Ep 463: The Importance Of Seller Financing & Real Estate Leverage

Transcript

in nutshell me and Anthony have been doing this for six years with our own capital and little to private little

very little private Capital so we've been very it's been it's forced us to be as effective as possible with the

private Capital we have and our own Capital that we have so when you're broke you're forced to do a lot of

creative stuff and I want to cover the amplification of that and why it's important

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man so there's a lot of lot of investors and for different reasons they they like

buying cash or with hard money to buy assets and it's not a bad thing but when

you have when you're spending with your own wallet you will always run out and you'll run out very quickly

so that's the that's the main thing so you always want to be effective with your capital and where you spread it and

disperse it so me and Anthony as we're getting more and more Capital we're being even more selective on what we're

looking at because we don't want to put the capital into a bad or not amazing

deal that is the big no no big no no so when we started off like Daniel said

little to no Capital just whatever we had in our pockets in our bank accounts and you know when when when you have

very little money you got to make moves like creative finance and seller finance so we were doing that right when we

first started even before it it blew up with pace and people started getting real Savvy to creative and seller

finance we were already negotiating these crazy deals and and when people talk to us they're like man you guys are

super Advanced how'd you'all learn all this just by being being broke like just trying to move the little bit of capital that we had on hand you know that's how

we learned it so early because we didn't have money to buy our own deals and then now that we have a little bit of capital

laying around and we have access to a lot of private Capital now we're being even more selective about the deals that

we're going into so instead of us being more Carefree to say hey we could make a call and grab 500 or a million now and

now we could what does that tell you like instinctively like oh plenty of cash plenty of deals to buy right but

we're doing the opposite now we're we're tightening up even further on what we're buying now so when we look at something

something that we might have bought with our own cash a year ago or two years ago that's a noo today right because now

it's not our money right that we're risking now we're risking somebody else's money so think you we want to start looking at at being more selective

about the deals that we bring in and this goes for everybody in your own business too as you accelerate and grow

you always want to be you always want to be more selective CU if you have a deal for problem like we did we have too many

deals to to many opportunities you cut things off man you say no to even okay deals you want the best of the best and

that's okay so I really want you to be we all want you to grow as investors and

get better over time but you got to be you got to stretch that Capital man stretch as much as you can now here's

the biggest reason why enhance return on investment that is the biggest probably

one of the biggest things we get is we one of the first deals we did seven figures we leveraged a million dollar

property with 200 ,000 down now there's people out there that are buying $200,000 houses and flipping that into

350 or 400,000 but they have to put another 50 60 Grand in repairs or

whatever that looks like so there's people out there leveraging that 200 to buy a flip house

where we're we're trying to get as Max value on the ROI so if we can and I

think that first deal we did pretty well on so it's always leveraging the capital you have into uh to get the best Roi

possible so if we bought a million dollars cash and turned into 1.5 hey it's a good 50% return if it took us a

year but if you leverage that with 200,000 you got a 150% return versus a

50% so the the the math matters and the numbers matter of how much Capital

you're actually putting into each deal just because it's it's important man let

me give them a framework real quick because you guys are out there looking at a lot of deals I hope you are we're looking if you spend a dollar you need

to be able to make back two right so if you buy something for 10,000 you need to be able to sell it for about 20 why

because if you buy something let's say you have something that's worth a 100,000 retail if it was listed right

for a few months and you buy it for 70,000 right you pay 6% in agent

commissions holding cost taxes everything else you're pretty much made zero right so there's no yeah what's

lender lender and unforeseen cost we'll eat up all your yeah unforeseen cost yeah you think you're going to make 50

Grand and the deal kind of comes apart some things go wrong or you need to fire sell it and now instead of making 50 you

make 20 or or 30 right so if you're only planning to make a 30% gain that 30% can

turn into zero quickly the good news is like if if you're looking for a smaller deal you know 40,000 you might it' be a

little tougher to find something for 40 sell for 80 which we we found one today we're going to buy those are harder to

find right but when you get into the bigger deals right buy something for 00 it's a lot easier to sell it for a

million right because you have a lot more leverage when you have a bigger property and I think that's something that Daniel might cover today too and of

course I'll be jumping in yeah so Hand RI is the f is the first one number two

is access to larger properties so I kind of alluded that a second ago but you can get into a larger asset class with six

figures so for instance first seven figure deal we did we got into it with 200,000 so just buying that just doing

that alone we can Leverage in into our um into our our bigger property so our

goal is as we get more Capital we're going to leverage it into larger even larger deals like I think the biggest one we've done is the the potit might

turn into like a $10 million deal but that's hitting was it eight figures

now so we might be doing that a little bit more often leveraging into larger assets with uh more with more money down

but it gives you the ability to get into that position with with large sum of capital so you can afford to put some

money down on a property and still get access to some good leverage let's go in the extreme opposite direction right so

as the deals get bigger your leverage gets bigger so I'm looking at uh 500 acres north of San Antonio and they want

15 million okay 29,000 an acre I think is a great price for the area but if you're buying 500 Acres it should come

down tremendously right so that that might be a deal that of course we're not going to buy pay that cash I just don't think the the spread is there and the

risk is there for us to throw 15 million into one deal plus development cost but what the what the seller has agreed to

verbally is that they would hold the property while we develop it out so now if we come in and we bring in five or

six million worth of roads and a couple million worth of water lines I think all of our development into the deal could

be somewhere between 10 and 12 million and then the profit on the back end is is pushing close to 60 million right so

you couldn't get a 6X return on a $100,000 deal there's no way you're going to buy something for 100 and sell it for 600 but when you negotiate a deal

like that that's worth in a hot area right that that's worth five or 10 or 15 million we probably would never buy that

cash at least not in this point in our career but if the seller's willing to hold it and let us put cash into the

deal now we're talking Bryce Smith got one of those he has like a five or six million dollar lot in Anna Texas again

we wouldn't buy that cash right for that price in that area it's a good area but the seller is willing to give us almost

two years to complete the development on it so again now we're talking we sent a contract on it right so it all depends

on what you negotiate on your end and this is one of the big reasons why like novs are popular and these like

partnership JV deals where the seller brings the land those are super great deals because if we can just bring the

capital to value at it and lock them in out of price I mean everybody gets paid at that time and we can make a huge huge

