all right y'all my name is Phil Pugh
style skiing I want to thank you for
being here because I know you have a lot
of there
is where you could be when I was in
school I know I had a lot of choices and
it was a constant battle do I go to
class or not but thank you for being
here and I do reward action takers I
believe that 90% of success is just
showing up so because you showed up
today you're all gonna get my book you
don't have to go to Amazon you don't
have to go buy to Barnes & Noble on your
way out the door you can get a free book
how about that and also thank you dr.
Harris for giving me this opportunity to
share this with y'all and my story is
when I first got started I was just
graduating from Vanderbilt University
with a degree in mechanical engineering
of all things and I did an internship as
an engineer and I fell asleep at the
desk and I said well this is this is not
gonna be my life no way and so I start
reading books on real estate and I got
so inspired by it I said oh I'm gonna go
out there and do it and I was a bit
premature I should have probably had a
job maybe a source of income because I
ended up living out of my truck for a
while before I got it all figured out
and you'll read about it in my book just
how I went from living on my truck to
where I am today I live in Central
Florida here I live in New Smyrna Beach
my wife and I we got to the point
economically where we could live
anywhere in the world we wanted to so we
we looked from San Diego Seattle New
York where do we want to live and we
chose New Smyrna Beach beachside so kind
of living the dream now and it's a
result for real estate okay so show of
hands how many people here raise your
hand if you own real estate okay great
raise your hand if you would like to own
real estate ok great
raise your hand if you would like to
learn how to buy real estate without
having to go get a bank loan and without
having to put down a down payment all
right perfect cuz that's what I'm
talking about today good this is going
to be the subject of creative real
estate finance ok this this training is
it's coming mostly from the school of
hard knocks but also there are
publications on these particular
subjects it's just not
as much mainstream this is very creative
it's outside the box but it can apply to
just about everybody but you think about
it think if you could own a piece of
property right now you didn't have to go
to a bank so you didn't have to worry
about your income or your credit what if
you could buy a property right now and
maybe you lease it out a couple of the
rooms to your friends and so you live
rent-free or maybe you were like me in
college and the biggest and most
important thing was to be able to throw
the biggest parties and the Landlord
would have a problem with it so if I own
my own property I wouldn't have that
issue um when you have to qualify for a
loan the first thing you need to deal
with this good credit history you know
if you're in college or you may not have
had the time to build up a good credit
history and even if you've had the time
to build a good credit history a lot of
people in this country don't have good
credit for whatever reason
another problem with qualifying for a
loan is you need high income they want
to see that you're making money when you
go give your application to a banker
they want to see how you're making money
well if you're not making a lot of money
it makes it tricky doesn't it you also
have to have a low debt to income ratio
so banks want you to have credit they
want you to borrow money so you have
good credit history but then they have
this thing called debt to income and if
you're paying too many debt payments
student loans credit cards car loans
versus how much income you're bringing
and they won't give you a loan either
and they usually want a big down payment
to a lot of people don't like all this
fun stuff so what what you're gonna
learn here in the next hour or so is how
to buy real estate without having to
deal with any of this is that exciting
by the way I'm gonna be asking checking
questions to see if y'all are
participating that way nobody falls
asleep alright so what's in it for you I
talked about you could own your own
off-campus house you know maybe when you
graduate you want to own your own home
this is a way you can do that and also
since you all have been talking about
investments
this is a way where you can start buying
investment property so let me give you
the story on my first deal I had just
graduated from Vanderbilt and I was I
had read a few books on this thing
called real estate and so I I drove
around this neighborhood near campus and
there was a big for sale by owner sign
you've seen those before so I'm all
excited I'm gonna put this knowledge to
some good work so I give the you know
give this sign a call and person picks
up the general construction company yeah
I uh I called off a for sale by owner
sign is this wrong number now you got
the right number I'll be there in a
minute excuse me you're at the house
right yeah I'll be there well that's
kind of pushy right so I didn't really
know what I was doing
I didn't know what house gonna buy this
property I had no clue so he drives up
it's an old guy like 75 years old he's
just a fast talker he walks me around
the property and and he says well how
are you gonna buy this and I said well
that's a mighty fine question he says
what do you get of load I said oh
there's no way I could qualify for a
loan no no way he goes well I got some
good advice reduces what night years
from good good idea for you feel I'll
finance the property so what do you mean
I'll finance he was gonna offer since he
owned the home with no loan on it he was
gonna become the bank so he would lend
me the money now at the time I thought
it was the greatest thing since sliced
bread now later I learned that he sold
the property to meet for higher than it
was really worth so it was a good deal
for him to be the owner finance person
so in other words what happened was he
offered it to me for a hundred and fifty
thousand 3-bedroom 2bath now now again
that was a little higher than it should
have been but I was gonna have to put
down a down payment at all I just would
start paying him each month that make
sense so here's how it worked out no
down payment no bank loan it was a 6%
interest loan that I signed on but he
never checked my credit he never asked
how I was gonna make the payment he
didn't even ask for a down payment
that makes sense this was interest-only
he was being he was being ultra nice to
me because I told him I was like man I'm
gonna have some trouble with this
payment if you make it too high because
I didn't know what I was doing and so he
came back if it'll all make it interest
only for you interest only it means it's
gonna be a lower monthly payment cuz
you're not paying any principal you're
just playing the interest each day when
you when you have a mortgage a part of
it goes toward the principal part of it
goes toward the interest okay so the
total payment was eleven hundred now I
gotta tell you this was a quaint little
house just you know just south of
Vanderbilt campus in Nashville and
3-bedroom 2bath like that would at the
most rent for $1,000 a month but here
this thing is I don't have to pay 1100
so here's what I did I rented each of
the three bedrooms for 500 apiece and I
brought in 1500 the best part is the
parents co-signed now Here I am 22 years
old no clue what I'm doing and one of
these tenants was late on his rent I got
a parent to call me and apologize I am
so sorry the payments not do I think you
know when it was due I'm overnight in
you your rent I couldn't believe it
I shouldn't even own this place never
mind they got a parent you know bowing
down to me is the landlord so I brought
in four hundred bucks a month each month
raise your hand if you want four hundred
bucks a month coming in extra not all of
you that's okay that's fine I understand
y'all got bigger sites you'll be
billionaires so I was bringing in $400 a
month positive cash flow how come I was
able to positive cash flow on this
property when normally it rents for a
thousand what did I do
