Easy methods to Purchase a Rental Property with NO Cash OR Credit score

Ashley:
That is Actual Property Rookie episode 280.

Tempo:
Each time on a topic to deal, vendor will get the quantity they need, agent will get paid their fee and I get a property the place I’ve an rate of interest under 4% connected to it with a cost that I can exit and money circulation instantly and not using a credit score verify. And I pay quite a lot of occasions 85 to 99% of retail worth. So everyone wins. The sellers get more cash, the brokers receives a commission fee and I don’t must go to a financial institution. All people wins within the transaction.

Ashley:
My identify is Ashley Kehr, and I’m right here with my co-host, Tony Robinson.

Tony:
And welcome to the Actual Property Rookie Podcast the place each week, twice per week, we’re deliver you the inspiration, motivation, and tales it’s essential hear to kickstart your investing journey. Rookie viewers, do we have now a present for you guys at the moment. We’ve acquired the one and solely Tempo Morby on the Actual Property Rookie Podcast. For those who don’t know Tempo, Tempo is well-known within the BP neighborhood, however Tempo additionally has a brand new guide out referred to as Wealth with out Money: Supercharge Your Actual Property Investing with Topic-to, Vendor Financing, and Different Artistic Offers. Tempo comes on to interrupt issues down all about artistic financing.

Ashley:
Yeah. He additionally talks about… He offers this golf analogy as to why you could be taking part in this actual property recreation with only a putter when it is best to have your whole golf equipment. So I believed that was an excellent attention-grabbing analogy, however very, very relatable.

Tony:
Yeah. Nearly like David Greene esque, proper? With the metaphors there. It was good.

Ashley:
Yeah. After which we really walked by way of learn how to get a deal at the moment, as in get a deal in at some point. So the primary motive we have now on, as Tony talked about, that Tempo simply wrote a guide, Wealth With out Money. So head to biggerpockets.com/wealthwithoutcash to pre-order this guide. Be sure you pre-order earlier than Could 2nd. Tempo really goes by way of what you get with the pre-order in addition to simply the guide. And let me let you know, these are alternatives. I believe me and Tony would possibly simply buy a pair books to get the entries.

Tony:
One of many prizes, I’ll simply trace out one in every of them, however you possibly can actually get on a tv present with Tempo in case you are one of many fortunate winners right here. Tempo additionally, along with the guide popping out, he’s acquired a bootcamp popping out with BiggerPockets about artistic financing and topic to, and that begins June 18th after which ends on August twenty sixth. So should you guys head over to biggerpockets.com/bootcamps, you possibly can study extra concerning the Artistic Finance Bootcamp.

Ashley:
And naturally, in case you are only a rookie investor and need to study something and the whole lot about getting began in actual property, there’s additionally the Rookie Bootcamp that I’m co-hosting with Tyler Madden that will probably be beginning those self same dates over the summer time.
Tempo, welcome again to the present. The final time we acquired along with you, we had been really dwell at BPCon and acquired to do a dwell recording. And now we’re again to being digital. So how have you ever been?

Tempo:
That was particular. San Diego BPCon. Now the brand new BPCon is in Disney World primarily. Orlando.

Tony:
Yeah.

Tempo:
So it’s not in Disney World. I simply take a look at Orlando and I’m like, “All of Orlando is Disney World.”

Ashley:
Did you see that we’re really going to Common one evening too? They rented out Common Studios.

Tempo:
I noticed that. The final evening because the cap get together. I’m tremendous enthusiastic about that.

Tony:
Tempo, I don’t know if you recognize this, however that was one in every of our greatest performing YouTube movies, or I believe it was the perfect performing YouTube video for the Actual Property Rookie Podcast additionally.

Tempo:
Wow, that’s cool.

Tony:
You bought some massive sneakers to fill at the moment, brother.

Ashley:
Yeah.

Tempo:
Yeah, I simply was so excited to hang around with you, guys. You guys had been nice to satisfy. And Tony, your partner, and simply everyone in the entire BiggerPockets management, it was simply so cool to hang around backstage and try this podcast. So thanks a lot for having me again.

