REI188: Wealth Without Cash w/ Pace Morby

22:16Okay. This is where it ties back in with my dad. My dad calls me. He goes, man, how's this real estate thing going? Man, you broke the curse. Like you got into real estate. I go, man, dad, you wouldn't believe it. He goes, oh, I'm blown away. Your mom just told me the story about these bunnies that she brought home. Like, what was that all about? And I go, oh, that wasn't even the cool part, dad. And I start telling him about subject to and seller finance and lease options and all these cool things that I'm doing. And he says, I go, have you ever heard of subject to and seller finance? And my dad says, yeah.

22:41How do you think we lived in every single home you grew up in since the day you were born until you were 20 when you moved out? And I'm like, what are you talking about? And he says, well, we have 12 kids, Pace. I worked as a CPA in the daytime making$60 ,000 a year. And then I had to moonlight and bring in cash under the table as a contractor, no bank would give me a loan. So I had to go out and work with sellers to give me rent to own. And then I learned about just taking over mortgage payments on subject to, then I started figuring out seller finance. And I said, dad, why didn't you like start branching into real estate investing yourself?

23:18And he says, because I was too busy installing other people's toilets at their houses. I was too busy trading my time for money. And so I'm lucky. I'm grateful for my parents. I'm grateful for my dad amplifying me to a point where I could break the family curse and actually get into real estate and be the one that changes the trajectory of all of our future generations' lives is having true wealth and having houses make money for us rather than we make money by touching houses, which is what I did as a contractor. So the F-150 story ties in where I got so good at this. I got so good at creative finance and explaining things to sellers because I would use stories that made sense to sellers, just like I just did with the bunny story.

23:58I get so many people call me and they go, hey, Pace, I got a deal. I go, great, tell me about it. And they're telling me about it. And I said, so what are the bunnies? Why would the seller sell to you at a discount? Why would the seller give you a good deal? Why would the seller let you take over payments? Why would the seller seller finance you? What are the bunnies? And these people that think they understand how to get into real estate investing are just looking at random houses on the MLS. Guys, people that are selling on the MLS typically don't have bunnies. Bunnies are the motivation. Bunnies are the reason why they need to sell to you at a discount quickly, or bunnies are the reason they got to let you take over their payments.

24:33You got to find the bunnies and you got to start where the bunnies exist, which would be foreclosure, probate, expired listings, people that have long days on market with real estate agents on the MLS. I would never call a deal on the MLS or try and buy a deal on the MLS unless it's been on the MLS for over 90 days. Because now I know that they're going through some pain. They haven't gotten offers. They're having a challenge. That's so easy to see that they have bunnies that I can help rehome. Well, I got so good at this. I got so good at this that I started having wholesalers and real estate agents in town call me and say, I have a lead and we don't know what to do with it because the seller wants too much money.

25:11And I would just go on these appointments. And I basically, everybody in town started calling it the Pace method, which was taking people's dead leads, at least what they called dead leads. And I would go and make money on these dead leads. And I got to a point where I actually liked the dead leads way more than I liked the leads that were willing to sell to me at a discount. I wanted the ones that were impossible because that's where I was making the most money. And I had the seller, I was a wholesaler. His name is Tim. Tim calls me up one day and he goes, Pace, I've got this seller. And the seller is, she wants$110 ,000 for this property that me as a wholesaler, I got to offer like 40, 50 grand on this in order to me to assign it to a fix and flipper in order for them to have enough meat on the bone to go and sell it for 110.

25:55It's worth 110 renovated, but this lady wants 110 right now. I go, okay, great. I love that. That's a great lead for me. He's like, how is that a great lead? I go, because I know how to solve the problem. I know how to identify her bunnies and I know how to liberate and rehome those bunnies and solve her problem And so I go to this appointment seller's name is susan and dale And this is the first time I used the f-150 story to get a seller to understand what terms were So I go to the appointment tim's there susan dale the owners are there We're in the carport because this property three bed two bath house this property by the way if anybody wants to look it up It's 1906 south 78th place in mace arizona.

26:34I still own it to this day We meet in the carport. There's tenants in the property. We're sitting there talking basically in the carport. The tenants leave, so we go inside the house. We're now in the kitchen. We're chatting. And I go, so Susan, what's kept you from selling the house so far? Same question I ask every single seller. My team asked every single seller, what's kept you from selling the house so far? She says, well, because everybody's low-balling me. Yeah, it's typical. I go, I think that's why I was brought here and introduced to you. let me guess, you're probably getting offers somewhere around 40, maybe$50 ,000.