I leased it out to two students didn't I
student student Reynolds is some of the
smartest rentals you'll ever do because
the parents are gonna cosign and the
students are gonna be back next year and
next year the college ain't going
nowhere
whereas if you if you had
a lot of rental property next to a big
plant or factory that could go out of
business right and y'all made no more
than I do but I think that the state of
Florida had me on on the business yet
and UCF's doing just fine so student
rentals is not only consistent not only
is it good to have the parents cosign
but also you can rent by the room so
hopefully by the end of this you'll be
inspired you may say you know what maybe
I should go in my own rental maybe I
should start to lease out some of the
you know the other rooms and then I can
live for free but there are three
creative ways to buy real estate I just
talked about the first one which is
owner financing and by the way at the
end of this you can ask me any questions
you have because if I run too fast
through some of this and you didn't
quite get everything just just make some
notes and then it will touch on the end
so owner financing works when the owner
owns the property outright what kind of
property owners owned properties
outright with no loans on them that's
right he just said old people that's
right older people retirees they they
have been paying on that mortgage for 30
years they've paid it off that also
means properties that are inherited by
all people right so that's another
example and so when people owned
properties outright you have the ability
to potentially negotiate an owner
finance deal so that's one way in which
you can buy a real estate without a loan
pretty cool huh the next way is through
a a subject to subject to means subject
to the existing financing meaning
there's already a loan on the property
and you're literally just going to take
over that loan and I'll go into that in
just a minute a little more detail and
the third way major way to do this is
through a lease option which is kind of
quasi I mean a lease option you don't
own it you control it because you rent
it with the option to buy it but we'll
talk about each one of those as well and
in detail all right so real estate 101
you all may already know all this but it
sets up nicely for the next slide okay
to own a home what really signifies
ownership is that deed de Eadie and what
happens is the the previous owner signs
over the deed to you they sign a
document it gets recorded where does it
get recorded well I by the way to say
bye now yeah the county recorders office
the courthouse yes so that each county
in America has a recorders office and
that's where these deeds get recorded
now the mortgage company wants to
protect their interest right because
they just shelled out 150 grand or
however much it was a separate document
is going to get recorded as well now I'm
calling it a mortgage in the state of
Florida it's called a deed of trust but
it could also be called a mortgage in
other states and so that's a separate
document does it make sense so the owner
is one document the money is another
document you know when I speak in front
of big crowds I'll do the whole spiel of
if anybody's cell phone goes off they'll
give $20 to their favorite charity we
won't do that here today though okay so
the anatomy of an owner finance deal is
you become the owner right so this this
seller of my specific example he deeded
the property to me but he was the one
I'm he was the one that was the mortgage
person so I mean in other words he was
the bank so that's how it auto finance
deal works now how is that different
from a subject - well a subject - is
kind of crafty watch this the the seller
is going to sign a deed over to you so
now you're the owner but the loan
doesn't change the loan stays exactly
the same and what you do is you just
send payments to the bank
pretty creative admit now some people
think well wait a minute is the bank
going to accept your payments yes they
don't care where the money comes from so
long as it comes in so you're probably
thinking well jeez well who's who's
willing to do that who's willing to give
their home to you but then they are
their name and their credit stays on the
line
well let me give you a story all right
so this was the the owner of this
property guy named cauri
he was a friend of somebody I knew and
they said you know Phil I hear that
you've been getting into real estate and
by the way real estate a lot of it is
you can generate business through
referrals for talking to other people
and let them know what you do and so I
said yeah I'm in real estate said well I
got this friend of mine Corey who needs
to get rid of his house now I said okay
I'll go meet with him so I go over to
this property here and I'm talking to
Cory and this sweetie tells me he says
well Phil the property's worth about 105
and I owe about a hundred thousand he
says I felt been trying to sell my
property I'm just getting stuck
why is Cory having trouble selling his
home he owes about as much as it's worth
he can't even pay the commissions and
the closing cost when you sell a
property there's expenses it's funny in
real estate when a deal closes you
wouldn't believe all the hands that come
out ask him for money it's pretty funny
so he can't sell his home well I I
brought this up to him oh by the way his
total payment was nine hundred I asked
him I said well Cory what if I took over
your payments I dealt with your 900
bucks a month that way cuz he was moving
out that way you can move out and move
on with your life
he was like Oh that'd be amazing I said
yeah now I can't pay off the whole 100
right now but maybe in a couple of years
I'll be able to do it but in the
meantime I'll just be able to deal with
your payment and and Cory was happy to
do it now is every sell are gonna be
happy to do that no now this is a small
fraction of the overall number of
sellers out there in fact it's even more
so it's even more reduced by the fact
that typically we're dealing with people
who want to sell their home that are not
working with a real estate agent when
you drive out off campus and you see
real estate signs those are usually from
people that are working with real estate
agents when someone's working with a
real estate agent
rarely is that real-estate agent going
to want this to occur because then they
won't get their commission so this is a
small fraction our studies have shown
about 5% of the total seller market fits
into this category where they're kind of
stuck and they need to get rid of their
property fast that make sense okay so I
also toker I said well now look so now
if I'm gonna take over your payment's
I'm gonna take on your responsibility
I'm gonna need some I'm gonna need to
make sure that I've got complete control
of this property would you mind if I
became the owner and again I shoot these
people straight you know you get a share
with exactly what's going on and he said
well I guess that's what I got to do
Phil that's fine so he deeded the
property to me so now I'm the owner but
his name is on that loan and my
responsibility is what make his payments
now I wasn't moving into this property
so who was gonna actually make these
payments the tenants that's right
so I moved it a tenant oh this this
should be pretty interesting here I
don't know how much y'all have talked
about yet as far as loans but this loan
was an FHA thirty-year 6.25% fixed-rate
loan
let me completely impact that FHA
Federal Housing Administration that's a
government-backed loan government backed
loans typically have lower interest
rates number two it's a 30-year mortgage
which means it's got a lower monthly
payment because it's cut you know the
payments have been stretched out and
then 6.25 when this property was
purchased about ten years ago that was a
good deal nowadays I mean four and five
percents a good deal but real you know
interest rates by the way you look at
history on real estate they've gotten up
to as much as 18% in the early eighties
so 6.25 is kind of a slam dunk now here
are some hidden benefits of this whole
thing number one by the way the tenant
pays about a thousand a month I still
