

Pace: come in and restructure it where there's they say, my seller's out of control. They want too much money for this property. I'm like, I kinda reminds me of my f one fifty. Mhmm. I looked at the price of what Zillow tells me or Kelley Blue Book, and I'm like, f that.

I think it's worth more than that. I'm a belligerent seller just like anybody else. So I go, well, the value of something is not the purchase price. The value of something is what I can do with it and how cheaply I can get into it. Right?

And so seller finance, typically, all the seller wants is to see that they sold the property for a mental they committed in their minds when they bought the property and when they're selling it. The seller in a seller finance situation is financially savvy.

Steve: Mhmm.

Pace: K? Most seller finance sellers actually know what a no is, a promissory no. They know what seller finance is. A lot of sellers know what subject to is too. Mhmm.

K? These sellers want to win. They want a high purchase price. Okay? That's a seller finance.

I wish I knew that or way earlier. Took me about a year, maybe two years to truly understand the difference between these two sellers.

Steve: Yep. So

Pace: when you have a seller that says, I want 300,000 for a $300,000 house, I go, no problem. If I was able to come up to $300,000, would you give me terms? Seller says, what's terms? I then tell them my f one fifty story. They go, oh, that makes a lot of sense.

I go, so you can see how I can pay you $300 as long as it makes sense for me. Mhmm. On subject two, it's always pain. It's always I I owe too much money, and some people right now will go, well, everybody has equity. Go, not the people that did a refinance last year.

Steve: Yeah. If you if it's the last six months, you don't have equity. But more than six months.

Pace: Depending on the market. Some markets think about this too, and that this is another thing I wish I truly understood when I was getting into real estate, is what does it cost my buyer to sell their fix and flip? Most people have no clue. They're out there wholesaling deals to to their fix and flip buyers, and their fix and flip buyer has to renovate the property, sell it on the MLS, and pay roughly eight to 10% in in selling costs. A lot of sellers don't have eight to 10% of equity a year after they bought their house.

So they go sell their property. It's like, I know I'm a little bit over the place, but let me explain this. If I have a house that is ARV or my Zillow price says if I go to Zillow right now and Zillow says it's worth 300 and I owe $2.70, How much equity do I have? Put a put a put a put a comment in the side chat. How much equity does that seller have?

$300,000 is what their house is worth. They owe 270,000. People are like, this is obviously a trick. Right. It is a trick because you think that that $30,000 is equity.

That is not equity. That is called spread. That is not equity. Write this down. Equity is what you have in your pocket after you sell your house and everything is paid off.

That's equity. So somebody who who owes $2.70, the house is worth 300, will actually walk out of that transaction with $0. So if you bought a property and actually went up 10% in a year Mhmm. You still don't have equity.

Steve: Yeah. You're breaking even.

Pace: You're breaking even. And so you get a lot of sellers like, wow. Really? This is it? So I'm buying we're gobbling up subject to deals from people that are in foreclosure.

Lot of foreclosures are happening right now. A lot of, people that are they refinanced last year, and they don't have any equity. A lot of those deals are popping up right now.

Steve: Yeah.

Pace: I shouldn't see popping up. They're flooding the market. They're everywhere.

Steve: By the way, I think your your crowd, your community is alive and well.

Pace: Oh, great. Yeah. My my community is the greatest.

Steve: Yeah. 445 people here, which is a new record. So

Pace: New record. Shout out is up to you. I can tell you the most magnificent thing that I've done in my life Mhmm. Is that the burn and all the things that I had to go through with finding the wrong mentors and spending the money in the wrong place and not getting what I needed, what I said to myself is that if I ever created a mentorship, it would never be a mentorship.

Steve: Mhmm.

Pace: It would always be a community that is lifelong. And so my students, they join, bro, like, I memorize their names. I know their spouse's names. I know the last deal they did. And we're not talking a thousand people.

We're at 5,000 sub two students right now in the nation.

Steve: Mhmm.

Pace: We are I'm gonna challenge other real estate educators. We, in my opinion, I believe I'm the only real estate community in real estate. My people are so connected. They're doing local meetups. They have accountability groups.

