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Oct. 28, 2022

Ep 250: Proper Positioning With Creative Finance With Eddie Speed

Ep 250: Proper Positioning With Creative Finance With Eddie Speed


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0:31 Hey, everybody, if you're watching this right now you are in for a real treat. I'll tell you after almost four years of doing real estate, if I did have secrets, this this show is going to cover those. Mr. Eddie speed is on with us today. We appreciate you taking time out of your amazingly busy day to hang out with this man and share. I call it the land investing gospel. I don't know what you call it, but this should be a really good one man. 1:05 Yeah. Now it's, we've entered a very interesting time in the market. Right. And, you know, if they say that the most important rule in anything in real estate is timing. So what you do at certain times has a gigantic to do with your success. 1:30 Amen, amen to that. 1:32 100% 100% For sure. So I'm not going to cover, we're gonna do like this, this man has done like 50,000 transactions in real estate. Like, it doesn't even make sense that it makes sense. So we're gonna go straight into it, we're gonna jump straight into it. So with the with the market, the way it's going the way it's going. Why is creative finance the go to strategy in this coming market? 2:01 Well, conventional lending and conventional real estate, our twin sisters, right. And words, when you have traditional real estate, and they're getting a traditional mortgage, there's not a lot of room for inefficiency, or there's not a lot of room for, you know, something else to be needed for the formula. Go look at real estate over the last couple of years. And you had this own fire market, right? FOMO fear of missing out right. And the truth be told, the number one variable that drove all this was that you had giveaway interest. And when you have giveaway interest, people can go overpay, because it really didn't cost them that much over time. Right? average interest rate on a residential mortgage for the past 50 years is 7.7%. Yeah. So understand, I started in this business in 1980, when, when when the famous thing was interest rates reached 20%. Now they weren't 20% for a year and a half, but they reached 20%. And the average rate was probably 16% interest or something like that. And so what happened in that era, was that conventional lending wasn't a thing. You couldn't make a payment work. So real estate ground to a halt. So how could somebody sell their property, because you can't ever just cut the market off. So what they did was more than they had ever done in modern times. They used seller financing, and the seller could carry an interest rate at lower than the market rate, seller financing filled a void that conventional lending couldn't. There's two voids generally in conventional lending. There's credit. And there's, there's availability of credit. And there's cost of credit to really two variables, right. So in that market, it was cost of credit. And when the virus happened, for conventional lending, the availability of credit was cut down about a third, which is continuing to get worse. Right, meaning that about 40% of the people today can't get a mortgage that could qualify for a mortgage before the virus started, and that has nothing to do with the cost of credit. That's just the availability of credit. That's the underwriting standards. You mean 4:54 availability of credit like the like the lenders are tightening up their money, they're no less like? 4:59 Absolutely, and and the Mortgage Bankers Association has an index called the mortgage credit availability index. Wow. Okay. And before the virus, it was at 185. Yesterday, Housing Wire sent out a message and said is the lowest the index is the lowest it's been in nine years. It's at 105. So, when you hear a story from a realtor, or from a home builder, or from a real estate investor who was selling a property, they say, Yeah, my God got to the closing. And the loan, the deal fell apart because of financing. I've been hearing it's it's the new word, right? Well, it falls apart for two reasons. The mortgage industry is in terrific, terrific turmoil. Terrific turmoil, like theory, and like the ugly stories have not really even come out yet. Behind the scenes, it is not good. And what happens when you have a double an interest rate? What happens to the affordability of the payment? So you're saying anyone does every real estate investor right now screen no matter what asset class they're and no matter if they're dealing in houses, land, storage multifamily, like what asset class has not been affected by rates? All all. And so the deal is, is, this is the opportunity with information, or clarity of what you do. This is the opportunity land, you think I'm sleeping good at night or bad at night. This is my Briar Patch, man. Huh. And when you said I've done 50,000 deals, let me make sure you understand something. I've set my mark in this industry by showing real estate investors how to utilize creative financing. And then they ended up selling me deals. So I started out with education, I started out with teaching them how to do it correctly. So that they've created paper, in this case, if you're buying from someone and they're creating paper, I guarantee you, you're gonna have an opportunity to buy their note at a discount. You might want to come see me? Wow. Understand when I've started all these things, the reason I you know, 50,000 notes is a crazy number, right? But listen, I developed a note system for home investors, I developed a note system for a lot of real estate investors who carried seller financing over and over and over and over, and then they would sell their lungs to me. So when you say I'd bid 50,000 notes is the truth. But the deal is, is I had a system to create notes, so people could follow that track. And that's when they ended up doing business with me. So now all of a sudden, we're in an era where I know what the problem every real estate investor has. high interest rates have changed how they exit their their deal. Right? So they need to change how they acquire the property so they can change how they dispose of the property. Does that make sense? Can you give us an example of that, okay, here's a perfect example, if you're gonna go buy a property and you're gonna, you're gonna be paying 8% interest, you're gonna use it as a rental, or you're gonna buy dirt, you're on whatever it is, right? If I could change your effective interest rate to 2% then you could offer the wrap note and resell it. And you could make a lot of money off financing because you have a different strategy and everybody else paying cash. Does that make sense? Yep. That's how people thrive in these kinds of markets. And the truth of matter is, most people aren't going to do it. Right. Most of the people that are in the market are going to sit gonna put their head in the sand like an ostrich, and they're not going to do anything about it. And every real estate mastermind I go to that the predictions are pretty clear by next by February of next year, half the people will be gone. I don't think that's funny. I'm not trying to make I'm not making light of that. I'm just saying that, that 9:39 adapt to overcome. 