27:10And you're wondering why all these investors are lowballing you. She's like, yeah, that's exactly the offers I'm getting. How do you know? I go, because if I was going to give you a cash offer, I would give you the same cash offer. And I would then be duking it out with these other investors. So they're not investors, they're wholesalers. And I would be duking it out with other people, trying to compete with them and trying to throw them under the bus and say, these aren't good people to sell to. I'm a better investor to sell to because I'm honest and I'm trustworthy and I can close faster. It's like, Susan, those advantages, everybody has those advantages.

27:43The reason I'm here is because I'm a superhuman. I can solve your problem at a level that other people can't. She's like, so you're telling me you're not going to give me a cash offer? I go, nope, I'm not going to give you a cash offer because if I was, you would also say I'm going to lowball you. So I'm not going to give you a cash offer. She's like, okay, well, then how are you going to buy my house? I go, well, Susan, if I was willing to come up to$110 ,000, which is astronomical compared to what everybody else is offering you, would you be willing to give me terms? Susan has no idea what terms are.

28:13Most people don't know what terms are. And so I came up with really great, easy stories to tell people to kind of help them understand what terms meant. So I always lead with that. I say, well, would you be willing to give me terms, knowing that the seller will not know what that means and it will cause them to pause and go, terms, which then tees me up to tell my F-150 story, which I've told a thousand times. My students have told this a thousand times. People take it from my YouTube videos and everybody has permission to take this story and go use this story to explain things to a seller. So this is the F-150 story.

28:46I go, all right, Susan, let me tell you what terms are. I'm a contractor. I trade. That's what I did for a very long time. I had an F-150, world's most popular truck. And this truck hit 320 ,000 miles. And it was a truck we were using that four guys would sit in the truck. They'd go from job to job to job. They'd paint houses. And this truck was a catalyst and a tool to make money for my company. And it got to a point where it's having engine failure and overheating and all sorts of things. And it was actually causing me more headaches than it was giving me benefits. Probably similar to the house that we're talking about right now.

29:21Your tenants are giving you a hard time. They're not paying on time. You're constantly dealing with them. And this is where some of her bunnies start coming up. She has family members renting the house from her, taking advantage of her, and then complaining to the rest of her family about how she's always demanding her rent on time and that she doesn't understand the hardships that they're going through. And what kind of Christian is she? Because she is demanding to be paid every single month. These are bunnies. These are the bunnies that Susan had. So I obviously extracted all that in the upfront conversations.

29:53I already knew that before I went into the F-150 story. So I said, so just kind of similar to what's going on with your house, you've got more problems than the benefits and you're looking to offload the property, but you don't want to just get rid of the property. You want to get as much as you possibly can. Well, guess what? I'm no different than you. I decided that I was going to sell this F-150. So I go to Kelly Blue Book, kbb.com, which is the Zillow for cars, basically. And she says, oh, okay, cool. Yeah. All right. Well, yeah, great. Yeah. That's kind of like the Zillow for cars. So I'm starting to tie these two parallels together.

30:27And I said, I look at the Kelly Blue Book. I see the truck's worth five grand. And I said, oh, hell no. I'm not selling this truck for five grand. It makes me way more money than that. I'm going to go put this on Craigslist to see if there's any silly idiot that's going to pay 10 grand for it. So I put this truck on Craigslist for 10 grand. And I said, I'm just as belligerent as you, Susan. You want$110 ,000 for a house that everybody else is offering$40 ,000,$50 ,000. You want what you want. Well, guess what? I wanted what I wanted to. But unfortunately, I didn't get any emails. I didn't get any phone calls.

31:01I didn't get anybody to even criticize me about my high offer. Three months goes by and I didn't sell the truck. Nobody even messaged me one time. It was just way too high. After those three months are up, my wife comes to me and says, Pace, every morning I have to drive around this truck parked in our driveway. It's not a lot, but I got to kind of watch out for it. I got to worry about it. And then when I come home, I got to do the same thing. Can you sell the truck, please? And I go to my wife and I'm like, sweetheart, I'm not going to go put this truck on Craigslist for five grand because if I do, I'm going to get an offer for$3 ,100.