own that property by the way I don't for
a long long time every month that tenant
is paying a little bit of that mortgage
down isn't he because a part of that
nine hundred bucks a month is kind of
chipping
now that that mortgaged the overall
hundred thousand which is nice so that's
building equity for for me next it's a
low interest rate loan you're also
probably going to discover as you
investigate the world of getting a loan
out there that believe it or not
investors have to pay a higher interest
rate than people who live in the home
people that live in a home are called
owner-occupants because they live there
and banks I suppose
assume that you're more likely to pay
your own home mortgage bill than you
would if you had an investor property so
investors have to pay a higher interest
rate but you see what's so creative
about this subject to transaction you
can get low interest rates even though
you're an investor okay so you've got a
low interest rate loan and you have the
other aspect of this which is property
appreciation
what's appreciation price of the
property goes up now what's happened the
last seven years depreciation most
statistics are proving that we are at
rock-bottom right now now I am I'm not a
prognosticator I'm not a market
forecaster but as I'll talk about a
little later there's a lot of indicators
proving that now is the perfect time to
buy a single-family home if you were
gonna do it the next 20 years and you
could all do it now is a wonderful time
because most properties in places like
Florida are actually it's cheaper it's
cheaper to buy a property than it is for
somebody actually building get the
materials get the contractors out there
buy the land and build a thing and
that's a really special time because
real estate in general this is kind of a
fascinating statistic and you'll see it
in the book as well residential real
estate over the past hundred years has
not appreciated on average a professor
out of Yale put this together from like
1900 I'm sorry 1910 to like 2010 it
actually just keeps pace with inflation
now certain pockets of residential real
estate go up above that that a that a
flashing Airy number that's kind of
interesting that means real estate
doesn't really appreciate it just kind
of stays with
inflation but in a situation like now
where Real Estate's gone way too far
down now there's a little there's a
little gap or an opportunity so in this
particular case I've benefited from all
three of these and I still own this
property so I have a tenant in there
right now paying the mortgage off giving
me a little bit of money extra each
month it's not a lot of money but then
I'm building equity each and every month
year after year
now with the property when I bought this
property prices are about at the same
mark as they were when I bought this
thing so it's not like I've appreciated
much but I haven't lost anything and I'm
looking better and better each and every
month that's how you build wealth you
build wealth by owning real estate and
this is how you can do it without having
to go get a bank loan oh great question
property management property management
in my opinion comes down to one thing
tenant selection you choose your tenants
wisely so I choose tenants I love nurses
anybody in the medical field because
they'll have a job tomorrow they'll be
able to pay me plus nurses if they ever
fall behind can pick up a couple of
extra shifts and then what I do is I
direct draft the payments right out of
their bank account on the first comes
out of their bank account if they if it
if it over drafts I hit them again on
the next day and then I try to hit their
credit card and if that happens and I
still got the money I sent it to my
eviction attorney and he takes care of
it and it doesn't matter which state you
and if you have the right admission
attorney they can be out in 30 days I
make it very militant I'm not their
buddy I'm not their friend this is
business and if they're not paying the
mortgage I got to pay the mortgage if I
got to pay the mortgage that's less
money for my wife to go shopping with
and then I hear it I should say it's
less money to build wealth but less
money to give to charitable causes so
here's a question I always get Phil why
would anyone agree to leave their name
on the loan and let you become the owner
hey why would
we say here Phil take my home oh by the
way that's fine my loan will stay on my
credit for the next ten years you just
pay it each month he need to get rid of
his home he was in a tight spot most
people aren't in his situation but we're
not dealing with most people are we
we're dealing with a select few people
they need to be motivated to get rid of
their property and this is our little
tip in business you may want to circle
this in your ongoing notebook of life
you are not always your customer have
you ever looked at a retail store before
and god I'd never go there I never buy
anything there they're overpriced at it
you are not their customer business is
cater to certain customers and if you're
not in that little that little box you
may never understand what that business
is even alive you all of us in this room
college-educated we met and may never in
our right minds let somebody just take
our home and they and they just make
payments to the mortgage but there's a
lot of people that are in desperate
situations and need to get out and
sometimes this works out really well I
give an example if somebody's actually
falling behind on payments and you can
catch them up now that would be a little
bit of a down payment right maybe a
couple of thousand to catch up the back
payments you can actually help their
credit which it's better for you to
catch up the payments than for them to
sell their home if they sell their home
while they're behind it actually hurts
their credit more so it actually can
help them maybe some people let's say
Phil I am NOT gonna just turn my house
over to you just because you're gonna
take over the payments that's fine
that's dandy but I'm not gonna just give
you my home in that case we go to a
lease option that's the third way the
lease option the owners still on the
deed the owners still on the mortgage
the owner still owns the home the
difference is you get a lease and you
get the option to buy RAZR get if you've
signed a lease here okay great so you've
been through that experience before with
a landlord
well it's basically a lease but then you
also get an option to buy the property
for maybe a couple of years or more and
that option to buy what's nice about
that is you're the only one who can buy
it but you don't have to buy it okay let
me give an example of a deal like that
so this was a for rent sign so if you're
driving around and you're looking for a
for your next rental for maybe next
semester where you live you may want to
use this little technique here so I I
saw this for rent sign and it was in
front of this condo here and I I gave
the owner a call and I said how much he
asking for rent and let me see what my
numbers are hold on I forgotten already
all right yeah he said he said well I
need at least eight hundred minimum
eight hundred I really have to do 850
how wasn't a good negotiator
sorry telling me it's a little bit right
and I said oh I said I gotcha what's the
situation so well just graduated from
Vanderbilt nursing and I got a job in
Atlanta and I'd like to to get moved out
as quickly as possible
and and I'm having trouble selling the
home right now I've had it listed for a
couple of months and nobody's buying
that happens you know I mean here's what
his problem was
his problem was that his condo complex
was being built it was still being built
at the time what that means is he was
competing with builders and so if
somebody came into that condo complex to
buy a condo that builder were just
taking about a handout come on down here
we're gonna get you some paint we'll get
you whatever carpet color you want we'll
get you a brand new building and who do
you think they're gonna buy from the one
that's two years old that they can't
change the paint and carpet color or the
brand new home you see so he was
competing against this builder so he