Roi on that so if we can get into a deal with no money down and just put up the engineering costs that's an amazing

opportunity if we can put it if we can get inovation list that property with and repair do some minimal repairs or value ad and

list that property until it exits I mean that's why those those opportunities are so great and they're up and coming

especially in this market where I think we're heading to they're such a great opportunity and strategy to use in your real estate

Investments all right so I hope you all if he has any questions you can put in the chat too are there different types

of Innovations I don't I mean there might be like a I think I covered this on the nav the offer there like a

partner inovation and there's just like a Novation so a partner Novation is more of like they bring the property you

bring your skill set and then like a JV Innovation is you might split profits

but there's there's little like hitting variations of that and that's where you can still you still bring it to Market

and not leverage bringing all the capital to the closing table so great

question Angie all right all right so this is this is a big one we all me and

Anthony talk about this a lot too capital appreciation so if you lock up a property long enough and the property

appreciates you get that upside so we always the longer you get that contract and the longer we get into deals the

more upside we get into it in most cases because usually the the properties apprecia new comps if interest rates

drop there's more there's more cash in the market and we're into that deal we have a six-month contract guess what our

valuation might grow up so if you can get into bigger deals and bigger opportunity with long-term contracts

very very super important all right it's usually upfront it's one of it's one of

the offers we're going to make so usually while we're probing the agent or seller Angie asked what do you typically

offer an ovation opportunity usually UPF front we we're gauging like hey how soon

did they need to sell we're asking probing questions to kind of figure out oh they're not in a rush to sell okay

would they be interested of uh us putting some money down as security and and US value adding the proper it's

usually upfront before we even send a contract we're doing a lot of this probing up front so this this is good

question where if you're doing some Outreach ask if if we can bring our skill set and value in the property and

they can just bring the land it's it's definitely on the front end of the conversation look Andrew just brought me one 420 Acres South of San Antonio it's

listed for like 28 or 29 I get on the phone with the agent and you know we're talking a little bit and I said hey you

know what are they thinking when do they need to be paid by like is anybody in a hurry to close and this I I always ask

this to seller agent anybody are we trying to hit any specific deadlines are we facing foreclosures any kind of tax

problems divorce is it's in court no none of that stuff none of that stuff okay so they're not in a real hurry to

get the capital is what it sounds like no not really they've own this thing for 30 years okay I told her cuz here's what

I'm going to do I said I'm going to make two offers I said one's going to be a lower cash offer I said I don't want to

offend anybody I said but I got to send it I'm going to send a cash offer I said and then my second offer I said is going

to be a lot closer to your listing price but it's going to have me putting some kind of down payment and paying it off

in about two years and she she was already pretty hip she said hey so are you going to need a partial release of

lean you know as you guys move this thing I said you know that's not the only way we do it I said what I'm going

to do I said is I'm going to give you a down payment I'm going to spend about 500,000 in engineering I might put in a couple roads I said but once this

thing's ready for approval to break to break ground once I have all the approvals with the county the city everybody then I could refy out of the

deal and just pay you guys off once I get that far I said so I don't need financing for that long and she said

okay that sounds great send it over so that's kind of like a soft pitch on Innovation it's like hey you're going to

sign the property over to me I'm going to do a couple of things to it and I'm gonna get us both our money how does that

sound yeah that's huge huge huge opportunity and that's when I'm working

right now a right Anthony with that seller with and yeah I just drove it I

just drove it like two days ago yeah amazing amazing amazing property it's a really nice property it's like six it's

listed for 6,000 an acre in an area where stuff's selling for at least double and we're going to hit them even lower I'm probably going to hit them you

know 25 to 30% lower than what they have it listed for so I'm going to aim for about 5,000 an acre maybe do like 10%

down and then a pay off in about 24 months that's a huge beautiful property

it has a water well on there that pumps 1,100 gallons per minute they there's a

15 acre Lake on property that's drained and the guy that takes care of the ranch was there luckily we got there there was

an Alberto there he goes oh that pump will probably fill up that Lake in two days so that property already comes with

its own water company you know it's probably like a $200,000 wh yeah if not

more Frank asked they're not in a rush to sell I always ask and why is it

listed so there's always underlying and this is one of the reasons why I love like listed properties is if it's on the