31:33And this person is going to go, I'll give you all cash offer for$3 ,100. That's what you're going through right now, Susan. Everybody's coming in and lowballing you. Everybody's lowballing you because they want to leave meat on the bone for themselves, as you can understand. And I said, so I decided I'm not going to do that. And I told my wife, I'm not going to do it. She says, well, why don't you just take payments? And I'm like, oh my gosh, that's so genius. So this is what I did, Susan. I went back to Craigslist and I changed one thing. I said, F-150 will take payments. And within 30 minutes, I had to turn that ad off because I was swarmed and swarmed and swarmed with people.

32:11Where are you? I'll come and give you a thousand dollars down right now. So Susan, did I sell that truck for$10 ,000? She said, probably. I go, I sold it for$12 ,500 with a thousand dollars down$350 monthly payments for the next several months until that was paid off. And she's like, wow, wow, wow, wow, wow. And I go, that is terms. It's where I, the seller, give my buyer terms, okay? Down payment, interest rate, length of time that they're, and I become the bank. So what I'm asking you to do, Susan, is to become the bank. And the gentleman who bought my truck for me gave me$1 ,000 down. He then made monthly payments to me and I got the number I wanted.

32:53I made way more money because I was willing to be patient and play the bank. And the best part about it, Susan, I was able to help a family. And I was able to help this gentleman who bought my truck. Guess what he did? He was an auto mechanic starting a paint company. He fixed up all the truck issues. He did that himself. And he went and put that truck into operation and he made a lot more money on that truck. So some people might look at him and go, man, you overpaid for that truck, Jose. No, he did not. Because the value of something is never the purchase price. The value of something is always what you can do with it and what money you can generate from it.

33:28So Susan, if you're willing to give me terms that can allow me to go make money on this, I would be willing to come up to your$110 ,000. She's like, done. What do we got to do? I go, well, you tell me you're the bank. You're the bank of Susan. I'm coming in, applying to you. How do I get a loan? How can you sell or finance this house to me? She says, I want$20 ,000 down an 8 % interest. I'm like, okay, that's a problem. Everything's a teeter-totter. You want a high purchase price on one side, so that your one side of the teeter-totter is really high. Well, then if you want a high purchase price, then the other side of the teeter-totter needs to be really, really low.

34:05And that would be a low or no down payment or a low or no interest rate. So what do you want? Do you want a high purchase price or do you want a high down payment? She says, I want a high purchase price. I go, then let's do a no down payment and no interest because you want to sell the house for a really high price of 110 grand. She says, I can't do that. I'll give you no interest, but I will. I need a down payment. I go, okay, cool. Why don't we do this? You pay closing costs. Okay, so she paid closing costs on this house. I'll take over your tenants so you don't have to evict your family. I already knew what I was doing.

34:37I knew the problem with her tenants was actually that it was a family member renting from a family member. And the second I took over the property, all of those problems would go away. All of them would go away. Guess what? Those people are still renting the property. They're on time every single month. And it's because they were taking advantage of a family member. That's all it came down to. So me being in that situation was actually better. So I never had to renovate this property, which was cool. And she says, I want, okay, I want$10 ,000 down. I go, no problem. I'll give you$10 ,000 down, but here's how I want to do it.

35:07Every six months, I will give you five grand above the payments. She goes, okay. So what I did is here's kind of how it works. The tenant was paying$1 ,650 a month. Now they're about$2 ,000 a month, but they were at$1 ,650 a month. And the way I structured this deal, which I'll get into in a second, I was netting$1 ,000 every single month after my payment to Susan, which I'll tell you, I structured my payment to her. After my insurance, my taxes, my vacancy repairs, I was netting$1 ,000 every single month. So imagine I go, I'll give you a down payment, but I won't give it to you when we close escrow.

35:41I'll give it to you six months later. And then I'll give you another portion of it six months after that. So I accumulate$1 ,000 in cashflow for six months. Now I've got six grand in cashflow. I take that six grand, pull five grand out of it, hand five grand to her, and that pays down her down payment. Then six months later, I pay another$5 ,000 out of the cashflow from the property. So I got closing costs paid for by her, took over the tenant. So no renovation. I got 0 % seller finance and I didn't have to put any money upfront. She allowed me to pay my down payment out of the cashflow of the property.