9:40 This is what being an entrepreneur is. 9:45 Yeah, you have to you have to be ready to pivot. So that's why I'm so interested in this conversation right here. I keep hearing your your, you know, you're probably like maybe the third and fourth person that said that, like you gotta like start thinking about creative offers create that's gonna be the way of the future now to pivot into this new store that we're at added into. So can you tell us a little bit about how you set up your offers or you know what you present to a seller when you're talking to them boasts somebody that's maybe they're they're fairly priced. Maybe they're not under market. I heard you talking to Ari tipster and you said you can almost pretty much just off make a full price offers, you're not having to make these low wholesale offers, you can negotiate some stuff on paper to make the terms little bit more attractive to the seller. 10:23 Let me give you a number. Okay. Write this down the red pencil, audience write this down. Payment is 1000 hours a month, term is 30 years that payment and that term are on two loans. One loan is 166,800 bucks. And one loan is 360,000 bucks, two loans, both identical payments, both identical terms. 166 166 800 is on a 6% note and 360,000 is on the 0% note this price matter? 11:11 No. Because yet, you negotiating 0% interest. 11:16 Yeah. So now now what we're doing, and I'm going to tell you a little secret, I want your audience to really, really get this, this is a little deep. Okay, it's the most important thing I'm going to say to you all day. Other than how to get some more information. People go to a car dealership. And they have access to so much information today, they pretty much know what the car dealership has in the car. There's so many websites, there's so many hacks, there's so many ways to do it, that you can figure out how much the car dealership is making. And you can beat the guy down on price. People go in the finance department, and they'd have no idea how they make money. And that's why every big car dealership in America, the most profitable entity in that car dealership is not the sales department. It's the finance department. And so understand that this market turning is turned into an opportunity because when you learn how to make a creative offer. You can erase price. And that throws everybody else off. And I will tell you this. There, there there's you nothing's 100% nothing that anybody can ever say in life. It's never true. 100% Well, I wouldn't say that. But most things in life are never 100%. But I'm going to tell you that there is a good percentage of people that sell property, that if you give them the price they want, they will give the farm away and how they give it to you. And I'm pretty good at that. I've done it more than anybody in the country. I've done it longer. I've done more transactions. I'm not some young, some guru that started doing this in the last month or two or a year or two. You know, when they were in junior high school, I was teaching home investors how to do this. You got it. I've been doing it a while. And so, so So sometimes gray hair matters. You know, like young people like oh, people, they're this or that? You know why? Why are most presidents old guys. Right? They've got a lifetime of learning. Now, some people, some people don't have 40 years experience, they just have one year's worth of experience 40 times. Oh, some people have 40 years experience. Right. So the point is, I know because I've done so many of these transactions, my mind in this area is very trained, right? I'm dumb about most things in law, don't get don't get me say that I think I'm smart. I am very seasoned. And on this subject, my mind is a little bit like a Rubik's cube. So I can adjust this or just term or just payment and do whatever. And I can do all that kind of stuff. The problem is you can't carry it around in your pocket. Right. So what I had to do was take after structuring 1000s of deals, me and my team had to break it down into structures that are most likely accepted and show you how to structure that when I've already baked in all the good stuff. Instead of you're having to know all this stuff. And eventually guys, I could go take you for a long enough period of time and I can tell there's nothing I know you can't learn. But if I could just give you a lot of experience So, uh, some real time tested stuff. And then I start showing you how to interview a customer and get the customer into a pattern. We call it decision tree path. Right, you're taking a customer down a path to determine if, if that deal is a candidate. Right? And so, so there's an interview process, they don't know where you're going. Right? You're asking them questions about their property, and they're answering questions. And then you're, what you're doing is saying, oh, call their candidate carry a second lien there or can carry a larger second lien there can carry financing on all of the deal. And another thing that people always believe is that seller financing always have to be a first mortgage, and they always have to own it free and clear. That's a myth. Right? There's, you will do if you do creative financing correctly, you will do a second more often than you do a first. 16:06 So you may have to bring other financing to the deal. Right. But the point is, is why you do it, is because you're essentially borrowing money at way below the market. And that gives you an inordinate advantage. 16:29 Can you give us an example of that, because it kind of went over my head. So you said if somebody has the property is not free and clear, you're gonna take a second position as the buyer, and then you're gonna keep the original financing in place? 16:40 Well, you might, you might keep the original financing in place, or you might go find new money. 16:47 To clear clear out both. 16:50 So then, here's an example. Let's just say you have $100,000 piece property, just rise, nice round number 100,000 bucks, everybody else is kind of stuck at 85,000 or 88,000. That's all they'll pay trying to lowball you, your guy, your guy says, No, I won't sell it to you unless I can get 100. But he has a big mortgage that has to be paid off, or he's got some big and mediate Kashmir Nords, he can't finance a whole 100 grand. Okay. And you're like, I can get you money today to solve whatever problem it is. And I can get you a price. But in order to do that, you're going to have to carry a second mortgage for 20,000 bucks. Would you consider that? Yes. Okay, you know how I'm gonna pay you back. I'm gonna pay you back in 15 years. I'm paying you more than anybody else. I'm trying to make the deal work for both sides. But in order for me to do that, because I'm having to pay a lot more interest in the bank than I used to yesterday, then you're gonna have to work with me, the banks have caused your property to go down in value. I didn't cause it. But guess what? You think all the furniture companies that carry financing? You think they're losing money? No, no, they're not. You're not losing money either. 18:29 And that's super strong. That is super strong. 18:33 Yeah. So I want to hit on something as well that you've meant you kind of brushed over, but I'm gonna I'm gonna dig in on this one. But what's the advantage of buying creatively? When you sell when you're planning to sell it again? 