I fly all over with Jamil, see my students, memorize their names, get to know them. There's no end to the sub two community.

Steve: Yeah. I mean, truthfully, I'd be afraid to attack it because or attack you because I think I I think they would murder me. I think they'd be

Pace: I have at least one person in my sub two community that would probably kill for me.

Steve: Yeah. I I would I would venture to guess the over under is probably, like, five or 10.

Pace: Right. But my goal was sub here's what my goal was with the sub two community always was, how do I normalize the conversation around creative finance? Mhmm. Because I I you know, there's things that are normal in real estate, like a real estate agent, a broker, a title and escrow agent. Right?

All these types of things are pretty normal. But my goal three, four years ago was how do I normalize the conversation around subject to seller finance, novation agreements? I don't talk a lot about novation agreements, but my our group does more than anybody else. Like, we do so many novation agreements. And then, we've got it.

I get emails from attorneys. Like, I just got an an email from an attorney in San Antonio last week that says, PACE, I've been doing subject to and seller finance transactions here in Texas for over thirty years. I've met a lot of dummies. But every time a subject to a sub two student comes through my doors and opens that escrow, we know it's gonna be the easiest file we do that whole week. And so we're on our way to normalizing what creative finance really should be in the the real estate space.

But we're doing it together. I can't do it on my own, and we're doing it together as a community.

Steve: Yeah. So I think the other thing I wanna look at is, before we talk about, you know, pitching and so on Yeah. Yeah. Let's say someone's brand new

Pace: Yeah.

Steve: To sub two or creative. Right? Seller, finance, or whatever. Someone's new to it. What are some things they should do, or what are some things they shouldn't absolutely not do?

Pace: Okay. So I I would love to get into that. Do you mind if I break down a deal that I just did, like, a couple days ago?

Steve: Go for it. I I set aside thirty hours for this.

Pace: Perfect. Perfect. This that's just that's the intro. I'm actually thinking so I did a sixteen hour live two years ago. I did a twenty five hour live, and then I did a twenty six hour live.

No food, no drink, no no pause, no break, and just did all that stuff. I'm planning on doing a, thirty hour live where I talk about nothing but creative finance, but I go a to z on creative finance where I'm like, start here. Do this. I'm gonna end up doing on the on the YouTube channel at some point in the next couple of weeks.

Steve: Instead of sub two or seller finance for us, can we just talk about Steve for an hour?

Pace: Of course. I'd like bro, I got a lot of stories about you. So, I I've got a deal right now that I don't look at when people send you me a cash deal, what's the number one thing you look at in a cash deal is my purchase price. In creative finance, the purchase price is the last thing I look at. The first thing I always look at on a creative finance deal is what I call the entry fee.

So I'm gonna give your audience and a lot of my students already know this. They'll fill up the chat with what the entry fee is. Watch. So I always look at a deal, and when somebody goes, hey, PACE. I've got a sub two deal for you.

I go, great. What's the entry fee? I don't even care about the address. I don't care about the bed bath count. I don't care about the garages.

I don't care about the condition of the property until you tell me what my entry fee is first. What is an entry fee? K. This is something that I created because I would watch all these other guys on YouTube and other mentorships I paid for. Nobody ever talked about this.

There's seven parts to an entry fee. Number one is what does the seller receive? What's the cash to the seller? Sometimes that's zero. Sometimes that's a $100 depending on the deal.

What does the seller receive in their pocket? That's number one. Number two, are there any arrears, liens, encumbrances that I have to pay? Because I've taken over IRS liens. I've taken over mechanics liens.

I've taken over child support liens. I've taken all over a bunch of those things. Did Steve, send you guys a message and say get a fan in here, pace is on fire? Is that what's going on here?

Steve: Yes.

Pace: I love it. So, number two is, are there any arrears, a you know, back payments, things like that? Number three, what's my assignment fee to the person that brought the deal to me? Mhmm. Or if I bought it in house, which we buy a lot of sub two and seller finance deals in house, what's my commission I'm paying to my guys, my acquisition guys?

That's number three. Number four is, now I know what the seller's getting, what arrears I have, the person who got the deal under contract is getting paid. I now have to know what is the closing costs. Mhmm. K?