36:13I've done this hundreds of times, hundreds of times. And if you're willing to meet the seller at their number, especially in a seller finance situation, sellers that are willing to sell their finance just really want to win on one thing. They want to sell at the maximum amount of money as possible. And so how did I structure the payment to her? My payment to her was$375 a month. Again, going back to the bunnies. The story of the bunnies is this. She says, we want to retire, Pace. we are sick of begging our family member to pay the rent. We just want to go and retire and travel around the country in an RV one month here, one month there, one month here, one month there.

36:52Obviously, obtained that information. I waited to utilize that as ammunition for a later portion of the conversation. And now is the time where I use that information as ammunition. And I said, so what kind of payment are you looking for? She says, I don't know. What would you pay? And I said, well, how much does it cost you guys to rent a typical RV spot when you guys are traveling around the country? She said$375. I go, okay, why don't we just set up the payment for$375 so you never have to worry about paying another RV spot rental ever again and you and your husband get to go around the country and just travel.

37:27She goes, okay, that sounds great. I didn't have to use this fancy spreadsheet. I didn't have to use some magic calculator. I just understood her motivation. I understood what she wanted to accomplish, and I helped find her bunnies and rehome those bunnies, if that makes sense. The F-150 story, I've told this a thousand times, and it breaks seller, it just breaks it down to the most simple version, a vehicle. I took payments on a vehicle. I let somebody pay over the value of that vehicle because they didn't want to use their credit or they didn't have credit. They used very little money down and I won.

38:00I won. I sold that truck for two and a half times its value because I was willing to give somebody terms. And so I go around the country and I'm buying houses a lot of times at 91 cents on the dollar, 98 cents on the dollar. I'm paying almost full retail all of the time. But guess what I'm getting? Getting a lot of no money down, low money down, very low interest rates. I'm taking over mortgage payments at 2%. I just got a deal in Hawaii last week, two acres on the ocean. Seller let me take over their 2 % interest rate. They have a guest house in the back that's already cash flowing, payments already being made by tenants in the back.

38:36Now I got to fill the main house and I'll do an Airbnb there. I'll probably never see that property. You think at this point, oh, you can go visit all these houses. No, I don't have time for that. We have so many deals that we're buying all over the country. And so creative finance changed my life. I didn't have the money to buy these assets. I have not had my credit pulled. I have not talked to a lender. I'll give you a really good example of this. I decided I want to buy a house in Montana, on a lake, Kalispell, Whitefish area up in Montana. So one of my students, newer students, calls me up and he goes, hey, I'm a real estate agent up here.

39:08I'll help you. I keep hearing you say you want to have a house that you can fish on. You want water flowing through it, or you want to be on a lake. I can help you. I go, yeah, but I'm not going to buy anything that's cash. So you got to go find me creative. He goes, oh, there's no creative finance deals up here. It's too ritzy. It's too nice. I go, okay. There are literally hundreds of deals everywhere. And so after a couple of Zooms with him and coaching him along and showing him how to go find them. Here's what he said. He goes, I will go find these, but I want you to also do me a favor and go get pre-qualified for a loan.

39:39Okay, cool. So I call his mortgage officer up there in Kalispell. That was about six weeks ago. I have still not got pre-approved because I'm a business owner. I claim nothing on my taxes, right? So she's having a hell of a time getting me pre-approved, even though our companies generate millions of dollars. He goes in three days, finds me 12 properties on seller finance. And he's just like, I'm blown away. I'm blown away that there's that many deals out here for seller finance or taking over mortgages. I just wasn't paying attention. I go, no, you just, it's not that you weren't paying attention, that you didn't have the information in your head for your head to pay attention for you.

40:14It's called the frequency effect, or I call it the Tacoma effect. Other people use, there's some scientific name for it, but when I bought my first Toyota Tacoma, I thought I was the coolest kid. I was like, I got a Toyota Tacoma. Nobody else has a Toyota Tacoma. And then all of a sudden I'm driving around and I'm like, holy crap, everybody has a Toyota Tacoma. It's the same thing with creative finance. Once you know it's there, you can't unsee it. It's there and it starts popping up. And what you focus on expands. And then all of a sudden there's deals everywhere. And we're at a point now where 85 % of the deals we do are all creative finance.