Tony:
No, in fact, brother. We’re right here to speak about one thing particular at the moment, proper? Tempo, you’ve gotten entered uncommon air as now an formally printed BiggerPockets writer. Clearly, we’re going to speak about your new guide, man, Wealth With out Money: Supercharge Your Actual Property Investing with Topic-to, Vendor Financing, and Different Artistic Offers. However earlier than we do, man, you’re clearly the king of all issues artistic finance, so we thought it’d be cool for the Rookie viewers simply to type of get a fast breakdown of what it really means to do a deal topic to, what’s vendor financing, and type of what are a few of these artistic methods.
So Ash, I don’t know. The place ought to we begin? You’re a wealth of information, Tempo. I simply need to be sure we get the viewers the perfect stuff.

Ashley:
Yeah, let’s begin with what are the choices for artistic financing. Once I began investing, I didn’t even know you can go to a financial institution to get a mortgage. I simply thought you needed to have money to purchase a property, as a result of my mentor, that’s what he did. He used money to purchase properties. So what are ways in which you are able to do artistic financing? Let’s begin with that.

Tempo:
I believe the most important problem in actual property is that there are such a lot of methods to succeed, whether or not it’s from the BRRRR technique, sure, utilizing money, all of this stuff that artistic finance I believe could be very daunting for individuals as a result of what it does is it takes the ten methods to achieve success in actual property in money or conventional strategies and it multiplies by 10. There’s actually 100 other ways to generate profits with artistic finance, perhaps much more. I’ve by no means seen a transaction ever similar to a different transaction due to how artistic you will be with it. However what precisely does that imply?
So should you take a look at this, right here’s what you’ll see. You’ll see that there are all… All the pieces begins with a vendor, proper? No matter deal you’re working, there’s at all times a vendor of a property concerned. After which that vendor is both A, represented by an actual property agent, or B, they’re unrepresented, proper? And what we name as actual property agent, these are on market. And up unrepresented, we name these off market, okay? No matter technique you select, you’re going to go after a vendor in someway, A or B. That’s principally it. Happening market, I see one thing on the MLS or Zillow and I’m going to succeed in out to this actual property agent and I’m going to try to get this actual property agent to assist me work a take care of this vendor. Or B, direct to vendor. You’re going to the vendor direct perhaps primarily based off of a ache level like probate, foreclosures, expired itemizing, no matter it could be, and also you’re working leads.
So right here’s the place artistic finance is available in. What I realized is that once I was doing nothing however conventional lead gen, I’d’ve to generate about 50 leads for each two offers that I did. Why? Nicely, typically the sellers will not be motivated. They don’t need to promote in any respect and there could also be simply kicking tires. However what I discovered most of the time, it was both A, B, or a mixture of each of them, which was C. It was both A, the vendor desires an excessive amount of cash. And even brokers run into this on a regular basis the place an agent will go discuss to a vendor, vendor says, “I need you to listing my property.” The agent sees that the property’s price $300,000 by comping it after which the vendor says, “I need $350,000.” So you’ve gotten principally unrealistic sellers, proper?
Once I first began Ashley, I additionally didn’t know that folks may get a tough cash mortgage. I believed a tough cash mortgage was like a mortgage shark.

Ashley:
With the baseball bat?

Tempo:
Precisely. Like they’re going to interrupt your kneecaps should you don’t pay them again, proper? What you don’t know hurts you dramatically. And what artistic finance does is it helps these sellers that need an excessive amount of cash. Then B is perhaps a vendor has an absence of fairness. And also you’re seeing this increasingly and extra proper now, particularly should you look in Maricopa County the place I dwell, I dwell in Maricopa County, Phoenix space, and also you pull up expired listings. For those who’re a rookie, write this phrase down, expired listings. You need to go get a topic to deal at the moment? Go after expired listings. Sometimes, brokers are representing a vendor. The agent has six months sometimes in 99% of preparations to promote that home for the house owner. And if they will’t, then that itemizing will get damaged and the agent not represents that vendor and now that turns into what we name an expired or unlisted or delisted property. If you would like a topic to deal, that’s the place you go, is expired itemizing.

Ashley:
Are you able to simply inform everybody the place they will get these expired listings? What are the steps they must take?

Tempo:
So first off, I’d make buddies with actual property brokers as a result of the simplest and the free least expensive method to get them is simply get them from a list agent or an actual property agent who has entry to the MLS as a result of they get that data without spending a dime, okay? Second place I’d go is I’d go to perhaps PropStream. BiggerPockets has a terrific software program as nicely. There’s so many various methods to drag that up. We get ours from PropStream.