Number five, renovation. Number six, now that I own a subject to or seller finance house, guess what I'm responsible for? Payments. Payments. So number six is before my exit strategy comes to fruition, let's say it's an Airbnb, might be two months of renovating, a month of furnishing, that means I got three payments, three months of utilities, three months of taxes, three months of landscaping, three months of all that kind of stuff.

That's number six. And then number seven is what is it going to take to market that property to get a tenant or an Airbnb launched, etcetera. So that number, add all those numbers up, that is my entry fee. Mhmm. Now where does that entry fee come from?

How do I buy a subject to or a seller finance deal if I don't have any money?

Steve: Private money.

Pace: Either private money or partnering with people. A lot of my students partner with each other. They go find the deal, and somebody else goes, I'm brand new, but I got 25,000 in cash. Let's go buy this deal together, turn into an Airbnb, and let's go $50.50 on the ownership of it. I also wish somebody would explain the fact that you can creative you can wholesale the piss out of creative finance deals.

You can wholesale novations, lease options, subject to deals, seller finance deals, morbi method deals. All of the deals can be wholesale. So even if you're brand new, you would need to understand what are my entry fee costs because I need to go to a buyer like PACE Mhmm. Or somebody else and say, it's going to cost you $32,700 to pay the seller, get my assignment fee, and get the arrears paid, my assignment fee, closing costs, a little bit of renovation, and get this thing rented out.

Steve: Do you have a calculator for this? Because, like, one thing that we have is, you know, one thing I see is funny on, you know, wholesale as email blast is, like, here's what ARB is.

Pace: Oh, yeah. Yeah.

Steve: Here's what the renovation budget is gonna be. Yeah.

Pace: And

Steve: you can't trust either number.

Pace: You can't. Now that's the other thing about creative finance. Again, I don't care what the ARB is.

Steve: Right. I get that. But, like, if someone says, hey, Pays. I got this deal. Entry fee is $30,000.

Pace: Oh, yeah. I have to check it every time. Yeah. I have to check it every time. Especially people that watch.

My students know. So, like, a student sends a deal to me. Mhmm. I bought a I have a deal right now that I'm doing where my student says, hey. The entry fee is $31,000.

And I went through and I looked at it, and I go, ah, it looks like it's more like $34,000. But, like, they're really, really freaking close. Yeah. Most wholesalers are like, ARV is 400, but it's really $3.20.

Steve: Mhmm.

Pace: Right? Yeah. So that happens, but there are typically non students that watch my YouTube channel that don't quite understand it. So I wish I knew when I first jumped into creative finance that the purchase price is ancillary. It's not really that important.

It's irrelevant. Yeah. Until k. I'm not going out there and paying 300,000 for a $200,000 house. I've never overpaid for a property maybe more than three to 5%.

I've never just gone crazy on stuff. Where I just stopped looking at it is because I'm like, well, I need to know what cash I need to bring to the table, right Mhmm. Before I know anything else. Because if you tell me my the seller wants $500,000 down on a $700,000 house, I already know that's not a good deal. Right?

So immediately, that's my first filter. Knowing what is my cash outlay, what is it gonna going to cost me to enter into that deal? Whether it's a sub two deal, seller finance deal, novation agreement, lease option, does not matter what the deal is. What is my actual cash that's going to get me to a point where I'm cash flowing? That's called the entry fee.

And if I'd if I knew that, I probably would have an extra 100 properties in my portfolio if I knew that faster. But I would get a deal, and a seller would be in in foreclosure. And I go, I don't know how where does that money come from? How do how do I know all the things it's going to cost? I wish I knew that earlier.

So the entry fee was super, important when I when I put that together. Another thing I didn't quite understand is exit strategy. Yep. And I would just assume, okay. Well, I would I wholesale a lot of my first sub two in seller finance deals because I didn't have the money, and I didn't have the skill set of raising capital.

Right? So and I didn't have the ability to have a brand that people wanna partner with me. I got people emailing me every day saying, I got $300. What what can we do with that money? I I don't need money anymore.

Like, that's the crazy thing. You go from needing money and not knowing where it comes from to then you figure it out, and then you figure it out at such a high level. You don't need the money. Too much money. You have too much money.