18:48 Okay, so you know, that deal that you structured? You know, that deal? You structured? Yeah, you're going to, you're going to, you're going to close this at a title company, right? Yeah. And you're going to have the doc that we're gonna have, you're gonna have your lawyer draw these documents. You don't go go get the seller to have his lawyer draw the documents. You want your lawyer to draw the documents, because you want them draw on to your advantage. Now, you're not willing to cheat somebody you act, you're going to pay them back. But there's just all kinds of little clauses and things you can put in legal documents that are not standard at the bank or mortgage company, that are way to your advantage if you owe the money. So you're going to bake into that deal, what I call a permanent subordination clause. It's going to say it's a second mortgage, and it's gonna say it's a second mortgage, against any mortgage that somebody else goes and gets on it. So now you're given the guy a deal, you're gonna flip it right, you're giving him a deal, that a certain percentage of the cost of property is just free money, almost. So so if you're gonna flip it, then you're in great shape. Now I can tell you from experience that I don't like owner financing junk property, period, I'm out, I got too much experience, I don't give a crap what they say on the internet. I know how to pay, I bought 2000 portfolios of land notes. I've looked at 6000. Right? experience. So I don't like buying property where I think somebody's gonna pay me back unless it's desirable property, house land, apartments, whatever. I'm not, I'm not a I'm not a slum note guy, of any of any asset class, I'm just telling you, it won't pay. And I know there's people that disagree with me, but they don't have 50,000 in front of their name. Right, I've seen so much of this, I bet. I bet I've drawn very distinct patterns. Good notes are on good properties. Right. So if you want to flip a deal, you can flip it with financing in place, that is not a problem, that is a great advantage to the buyer. And they will pay you more money because you gave them free financing, right. But what it also allows you to do is to go buy a better grade of property where the seller may carry a first mortgage, and then you get to do a rap note. So you get to get you get to go into a better asset class. And that's the lungs that will pay you perfectly for decades. And now all of a sudden, you built your own bank. And that's wealth. There's nothing wrong with flip, and it's just a job. And it's okay, I still I flipped some deals, it didn't fit our criteria. And I know you guys flip. I mean, I got it. But the truth of the matter is, if you can think in terms of using buying terms and selling them terms and building a portfolio of your own bank of your own notes. You wake up in five years, and where are you? You know, there's an old saying, and I think it's true. If you'll do what most people won't do for five years, you can do what you want for the rest of your life. And so, you know, we've we've made certain things sound really sexy. And flipping is, obviously overall flipping all kinds of real estate is really sexy. It's not well, so you can flip some deals and keep doing it. I'm not telling you not to flip some deals. But I'm saying to you what deal would you love to do? That financing got in your way of doing it? 23:05 I got a couple of them on my radar right now. Yeah. 23:08 And the other thing is, is if you can figure out how to use the secret bank. 23:17 Who who is the secret bank? Because you're 23:19 alluding to never ask 23:23 Who or what is the secret bank? 23:28 Fear the secret bank did $27.5 billion in business, almost $28 billion in business. I'm gonna have fun they had they had the most all of the transactions were not underwritten. There was no qualifications. There wasn't any there wasn't like there was some you know, there wasn't a big loan committee. They loan money at below market rates. Yo, y'all have y'all heard about this bank? 24:04 guessing it's the sellers 24:07 in the bank of seller financing. 24:10 Financing. Wow, how many billions last year? 24:13 About 28,000,000,027 change? 24:16 Oh my goodness. So you see 24:19 somebody is utilizing this that 90,000 transactions so that's what I teach people how to do is go find the secret bank. 24:39 So it's like, it's like it seems like secretive and like, oh, the secret bank. It's individual sellers. So and this is I know, you know this one, but how many how many? How much property is owned free and clear in the United States? 24:55 About a third? A third so 30% Yeah, I mean it depending on what What asset class you're chasing, you know, like landlord properties, if you're buying houses, landlords, small time, landlords have an inordinate amount of free and clear houses, but half the houses they own land, people that inherited land, have, you know, a lot of free and clear property, right. So there's certain types of property, where you just know this will work better, because the odds are, they don't have any debt against it. 25:32 And so, it's so powerful, because I knew I didn't realize it was that big of a number of 27 billion, that's a, that's a huge number. And absorbing and finding that market market share, and possibly contacting those people, it's just saying, it's crazy. And once 25:48 again, it's a, you know, so I've coached a lot of people to do this. And, here, here's what I learned, right? For this process to work, it's got to be a simple process for you to follow. So what I did was, I basically went backwards and looked at, you know, we blueprinted out the process, and we blueprinted out the structures and how you do them. And from there, it becomes a lot easier. Because it's not, so it's not so out there, right, it's becomes pretty easy to go follow a template, like there's certain like with a second lane, like I described, you can about figure that I'm gonna write a gigantic deferral, before you owe me any money, they're just financing a little piece of the deal. So you're not gonna start paying them immediately. You know, and so there's three skid, there's three pet paths, small, second, larger second, seller carries all the financing. And once you can categorize the customer, as to which program they're eligible for, then I can show you, you know, things of go structured this way, go do this, go there. So that's what I do in training is I show people the templates, so they don't have to go think of everything, because it's not fair. I mean, it's, this is what I've done. For a long time, and I've structured so many deals, I now know what the odds are, let me let me get you on a hack, I'll tell you a hack. Okay. Most people that are buying on terms and trying to buy with an extreme advantage, because they're getting the seller to carry financing at below market rates. Most people think the only way to do it is 0% interest. Statistically, less than 20% of the people will carry financing 0% for a long period of time. Right. So, so getting drunk on carrying it a 0% interest is not the that's not the magic, because they're they're losing all these deals that they don't even know about. But let me tell you what sellers will do over and over and over consistently, they will let you structure the financing, where it looks like they're earning more interest than they're actually earning. Okay, all of that, that's a step rate. So you start out with 100,000 bucks, and you're paying one and a half percent interest. And after five years, it goes to two and a half percent. And after another five years, it goes to 4%. And after another five years, it goes to 5%. But here's the math. The effective interest rate on that structure