40:48Only 15 % of them do we use cash. 85 % of our deals, multifamily, RV parks, land, single family homes, storefronts. We're looking at a strip mall right now. We're even buying businesses with creative finance right now. We got a CPA firm that we're negotiating right now. No money down. They will give us a hundred grand the day we close escrow out of their pocket to take over their company. Understanding people's bunnies is what this is all about. Why would a CPA firm sell to me with no money down and give me a hundred grand to take over their business on day one. You know why? It's because the CPA has 15 people working underneath him.

41:26They have a great business, but now the CPA wants to retire, but he never put anybody in charge. He never built a real business that didn't rely on him. So he's saying, I'm going to retire. And now this business I put 40 years of my life into is going to die because I didn't know how to operationally build a succinct and like a manufacturing line where I could step away and not have to be in this business and I could actually retire. I need to basically pay somebody to take over my business so I can have a check come in every single month through my retirement. Otherwise, this business will implode.

41:59So we come along, take over a CPA firm. We put a COO in place, a CFO, and we start running this business. He gives us a hundred grand up front to go hire people. And then all he wants is he says, pay me 10 grand a month until I die. That's creative finance. Buying businesses, buying cars, buying houses, apartment complexes. I will never use cash ever again. The only time we use cash is if we're wholesaling or we're fixing and flipping, but to acquire and put things in my portfolio, 100 % of it has always been creative finance, subject to seller finance or the Morby method. Let's take a quick break and hear from today's sponsors.

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45:12To begin getting smarter about investing, just visit theinvestorspodcast.com slash get started with stocks. That's theinvestorspodcast.com slash get started with stocks. And for a limited time, you can use code STOCKS15 for a 15 % discount at checkout. All right, back to the show. So many good stories there, Pace. I really appreciate your storytelling abilities. It's incredible. I want to get into the book though. Talk to me a little bit about, it's called Wealth Without Cash. It comes out in May. I want to hear about what the inspiration was for it, what the writing process was like. My co-host, Robert, who wrote a book about house hacking.

45:52And it sounded like a pretty grueling process talking to him. Just talk a little bit about the inspiration for it, why you wrote it, who it's designed for, and just what the process was like for you. I did not like writing a book. And so I ended up having to hire a ghostwriter. I'm great at speaking. I'm great at telling stories. I'm great up in front of a whiteboard, on camera, on stage. I'm great at those things. But sitting down and keeping me still is an impossibility. So I hired a ghostwriter to go through and have conversations with me and me tell stories. And he took those and put those into the book.

46:21I just feel like a book just can't do 100 % justice of what I want to talk about. So what I did also, and I love video so much, I created a video companion guide that comes with the book. So every single chapter gets three hours of whiteboard videos and stories about deals and why this and terminology. It is a masterclass of creative finance. The book is basically the appetizer, the video companion guide is just the meat and potatoes. And it is so cool to have gone through that process. It took a year and a half. I still have two more videos that we're still putting together, Mad Dash for the release on May 2nd.

46:57And it was grueling. It was hard. On July 4th last year, when the book was completed, I couldn't even read the book because I was so excited. I was like, okay, I'm like, oh my gosh, I want to do more. I want to add more information into this. And BiggerPockets, an amazing collaborator, reminded me to simplify, simplify, simplify. So it's only 200 pages. It's really an appetizer into creative finance. And then the video companion guide really gives you a ton of power. And that video companion guide is free when you buy the book, which is really, really cool. That's amazing. I did not know that you did the video companion guide too.

47:31So I will put links in the show notes for that. Talk to us about who the book's designed for. Or is it for the beginning investor, for someone a little more advanced? What would you say about that? It's definitely not for the advanced. I'd say that there's a lot of things in the video companion guide that are way, way, way advanced, but the book itself is just an appetizer. It's just there to let you know what these terms are, that these things exist, and then for you to dig a little bit deeper. Otherwise, this book, I mean, Creative Finance is so much more diverse than Burr. It's so much more diverse than cash deals.

48:04To put it into perspective, I look at like, let's say as a contractor, I'd pull up to a job site and have a truck full of tools and a trailer full of tools and everything you can imagine, jackhammers to drills and saws and everything you can imagine. A cash offer to me is a hammer. That's all it is is a hammer. Creative finance is all of the other tools. It is so diverse. It is so deep and so wide that you can go to an appointment and use such a variety of tools that a 200 page book is never going to be able to tell you all of that. So the book is really for beginners to let them know that it exists and that these things are there.