MLS they have a motivation to sell it might not be this may not be upfront in what they're what they're asking but

they just they're ready to move the cash or I talk about this in another call too but people are ready to sell they're

ready to move the cash they're ready to move to another asset or they're ready to move to another investment they're moving that Capital somewhere else so

they're trying to liquidate so just by them being on the MLS they're they're they're they have some underlying

motivation and a lot of them are older too they don't need the cash and they just looking to move maybe move it in

some other asset so that Greenville deal we did that seller own like 2,000 acres

and what she would do is she would just she would as the population grew around certain areas she would buy a little

further out and hold it and she would kind of phase in all these little land Holdings over time and distance so these

these these big land sellers they just they just they're just moving capital and waiting is it ever today that have

the the the that hundreds of 400 Acres where the seller said they want to get rid of the land so they can move into a

cash flowing asset like a shopping center me and Daniel were just chuckling right if you buy a c a shopping center you got

like a six cap or seven cap you killed it like you stole that thing and all day long we're writing like 10 or 12% loans

like almost double what what a shopping center would provide yeah yep so a deal like that we

might offer them an Roi on their Capital so don't have to actually move that Capital somewhere else just keeps them in the deal so as

long as you know how to make a bigger Roi than what you're they they're getting or they're wanting to get and they have to deal with the uh the

management of it you might have an opportunity there all right inflation hedge so this

is one of the bit I'm G talk about this Marvin good job Ed Marvin and Edward so this is another reason why

seller fining is dope so like what we pitch this to sellers all the time is that especially this is for everybody

that's selling properties a reason why they want seller financing is because they want leverage too yes it's high

interest but property appreciates and there's new comps a they can refinance out that

property and get better debt in the future but at least they have their their deal locked in now and they can refinance out in the future but two if

the property appreciates I mean they can sell a thing for whatever and they can leverage our financing to get an Roi in

the back end so I think Anthony's pitched that one a few times to sellers where he'll be like man as soon as I do

this this and this this value of the property is going to be way more than what I selling it to you for so you better buy it now

you want to cover that story Anthony he which one was it it's the one where you pitch sellers to to buy the property

because you're going to make it more valuable what was there was there one in particular one special one you did it to

the bti the bti buyer the one buying the 30 that I what the one buying the 30

Acres you did that to the bouti buyer man I don't remember what I [Laughter]

did what happens happens you do you're always negotiating I know every single deal there something Anthony Anthony

with that one is he they only wanted 20 acres and Anthony upsold him into 30 oh

okay on the 243 yeah yeah for sure so I showed them what we were going to do I showed them the

breakdown of the individual lots and what we were going to do to the property and I I showed them on paper I said look

what you guys are getting for 600,000 they they were only going to spend 320 or 340 or something and I upsold them to

600 and I said look what you guys are getting for 600 I said it's if I broke it off up and sold it it's like $2

million it was like 1.8 or 1.7 million I said so you guys are getting a huge discount by buying it in bulk I was like

so you know like I can't wait past today I said but if you guys want to do it let's do it they said yeah for sure they're ready they'll do it ready to

close cash so Anthony I think we need with that one we need to hit him back with an option to buy it in like three

years to buy it for double the price that's not a bad idea because by

the time we get to that phase of the development it would make sense to buy it back from them and break it down yep absolutely and it wouldn't even cost

that much to do it so it's already in our in our in our cost just side notes

options leverage options options are very underrated if you know what a real estate option is go learn about it watch

some YouTube videos about it but if you know you're going to if you know you're going to increase the value in a certain area for whatever reason get an option

on it to buy back little tidbit right there building Equity through amortization this is probably a great

one for solid finan so we're always trying to get 0% interest so amortization means

everything goes to principal so we're always trying to pay as little interest as possible that way most of most of the payment goes to principal doesn't do

that when we sell but when we buy we're always looking for seller financing to knock down that payment down as much as

possible and then one thing me and Anthony talk about this too is once you get once you get a seller to seller

finance that's not the last part of negotiation that's just today's negotiation every time the bank you can

send them an email on right before Christmas and tell them hey would you like to sell me some payments and you

can renegotiate yearly or if they ever need cash you can buy some payments back to even buy down your property even

further so when you have a seller as a bank you can negotiate every year every

month whenever you want and buy down to that that deal little by little to knock

out the equity so um seller financing is huge man man when you're bu through amortization you want to cover a little

more on that one Anthony on amortization yeah yeah renegotiating terms with sellers after

you get seller financing yeah so that's a cool thing about getting seller financing right as opposed to going and

getting institutional Capital right so you go people ask us all the time if we want hard money and all this stuff and

you know can you fill this out and I'll get you guys some Capital we've never asked anybody to borrow money like that

like from an institution a bank or anything like that not even hard money it's all been private and the reason is

is because that's the best loan that you could possibly get like most of the time we're getting zero% interest you know those kinds of things but what you can

do is like we have one right now we have an 18-month balloon on it which is fine we get still pay it off at the 18 month

like we agreed to but since you're dealing with an individual you can always change the terms as you go you

know six months in we could say hey I'll give you 12 payments up front you know if you can extend the contract for six

months for me right the balloon or you can say hey I'll give you you know 50%

of what I owe you tomorrow if you can extend for me for five more years right so you can always modify as you go um

just what what you sign a contract on that day is what you're promising to stick to and we're going to keep our word for sure but it's always you can

always modify as you go like you can make the deal better and better as you go like literally that deal can continue to get better for the next several years

you can get better every six months so just negotiating something getting something on paper starting the

relationship and then you can just modify as you go yeah so huge huge leverage any any

else have any questions about that or anything we've covered so far I don't want to get too far

ahead you guess had some had some good questions on this so we're covering

today for people that came in a little late the why seller financing is important all right no questions all

right so we're getting to the point almost we're not almost not even doing cash at all unless it's a crazy price

yeah it has to be just like a really cool 50 cents on the dollar price for us to just pay cash especially if you're

paying 500 or a million all right so always thinking about seller seller finance and creative that should be your

first offer right before you even go into a cash offer and if this agents of course agent's going to say Well they're

just looking for cash okay I said but you may not like my cash offer just fyn I don't want to offend anybody it just

is what it is so the the biggest thing about this is you always want you can

get some type of seller financing on every deal it doesn't matter how much it is you can get some type of seller

financing I I don't I don't because everybody has Equity if you got to wipe out a bank and give them 100 Grand in