is very, very low. It's it's in the low 2%. Because you're paying all of the high interest on the backside of the loan when you paid off most of the principal. Let's see they don't know that. There are bank. Well, let me ask you a question. average guy walking down the street wants to negotiate interest. I just pull out my financial calculator. I was looking to see if I can put my hand on it. I just bought my financial calculator. Say no, no, you figure it, you calculate it. Exactly. They can't do it. And when you then make it an adjustable rate, you just eliminated 99% of the people that can do it. I'll bet you Daniel, you can't do it. You're You're a dang sharp guy with a financial calculator sitting on your desk. But if I told you to give me the true effective rate, on the way I structured it, you'd be like, Oh crap. How do I do that? Because that because the bigger payment, and the bigger interest is darts way down the road 10 years from now. But what I've learned is this. Interest rates are Country Club bragging rights. They want to call their sister and say we seller financing, we're getting 5% interest. 30:37 Like bragging rights. 30:40 And so listen to you, how do you figure any of anything out out in life, you're either taught it, or you just done it so much, you finally figured out the pattern to it. I thought I'd done it so much, I figured out the pattern. I would rather just teach you. words, if I can give you the experiment, and give you the results that we figured out. That's way more efficient than you're going to try on it. Yeah. 100%. And I've learned that there's just certain things that sellers will do. It's, I describe it like, Y'all know any junior high school teachers want to bring in some ice a junior high school teacher, right? Yeah. So pick a school teacher that teaches seventh grade English. Okay. There's, there's two very distinct differences. That school teacher that adult does not think, like a seventh grader. Agree. But that, but that teacher has to know how a seventh grader thinks. I know how somebody seller financing thinks in I've reduced it to a process a system that I can help people do it's not it or it's, it's just, it's just thought patterns that they're most likely to do this. If you structure it this way. They most likely will do this no words. And there's, there's enough patterns to it, that all of a sudden you I've cracked the code on that pattern. I describe it like you remember the show Candid Camera? 32:25 Yeah, yeah. 32:28 So they know, little kids are gonna stick their hand in the cookie jar and open their hand, get that cookie, and then they're not gonna we'll pull their hand out, right? They know that. But that little kid doesn't know that do they? So put, they put the hidden camera over and over and over and the kid sticks his hand that kit cookie jar and then he can't get it out? Ha ha. Somebody just figured out a human pattern. I figured out some human patterns about people willing to carry on or financing. 33:02 Can we do a demonstration just like, because here's what we get all the time? Is No, I just want my cash. I just want cash. You know, where do you go with somebody like that? Well, you can show my PayPal, you can make more money. 33:15 Let me say this, okay? This system works. When you ask the right interview questions. This system works when you can overcome their objections. This system works when you can then structure a deal at structure in a way that works. So when somebody says I just want my cash, of course they do. Duh. But the answer is, is if, if what is more important to you getting the most amount of money for your property, or taking a little less price for your property, maybe sometimes a lot less price. And, and and getting it all in cash. I can give you what you want, which is price. But you're gonna have to give me something of what I need to make it work. You see? Now you're positioning it. 34:16 Yeah, that was amazing. What you just did right there was already like a great opener. How's mazing 34:21 so so people's tell me this all the time. Like sellers won't take my price. You can imagine anything. What I'm saying to myself is you're not asking it the right way. 34:36 Yeah, cuz just the way you think you the way you just structured that was was perfect. Like, what's more important to you taking a low cash offer or getting the most amount of money for your property? So you just kind of like segwayed into that is like okay, well, I'm going to show you how to get the most amount of money. Yeah, that's amazing. That's perfect right there. 34:54 I mean in there, the more you go and the more kind of positioning you understand The thing that I love about teaching is I like to teach from a perspective of most people that do what I do are kind of math nerds. Right. And they're good at whiteboarding a deal. And there's people that may be, there's, I don't know, anybody that's structured near as many deals as I have. I mean, I like when you've done 1000s. And I mean, Mega 1000s. There's just a shortlist of people in the world that could say that legitimately. So I part but but but I know there's other people that also are good at structuring deals, and I appreciate their skill. I structure a deal with a mental thought of whether the seller is willing to take the deal I'm structuring, I always start out with would they do this? Now I have an advantage. Because I know how somebody seller finances thinks, right? And so when I'm giving you a structure, I've already played all that out. In my mind, I've already I know that a seller 82% of the time, we'll do it with that, that step right interest the way I described, you don't know that what you seen is some guru on Tik Tok or internet or whatever. And they say they always bomb at 0% interest. Well, they may but they're leaving a lot of money on the table, I can tell you that because there's a lot of deals that won't close. And I would rather have a 20 year note than somebody willing to cure me 0% With a five year balloon, I would far rather have a 20 year note. And so you may feel like Lady you're giving up interest. You don't have to pay? And the answer is now I may not be. And so you know, it's okay to take a swing 0%. But just expect no more than you're going to expect. Yes. The other thing I've learned is this seller start out when you when you start out in terms and it's a little along the lines of what you said, sellers always start out with high expectations. What you have to do is interview them to find out which of the expectations is truly a sword. They're going to follow them versus just them not really knowing what they're negotiating for, and just sort of air fighting. You see what I'm saying? And I've learned that these interview process as we develop lead people to the right question, that's the story they really are going to follow. So it's it's just it's it's a it's a pattern. It's a process that people follow. That leads them to better success than this. Let me ask you an example Anthony. Take two salespeople. Give them 1000 deals each to go work on this the the salesman that has a psychological sales process will crush a salesman that just gets in there and starts to shuck and jive and try to talk about the property. Am I right? Oh, yeah. 38:32 Wow. I mean, if you can systematize it, you can like walk the sellers down and they're in their mind and you can go down these mental hallways. 