48:40And then for them to go out and start doing the research and go onto some of the BiggerPockets forums and go onto the BiggerPockets YouTube channel and listen to some of these videos that I've done and give way more in-depth stories. The video companion guide is then basically 30 hours of just unbelievable... I'll give you a good example. When I did the video companion guide, I was like, I want a live audience. So I have a studio. I brought in 15 people into the live audience. In the day that I press record on the first video for the video companion guide, I get a text message from one of my sellers.

49:12Homeowner lives in Boston, has a house in Boston. And he says, Pace, we've been negotiating for the last couple of weeks. I'm in Phoenix for a convention. I think your offices are here in Phoenix. Any chance we could meet up and finalize the deal today? I go, yeah, but I'm recording in my studio with an audience. Do you mind just stopping by here? And he goes, no problem. So literally the first video you will watch is a seller walking into my studio and going, all right, how are we going to do this deal? And for an hour and a half, I broke down subject two for him and I gave him an offer, shook hands.

49:46I bought his house right there on live camera only to be seen in the video companion guide. So an hour and a half appointment face-to-face with the seller talking real live. Here's the address. Here's the numbers. Here's why I would buy it. That one video alone is a masterpiece. The book could never do that. And so the book is an appetizer that hopefully leads you into the main course meal, which is the video companion guide. That's really awesome. I'm eager to look into all of that. I wanted to talk a little bit about your why. Early in the book, you talk about the seven layers of why. Can you explain to us that idea?

50:20And then I also wanted to hear what your Pace Morby's why is. Yeah. It's interesting. Somebody took me through this practice. Actually, it was Dean Graziosi when I became friends with Dean. And Dean says, what do you want to do? And I tell him, I want to become a billionaire. And he goes, why? I go, well, because I can provide for my family. Then I paused and I was like, so I can provide for my family. He goes, okay, but why? And oh my gosh, what a practice of depth of really getting into this. And then you really realize like, wow, okay, I actually don't know my why. So when you go through the seven layers of why, it really forces you to get deep and deep and deep.

50:57And you have to stop. If you have not gotten to your seventh layer, then you truly don't understand your why. Okay. Now for me, my why is I was put on this earth by a creator, whether it's God or the universe or whatever. I was put on this earth to help my other mankind. And I would be wasting my life if I was not obtaining resources and experiences and then turning around and giving those back. My why is that this is my purpose. I was put on this earth as an instrument, as a tool, as whatever to help other people go and find their why, find their purpose and find financial freedom. And so the reason I do all the things I do is because I'm supposed to, I'm required to, it's my responsibility, it is my duty.

51:37And I'm trying to live up to my creator's requirements of me. I love it. I wanted to get into a little bit more of just, there's so much to creative financing, but, and you've kind of touched on some of this as you've told some of your stories, but for our listeners that have no idea about subject to and seller financing, just at a high level, what are the differences between those two? The two differences between a subject to and seller finance means, subject to means there's an existing debt on the asset. So the asset is a house, could be a car, could be a business. So let's take a business, for example.

52:14If I go to buy a business and I'm talking to a company and they go, buy us for$2 million. And I go, great. What do your books look like? And they go, well, we have an SBA loan for$2 million. Okay. I go, great. So how about I just take over your SBA loan and I just make payments on the SBA loan and you walk away? That's called subject two. I literally took over payments on their debts and I took over the asset by transferring the ownership into my name. That's subject to. Same thing with a car. I buy cars subject to. I go to a car owner and I go, looks like you're having a hard time selling that on Craigslist.

52:46It's been on Craigslist for a hundred days. Would you let me just take over your payments? And I can just take over car payments. Same thing with a house. Hey, looks like your house has been on the market for 120 days. Can I just take over your payments? Subject to is taking over an existing debt that is already there. And the benefit of that is that you don't have to go through an application. You don't have to talk to a bank. Nobody cares about your credit. Nobody cares about your job history. Nobody cares about your tax returns. None of that. Thousands of deals we've done. Nobody's ever asked for any of those things.