And, you know, that's why we're doing a lot more apartment complexes and stuff like that too. So if I knew the entry fee and I knew what the hell I could do with the properties Mhmm. I would have been off to the races a lot faster. So I have 26 strategies of what you can do with properties once you get a sub two seller finance, any of these things under contract. There's 26 strategies.

Wholesaling them is one of 26. So if I understood those things, I would accelerate a lot faster. So, one, knowing the difference between subject to and seller finance. Two, knowing the difference between the sub two and seller finance sellers. Number three, what money is going to, you know, need to be done to to bring these things to fruition.

And then number four, how to find that money. Is it a partnership? Is it I'm gonna raise the capital and pay simple interest to somebody? I wish I knew that stuff. I had to figure that out along the way.

Right. I I've done a lot of zero down,

Steve: 0% interest deals. My best deal ever was a deal.

Pace: Am I just rattling or people don't wanna hear this? I'm

Steve: pretty sure people wanna hear. I mean, we have almost a 100 people in here.

Pace: Okay. Great. People wanna hear it. Love it. And but the thing is, these are probably 500 of my best friends.

They're my my sub two students. So, like, they're these are my One

Steve: or two of these people are my people, so it's fine.

Pace: Okay. Cool. I'm talking to the one person. Alright. So, one of the best deals I ever did was a wholesaler came to me.

I'll give you guys the address. If anybody wants to pull it up, 1906 South 78th Place in Mesa, Arizona. You guys can pull it up on Zillow. And it's a little three bed, two bath mobile home in a pie shape shaped lot. Wholesaler comes to me, and she says, hey, Pace.

I'm talking to the seller. I cold called her, and she wants a $100,000 for this deal. This is seller finance deal, guys. So when you're writing this down, just remember this. She wants a $100,000 for this deal.

And I go, okay.

Steve: Well, if it's a cash deal,

Pace: that means you could probably gotta buy it at what? What would you have to buy a hun ARV is 100,000. What would I gotta buy buy buy this thing at?

Steve: $70.75.

Pace: As a as a as a wholesaler or as a cash buyer?

Steve: Oh, as a cash buyer.

Pace: As a cash buyer, 75. Maybe I put $10 into it, list it for a 100, maybe I could walk away making $10 maybe. Right? But most of the people talking to these sellers are who? They're cash buyers or they're wholesalers?

Wholesalers. They're wholesalers. So this seller is getting offers at $40 Mhmm. $50. And she tells this wholesaler, don't even bother me unless you have an offer at a $100,000.

Stop bothering me. Yep. So this wholesaler says, do you wanna come to this appointment with me? I would love it. By the way, I've got this this I record every single appointment ever.

Every appointment I I record do you wanna hear the last one from last week? It's so good. Zero down. Zero percentage was so good. I'll give

Steve: it to your audience. I'll give it to the audience later.

Pace: So, I go to this appointment. I record the whole thing. Her name is, it's Dale and Susan Poyer, the name of the sellers. This is a true unicorn deal that happens they happen all the time. But this is the first time I push the limits on a unicorn deal.

Unicorn means I zero down, 0% interest, seller pays the closing costs, and I have a tenant that's already in place and the property cash flows on day one. K? We probably have a good 20 of these in our portfolio. So I go to Susan, and I go, hey, Susan. I would be willing to give you this is the pitch.

K? So people are like, well, how do I bring up terms? How do I bring up creative finance to the seller? You ask the seller. This is one of the advantages I have over all you knucklehead cash buyers.

All you knucklehead wholesalers out there. I'm a wholesaler too, but I that's one tool in my tool belt. So I go, so what kind of offers are you getting, Susan? She's like, oh my gosh. Yeah.

I don't wanna tell you that. Go, oh, I imagine they're really low. Are you getting offers at 4 $4,050,000? You see what I did there? I didn't I didn't go, oh, I'm sorry.

Steve: Mhmm.

Pace: I go, well, I imagine they're probably lowballing you. And I'm starting to inch my way towards being on her side with a common enemy, which is the wholesaler. Yep. Because if you're a wholesaler, I will scorch mother earth all over you. All over you.