38:40 That's it. Yeah, you got you have to make them face what they have to face. So I started out with completely understanding that if somebody brings me a terms deal, and they haven't taken the customer down as you refer to that psychological hallway, and that all they've done is gotten on there and found out about the land and this and that and they haven't prepared the customer. I'm not a magician. Right, I can't help them with a terms offer that's highly effective, because I haven't prepared the customer in the right way. But I will I guarantee you that people that are just making cash offers in particularly on the asset class, you know, people people making cash offers on land. They're buying on ridiculous terms. Right, ridiculous price, right? I like dealing in a little better grade of land. Right? I don't I don't like dealing in in real cheapo land. But if you can flip it, it's fine. There's nothing wrong with that. I'm not saying you shouldn't do it. But I deal in land. That's a lot of money. But I get to sell it Carry terms 40:01 like development land versus like farm and ranch, are you talking like cheap land like, 40:06 I like farm and ranch deals I like I like breaking up land tracks. Okay, I'm not really a developer, I call myself a land aggregator. But this sometimes I might buy single track, or sometimes I may go by, you know, a single track that I sell as a single track. Or sometimes I may go buy a piece of property. Now I can break it into three or I can break it into eight or I can break it into whatever. Right. But but but I have, I love that business. Because the sellers are so prone to carry terms. Now I know what a lot of guys say about the land business owner. Oh, no, they won't. They won't carry terms. We offer terms to them all the time. They will never take terms. I'm like, Well, how do you ask them? 40:55 Very nice, man. Is that do you focus on land primarily or what? So 41:00 I have a partner and we're in I've been in the land business for 30 years. 41:03 Okay, yeah, that's our game. That's all it's all we do is land. So we think about so we talked about, and yeah, that's, that's kind of our primary. Oh, yeah. 41:10 I mean, I've done land from Eagle Pass to, you know, Kansas City. Wow. And, and I liked the land business. I'm, I've been around it for a very long time I got into it, because land guys would end up owner financing property. And they and I was a note buyer, right? So they'd show up at my door, and they try to sell me notes. And then I figured out they weren't terribly good financial modeling. They weren't good at structuring deals with terms. So I didn't partner with them. And they were the only boots on the ground land guys. And I was more of helping them with that side of the business. And one thing is just kind of led to another. And so yeah, I've been I've been around the land space a long time. And you know, and I bought a lot of land notes, I've seen literally 1000s and 1000s of portfolios on land. And so I kind of figured out over the years that you'd be portfolios, where people have owner finance the land, they're carrying paper. And so then I've sort of patterned it to that land notes that were really, really good. And land notes that were really, really substandard. And so that I work backwards and thinking, well, if it's some if a deal is a seller finance candidate for me to care and sell it on seller financing, the land has to be a certain quality grade. Like let me give you an example. operate in. We buy land in North West of Dallas, Fort Worth, and a county up there in old towns called an akuna. Okay, 42:49 I have something Northwest Fort Worth. Let me look up in the corner real quick while you're talking. 42:55 And so so there's a subdivision, they sold several 1000 lots in the subdivision. And they sold third acre lots. Okay, this just looks like a pasture. Right? It's an old subdivision, people have lived people live there for years, they inherited mom and daddy died, they've been paying the taxes on it for 20 years and anything with it. And they call us and want to sell this land. Okay. And their third acre lots call the county and to put a water well in and a septic system, it takes two acres day. So guess what? That's a worthless piece of land. In my humble opinion, that's a worthless piece of land. So I don't like that kind of deal. Like it's what are you gonna do with it eat the grass on it. I mean, it's just like, it's nothing to do with it. So I like deal. I like a deal. So I wanted to sell a piece of land to somebody that I won't that land, in my mind, if they're going to be paying me back over time. I want that land to be sacred to them. So and there are so many opportunities in that regard, and to be honest with you, the land business kinda like the house buying business. There's not a whole bunch of people walking around. They're really, really highly skilled at Creative offers how to go by on terms, right? So so people would find themselves just like, hey, I can make an offer that they don't hear this from their competition. Let me give you an example. Go fine. Go find me a $300,000 piece of land somebody inherited it from mom and dad. They've had it for 20 years and they thought they were gonna go back and ride around and stay there and do weekend and they never did it. Right. Typical piece of dirt. Do you see right? Yep. What if I could show them how to sell that property and maybe never have to pay tax on the capital gains Dang. So let's say they inherited it 25 years ago, they got basically no basis in it. I mean, they might have something, but they got $20,000 basis, and they sell it for 300 grand thanks to 80, right? If you sell or finance it, you get to pay capital gains. The year you collect the money, not the year you sell it, you get to instead of standing it up and it's all paid at the end, you get to lay it down and pay it over time. Now, let me tell you a little trick. That's called installment sales. It's been in the tax code for decades. Right? Every accountant if you ask them that they Oh, yeah, that's installment sales. Yeah, you can do that. Here's what most people don't know. If you lay down and you only collect just a low amount of capital gains in any one year, and you don't hit that 40,005 $40,400 that it takes to get to a number that capital gains is taxed. See, the first 40,000 bucks is tax free capital gains every year. So if you kept yourself below that every year, as a single filer on your on your tax return, you would never be forced to pay capital gains because you'd never hit the threshold when it gets taxed. Bada bing, bada boom. 46:42 That's a freaking game changer right there. 46:44 That's a hack. 46:48 Wow, dude. Okay, can you can we go over the installment sale a little bit because I've heard like, like in Texas, they said, You can't do contract for deed. So the other gentleman's he wants a million dollars, he can't take it cash, because then he's gonna lose like 21% Capital short, long term capital gains or something like that. You don't, you would 47:05 never buy property on a land contract. 