their pocket and they can leverage 20% of the property that's still opportunity because you're not putting the full

thing up front cash so you always want to get some type of seller financing the bigger the better of course but even if

you only get 30% somebody sent us one where they wanted $600,000 for a property with 400 K down and there's

opportunity to Value ad so even something like that leveraging $200,000 seller finance is still huge so don't

don't miss on seller financing because sellers will do it for the right terms

it's all mindset too because we'll see the same people that come back over and over again and they say oh they would

they said no to seller finance they said no to seller finance there's somebody on this call right now he said no to seller

finance and I said send the offer anyway now we're negotiating seller finance offered 10% down they said they're

probably going to take it and then they said hey can you guys do 20 I said yes but our our overall offer price is going

to come down right so you take something we take something every single time but you can always there's always a happy

middle ground and no matter what somebody says to your offer you didn't hear it you're still going to make your two or three offers anyway yep no matter

what they say oh no seller finance allowed fantastic but I have to send one my boss makes me I have to send you a

cash offer and I have to S send you a seller Finance offer no matter what just look at both of them I don't care if you even look at the Sol Finance one I'm

just going to send it anyway you always we're always going to do what we're going to do no matter what guys we're like robots we're cranking out the same

effort over and over and over again and we don't care what they say on their side it gets the wheels turning and the

whole point of sending that offer is now they have it in front of them and they're it's like okay I get more money

here but I I have all this Equity I get payments and it gets the wheels turning in their head so it's just it all it is

is psychology getting in their head in the seller's head and as far as like what our base offer

is usually 50 cents in the dollar 50 cents in the I'm going cover like the the offer too because this is important

this is why you even make this offer this is this is something crazy so 50 cents on the dollar and this is based

off of what you think it's worth based off if it's already subdivided or whatever whatever it is 50 cents in the

dollar or the 10% down 360 equal monthly payments

I always say equal monthly payments equal monthly payments always alludes to 0% financing so if you do e monthly

payments always say that in your in your letter so let's say million dollars You' make an offer for 500 or 1

million purchase with 100K down because now there's a big discrepancy like why would why would they do that why would

they do that why would they make that offer it doesn't make sense like how why would they do 500 cash or a million s

Finance they don't they might not even understand the reasoning why and it gets their mind thinking so if it's a million

dollar property 500k cash we can close in 90 days or a million with 10% down

$100,000 down 36 equal payments go ahead what's your question I was GNA say today

just real quick hey that that same seller they they said uh hey how much interest are you guys going to pay and

uh I said to respond 0% interest because if you guys add interest that's going to bring down our overall sales price again

so anytime they ask for anything you take something back just yeah I really want to hit on that too this is the base

and hold on Al one second this is a this is a tuckle war so whenever they pull

back which they are because they're not going to like both of those offers in most cases no one has ever said yes on

that first offer not at least that I know of so it's a tug of war they're going to pull back and you pull back so

if they want a large down payment hey the purchase price goes down this is is what it is hey we need longer terms boom

so when they pull you pull go out hey thank you can you hear me okay

yep absolutely awesome awesome it's great that Anthony mentioned that sometimes agents don't know what they're talking about because I actually spoke

to a seller agent today and I gave a 10% down offer on like an 18mon

amortization and they responded that um the seller initially thought they'd be du to seller financing but they said no

they can't do it because it's already on the note so I said cool well can I put can we put 10% down on the Note purchase

note instead and the agent responded said no that's not going to work and I kind of thought that was odd like you

know well how could that not work you know I would assume the not would be perable I didn't really question it and

then the agent I was speaking to said well you can Circle back to it later but let just a piggyback off what was

Anthony was saying regards to the agents Z no regards to the possibilities of creating Finance that's definitely

something I will follow back up on have listen to you guys so when there's a loan in place you can do a couple things

so a if the deal sweet enough we might cover that loan and put Mone still money in their pocket where they can sell or

Finance the majority of it so let's go like that million dollar property let's say they have a loan for 200 Grand hey

what if we gave you 200 to wipe out the loan and 200 in your pocket how does that sound like it depends on what the

deals what the deal what the what the loan amount is and how much Equity there

is and how much what they're buying with if they have a large loan on that property let's say back to the million dollars they have a $800,000 loan and

they have good they have good debt on that property we might try and take over that loan sub two and give them 50 to

100 Grand and then have them carry the rest because they don't have a lot of equity to make that 200 Grand so we can

still leverage them at them getting that note we'll do that

too so we in for instance we did we did a deal in Florida last year we purchased

it for 330 I believe purchased it for 330 there was

underlying loan for 240 I can't remember the numbers it was like 230 240 I can't remember exactly so

that one we took we did cash for keys we paid the seller 10 grand she had like SE 75k in equity or so we gave her 10 grand

in her pocket to sign over and then we gave her the rest of her Equity whenever she vacated so once she vacated the

property we gave her her amount and then uh we took over the loan sub to we sold that sold that note we ended up selling

the property and making we're projecting 100 Grand we ended up making 50 and this is one of the reasons why if you buy

deep so at the get that deal was literally 10 grand it was it was a risk where willing to take to get into that

deal to make a 100 and that's where the equ that Equity like cash Reserve comes in and why seller financing is important

so you always want to make sure you balance how much the loan is versus how much Equity they have versus the asking

price they're asking and then you can do if there's a lot of if they have a big loan and no equity you can do something

subject to if they have a smaller loan might be able to wipe that out and have them still sell their finance a big portion of their Equity yeah so another

thing I was going to say is there's no rules to this game right as long as you're behaving legally and ethically there's there's no board that approves

the the the loan or the terms that you agree with with the seller y right so if let's say they did have monthly payment

in place right that's I don't know two grand a month what what we've offered before is hey look why don't we do this

why don't I come in I'll fix up the property I'll make some improvements I'll do everything I'm going to do on my side and in the meantime I'll pay the

mortgage payment so now we we picked up their mortgage payment that relieves them of that especially if they're not using the property and then that that's

one strategy also like Daniel said you can give them some upfront money to say look it sounds like you need about 15 20

grand in your pocket right this second and then also what I can do to help is I can pick up a mortgage payment so you

don't have to pay anything at all per month right now and then it'll take me about 90 days to 180 days to get get

this thing paid off and get you your money how does that sound right so you can pretty much negotiate anything today we're making an offer I don't know if