Tony:
Tempo, simply actually shortly. To not go too far down the rabbit gap, however say I’m a model new investor, I’ve by no means accomplished a deal earlier than and I need to attain out to brokers for the needs you simply talked about. What am I saying to them to get them to take me critically and really give me deal circulation?

Tempo:
Okay, cool. That is nice. That is the place I’ll tie that every one into your query. So both A, I used to be working, I’d go generate 50 leads, I’d go get two of these offers money as a result of I’d have tremendous motivated sellers out of fifty leads, proper? The opposite 48, they both, vendor desires an excessive amount of cash or the vendor has an absence of fairness, or a mixture of each, which is C. So what I realized is that I may make the most of topic to and vendor finance. And there’s a handful of different issues as nicely, however I gained’t go into them as a result of we solely have restricted time, however like notation agreements and lease choices and all of these forms of issues.
One other technique I speak about within the guide is known as the Morby methodology, which is a method I created about 5 years in the past. We gained’t go into that at the moment. However there’s so some ways to generate profits. The 2 major stuff you need to go after are topic to and vendor finance. So what you’re doing is should you’re going to succeed in out to an agent, what you need to do is you need to begin off the dialog at all times about their commissions. All the time. “Hey, my identify is Tempo Morby. If I used to be in a position to get your commissions paid, would your vendor be open to phrases?” Some brokers know what phrases are, some brokers don’t. Mainly navigating that dialog, some brokers go, “What do you imply phrases?” You go, “Nicely, once more, if I may get your commissions paid, would your vendor be open to me taking up their present funds? Or in case your vendor doesn’t have funds and so they personal the home free and clear, would they be open to vendor financing the property to me?”
Now the agent will hesitate. Typically they’ll go, “Oh. Ah…” You go, “Look. By the best way, I’m not going to barter the gross sales value. I’ll even come as much as the quantity that the vendor and you might be searching for. I’ll get your commissions paid, however I’m a phrases purchaser. I’m going to purchase solely on phrases.” Now the method of topic to and vendor finance, right here’s what I discovered. Once I would go after these 50 leads, two offers flip into money and one other eight offers will get accomplished with artistic. I discovered that using artistic finance topic to, which we will bounce into what that’s in only a second, and vendor finance, using these two methods, I may 4X my conversion price and 4X my monetization.
And by the best way, it’s method simpler to purchase a property, topic to, than it’s with money. Approach simpler. The one motive why individuals are confused by topic to is as a result of it’s not at all times talked about and it’s new. It’s type of like when Ashley and I each realized, “Oh wait, individuals aren’t really money consumers? Like 99% of individuals are not shopping for with money?” They’re really, should you use the proper wording, you’ll say, “I’m a tough cash purchaser.” We’re not money consumers, we’re exhausting cash consumers. We purchase homes to flip them utilizing exhausting cash. So it’s similar to studying a brand new language.
Topic to sounds complicated, however it’s really method simpler. It’s quicker to shut out a title firm. There’s 5 much less individuals concerned. It’s method simpler to get beneath contract. There’s hardly ever inspections, there’s by no means any value determinations, there’s no banks concerned, there’s no mortgage payoff requests, there’s no purposes. There’s none of that happening, that are all of the sophisticated components of a money transaction. And so in topic to, you don’t have any of these issues. So it’s method simpler for me to go to a home-owner and say, “Your asking value isn’t the issue for me. Whether or not you’re prepared to do phrases or not is my most important concern.” It’s like, “You’re not going to barter my gross sales value?” No, I’m not. All I need is I need the rate of interest. I inform sellers on a regular basis, “I’m not likely shopping for your own home. I’m shopping for the rate of interest connected to your own home. That’s actually what I need. Your own home simply so occurs to come back with it.”

Tony:
Tempo, a lot, a lot good data there, brother. A lot. And I simply need to pause for a second as a result of I need to make clear just a few issues for our rookies earlier than we maintain going.

Tempo:
In fact, yeah.

Tony:
So first, if we take one step again, are you able to outline what topic to means and outline what vendor financing means and clarify how these two ideas are completely different from going to a conventional financial institution to get financing on a property?