47:08 Okay, how does he how does how do you buy it to where where he gets the tax benefits, and then you might also get seller finance it to you. And so as long as he hits, he doesn't go above that threshold. He's good. 47:19 Yeah. Literally, you just take your piece of paper and map it out, take a million dollars in game and lay it down sideways, and take it out over 20 years, and figure out how much every year that you can pay him to keep him below the amount that see the first so much money in capital gains each year isn't taxed. And if you never get to that amount, that's a free year of no tax and the next year and the next year and the next year. So so let me let me just generally tell you this about land contracts, okay. First of all, I bought well over 20,000 land contracts. So I happen to actually know how they work. I'm not an attorney. But I know a lot more about them than most attorneys. I foreclosed on him. Bottom. I know, I believe me, I bought him in 3040 states. Most people are saying do a land contract because they're quoting to you, and advantage that used to be true 15 or 20 years ago, because 15 or 20 years ago, if the people didn't pay, you could treat them like a tenant and just do an eviction call the termination of contract, most every state's law have changed. And that's not true anymore. So when all these gurus are teaching land contracts, they don't know what the heck they're talking about. It's no unique advantage. It was 20 years ago, but the states have changed the laws. And you can't just the people have what's called an equitable interest in the property. Court of equity, they call it and so then you have to say, well, you know, I can't just evict you I gotta go through a foreclosure process. So people think there's not foreclosure on land contracts, just don't know what you're talking about. Believe me, if I could have bought all the deals are bought and not had to take them to foreclosure. You think I would have done it? Of course, I would have. I would have saved the money in time. But I had to follow the law. So this there's most things about land contracts are a myth. Right? I got no problem with a guy selling me a piece of property and deeding the property to me and I'm gonna give him a mortgage against property. I'm going to own the property in my name. And he's going to be the bank. And is there a terrific tax consequence? If I know how to show him how it works? Then you got to do a disclaimer, you're not a CPA, you know, all that stuff, you got to do a disclaimer. But let me just tell you something that is a crazy close, and he's never been pitched on before. And by the way, Anthony, look what I did, I showed you how to deal with a different asset class. Better property? 50:28 Yes. And you mentioned that in the beginning, yeah, you can go after nicer stuff, better stuff that you actually want to keep or hang on to, if it was your property. And I love the way you phrase that this land has to be sacred to them. Like you're not buying it like as a as a hobby or a play toy, like you better this land better be your your, your sacred ground, you're holding your holy ground. Well, listen, 50:49 if you want to get paid, you can't sell somebody something, they're gonna wake up one day and find out they're dissatisfied, or find out they don't like it. So you got to sell them something that they want. And I just did. And like I said, I've I'm involved in deals that are literally on the on the border and Eagle Pass. I've done stuff all over South Texas, been deeply involved with guys that did a lot of seller financing, or lots of seller, but I have a client in the back valleys done 36,000 seller finance notes, right, I believe me, I know the pattern of this property and how people will pay. So when people have done a dozen deals, that let's just say they haven't done a big enough sampling yet to really know statistically how it works. And I want to say that I can show most people how to deal in a better grade of property by using creative financing, like we just discussed. And so I love land, you'll have people on the podcast that want to do other kinds of property, and I help people with all kinds of asset class, I don't care if you're dealing in dirt, or houses or multifamily or storage facilities. The credit problem today that the interest rate problem today is not on one kind of property. It's universal. Yeah. What I hope after this conversation, is people see it more of an advantage than a disadvantage. 52:26 Yeah. 100% 100% Um, there's one thing to ask, as far as financing goes, Are you going through Armello? Or you if they put a large enough down payment is that standard as you if you're selling that seller finance property you have? Well, 52:48 generally speaking in every state, they define property that you're the lender on is used for residential purposes. So that's another big myth, like some land gurus tell you that land is not subject to Dodd Frank, that's a life in the pits of hell. Oh, shoot, I know that. It's not it is if they could potentially use it for residential purposes, is subject to Dodd Frank. 53:22 Even if there's no house on it, just because it's landed, they could rebuild dental purposes, 53:25 you know, that guy told you about so 36,000 owner finance properties in the valley, he has to use an AR MLO because they're going to put a house on that lot. So by the way, you think he's hired have a stream of lawyers that could figure out if he if there if there's any way he could have not had to fool with Dodd Frank, do you think he'd have figured it out? Oh, yeah. So when some guru tells you that it's not you're not subject Dodd Frank. He's just making up stuff. Let's just be fair about it. I don't like that. I am a I am an advocate for good business. And I'm an advocate for seller financing, bringing a lot of joy to people's lives. Right, but I just don't make stuff up. That's not a truth. And I've seen land gurus. I know many people in your audit. So you're more my guru said this. I don't know what to say. I mean, I mean, you're asking me to respond to something. I think it's kind of ridiculous because I think the Guru's say and something ridiculous and, and I think sometimes they know better. They just say it anyway, I have a high distaste for that. So let me just say something. It's no big deal. Anthony. You hire an AR MLO and you sell or finance it. And and you're good. And by the way, when you go through an AR MLO and you really do have an underwriting box, and you really do have an approval process. I can tell you from looking at papers since 1980, it'll pay better so that that extra trouble you went through will be good To you, because the people will pay pay you, they're more qualified and they will pay you more consistently. So it's good for you. Now, when is it non? When does a piece of property hit the phase of being non residential? Is that 20 Acres is that 50 acres and there is some point where there's a decision, if you're selling enough acreage, they're probably not going to use it. Or they may sign an affidavit and say, I'm not ever gonna put a house on this. I mean, you don't make them lie. I don't teach them to lie and make them sign something that days. But there's also a lot of tracks of people that people say, No, we're not putting the house on it. This is just our weekend place. You know, okay. 55:47 So let's say they don't qualify with the Armello. Do you just not sell to them? 55:52 Why don't they qualify? 55:54 I don't know. What would it be like? If it was, I don't know. Maybe they're just debt to income ratios off or something? 56:02 Well, you don't have to qualify somebody to Fannie Mae standards. Okay, you just have to use good judgment. 