Daphne's on here but we're making an an offer where we would that the seller says no I can't sell because I owe

10,000 in back taxes okay that's fine what if we paid the 10,000 how much do you need to put

in your pocket right so there there's a million ways that you can cut this up but there there's no correct way to do

it it's just whatever you can negotiate and agree with with the seller you know and then considering how much Equity they have how much profit you're trying

to make what your risk is right so if you're going to throw out again 100 Grand to try to make 10 or five or whatever then it just doesn't make sense

then you might just get an inovation where you just have permission to just sell it for them and that's I really want to dig into that real quick so

Innovation is a perfect setup for that so let's say they have underlying loan and for whatever reason they can't pay it whether it's 2,000 or 5,000 you can

come in hey let me help you carry this payment that 2 to 5,000 a month and then

let's lock in our price and then I'll help you make sure you get cashed out and the underlying loan is taken care of so for instance say it's a half million

dollar property there's an underlying loan of$ 250 and it's two grand a month and they're trying to get it for 400 you

lock them in at 37 75 pay the two grand a month and sell that thing for whatever the arv is now you're only in you carry

that that that loan that loan for six months you're only in 12 15 grand and if you have to put add paperwork or paint

add paint if it's a house or whatever it is all you have to do is put in that that little Capital instead of buying the whole thing out right you're

leveraging them as the as having them already having a note it's a it's huge

and you're taking care of that balance so it's no longer on their head for however many months and then you you do a listing agreement to list the property

and everybody exits out at their price point and everybody wins Angie ask how do you know how do

you find out if you could take over a note talk to the seller talk to the agent there's a lot of like rules with

subject to and stuff like that I would talk to like an attorney depending on what type of deal it is and how much Equity there is just to make sure

everybody's covered because the one seller in Florida that we did that deal with in Florida when we initially gave

them the cash they they were asking us for more cash in the middle of it and I'm like hey I can't give you any more

cash to you vacate the property and is what it is so they thought we were scamming them cuz we give them 10,000 and took over the deed I was like no no

no like we're not scamming you it's like once you vacate the property we we'll give you the money it's not a problem

it's just we can't get we once you give them the money they have no urgency to leave so you got to make sure you're

upfront with the terms and every everybody's everybody's on the same page in a transaction like that because it

can get misunderstandings and you can get sued and lawsuits and all this stuff so you always want to be over

over over overe explaining all the stuff because you don't want to have a lawsuit

on your hands later great questions though but novs are huge man learn about novs they're

super super powerful if if you can do what was that one deal you did

Anthony that it was like early it was a couple years ago but you did some type of like Novation you gave her like is

this a China lady you gave her like 1020 Grand up front and then she deed you the property oh yeah there's a ton of them like that yeah where she needed I forgot

what what her number is she's like 225 250 but I asked her like what what do you need to get in your hand right now

so to be okay where you don't have any stress on your plate right now and she said I just need

$10,000 so that's it I had my attorney drop a contract like a a sell contract purchase and sell agreement $10,000 down

no payments no interest until sold so I gave her the 10,000 property went in my name and we immediately turned around

sold it to the neighbor you know for almost 100K profit so it's so those

kinds of deals that are out there again just trying to figure out and you have to be sincere right this it sounds like

we're you know asking all these specific questions to lead down this quol like sell and I wish we had better sales tactics like Steve Trang but it's just

basic like you know Rapport just like hey what do you need to put in your pocket right now if I can help you I will if I can't I won't and then I use

that to kind of reverse people too on their their urgency right so you're talking to somebody and you know what

they're going to say is like I just need to get my cash and that's all I want okay cool you know do you have anything happening like are you facing forclosure

do you have any kind of like debt something you're trying to pay off like are you trying to beat the clock here so you're trying to make them seem like

they're like asking them if they're desperate to sell to get a huge discount so what do they do right they go into

defense mode automatically and they start saying things like no no I've owned the property forever I don't have to sell it I can hang on to it for

another 20 years and I'll be okay I say and then I I I let them know right away I'm like oh that's great news use it

sounds like you're not in a hurry to sell because I'm not in a hurry to buy I like to buy very slowly and very

methodically to make sure that I don't make any mistakes right because I'm a little company and if I make one big mistake that could be the end of my

company so I'm glad you're not in a hurry that helps me a lot is it okay if I ride it up for a 90-day close 120 day

close a six- Monon close and that's it now they've already told you over and over again that they're not in a hurry

so you say okay that's that's amazing that's awesome because if you can give me some time to close I don't have to go

to a bank to find the money I could just wait till one of my other property sells and then give you that cash so that gives you an extended closing period by

asking those questions well Anthony's so brilliant about that because he backs into the conversation by being direct which is

the normal way people go in but they don't have that back an angle where he just asking for time because the longer

we have these deals the more we can value at the property s a chunk of it do a lot of crazy stuff with land and it