So what happens is she goes, yeah. Yeah. I'm about I'm getting offers at $5,060,000. I go, okay. Great.

So if somebody was willing to give you that $100,000, which you know that's what Zillow told you, would you be willing to give them terms? And I shut up. Mhmm. 99% of sellers have no idea what the word terms mean. In fact, some people on this podcast right now don't even know what terms means.

Steve: Right.

Pace: So she says, well, I mean, okay. Interesting, but what are terms? And then what story do I tell anybody that asked me what are terms?

Steve: Either the truck or the tree?

Pace: The oh, the tree is good. I haven't told the tree story in a a bit, dog. That's a good story. So I told her the f one fifty story.

Steve: Mhmm.

Pace: I recorded the whole call I recorded this whole meeting on my phone. Phone was on the countertop, and she goes, oh my gosh. Yes. How do we do this? I go, well, you know, if I'm paying a $100, which is full value of this, and there's no real estate agent, then I need and I'm giving you all of those things, then I need to get something in return.

This is a win win situation. By the way, creative finance is the only way to truly have a win win with the seller and the buyer. It's the only way. Because on a cash transaction, I gotta buy your shit at 50¢ on the dollar, which we do frequently.

Steve: Right.

Pace: The only thing the seller gets in that situation is convenience of time. That's really it. And it's good, but creative finance is, like, 10 times stronger in the benefits. So I go, if I'm gonna give you all of this, then I gotta get something in return. I gotta have something in return.

She's like, okay. Well, what do you want? I go, well, I would wanna do no down payment. And she goes, oh oh, okay. And I go, and I also want you to know that if I'm giving you a $100, that means anybody else has been willing to give you 60.

I'm paying you $40 more than anybody else. Mhmm. So what I would want is I would want you to know that that's my interest that I'm building into the purchase. You're like, okay. And I go, so I'm gonna pay you $4,040,000 dollars in interest is the way I pitched this.

Yeah. And she was okay. I like that. Alright. But here's the thing is that means you're gonna get 0% interest.

Okay. Great. And you pay the closing costs. I go, no. I gave you a $100,000, Susan.

We're closing in three days. Like, the you gotta give something to the table. So she pays closing costs, $2,000. Mhmm.

Speaker: She

Pace: goes, but who's gonna evict the tenant? I go, nobody. I'm keeping those tenants in place. He goes, okay. They're my family members, and they're, you know, they're late almost every month.

I go, the reason they're late every month, Susan, is because they are your family members. Wait until I manage these people, and we'll be fine. So what happens is we she she comes to me, and she goes, I want $10,000 down. If you want 0% interest, I pay the closing costs, all of these things, and you want twenty year you know, because a 0% seller finance deal typically doesn't go thirty years. It goes twenty years.

Yep. So she says, I'll do all of this, but I want $10 down. I go, no problem. I'll give you $10 down, But I'll I got I wanna give you the $10 over the next year. She goes, okay.

So this property, you guys can pull up my note. It's on public record. My payment to the seller is $375 a month, principal only. My taxes and insurance and all my other stuff is about $2.25. So I'm all into this thing, $600 a month, and the rent on this thing is $1,650 a month.

So I got a thousand dollars a month net cash flow on day one. Right. And I gotta pay her $10 over the next year in a down payment. How much money am I gonna have to pay this lady? I'm gonna have $12 in

Steve: cash flow.

Pace: It's her money.

Steve: Yeah. That's the Unicorn deal.

Pace: No down payment. Down payment can be paid over the course of a year. Nobody knows you can even create you can structure things this way. Structure I'm buying a $3.03 and a half million dollar apartment complex the same way right now. 43 units in in Texas.

I'm the seller's like, yeah. I'll seller finance your down payment. I'll sell or finance the whole thing 4%, 43 units. Cash flow is, like, $11,000 a month net net after everything. You can you can pay the seller on payments, and you can seller finance their down payments.

Gangster.

Steve: Right.

Pace: So I look at that deal, and, obviously, I'd been doing deals at that point for a couple of years, and I was just testing the bounds of what I could do. You can do anything in creative finance. Anything.