56:08 Yes. So you just look at it. And you're, you're basically the judge of it. If you're gonna give the loan or not, do I trust this person to pay me back? Yeah. And 56:15 the other thing is, is if you hire an AR MLO, understand that you need to establish what are acceptable guidelines for your lending. People say, Well, I went through an AR MLO where he underwrote them, he underwrote them to what? Right now the RML Oh, is just an underwriter? He's following down with what that is. So I help people figure out what that looks like. Right now where it's I help see my goal. Anthony is I want you to be able to create good paper that'll pay you years in the future. We've we've not found two big walls today. How do you go find better property? Creative terms? How do you go create rap notes that will be good to you for ever, dealing in better properties and dealing with an underwriting process where people are actually vetted? Like, can you imagine renting the house and not vetting the tenant? 57:16 What would happen? Disaster? Okay, well 57:19 then if you sell a piece of it, sell a piece of dirt so mine you don't vet the buyer? What do you what do you figure is going to happen? 57:24 So yeah, something's not gonna happen, right? 57:28 There's, there's millions of landlords who will tell you that won't work, right? So understand, it's the same thing. And so we're just established in simple, common sense processes. So that now all of a sudden, you've really tightened up your business. That's what I like. 57:46 And that's amazing. So what can people do to work with you? Do you have a course of training? Is it a kit they can buy? Is it as a as a like, weekly mentorship? 57:55 Best way for them to start is to go through a masterclass with me. Right. And I've got it popped up there on the screen. I know you'll put it in the notes, right, Daniel? I know I know how you are you do good. You're solid, right? You got you got this system figured out. So yeah, just note school forward slash Hi, this is a this is $100 class. And because of you guys, your your your squad are getting invited to and you're paying, essentially, right? I'm not charging you guys to come to it. So it's a couple of hours. And I just basically lay out what the system looks like how does it work like you you got to theoretically hear it today. Let me show it to you. Let me show you some examples. Let me show you how it works. And when you do that, then all of a sudden you're like hey man, I can see this this is like lining up and I mean it you know they at the end of the the masterclass if they learned all they need to learn and go go get them Tiger if they want to come to more a little more extensive stuff with us then they can come down the path with note school and we've got some very affordable training. It's not expensive and it's but it's valuable. And we just show him how to go do this. 59:15 Man, I'll tell you guys, what if you're watching this right now, for one, you are blessed you are in the presence of greatness. And if you learn the things that Edie is talking about it it will change your business and it will change your life and the life of your if you are a teacher, your students, all the people around you everybody talk to you from now on. This information will change your life. Yeah, so for what he's offering at that price point, apparently, Daniel and we're working something that we're going to cover it 59:45 well, I'm saying to you that I don't just go and when you go to other see other notes, school marketing, those people are paying 97 bucks. You guys have been kind enough to kind of introduce me to your inner circle and Your group here. And as a result of that, then we're not charging it. So, yeah. 1:00:08 Yeah, if you guys don't take advantage of this, I mean, just the things that I've learned on this call right here alone, applying creative financing and notes and that kind of stuff to our business. I felt like I've probably learned more in the last like 60 days than I learned in last four years. So I, for free, guys, I highly encourage you to jump on here and spend a little bit of time with Edie here because this guy is he's one of the greats one of the legends. And if a lot of this stuff went over your head, hey, a couple of things went over my head, right? So please take a deeper dive, take a deeper look, we're gonna, 1:00:39 here's what we're gonna do. We're going to slow it down. You know, we're gonna, we're gonna, we're gonna start out being very basic. This masterclass will show you the structure that we've developed, so that you can feel confident you can at the end of the day, go make these simple offers of creative financing to the sellers. And you know how to there's there's three things you got to did. You got to ask the right questions, you got to overcome objections, you got to make simple offers. And we're going to show you a very elaborate process to build it, that we've now broken into something simple, we started out, it was all over the place, right? 1000s of deals and all this stuff. But we just broke it down and built lanes. And so a deal would fit right over here in this line that deal. Like we now have made it to where somebody can just follow the path. And with that a lot more people can utilize it. That's my that's my heart. I want everybody in the country to be able to use it. 1:01:44 Yeah. Amazing, man. I know, there's people that that know some of the stuff you know, and they're not openly willing to share it. So we really appreciate you coming on here and spending time with us. And it's very enlightening. I hope we could do some deals with you. So I think we might start sending some stuff your way. Yeah, this is amazing, man. Maybe we need to do part two of this and go a little bit deeper. 1:02:06 We'll, the master class will really help your audience a lot, honestly. And I'm gonna say this to you guys. This is that's what you should do. Just go down go down the path of the master class. Yeah, what we've done is taken it and made it very simple. And when people leave the master class, their their level of clarity is like them becomes really high. Right? And we can teach very advanced stuff. Of course we can. But people just need some basic stuff to get started. And we just want to get them on some I want people to leave there with actionable steps. And that's the the masterclass is designed for 1:02:44 you. Let's say guys, we're heading into a storm. There's no question, whoever says that we're not just kidding. You better have the tools to be able to navigate the storm where you might find yourself in a little bit of trouble. So get ahead of the curve. Join the masterclass, check it out. I promise you the information is gonna change your life. 1:03:01 Man, thanks for coming on. I really appreciate your time. I know. I it's just amazing. It's just amazing having house conferences with you because like, every time I love doing podcasting, because you have you key on on certain parts that you don't really know the answer to and it's just, it brings, it brings clarity over time. So if you didn't 1:03:19 get format for me, because it lets people kind of get to know me, and I'm just a regular guy. I'm just a regular dude that's been doing something a long time and have built a little specialization out of it. But I love it and I want all your audience to have success with it. 1:03:34 Well, there you go. Well, we appreciate your time. Thanks for coming on. Check them out the note authority on Instagram and note Go check it out. We appreciate your time. Y'all have a great day. Thanks for coming on this episode. We'll see you next time. 1:03:46 Thanks