couldn't sell the property so I asked
him same thing I asked Corey I said
would would it work for you if I you
know I can't buy this property for what
what you're asking right now and just
pay the loan off but what if I just took
over the payments so you could move to
Atlanta you get to your new job and get
moving and then I could you know I deal
with it from there and then at some
point in the future I could sell it
hopefully you know be in a couple of
years I have to wait
builder to finish building but then
after that happens you know I can I can
get rid of it then and he was all about
it so I set the paperwork over to him
well his mom was a twenty-year real
estate agent in Atlanta and she said
whoa don't just turn that house over to
this old boy sorry I'm from Tennessee
these are some Tennessee phrases he said
instead do a lease with option so that's
what we did so in other words a lease
with option is kind of a fallback plan
if the seller won't do is subject to and
what happens is I put together the deal
together for six years eight hundred
bucks a month with the option to
purchase it for 120 and so in this
particular case I moved somebody in a
tenant and I gave the tenant the option
to buy it well for more than 120 it was
more like 130 and so I sold it to the
tenant a few years later so that's the
other way to do it now this would be
pretty simple for any of y'all in the
room here to ask if you were looking to
rent something around here you could say
hey I see you got this place for rent um
have you ever considered selling it a
lot of landlords consider selling their
properties for all sorts of reasons and
so what you can do is you could do a
lease and then you just have the option
to buy it now you don't have to buy it
but you'd have the option to buy it now
in this scenario I guess you're probably
thinking well Phil how am I gonna buy it
you know a couple years from now well
yeah you'd have to get a regular loan
that's kind of the that's why with lease
options we use that more for investing
that makes sense because with investing
we're gonna have somebody else in there
and we're gonna get them to buy it and
so the other nice thing about these is
there's no real estate agents involved
so we save on the Commission's so even
if the deal doesn't have a lot of room
we can still make a couple of bucks and
a little tidbit on this particular deal
this was kind of a because dr. Harris
had asked me to give you some of the
negatives as well as the positives this
guy had a loan that had an adjustable
rate
and that became a problem when it
started to go up and all of a sudden his
800 payment turned into 900 that ended
up where I basically broke even with the
rent so a little tidbit if you're gonna
agree to start paying payments in the
future for somebody make sure it's a
fixed-rate loan because if it's variable
you may wake up one one Thursday morning
and realize that you're no longer making
any money on your deal that's no fun all
right so which one of these versions is
better will really owner financing is
kind of your only option for properties
that have no loans on them so it's it's
kind of like having a couple of
different arrows in your quiver you can
bring out one if it you know if it suits
best to bring out another to pay on the
situation the subject two is nice
because you become the owner there's a
real problem with lease options and that
is that if you're not the owner that
person could get liens against them and
let me tell you a war story okay this
brings out some pain so if I get
emotional here shortly you'll understand
why I had done a lease option and I had
this tenant buyer in the property and
they were gonna buy it and I was gonna
make $45,000 cash was gonna go into my
bank account I could almost see the
money I mean I was already dancing I
mean this was the greatest thing since
sliced bread
well guess what happened right before
closing the title company found out that
the sellers wife had never paid her
student loan debt student loan debt
never goes away y'all unless you pay it
you can't file bankruptcy to get rid of
it it just it's like glue it just sticks
to you well apparently she didn't tell
her husband when they got married that
this had happened in fact they got
married after I'd own the property but
in the state of Tennessee as soon as you
get married to somebody you both own the
property so she had seventy thousand
dollars in student loan debt now if I
would have done a subject to I would
have owned the property and her student
loan debt would not have mattered but
instead I didn't
property in the Tennessee if you've got
any judgments filed against you at the
courthouse those have to be paid before
something sold $45,000 did not go into
my bank account that day in fact it
never did on that property I had to give
it back to him that's the thing about
the lease options you can give the
property back to him because you're
leasing it from them your question yeah
well if they if they take over the
property they take over your lien now
it's their problem now technically it'll
still be in your name the lien or but
but if they ever want to sell that
property they got to deal with it yeah
because what will happen is the way the
recorders office works is when you
record a deed that doesn't necessarily
disappear who the loans are because
another separate documents so yeah those
whatever lanes are there will stick
around and I don't know that it works
like that in Florida because I haven't
dealt with it but in Tennessee the
bankruptcy and in collections attorneys
of Tennessee they all got together one
day and figured out how to make sure
they can get paid more money with doing
no work it's called making it a law that
you've got to pay all the loans off
before you can sell real estate they do
they attachments all right yeah they
just they stay there yeah I would have
done the subject to where I became the
owner I would have just said you am out
of said look if I'm gonna promise to
make your payments every single month so
you don't have to worry about that
problem anymore I'm gonna have to be the
owner we're gonna have to put this
property you have to deed the property
to me
I don't want to do a lease option
because if I do a lease option I had
that sort of threat now the other thing
you could do but you could record a
second mortgage to protect your interest
but then you'd have to show that that
actual money was transferred so if you
had an extra 30 grand in your bank
account you could say you lent the money
to yourself but if you don't have that
money you really can't do that so really
the best way to do it is just do a
subject to or a lease option is kind of
your last case resort but then you'd
want to do a title search and make sure
the person wasn't full of liens hey kind
of a funny little side note if the owner
said to you they said well I
if you're gonna become the owner I still
have to have some control here there's
one other thing you can do has anybody
ever heard of a trust a land trust this
is a really cool tidbit Florida is one
of the best states in America for doing
creative real estate the exact opposite
would be Washington Washington's like
Russia it's like communist whereas here
here's flexible you can do all sorts of
stuff it's capitalist right we've lost a
lot of money in Washington for deals
that didn't go through because they
changed laws so on what happens is in
the state of Florida you can you can buy
real estate in the name on the deed can
be a trust
UCF trust you can name anything you want
to Superman trust whatever you want to
name it and then the trust then has
these beneficiaries but here's the
beauty nobody knows who the real owners
are all they see is the name of the
trust they have no idea cos that there's
no other documentation showing who the
trust owners are so you can have
complete anonymity now guess when the
legislation was passed in Florida for
the land trust you're in Orlando what is
one of the biggest things in Orlando
when when Disney was buying up all that
land he didn't want anybody to know
because if if all the other owners of
the love of the land saw he was buying
the other stuff they would go oh my