Tempo:
In fact, yeah. So let’s take a look at it like a automotive. Let’s say I need to go purchase a Toyota Prius and I’m going to a financial institution to go get a Toyota. I’m going to the automotive dealership. The automotive dealership says, “Okay, nicely what would you like? How a lot are you able to afford?” After which what do they do? They go to their finance division, they run your credit score, they take a look at your job credentials, they take a look at your W2. They take a look at all of the issues similar to you do by way of a mortgage and so they see should you’re worthy sufficient to purchase that automotive. Okay, nice. In a automotive transaction, very like an actual property transaction, you might be paying over retail for each home.
By the best way, have you learnt each house owner pays over retail for each home that they purchase? No house owner buys homes with equities. They purchase at full retail on the MLS. And in spite of everything their commissions and shutting prices and all their further charges and all of the shifting bills to get into the home, each house owner begins by shopping for a home underwater, proper? But it surely takes months to undergo that course of. So I take a look at that and I’m going, “If fairness isn’t the primary objective within the very starting, fairness will construct over time, my tenants pays down over time, actually what I need to do is keep away from going by way of the financial institution.” So why don’t I simply go to anyone that has a Toyota Prius and say, “Hey, do you’ve gotten a automotive cost on that Toyota Prius?” And so they say, “Sure.” I’m going, “Nice. Can I simply take over the funds on that Toyota Prius? As an alternative of me going to a automotive dealership paying over retail, getting a brand new mortgage, going by way of the entire course of, can I simply make the funds in your present mortgage?” Vendor says, “Sure.”
And should you go on my YouTube channel, I purchased a Kia, topic to, the place I discovered a vendor that goes, “Look, I purchased this on a dealership final yr, it doesn’t have any fairness and I’m attempting to promote the Kia on Craigslist, however I’m getting lowballed.” Welcome to actual property. That’s the identical factor. Householders purchase a home, a yr later, they try to purchase it for a job switch or perhaps they’re getting redeployed in the event that they’re within the navy. They go to promote to an actual property agent. How a lot does it price to promote a home by way of an actual property agent? 3%, 3% and one other 3 to 4% in closing prices, house warranties, inspection gadgets, et cetera. You’re like 10% to promote a home. It prices 10% to promote a home.
So for a vendor that doesn’t have quite a lot of fairness, I simply go to the vendor and say, “Can I simply take over your funds?” And that’s the technique of topic to. I take the deed, proper? As a result of right here’s the large distinction. If I’m going to Craigslist proper now and I begin calling people who personal Toyota Priuses, you’re going to run into some people who personal them outright, they paid money for these automobiles. And also you’re going to run into some individuals that also have automotive funds on these automobiles.
Vendor finance means the the automotive is paid off and I can simply say, “Hey, I’d like to purchase your automotive on funds. What funds do you need to arrange the place I simply make you a month-to-month cost and also you turn out to be my financial institution?” That is known as vendor finance. Vendor is financing me, vendor finance. After which topic to, I simply go, “Oh, you’ve gotten a automotive cost. No drawback. I’ll simply take over the automotive cost precisely what it’s. I’ll log into your account, I’ll make the cost each single month. Registration will get put in my identify. Possession will get put into my identify. And I’m the proprietor of the automotive, however the cost stays in your identify. We keep away from all of the financial institution charges.” The one person who makes cash once I go get a brand new financial institution mortgage to repay your present financial institution mortgage are two banks. You don’t make any more cash and I positively don’t make any cash. So what am I doing going and getting a brand new mortgage to repay an outdated mortgage? Why don’t you simply let me take over the outdated mortgage?
I’m not name speaking about assumptions. I’ve by no means gone by way of a credit score verify. No person’s ever checked out my job historical past. No person’s ever checked out my checking account, see how a lot cash I’ve in it. Nothing out of all of the transactions we do. So topic to is when anyone has an present set of funds that I can take over, an present debt. Vendor finance means I work instantly with a vendor and we construction a cost that works for the vendor.

Tony:
Tempo, earlier than you go into vendor financing extra, I simply need to notice that while you had been on on episode 236, we did undergo as to why a vendor would try this. Like why would they belief anyone taking up their funds? So should you guys need to study extra about that, return and take heed to that episode as to how come that doesn’t have an effect on their DTI, like how you utilize the third get together servicer, all these issues. So should you actually need to study extra about topic to, return and take heed to that episode.