Daniel Esteban MartinezProfile Photo

Daniel Esteban Martinez

Host/ Ceo/ Speaker

I have been an entrepreneur since 2018. I come from a regular home just like most people. My dad worked on the roads in the Chicago area for over 30 years. He always taught me to work with my brain, instead of my body. Your body can only take so much abuse. I learned so much from my father. He always pushed me to work smarter and not harder.

I have owned and operated a trucking business for 2 years. I started learning real estate in 2019. Fell into the Data & Skiptracing business in 2020. My partner Anthony & I started Hivemind in 2021.

I have done a ton of different jobs coming up from painting, to door-to-door sales, telemarketing, truck driving, and loading trailers. What I learned most is that I want to stay in the digital business space. The leverage you can have delivering digital products to the marketplace can yield limitless possibilites.

I started The List Guys in 2020. It is a data and skiptracing service. We provide seller and buyers list nationwide. My clients have been getting great results and I am proud to help people killing it.

I started the Hive in 2021 with my partner Anthony Gaona. It is a real estate and business mastermind. It also comes with a all in one CRM, that can host unlimited websites and users.

Starting the Hivemind has been an amazing journey so far. Seeing one of our users make his 6 figure month in June 2021 leveraging our software, I know there will be plenty more to come!

Anthony GaonaProfile Photo

Anthony Gaona

Host/ Ceo/ Speaker

Hi! I am Anthony Gaona.
I’ve been in digital marketing for almost 15 years.I grew up in construction working for my dad when I was only 12 years old. Normally we had a ton of work or no work at all so a lot of my free time was spent learning how to generate leads.

It didn’t take very long for me to master online marketing because I became absolutely obsessed with it. For the last 15 years I’ve been generating construction based leads. At first I was running the projects myself. This led to sub-contracting all of the excess projects and eventually wholesaling the leads off to other construction companies.

One day I was preparing to build a single family residence for myself. In mid December, 2018, a simple YouTube search led me to the term wholesaling and the rest is history. The plan was to use my construction background to start flipping houses. By January 1st of 2019 I launched several marketing campaigns both on and offline for real estate seller leads.

Within about 4-5 weeks I had my first real estate contract locked up. It didn’t take long for me get a land lead where I made almost a full year’s pay on a single transaction. This came from a land lead and that forever changed my life.

I ran low volume larger land deals for the first two years of my real estate career. Like anyone who has been in real estate investing for an extended period of time, I started thinking about scaling my business.

Instead of deciding to vertically integrated and start hiring I imagined a model where I would teach my real estate investing methods to others. This would free up my personal bandwidth and allow for unlimited large scale transactions.

Currently our operations are expanding globally. The goal is to identify one person per major US Market that we can build a team around and drive traffic to so we can close high volume transactions together.

You can learn more about our vision and join our free mastermind by joining hivemind CRM on Facebook and all social channels

Eddie SpeedProfile Photo

Eddie Speed


Eddie is a real estate investor, author, highly sought-after consultant, speaker, and expert panelist on the topic of note investing and creative deal-making.

Eddie is the nation’s most experienced private real estate note buyer. Over the past 40 years, he’s closed over 50,000 Private Mortgage Note deals totaling over $500 million dollars.
Through his company NoteSchool, he has also trained over 10,000 real estate investors across the US and the world.