just makes the opportunity more more makes the deal a better deal 100% with

more time yeah I'll tell you why too because uh we don't have to go borrow the money right I'm closing on a couple

of acres here in San Antonio and it's 990,000 right so I'm going to go have to

borrow that money from somewhere 90 grand and pay back five grand or 10 grand whatever that money cost so now

the property is costing me a 100 right but I called one of my old uh buyers

that bought a property from me in that on the next street and he he said he'll go ahead and pick it up for 110

so now I got to borrow zero make a quick 20 grand so if somebody says they're in

a real hurry they I got to get the money quick quick quick okay cool I need a discount because I'm going to go borrow

that money even with the money sitting in my bank account I'm still going to go borrow it we we covered this with the gator lending right I forgot what the

number me and dannyel were running numbers on earnest money last year we're like $300,000 in earnest money last year

some of it which we lost right so we always make sure to leverage no matter what it's like if you have 100 Grand in

your bank account and you lock up 10 deals or 15 deals now your bank account says zero because you got all your cash

out in earnest money it'd be smarter for you to hang on to your 100 Grand borrow the earnest money and then just pay that

lender back when the deal closes now you're not having to take it out of your own pocket so you can stay liquid

absolutely absolutely now Leverage is huge and if you learn how to use it

right it could take you very very far very very far I'm excited I'm excited about the opportunities we'll be able to

do pretty soon but leverage leverage Leverage is very very important it can make you a it can make a good investor a

great investor overnight good questions

today we covered a lot of different stuff Novation are powerful we've done a couple of those those have been great

opportunities we haven't done it lately maybe May dig a little bit more inovations Anthony we haven't done one

probably in a year or we haven't done one more we've been doing more solar Finance type stuff yeah we' been doing

more solar financing have you found many commercial land deals we have one working I do not recommend going in it

to it early on and even us we're kind of on our toes about the one deal we have

it's taking a long time to unlock that value yeah going on a Year's contract

and I say I got about 75,000 in engineering and I probably got another 50 coming for engineering just FYI so

commercial is a whole different Beast um it's subjective so somebody says I have an acre downtown Dallas and I got to get

$2 million for it because you can build an apartment complex here like you can't

do anything there until the county and the city says you can so if somebody brings you a deal and you could do this

and you can do this and you can do this do you have all those approvals from the county and the city that says you could build that well no but you can because

they built one next door so then you can't do that there you can't do that there until you have the approvals that

say that you can because anything can go wrong on that deal it could be a waste dump there there's a lot of uh areas in

town in San Antonio where they buried trash there 100 years ago so you start digging into the ground and there's just

car parts and crap under there so commercial and all that stuff gets

very very subjective as to what the value is it's very hard to tell what something could be worth so I say if

you're new just stay away from it the way that we will approach commercial is the way that we're doing the one that we have now it's 152 Acres it's $4.5

million we got a year to close and the seller is willing to extend for another year as long as he can see that we're

making progress so I met with the engineers today we have a ton of progress but we're not going to go and

and buy two acres for $2 million and then put 500,000 worth of engineering

into it and then the city shoots it down it just it doesn't make sense for anybody so the way that we will do commercial if the seller is willing to

hold it why we improve it why we we'll pay the engineers we'll do the surveys we'll do everything we'll Market it

we'll do all that stuff and we'll pay the seller when we get paid but typically on Commercial we just do not

buy outright yep it's a it's a lot of risk and we we've been sent deals like oh great commercial

deal closing Clos in 30 days I'm like yeah I'm good yeah somebody was yeah

this this commercial deal is 9 million and it has to close by the 21st like in 10 days like come on man what do you

think this is and you have no paperwork for it no engineering no nothing like that's a funny question to get so that's

the that I want to hit on that one too commercial deals they're typically $8

million if you look on you know one of the commercial

websites the rest of it's a wholesalers fee that they added on yeah the broker

adds it the broker adds a fee so we we have I have actually a friend of mine here in San Antonio we're gonna have to talk about this one if it comes a close

but daffany offered half of the listing price and the seller's probably going to take it maybe less than half you know so

yeah by the time the Brokers and the Agents get a hold of it and wholesalers yeah they just marked it up crazy this

where the numbers don't even make sense anymore I really I really want to hit on this too so if you work with a lot of

land wholesalers or if you check like investor lift they like oh I literally I

got sent one today bless his heart he sent me one it's like it could be used for a 9 unit and it was 10,000 foot lot

and I look it up and it says residential and I'm like bro just because it can be used as a N9

unit doesn't mean it's going to be used as a nine unit like a hospital will fit on this lot no cuz it's in a residential

[Laughter] neighborhood oh man so I always look out for that stuff it's semi annoying but

I'm used to it at this point it's part of the part of doing business Edward says three three acres for 15 million if

it's Vegas on the Strip maybe really depends on where that one is right somebody sent me one like probably like

an hour west of Fort Worth like 33 Acres for 7 million I'm like I think the

sellers are just messing with these kids now when they get a phone call let's just blow this kid's mind and tell them we want 300,000 an acre in the middle of

nowhere Andie was asking return on effort for minor subdivides versus big entitlement deals like flipping to a

developer I'm entitling 243 Acres right now and the engineering is going to be

almost half a million right our Target on this deal if we sell it out early to a developer I'm trying to cash out

somewhere between two and three million profit if we go ahead and break ground throw in the roads and the water lines

you know we're looking like at two years from now and then the total sales on that one we should make like six or S

million right so think about those timelines versus return so I'll take those 2 million tomorrow versus 7

million two or three years from now and then you know a little deal can be a big deal right so it just really depends on

what you're looking at um 5.5 Acres we're working on in Floresville right now we picked up for 200,000 and the

seller agreed to close upon approval of the subdivision so now we're like 6 months into this thing and maybe 35 or