stuff's more valuable and they charge
him more so before the day before he
bought his first property in Central
Florida the the Land Trust legislation
was passed in the state of Florida and
Disney was a big part of it so we can
think Walt Disney all real estate
investors in Florida can thank him so
that's a really creative strategy as far
as making sure nobody knows who the real
owner is and there's some real value in
that at times because if you build a
portfolio of 200 homes all it takes is
one tenant to say ooh here's mr. rich
man and we'll sue him so if every
property is in a different name it'd be
really hard to search and figure out all
your properties and also what they could
do is if somebody like you neptr
particular situation if we move it into
a trust I could still let that guy his
name was or cinta or sit to say I get
your check how can you forget losing
$45,000 right I could have had or sent
to be to be the beneficiary of that
trust but that would have still worked
because then I wouldn't have had to deal
with the with the student loans the
problem is is when you leave it in their
name long term you can you could
potentially not be able to sell it down
the line are you all going to good times
is fine okay
and again the lease option is is kind of
a fallback plan all right so what are
some wrong drawbacks all right
in the real world everything is not rosy
right first thing is you got to have a
motivated person now I see it so often
where someone you know hears about these
strategies and they go out there and
they try it like well it didn't work
well it didn't work as you were talking
to somebody wasn't interested this may
be a bad analogy but it'd be kind of
like a guy who is just in love with a
girl who just absolutely was not at all
interested you know and they go to class
and you know she starts kind of going a
different route I don't really want to
see this guy and he's like yeah I
haven't seen her in a while yeah the
point is is they're not interested and
that's the same thing here you're not
looking for the majority of sellers out
here that would look at this and go I'm
not gonna just let you take my home or
I'm not gonna be the bank if I if I own
my home outright for $100,000 I want a
hundred grand cash in my in my hand when
I sell it now we're looking for that
group of people that is desperate
there's a lot of ways to find those
people you heard some stories about just
like examples here where I just like
called up on a sign and whatnot that can
sometimes be the most productive at
times if you've got some time on your
hands a little bit of gas in the vehicle
because if you can just drive around and
see some for rent and for sale signs
that works for sale by owner signs
excuse me but then once you get all
fancy like the investors that that we
work with then you start running
advertisements and all sorts of stuff
but you can do this simply by looking
for some signs going on Craigslist
there's a lot of junk on Craigslist but
never so often you'll find a gym the
next thing is you have to have the right
paperwork
and that's really where an attorney
comes in you really want to use a real
estate attorney and if you've been to
the local real estate club around here
they have attorneys that'll help you
with this you just tell them what you
want to do say I want to do a subject -
can you send me a contract that'll do
that here in the state of Florida so I
get any trouble some of these properties
may need a little bit of fix up but
would that be okay if you didn't have to
go get a loan you can become a homeowner
if you had to be a little bit of paint
and carpet would that be okay so some of
these any you got a a this becomes all
clear when you're actually out there
doing it because think about it some
people are going to want to sell their
home they're not going to deal with a
real estate agent y'all seen HGTV you
know when the real estate agent walks in
they're like oh yeah you're gonna need
to change this and knock out that wall
yeah we don't new kitchen definitely
summers don't want to hear that I mean
when they're tired and they're stressed
out and the kids are screaming and they
want to sell their home so they can move
on with life and they get a real estate
agent walking in there with the high
heels and telling them all about what
needs to be done sometimes they get
turned off and if you can just walk up
and say oh now leave the house a mess no
worries the dirtier the better I'll be
over there in a minute sometimes they're
just like oh they just want to sign they
want to get rid of the property and they
don't want to deal with the hassles
that's why sometimes these creative
deals a little too cosmetic you know
cosmetic is gonna be you know paint
simple stuff I'm not talking about major
things like plumbing or anything if you
have problems like that yeah then you
have to consider do you have the money
to pay a contractor to go fix those
things and then all of a sudden there's
money out-of-pocket here's an important
drawback you're usually not going to get
as low of a price as if you paid all
cash or you had a loan why is that
yeah because you're paying for the
convenience of not getting a loan see if
you got a bunch of cash in your hand you
usually can buy things for cheaper can't
you if you're on the car lot or you're
you know you're buying an appliance TV
or whatnot in fact that's a good way to
go buy a TV at Best Buy in other places
you can negotiate those things just take
out the $100 bills and just start kind
of fingering them so I'm looking for a
TV today sir can you help me so if you
got cash you can negotiate lower prices
so you're not necessarily gonna get the
lowest price but is that always bad no
sometimes it's okay to pay full price so
long as you didn't have to go get a loan
and it may require a down payment there
are gonna be times where the seller says
okay I'll let you take over my property
but I'm gonna need at least five grand
for move out expenses and I've got a
good example that we had a somebody I
teach out in South Dakota
of all places it was a duplex and it was
rented on both sides for 900 1800 all
together and is there a marker okay
don't worry about it so 1800 month was
coming in and this owner owed a hundred
thousand and the total payment was like
yes somewhere around eleven hundred
bring it in 18 out of a month and only
has to pay eleven hundred that's good
money in seven hundred bucks a month
just whether you wake up or not it shows
up seven hundred bucks
well that owner needed ten grand some
gambling debt or something guess there's
some casinos out South Dakota because of
all the American Indians so gambling
debt problem needs to get 10 G's fast
and I student had some had a little bit
of money in a retirement account paid 10
grand of the person and the person gave
him the deed and so now my students got
a property that's bringing in 700 bucks
a month and had to put up ten grand you
see how that worked so now there's a
little bit of an enticement to
get him to go ahead and turn over the
property but my students pump 700 bucks
a month
these were long-term tenants it's so far
the last year it's gone perfectly well
they're gonna get their 10,000 back in a
couple of years right and then it's all
gravy and then here's the best part that
property was worth 160 and they only owe
100 that looks good on the balance sheet
to an extra 60 grand looks good but with
much comes much responsibility I've
given you kind of the proverbial keys to
the kingdom here y'all you could use
this for evil or you could use it for
good okay let me give you an example of
using these techniques for evil there
was a fella I guess is the nicest way to
say it in Nashville and here's what he
did he would go up to sellers of
properties he would target the people
that had bought homes and new
subdivisions who were trying to sell him
to sell their property because remember
we talked about if you're competing with
the Builder it's a lot harder to get rid
of your property and they go up to him
and he'd say oh I'll take over your
payment's yeah it'll all be good you
just move out everything will be fine
and then he wouldn't start making the