53:16That's subject to. Seller finance means, let's say I go to somebody who has a car in Craigslist and I call them up and I go, can I take over payments? They go, oh, I don't have any payments. I own this free and clear. I go, okay, well then seller finance it to me. Okay. Seller finance means that the thing that I'm buying is paid off and the seller is going to finance me. This is why we call it seller financing. The seller is financing me and they are becoming the bank. So I have to then work out an agreement with that seller like I did with Susan. I go, okay, what down payment do you want? And the four parts to that are purchase price, down payment, interest rate, and length of time they're willing to take payments.

53:55And so that's seller financing, finding things that are paid off free and clear. And by the way, a lot of people don't realize this, but 40 % of all the homes in the United States are paid off free and clear, 40%. So you go look at 10 houses, it's like 38.9%, it's basically 40%. A lot of people don't realize that. So when you're calling sellers and they just want too much money, that's typically a seller finance situation. Now, the way I determine these very simply is I say, subject to typically has pain, There's some sort of debt. There's pain there. There's pain that you have to solve. They're going through foreclosure.

54:29They can't afford the payment. Something is going on, okay? Seller finance is typically gain. They are looking for gain. All they want to do is win. They want a high purchase price. And so Subject 2 and Seller Finance are different, not only in the sense that Subject 2 has a debt attached to it, and Seller Finance is paid off free and clear, but it's also different in the sense that the people you are buying the house from on subject to are going through a really hard time, the people that you're buying on seller finance are typically the opposite. They're very well off. They don't need the money.

55:00They just want to make sure that they sell at the highest possible price. I've got a 43 unit in San Angelo, Texas, a multifamily I bought last year on seller finance. Seller Mario is like, I'll seller finance you, but I want 3 million bucks. I go, okay, you would probably get a cash offer for this for like 2.7, maybe 2.6. I'll pay you 3 million. and the seller, Barna was like, really? You'll pay me 3 million? I go, yeah, but on terms, I'll give you no down payment, 3 % interest. And I want 50 year term. Mario says, okay, great. He wins. He got$3 million on his books that he'll collect payments for, for the next 50 years.

55:38And some people go, why would a seller do that? Typically the people that are asking why would a seller do that are not well off enough to truly understand why a seller would do that. Sellers are well off in seller financing. If you go on my YouTube channel, I have an interview with Mario, the guy that sold me the 43 unit with 50 year note, no down payment, 3 % interest. And he gives us 19 reasons why he sold to me on seller finance. 19 reasons. Tax benefits. He avoids real estate agents. No surveys had to be done. He didn't have to do any repairs. He got way more money. He added interest to the way more money he got.

56:15So not only did he get$300 ,000 more, he also will get interest on top of that, that he'll end up making$5 million,$6 million on that total asset over the length of 50 years by becoming the bank. He doesn't have to deal with tenants anymore, right? Now the seller finance, the agreement that him and I put together called a note, he has a note that is secured against real estate. It's the safest investment. I mean, what's he going to do with the 3 million bucks if I gave it to him in cash? He's going to go do what? He wants to retire. He doesn't want to go invest in something he has to manage. So becoming the bank alleviates the need for him to manage a property anymore.

56:50You don't call the bank when the toilets go bad. You don't call the bank when the roof goes bad. So I'm upgrading these landlords into the lender and I'm making their life really easy. So seller finance, free and clear, subject to, has a debt attached to it. Let's take a quick break and hear from today's sponsors. Hey, it's Sean O'Malley, just popping in with a quick message. If you like this podcast, Well, I've got great news for you. We've got a handful of other shows for you to explore, from learning about Bitcoin to embracing a richer, wiser, happier lifestyle. Just go into your podcast app and type in We Study Billionaires to find our collection of shows.

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1:00:30All right, back to the show. Do you view your role primarily in trying to do these deals as one as an educator? Is that one of your biggest things that you're trying to do? It seems like in many cases, that's your primary role. It is the primary role. It's one of the reasons if you guys look in my backdrop behind me, you'll see that I have a gentleman over my shoulder right here. His name is Big Boy. He's from a rap group called Outkast. And cool thing is I own real estate with Big Boy now, which is nice. But more importantly, the reason why I have him over my shoulder is to remind me that my job is to be a storyteller.