40,000 and there's going to be about 380,000 profit on that deal that's one will take all day long you know locked up properly

on the front end very little money out of pocket almost a 10x return you know so that's a perfect deal we'll take

those all day so this is the this is the thing where like the minor subdivides we like

those they take a little bit longer but we're not actually working for that usually we're just waiting so if you

don't mind waiting for Roi that's what all entitlements and stff about are four

yeah well we talked about this today right we're looking for a 2X return if I spend $50 I want back a 100 right or I'm

not going to buy it so in terms of this deal we're getting a 10x return we're spending 38,000 to make 380,000

right so that's something to consider they were asking how do we structure the numbers with the property owner when

you're asking them to hold it this is where you can really really play with the numbers so that 5 acre track retail

as is is probably only worth 200 or 250 it's only worth 200 as this yeah and so

we knew damn well that we could subdivide it because it had a ton of Road Frontage on it we did the math on the Lots yep sounds like five or 600k

sell price so if that seller is just adamant like I got to get my whole 250 I'm not going to go below I'm G to hold

my breath for 20 years if I don't get my 250 I'm never going to sell it awesome I know how to get you that 250 but it's

going to take me about six months if not I'm at 150 175 cash which one would you

rather look at would you rather look at that cash cash offer to close quick or would you rather give me six months I

can get you the whole 250 and they let them decide you know sometimes they'll be like nope if you get me 175 next

Tuesday I'm taking it perfect get it we're done so and both those both those

are wins so like it feels worth 20000 we might have bought that for 100 cash so 100 cash 380 exit that's still a 3X

return we're still doing amazing but now they're they're stuck on that number by them by us paying more we make a higher

Roi how does does that make sense yep so we're paying them to wait

with us is what we're doing yeah right they if they want money today today we get a lot of you guys that come and tell

us hey they said they want to close in 30 days they want to close in 21 days for four million like probably not going

to happen for one right unless it is 40 or 50 cents on the dollar but you know what are they willing to do to get that

full price amount this is a question I always ask is can you give me a little bit of time like say hey I'm going to

send you a cash offer I don't want to hurt your feelings I'm in business when I got kids and I don't want to go broke

because my kids go broke and they can't eat you know might upset mom so I'm going to make a cash offer I don't want

to hurt your feelings at all it's just business and I'm also going to send you a second offer that gets a lot closer to

what you're already asking so I want you to take a look at that for me or I'll ask them I'll ask them up front to say

hey let me ask you a question real quick you sound like you're not in a hurry you said you're not in a hurry at all can

you give me about six to 12 months to pay this property off what do you mean

let me let me let me draw something up and I'll send it over to you so you can look at it while we're talking on the phone that's it there yep easy peasy so

T your question and Sh and we like them both they're they're both they're both going to be pretty good let the seller

pick let the seller pick what they want and you'd be surprised like I said it's getting on their level being on their side you know talking to them and then

saying I bet you had a lot of people make you offers on this property right it sounds like youve talked to a lot of people that have been trying to buy it oh yeah everybody calls me my property

yeah well you know the offer that I'm going to send you the number might not look like those other offers I just want

to forewarn you it might be a little bit lower it might be a lot lower but I'll tell you the number that I send you is a

number that I'm prepared to close on have you ever had somebody contract this property at that price and then come closing day they disappeared on you they

stop answering your phone calls oh yeah it's already happened a couple times yeah I figured the number I send you is

a number that I'm prepared to close on and I'll even give you five or $10,000 the day you sign the contct contract to

let you know that I am going to close and then I'm not that I'm in business and that's it so that's especially

another a good work around for when they say oh I've got a bunch of offers on the table right now I got I got tons of people I got four offers on my table

right now can you get those offers in front of you real quick so we can talk about them yeah say any of those offers

say they're going to give you $10,000 the day you sign the contract none of them they're all

refundable yeah all of them say none of them say that right no none of them say that then they're not offers you should

probably place them into the recycle bin right when the number I send to you is the number I'm going to close on and I'll give you money the day you sign the

contract I'll send it to your bank account so one thing one thing we really dig in on is we offer refundable

non-refundable deposits because usually it's worth if we can get the timeline we

need it doesn't really matter we'll get the terms we want by using inundable deposit so a lot of investors are afraid

to lose money so it's everything's non-refundable nonrefundable non refundable non refundable I mean day one

of wholesaling me and Anthony took the same course they told you to use under a hundred bucks and still get it

refundable yeah yep and that's how we knock off a lot of wholesalers off the table right these people think well I

got four offers I'm thinking about right now I'm talking to two other people right now perfect but I'll tell you

something our offer is going to say that theirs is not we're going to send you some cash up front and the cash we send you up front is yours to keep so if I

don't do exactly what I say I'm gonna do then that's your money so Angie what we'll do is we'll write him a check

right there so if and this is this is when we know it's a deal if we're making great terms and we know it's a deal

we'll give them 10,000 cash or a check right there 120,000 yeah or

120,000 it depends on how big it is because if if we know we're GNA we're going to go to close and this is we we

talked about this on on another call but so a lot of people are risk averse to give candle or Capital because they're

not going to get it back in most cases which is which you're not wrong there but on the adverse side of it if you

give somebody non-refundable cash now you're stuck in the deal now we're married now we're married

because you took that cash and spent it yeah worst worst case they go out they spend your money like somebody did last

year I sent them $26,000 before closing right and every Guru in the book all of

them are going to tell you don't ever do that so this is 301 303 stuff right this is not beginner stuff but I gave them