payments instead he'd move a tenant in
there and just collect the rent just the
rent each month until the house went to
foreclosure now the thing is believe it
or not houses can take a year or more to
go to foreclosure a year and a half two
years so this guy was just collecting
rent and letting people's credit be
destroyed now he did end up going to
jail the point is you can use it for
evil and that's not what this is about
with much knowledge come as much
responsibility so if you are going to do
these creative deals you need to make
sure you follow through those
commitments so what that means that
you're gonna take over someone else's
house and you're gonna pay their
mortgage payment you better pay it or
don't jump into it or or just don't get
in the business but you don't want to be
in a situation where you did what that
guy did question
no the only reason why he got legally
penalized had to do with the fact that
he he was literally lying and he had a
paperwork that said he was gonna pay so
if he wouldn't have done that actually
from a legal standpoint he would never
got any legal trouble he just would have
made a lot of people mad and just been a
jerk yeah oh yeah I mean didn't you can
he just this is another thing about
crooks you'll learn is they eventually
get caught because they're just not
smart enough they always leave a couple
of holes and that's what he did but it's
technically possible that you could you
know if you didn't use any other
paperwork but just had them sign the
deed over there'd be no paperwork to
prove that you promised to pay you could
do them well the people have the
mortgage their credits getting destroyed
[Music]
right go back to the credit bureaus good
question you can't go back to the credit
bureaus and go look you're not gonna
believe this this slick-talking short
guy from New Smyrna came rolling in told
me some good ideas and yeah I'm in a bit
of hot water kid is there any way we
could reverse life then they won't do it
they'll just it'll to be destroyed and
so you can get your credit repaired
that's a whole nother industry so that
helps people in certain cases but yeah
it's one of those things once it happens
it there's no really way to erase it but
after seven years usually yeah yeah
that's a whole nother that's a fun
little story I'm eight I forget a little
more time about the HOA game but what he
was also mentioning is the idea that
let's say somebody has not made a
mortgage payment in a year they even
live in for free for a year they're
worried it's gonna go to foreclosure
they move out now that property sitting
vacant grasses growing tall what some
people are doing what he's saying is
they'll go in they'll contact that owner
they'll find out the address they'll do
like a skip trace or hire a private
investigator find who that person is
talk to him and say look your house is
vacant would you mind if I moved a
tenant in there on like a two three
month lease kind of thing and just
collect a little bit of quick money and
then I'll give you half they're like
yeah and you can do that now remember
the person's credits already destroyed
so they don't really care if they
continue to not make payments and it
actually works pretty well but again
there's a the issue of course is you
have to find a tenant who wants to move
all their furniture in there for a month
or two because you can't keep that lease
going very long yeah that's right I've
heard that as well that the bank has to
honor it you know yeah if it's right you
know in in West Palm and in other parts
of this the state as well there's lots
of foreclosures that are there being
inhabited by homeless people and the
banks are happy to have it because I'd
rather have somebody in there than
nobody so there is some of that that's
that's definitely going in a fun
direction but I I could talk about that
for a long long time about all these
different angles you can take in the
foreclosure game and it's it's all
because there's so many foreclosures the
bank can't get it all taken care of plus
Florida as a judicial state they have to
go in front of a judge and that just
takes forever
you've seen government employees they
show up at nine they end it to take a
big lunch I can't get through all those
foreclosures amen brother
that's right okay so what are some
common pitfalls the first is trying to
convince an ordinary seller to do a
creative deal we're not selling people
here you're looking for people that are
already motivated if you try to convince
somebody to do something like this even
if you're a great salesperson you
convince them at the point at which they
sign a contract with you they can still
change their mind you know this is not
like selling stereos out of the back of
a pickup you know in the Walmart parking
lot and once the exchange is made no
refunds no returns it's over now this is
long term you saw the contract it could
be at least 30 days before they do
something and think about this you know
if it's not a good deal for them and
they think that you're gonna take
advantage of them they're don't call
their mom or their sister or their
brothers like I say this is a good deal
and they're gonna go no it's a terrible
idea so in other words you have to make
sure you're working with people that
already want to do this so you're not
convinced him of anything we've worked
with people that have a great sales
background and they actually run into
problems because they do such a good job
of selling people on these things that
the people end up you know going back
and said I don't want to do this anymore
so work with people who want to do this
that way when they're at a cocktail
party they say oh yeah I had to get rid
of my house I just let somebody just
take over the payment you did really oh
I had no other option I had to now the
person will support their decision and
that's what you need you need people
that want to support their own decisions
don't take over variable interest rate
loans subject to already told you that
because what happens the payment could
go up could the payment go down sure but
it usually doesn't doing a bad creative
financing deal just because you can
you're gonna be able to take over some
people's properties but you really
shouldn't just because they'll let you
do it doesn't mean it's a good idea
either a it's got to be a property to
live in so you'll make the payments or
be it's a property that at least is
gonna make some money you know if you're
not gonna at least make a couple hundred
bucks a month or have some equity in the
deal
you might as well pass on it just
because it's cool and it's it's it's
attainable doesn't mean it's a good idea
does that make sense and then giving up
before you succeed that's probably so
cliche you've probably heard it a
hundred million times I gotta tell you
in life if you never give up it's
amazing what you can accomplish I was
living out of my truck in Nashville
Tennessee
I was I was homeless and ten years later
I'm a public speaker an author and I
teach people how to invest in real
estate all across the country the
Caribbean and in Canada it's good I ever
gave up but this doesn't just relates to
real estate but whatever you want to do
stick with it most people don't but when
you do it's amazing what you can
accomplish in life all right so
hopefully you've been listening we're
gonna challenge those brains of yours
all right so here we go I'm gonna give
you the details this is a for rent sign
that you saw you're driving around you
give it a call person's asking $1,000 a
month
the owners are moving that's why they're
selling now they've been trying to sell
it for like 125 but they've had no
offers they're blaming a bad economy and
this that the other now they owe about a
hundred and ten thousand and the issue
is when they move they've got another
rent payment coming up in Tampa where
they're moving to and they simply can't
make double house payments what kind of
deal is this
it could be a subject to why
yeah they can't make double house
payments they're gonna have to do
something either they're gonna stop
making payments on this house when they
move or there ain't moving and when
people have a job transfer and sometimes