1:01:07I tell stories to sellers. I tell stories to real estate agents. I tell stories to private money lenders all day long because telling stories gets people to understand the concept of what I'm doing and what I'm trying to accomplish. So yeah, I mean, sellers don't know what subject to in seller finance is. That's my job to explain it to them in a third grade language. So instead of me being so high level, telling a story about an F-150 and taking over payments, I could tell you one of the best stories I ever, I could ever tell you. This is about a two minute story. Best story I could ever tell you.

1:01:36I have a camera guy that does my YouTube videos, gets hired, and he comes into my studio day one, and he says, man, I'm working for the sub two guy. I'm so excited. I'm working for the sub two guy. And one of my other camera guys says, dude, I've been here for a year, and you come in here, and you think you know what sub two is? You don't know what sub two is. And the new camera guy's name's Jose. He says, yeah, but I don't need to know. I go, dude, you need to know. If you're going to be my camera guy, you need to know what subject two is. And he goes, okay, tell me what subject two is. So I look at him and I go, okay, you're a camera guy.

1:02:11I'm going to explain this to you in terms that you'll understand. He says, okay. I go, what's a camera and a light that you would really want as a camera guy? He goes, oh, I want the Sony a7S III. I want the G Master lens. I want the aperture D120 light. That's my perfect combo. Okay, cool. Watch me. So I have him come over to my computer. I go on Craigslist and I go and I type in these terms and I find somebody has a similar combo of camera equipment that they're selling. And I make three phone calls. The first guy says no. Second guy says no. But the third guy says yes to this. I go, hey, my name is Pace Morby.

1:02:47I am a wedding videographer and I'm hoping to build my business, but I need some help. I see you're selling a bundle. I want to buy that bundle. I won't even negotiate on price, but I need you to let me make payments on that bundle of camera equipment. And the guy goes, you're not going to negotiate on my price? I go, nope. I imagine everybody else is trying to lowball you 500 bucks, 700 bucks, whatever it is. He goes, okay, great. Can you send me some of your stuff so I can at least know you know what to do with the equipment? I go, no problem. I go, here's my YouTube channel. So I send him my YouTube channel.

1:03:20Guy goes, okay, when do you want to come pick it up? Guy sells me a$3 ,800 camera, a few thousand dollars worth of lenses, a thousand dollar lighting kit, all of this with a hundred dollars down. And he said every time, and I set it up where I go$300 monthly payments as I take that equipment and go make money with it doing wedding photography. I'm not a wedding videographer, but that was the story I told the seller to understand why I needed the stuff on terms. So I hang up the phone. Jose looks at me and he goes, you just bought my dream equipment on payments. I go, yep, that's called subject to or seller finance.

1:03:55And that's what I do with houses. He's like, wait, you can do that with houses? I go, yeah, you can do it with anything. You want a boat? I just bought an RV with it. I just, you know, I bought RV parks, mobile home parks. What do you want? What do you want? You name something and I can buy it with terms. And Jose goes and gets the camera. He gets the lighting, gets the lenses, does all that stuff. And he goes and shoots side projects and he makes that$300 monthly payment to that guy that now is no longer the seller. He's now the bank. And Jose makes a$300 monthly payment to him. And if I tried to explain that to Jose in housing terms, it would have taken an hour.

1:04:30But because I explained it to him in camera terms, he immediately got it. And so my job when I'm talking to sellers or agents is to build rapport, get information about who they are. If I have a seller that is a third grade teacher, I tie in stories about a crayon. Okay, well, here's what we could do with this. I tell a different story. I try to tie it into their life. And I don't go into them saying, subject to, seller finance, novation agreements. I don't talk about notes and deeds of trust and wraparound mortgages. They don't know what these terms are. So I have to tell stories that meet them on their level.

1:05:03It's great. The book goes into all of that. I highly encourage people to check it out when it comes out. Pace, how can people find out about you, reach out to you? What's the best way for them to do that? You've got a lot of different platforms that you're on. I'd say go to YouTube where you get about 4 million views a month on our YouTube channel. So people seem to like it and DM me on Instagram. I'm the one that actually DMs and does all this stuff. So thank you so much. I appreciate it. Thank you. I really enjoy the book and best of luck with it. Thank you so much. Okay, folks, that's all I had for today's episode.

1:05:35I hope you enjoyed the show and I'll see you back here real soon. Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by the Investors Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.