26,000 and they didn't show up the day to close they actually me emailed me like the morning of or the morning

before like I hear by terminate my contract oh no you don't now we're suing them right and now they're ready to

close so once you give them that money and they take it that money's gone I mean your your your property is pretty

much yours now yeah and it's at the it's at the price you got it minus damages so

if you're if you're really want to marry that deal give them refund non-refundable deposit because once they

take it and spend it you're married into that deal and you're going to get that deal no matter what worst case scenario

you have to sue them and take damages and like if the L if the lady did not

show up to court we would have enough damages to get that property for free for the the 26,000 we gave her yeah it's

a it's a $600,000 property we invited her to court with some documents that said that we're seeking 250,000 in

Damages so or or we're seeking zero damages if you come here and close

that's it that's it so it's definitely 33 stuff

don't do what we say don't do what we do yeah you're gon if you're gonna do a

highflying tight rope act like that at least bring us in but we've been finding some people even in this Mastermind I

don't know if they're in this room right now are doing they're going out and Contracting stuff weird deals we haven't even comped or vetted it with them and

then making these crazy promises like closing 60 days 90 days we haven't even seen it yet so if you guys are going to

do anything crazy come see us first that's what we're here for that's what this meeting is about we'll be the doctor I I talked to

Chris today I told him the same thing he's like I'm gonna go contract the deal like no please don't do that please don't do it just seek advice first

you'll learn you'll learn faster and become better when you when we get when you seek advice Andre's asking if we if

we need any option period uh we're offering a million cash for 160 acres here in San Antonio South I asked for a

14-day option I think it was um and then this 243 we just closed on I sent it in

with no option at all 10,000 earnest money no option it's because the deal was a deal it was a steal at a price so

it depends on you can the terms are always negotiable based off of how big of a discount you think you're getting

it at so if you want to come in hard and heavy you can do the nonrefundable you can do the no option period you can do

all that stuff I think even that when we CL we closed in 60 days less I told her

I needed 30 days of due diligence and a 60 day close and she sent it back like in a 50-day close or something and I

still bought it like we're buying this deal so it really just depends on on how

hot the deal is how juicy it is it depends how much we would risk and how much terms the terms we need due

diligence that kind of stuff so a lot of the stuff we talk about it's like you know we've just been doing it for a

while so we know what our comfort level is right so if you buy a 243 acre track

to do entitlements for a neighborhood there's not a buyer in the country that's going to agree to buy that thing

until they have their approvals for the water the approvals for the electric there's probably six months worth of due

diligence needed on that lot but since it's in my area it's in San Antonio I know the area very well a very desirable

area that we just did a subdivide in and sold it really quick we just bought it before any of that stuff any of it

because I'm not worried about the approvals I know the I know it's going to get approved and just put it that way and then well how do you know like I

just know just from working in this area and we've been doing it it so long so and the caveat to that is is worst case

scenario will still make seven figures on it yeah even if we had to dump it in 10 acre lots it's still a million dollar

deal so worst case scenario it's if we fire sold it it would make a

million so yeah just like I said just use us that we're here we're we're we're

here operating Edward Peter's on here there's quite a few people that send us deals to look at almost daily so it

would take you guys sending us a handful of deals we'll critique them help you run numbers and tell you what we like

and what we hate about it and then you'll start to get better and better now Peter sent me like I think four or five hot deals in a row so it's just it

just takes refining it if you haven't been frustrated yet you're not working hard enough you should have if you hit a

wall and you're pissed off and you feel like you've been working too hard and not getting any results now you're getting close now it it takes time it

takes time and a lot of effort I think we we've had a few students they're they're getting Peter says I'm

frustrated daily and I love it it's it's one of those things where like

you gota you gota you gota you gotta look at a few opportunities and there's so much there's so many out there and this is this is one thing I really want

to hit on towards the end of the call is that there's so much opportunity out there we can us as us as the land buyers

bringing in the cash and doing all this due diligence we can buy better deals so

we want to really drill down to buy better opportunities that make better spreads that everybody's going to win

guaranteed yeah I'll tell you this right now guys before we go last night Daniel and myself Drew up a sheet to send over to

one of our investors and we put about 10 11 deals on that sheet total sales of

breaking down those lots and reselling them is aiming towards $100 million like in 10 deals profit so I'm gonna go back

and I'm going to count but a lot of those deals are listed deals they're on the market most you don't even have to

pull a list and go out there and Mark it I mean they're literally like shooting fish in barrel and just knowing what to

look for how do you know what to look for being on these calls and just sending us deals and sending us deals

we'll shoot them down in five minutes for you if they're no good and we'll let you know why yeah

yep and the bigger the deal the more the more you can get creative financing the

more you can manipulate the numbers there's nobody coming you talk to the guy he says oh they I got to get the

whole million or they're not going to do the deal okay tell them we don't want it go ahead and send in your offer for a million let them stare at it call back

when they're ready and that's it I don't know if you guys know this but when you send an offer to an agent by law they

have to show the seller so no matter what they say about your offer send it over get it in front

of them if they say no they're not going to do it okay have a nice day follow up with them in 90 days the deal is not

going anywhere all these deals have been listed for six months nine months a year

they really are just sitting out there doing nothing there's no buyers for this St

that's it no buyers Noy and a lot of opportunity so make sure you're picking out the best deals we're going to make a

lot of money this year and hope you all learn something today know we had a couple new people to on today's call so

hope you all learn some good stuff all right hit us on the Facebook group we'll see you all next week bye

[Music] guys

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Ep 463: The Importance Of Seller Financing & Real Estate Leverage

Daniel Esteban Martinez

Anthony Gaona