they've got to move there is no option
now what if they don't agree to a
subject - you can do that lease option
and then you can check the title to make
sure there's no liens and then you could
actually file a second mortgage if you
had some cash in the bank to prove was a
real second mortgage question
yeah well what you would do is you'd
actually check the title because in that
case that her debt was against the title
to the property which is at the
recorders office there are some programs
that you can pay for that'll do it like
a search of all of the liens against a
property the the courthouse also some
courthouses actually have it all blind
you could search it for free or you
could actually just go down there and
you could you could ask the person there
hey could you pull up any liens against
this property and then there's this
thing called a title search which a
closing company or a title company does
and they officially look up the title so
the other way you could do it is pay a
hundred bucks to a title searcher and
they would go do it and there's a
million title companies in the city you
just search anyone and they do it for
you good question so their total payment
was nine seventy five and so you could
do a subject to now what if this
property only ran for nine hundred right
you're losing money is that a good idea
I know that sounds like such a simple
question it's like no-brainer telling
you I've met people they're like oh my
first subject too and I only lose a
hundred bucks a month yeah you don't
want to do that now in this particular
case if it was say a three-bedroom
two-bath how could you maybe rent for
more money you know some students now
the great thing about y'all is you know
this campus or at least this part of
campus so you know where people are
walking in and out you know where to
stick some billboard a little you know a
little tear offs you know how to
potentially send out messages I don't
know if they allow like emailing between
groups but you know how to access the
student body here better than a typical
landlord who's never been to school
here's that make sense so you have
better access to students to be able to
rent too I got a friend of mine up in
Pennsylvania that this is all he ever
did was student housing he sell his
whole portfolio for like four point five
million I was talking to me today
about ten years out of school honeybat
four and a half large
okay so here's challenge number two for
sale by owners sign to give it a call
persons asking a hundred thousand
they've inherited the property they got
no loans on it but it may need some work
because they inherited it it's been
vacant for a little while they they
haven't dealt with the property it was
their mother who lived there and she
hadn't really kept it up all that well
doesn't want to deal with a real estate
agent doesn't want some agent to walk in
that property and tell them how much
work needs to be done to it owner lives
in Tampa what kind of deal is this owner
financing that's right now sometimes
when you deal with somebody who's
inherited a property they want the cash
now so you can do it one of two ways you
could off from say hey I'll give you 50
today or I'll give you a hundred over
time but would you rather have seen I'm
saying some people may want the fifty
today and if that's the case you can get
it under contract and called wholesaling
or flipping you could flip it to another
investor for sixty and make 10 grand
real quick but if they if it's a if you
give them an option the nice thing is
you're your owner financing deal looks a
little better now my first deal that one
with Marion that was just so lucky that
guy knew about owner financing I didn't
know anything about it it worked out
okay because I sold it a few years later
and I bought it when the real estate
market was going up so even though he
thinks he overcharged me and thought he
was a genius I actually made out okay on
that deal
but with with these owner finance deals
you also to make sure your payments are
low this is really cool you could just
set the payment however once you wanted
you don't have to have a standard
interest rate you could say look I'll
pay you 100 grand over time seven
hundred bucks a month how's that let's
say okay and literally just seven
hundred a month until you pay off 100
grand no interest interest free loan we
do it all the time it works if you're if
you're working with somebody who would
just wants to get out of a property
another thing to consider the reason why
they do this
tax implications that Marion guy
the reason why he sold it to me a ton
owner finance was cuz he was a builder
and he had just closed out a huge
subdivision he said he built over 20,000
homes in his life this guy was a home
builder had the jet had the economy guy
was loaded and he didn't want to get hit
with the big fat tax that year based on
his tax bracket and what was going on so
he would rather sell it to me over time
he'd have to pay all the tax all at once
kind of interesting right so sometimes
the owner finance deal is what the
seller wants to do anyways ha so you get
to be a homeowner you didn't have to get
along what you do is you have an
attorney create a mortgage it's how they
have an attorney do it just say hey
here's the deal and you just you just
tell them the term say look here's what
I worked out this guy's gonna be the
bank I'm gonna pay him seven hundred
bucks a month till I pay off a hundred
thousand set up the paperwork
let's close this or a title company can
do it too
and they'll don't write it up that's the
good news about this you can get
somebody else do the actual paperwork
yep
how long they're going to wait that's a
good question
well I tell you what you do you stretch
it out as long as you can right you say
look it's gonna take me at least 90 days
Paul it's gonna take some time and
sometimes they're ok with that now
sometimes they're not and they give you
only like 30 days and then you just get
on it you hustle I'll tell you one of
the best tips about how to find an
investor is get you a to get you one of
those if you see those little white
coroplast signs and get a big old like
magnum 44 marker like to go on the Space
Shuttle kind of markers and just put you
know for sale 100k house for 50k and a
phone number the phone will ring off the
hook and off the hook now don't put out
too many of those signs we tell you I
did one time I I had a bunch of signs
out there and I kept getting a phone
call take down these signs man you know
it's Tennessee I mean it's just it's
like you know that that show about the
guys that had those those distilleries
where they're making the moonshine
yeah that's Tennessee take these things
down man so I was like I hadn't found a
buyer yet and I'm like man I can't take
these things down now if it was like a
cop or something I'd go take him down
it's just some normal citizen and he
called one night and he said if I don't
see these things gone by tomorrow I'm
gonna rip them all up I'm gonna turn him
around I'm gonna write free pitbull
puppies in a phone number I'm gonna
stick him in the ghetto
I couldn't leave how creative it was I
was like who's gonna do that he did it
200 phone calls a day I had to get rid
of the phone number I don't know where
he put all the signs the phone just kept
going off the hook if you were to ruin
someone's cell phone number get that
down that'll work for you okay that was
that was a bonus I'm not gonna charge
you for that one all right dr. Harris if
I'm stretching into a wrong direction
you let me know you reel me back in sir
for sale by owner sign you see it and
it's the
see this home it's a nicer home they're
asking 150 for it they owe 130 on it
they're buying a new built home so some
home builder just wooed them into a
beautiful new home new subdivision where
you know they got the the pretty
entrance and they've got the water
coming out of the lake and they need to
sell the property so they can pay off
the mortgage so they can freed up their
credit so they can buy the new home kind
of deals this
yeah it's none of the ones I've talked
about is it these people need to pay off
their mortgage to get rid of their home