Steve: Someone's here is asking about the tree story. So you had to go back to our last episode. Right? This is Pace's fourth time. So the third time he was here, we talked about the the tree story.

Pace: Second second time, probably.

Steve: One of these times.

Pace: One of these times.

Steve: Anyway Just go back and watch all my videos. Anyway, go ahead.

Pace: So I have a I have a seller a couple years ago. This was, one of my acquisition guys was having a really hard time overcoming a seller. So the only time I go to appointments now is that, a seller can't get over taxes, or there needs to be a more creative structure than my acquisition guys can do. So my acquisition guy goes, dude, this guy just can't get over this subject to seller finance situation. He knows that you're gonna pay more money, and it makes more sense for him, but he doesn't quite understand, you know, taking the money now versus taking more money over a longer period of time.

I go, okay. No problem. So I meet with the guy. Same thing. Record the record the thing in the in the I'll give this in the show notes maybe.

You guys can give this Dropbox away or, like, on a Dropbox link or some. I go, so think about it this way. You is it the seller's name is Tim. I go, Tim, you bought this house. It's appreciated in value.

It's actually made cash flow for you because you had tenants in here for a long time. So, So, essentially, it's like planting a seed of an orange tree, and this thing sprouts up and starts producing fruit. You're super happy with it. You've got pride in it. And he's like, yeah.

Actually, yeah. This is kinda like my own little, like, fruit tree. I go, cool. So every cash buyer that's coming along here is coming to you and saying, hey. That really valuable orange tree that you've spent a lot of time, use your credit to buy it, dealt with tenants and their headaches, all this blood, sweat, and tears that took for you to water, irrigate, trim, prune this tree, that wholesaler is coming to you and basically saying, how about I do this?

I'm gonna cut the tree down. I'll take the branches and the and the the oranges and all the seeds that come with it, and you I'll just chop down the trunk of the tree, give you the fire word wood so you can just go burn it.

Steve: And

Pace: he was like, damn. And I go, that's what's gonna happen. You're gonna get rid of this producing tree. Whereas with me, I go to you and I go, why don't we just keep the tree in place, let it keep producing fruit? But instead of you having to manage the tree, let me manage the tree, and I'll give you a portion of the fruit this tree for the rest of your life or for the next thirty years.

He's like, oh my gosh. You're right. Why would I ever sell a property for $50.60 cents on the dollar? I go, probably because somebody told you your house is a piece of shit, and they need to renovate it, and they gotta make money too. And all the lines that I say to other sellers that it actually makes sense for me to say that to those specific sellers.

But for you, Tim, you're in no pain. So, really, you should be focusing on what's your greatest gain. So I ended up buying that deal because of the orange tree store. He's like, I don't wanna chop down my tree. I wanna keep he's like, you can keep 90% of all the fruit.

So the way I structured that deal is I turned that into an Airbnb, and I let him have the I'll I make a payment to him for the seller finance.

Steve: Alright.

Pace: But on my Airbnb, I also give him 7% of my net on top of his payment.

Steve: Yeah. You're giving him the fruits.

Pace: I'm giving him the fruits.

Steve: So you were talking about preferred exit strategies. Right? So I know there was one we were when we were talking a while back about this. There was one that you love more than any other.

Pace: Lease I loved lease options at a point. Yeah. Okay.

Steve: So you no longer love lease options.

Pace: Touch a lease option anymore.

Steve: Alright. So what so you tie up a deal. Uh-huh. What is your go to exit strategy today?

Pace: Well, let's let's talk about, like, top five exit strategies that most people are doing in creative finance. K? So I lock up a deal, seller finance subject to novation agreement, morbi method, whatever it whatever the deal is. I lock that deal up. I'm going number one, wholesale.

If I'm brand new, go wholesale your first five creative finance deals. Just go wholesale them. Find a buyer like me. Find the sub two community, wholesale a deal to them. That's number one.

Number two, when you're brand new and you wanna start getting cash flow, you take that that deal and you wrap it to an end buyer. Mhmm. And what does that mean? That means I'm going to take over the payments at, let's say, a thousand dollars a month, and I'm gonna go find a buyer that's willing to pay me $1,400 a month. So I make the spread of $400 a month.