so they can buy the new one you're gonna
run into this out there and you can't do
a creative finance deal now you could
try to you could try to like flip it if
they owe 130 you could try to do that we
call it a retail wholesale we talked
about at my book but sometimes that can
be a little rough because there's not
much room left in the deal when you have
to flip a property and there's real
estate agents involved in closing costs
that stuff really adds up so yeah this
is this is not a creative finance deal
so it's kind of a trick here this is an
example of where it doesn't work even if
the person is as motivated as all
get-out if they're begging you they're
on their knees take my home it doesn't
work because they need to get they need
to pay off their current mortgage it's
thinking about the new one make sense
all right cool just I figured I'd leave
it open for some more questions and they
coming to mind and what I've talked
about here then yeah go ahead yeah
now what he's talking about is in a lot
of mortgages they write in their a
sentence that basically says if you
change the deed we have the right to
foreclose it's called the due on sale
clause and when you're doing the subject
to where you get the deed the deed is
just change you do trigger that clause
so he's asking do we ever have any
problems with that well I've never heard
of it seen it I've never been a part of
it it's it's a lot more rare than seeing
Bigfoot yeah the bank's just happy to
get their money is it possible that a
bank could look at the title and go huh
you change the deed up we're gonna
foreclose that's true that could happen
we've never seen it happen in in 10
years and tens of thousands of
properties it is possible and where we
think it's most possible would be if you
didn't pay the mortgage if you didn't
pay it they'd eventually look at the
title when they're going to the
foreclosure process and they go wait a
minute the borrower's not the same name
as the owner oh they changed the deed
lets foreclose but that would be because
you hadn't paid them for eight months or
longer but yeah so we haven't we haven't
had that to be a problem and then here's
the thing to think about there if that
ever was to happen you know just your
luck you get struck by lightning right
just your luck that happens to you well
you could always just sell the property
at that point and just try to get rid of
it because you get rid of it before
they'd ever do their foreclosure but
yeah they're getting their payments
they're as happy as can be
in fact I mean literally as far as
paying these banks even though your
name's not on the loan I mean you
literally can set up direct draft you
could they'll take the money how every
way they can get it so yeah you can
definitely do it that way a good
question all that's great question go
ahead
a great question they would if they were
not motivated to get rid of their
property Oh they'd have a real problem
with that but if they're desperate
they're moving away they got to get rid
of something they get to the point where
they just don't care and it's it's an
interesting situation because you may
never be through it in your entire life
you may never go through that situation
but once you meet just one of these
people who tells you Phil just take my
home I don't care just take it I'm so
tired of it maybe it's a divorce that's
an interesting situation because in a
divorce typically one party is the one
on the loan and so what happens is that
party is the one that's most freaked out
about not being able to make their
payments and sometimes they're just like
look I'm going through a divorce I don't
want to deal with this I hate this home
or you're dealing with an absolute crazy
person funny story
so the nicest part of Tennessee is a
place called Brentwood is one of the
nicer parts of Orlando and Windermere
those kind of areas okay so I want you
to picture like the nicest part of
Orlando and a buddy of mine told me the
story cuz he owns the home right now and
he was he was thumbing through the
newspaper this was this was in the year
1999
he's thumbing through the newspaper he
sees an ad or somebody selling the
property for like a third of what they
should be selling it for I mean super
super cheap he's like that's strange he
calls the guy up guy goes yeah no 230
grand that's what I'm offering and my
friend was like isn't it worth like
seven hundred thousand or it is this
house like a you know like a crater
what's going on guy goes nah house is in
great shape wonderful shape guys like
well alright are you hiding something
guy says no this the guy that owned the
property who was getting rid of it was
worried that in the year 2000 the world
was going to blow up
this guy invented the noodle the noodle
that you see in those pools he was a
multi multimillionaire
he didn't really need the money he
thought the world was gonna end so he
sold this thing for 230 it was worth
seven hundred thousand my buddy buys it
and he can't believe it
the guy helped him move in you know
anything I can do for you dr. Campbell
you've done enough sir good enough well
you know the end of the world didn't
happen apparently the guy who this
Stefan not funny his wife left him
it took the kids with her he went
bankrupt and so I guess to him the world
did end but self-fulfilling prophecy but
yeah we do people just do nuts stuff oh
yeah oh yeah we got a new opportunity
thank you sir yeah December 21st
maybe you just run a couple ads in
Craigslist I'll buy your home before the
world ends that's exactly what his point
was Oh Oh because his plan was he okay
he's that's a various student right well
he was thinking
kind of like Mad Max the Thunderdome he
was thinking he'd be like a knight he
bought a camper like a so he and he went
on to the wood he went out to the high
mountains I mean I was thinking you know
like I'm you know I don't know if
there's some shows about it we're
basically the whole world has ended but
a couple of people are left you know and
he was thinking he was gonna be the
person to keep the keep the population
going wish it you know it's kind of
scary he probably procreated right all
right scene pool dadgummit
yes question
oh that's a great question
I am gonna argue the best way to get
tenants is not only to do Craigslist and
what not to put out some signs as well
and then if you're if you're doing
student housing get the word out get to
get the word out in any way you can I
mean just do an all-out attack tell
people you know I like to put signs out
in front of hospitals because they all
got jobs at a hospital I mean the
hospital is just at you know just
surrounded by my side it's a it's a
state of Tennessee a bunch of collection
attorneys are so much smarter about
creating laws and they didn't want to go
hire a bunch of paralegals through their
work form so they made it a state law
that anytime anytime a judgement against
a property was recorded that it had to
get paid even if it wasn't against the
property was just recorded in that
county to have to get paid off that's
what happens when when you let the
attorneys write all the laws if there's
any attorneys in the room I apologize
but it's true
yeah what I like to do is I like to what
I let you always let one person in the
house handle utilities and of course he
hates his two friends after a couple
months because they're not paying him
but it always happens but yeah so what I
like to do also is every single parents
on the lease they're all on the lease I
mean so the signature on that lease is
just you know you get all the parents
you got the and you get the the actual
students yeah oh well I like to do it at
the same time yeah I don't know I mean
you'd have to have separate entrances or
something because I don't know how many
people want to just go live with two
random folks I mean maybe maybe when
you're a freshman you get thrown in a
dorm but you know by sophomore you've
already negotiated who you're living
with next year I'll worry about wrapped
up we're out of time all right this is a
perfect time y'all there's a lot of big
players in the world right now buying
single-family homes for the first time
in history