And the great thing is if I wrap it, that person becomes the buyer and the owner of the property, and all I do is receive a $400 payment, thousand dollar payment, whatever it is that you structure. I have no issue. I don't have to pay the taxes. I don't have to deal with tenants. I don't have to deal with toilets.

I don't have to deal with any of that trash. Right?

Steve: Right.

Pace: And so that's number two. Number three, and the and the downfall of do selling a house on a wrap, guess what? You don't have. You don't have ownership of that property.

Steve: Right.

Pace: But you do have cash flow. And so that's a great preferred method for newer people. Or I also say lazy people. People that are doing wraps, you're either brand new or you're lazy as shit. K?

Because true wealth is not built by selling by just getting cash flow. Mhmm. K? True wealth is by having your tenants crowdsource your retirement, and your tenants are paying down the mortgage. They're paying down, all the in the interest and all that stuff.

So number three was lease options for a while. That was my next phase, was lease options. Because lease options, what we found is that I'd buy a sub two deal or a seller finance deal, and I would turn around and sell it on a lease option. And a lease option for anybody, I could do a whole episode on lease options, is both a lease and an option. So it means they're gonna lease the property from me for about five years is what we would give the buyer, and they had five years to execute the option, which is two different contracts.

Mhmm. The problem is when the market appreciated like crazy, all of my all of my lease option buyers executed their options, and I no longer own those houses anymore.

Steve: Right.

Pace: So I then you then convert to exit strategy number four, which is holding the property indefinitely. Mhmm. And then what you end up doing is you divest and you go, okay. Am I gonna do Airbnb, short, Airbnb long term rental? Am I gonna do corporate rental?

You know, section eight. Now you've got a whole bunch of different exit strategies. But for me, I would say that 90% of what we do with Creative Finance now is hold it and put in our portfolio. And the reason for that is because I get cash flow. Mhmm.

I get appreciation. I get depreciations. I I I made a lot of money last year. Made a lot of money the year before. I paid $0 in taxes, and I actually got a a tax refund of $2,300.

Steve: Right.

Pace: The tax refund. After paying zero income tax, I paid I got a $2,300 tax return. Why is that? It's because of the tax benefits of actually owning property. And so meanwhile, all my friends are making millions of dollars flipping and wholesaling and, you know, other things, owning title companies, and they're paying 40% of their money to the IRS.

Meanwhile, I'm just buying more properties. Right? Yeah. So holding properties is my main objective. And in the last year, I've really spent a lot more time in multifamily creative finance.

So holding. Holding properties is my my main exit strategy.

Steve: So, one of the reasons why you like lease option was the the fact that you that the tenant was eventually gonna buy, and they cared more, and you had to do a few repairs. So now Yep.

Pace: And I what I loved about lease options is we would average about a $7,500 lease option fee upfront. So I'm like, damn. I got paid upfront from a somebody leasing my property that was just a nonrefundable $7,500 fee. And then the other reason why I loved lease options before the pandemic happened is that 80%, maybe even 90% of my lease option tenants never actually executed my option. And so I would have an inflated rent.

I'd get $7,500 up front. And then at at the end of my five years, they wouldn't renew or I'm sorry. They wouldn't re they wouldn't execute the option. So I would evict them. Not evict them, but I'd say, hey.

We're not renewing the lease, and then we would just turn into a long term rental. So I got $7,500 up up front and a higher rate of of, rental. Because on a lease option, I'm not renting a property at the same price I would I would rent something just a traditional rental.

Steve: Alright. So, I think I got a lot of the questions I wanna answer. So we're gonna transition to the questions.

Pace: Did we really? Because I freaking I could go a long way.

Steve: Questions. There are a long list of other questions.

Pace: Oh, love it. Okay.

Steve: My questions. So before we do that, I want to just announce our upcoming, dis disruptors event. So our live event, we teach disruptor sales process to overcome seller objections, building real rapport, and purchasing properties at deeper discounts. If you wanna level up your business, sign up today, disruptors.com/salesdisruptors. And, you're gonna be a little bit quiet for this part while they roll this.

Pace: Mhmm.

Steve: And then we'll go to those other questions.