Tempo:
Yeah, so what I’m primarily doing is I’m going to owners or brokers. Most likely half the offers I do are with brokers concerned. The opposite half are with vendor. And why is it half-and-half? It’s half-and-half as a result of I’m going to the brokers first and I inform the brokers, “Hey, it seems like your own home has been listed for over 100 days and money consumers are already telling you this isn’t an excellent match for {the marketplace}. You’re asking an excessive amount of cash. I will probably be one of many solely consumers you’ll converse to that don’t care concerning the buy value. So if I may get your commissions paid, would you be open to speaking to your vendor about me taking up present funds or making a cost construction that is sensible for each of us?” 50% of the brokers say sure. 50% of the brokers say no.
So the 50% of brokers that say no, have you learnt what we do, is we put them in our CRM and we monitor the home till it doesn’t promote and when it goes expired, we then name the vendor instantly and say, “Hello, we tried speaking to your agent about this home two months in the past and speaking about taking up funds. Did your agent ever deliver that as much as you?”
“Nope, my agent by no means introduced your provide to me.”
“Nice. Would you be open to letting us take over your funds?” They go, “You’d be prepared to do this?” So the paradigm shift for me was like the identical paradigm shift you had Ashley while you went from studying from one particular person that purchasing money is how actual property buyers generate profits to realizing that 99% of actual property buyers don’t use their very own money, they use non-public cash or exhausting cash. There was that complete mild bulb second of like, “Oh my gosh, what have I been lacking?” It’s the identical factor with me. Once I acquired into artistic finance, I used to assume that sellers could be not open to this. After which while you even have the dialog with the vendor, the vendor is like, “Wow, you’ll be open to that?” It’s the polar reverse of what you’ll assume.
Now, in fact, similar to if I walked into my neighborhood and knocked on my neighbor’s door and stated, “Hello, I’d like to purchase your own home,” most house owner’s homes will not be on the market. So that you’re not simply going to speak to a random particular person to purchase their home whether or not it’s money or artistic and even itemizing by way of an agent. 95% of homes will not be on the market, nor will they be for the subsequent couple years. So what you’re doing on this scenario is I’m searching for brokers which have listings which might be over 100 days after which we begin reaching out to the agent saying, “Hey, I’m a money purchaser. Nonetheless, if this home was an excellent match for a money purchaser, it in all probability already would’ve bought. Nonetheless, I’m additionally a phrases purchaser, so if I can get your fee paid within the course of, would your vendor be open to letting me take over funds or vendor financing?”
Once more, 50% of brokers are educated on this and so they get excited on the prospect. The opposite 50% of brokers which might be new or unseasoned or their dealer hasn’t taught them this, they go, “No” or “Sure, I’ll current it to my vendor, however I do know they’ll say no.” We simply wait till the itemizing goes expired after which we purchase these offers anyway.

Tony:
Web page, only one clarifying query right here. If I’m placing myself within the vendor’s sneakers and we’re doing a topic to deal, that is the one factor that I believe would make me nervous, is that if Tony and Tempo conform to a deal, topic to, the place Tempo is taking up my mortgage and I’m transferring title to Tempo however my identify nonetheless stays on the precise mortgage paperwork, what occurs to Tony if Tempo decides to cease paying?

Tempo:
Nicely, there’s a handful of issues. That is the place perhaps we get a bit bit into the weeds should you’re okay with it. In each single state, there’s one thing referred to as an executory contract, okay? You guys have heard of them beneath completely different phrases. Land contract, contract for deed, settlement on the market, most of these issues. You guys ever heard these phrases earlier than?

Tony:
Mm-hmm.

Tempo:
Okay, that’s referred to as an executory contract. All states that is authorized. And what’s that? It signifies that I can take over your funds, however you continue to maintain the deed as safety simply in case I fail to make funds. So it’s a topic to mild principally. It’s the actual technique of me shopping for and controlling the property, besides the deed by no means transfers into the client’s identify. The vendor places it into a security deposit field or no matter method you need to maintain it. The deed stays in limbo till the client pays off the home, sells the home, or refinances the home.

Ashley:
Once I did a topic to deal, we really had the vendor signal over the deed, however it was by no means filed. Our legal professional nearly held it in escrow.

Tempo:
What state was that? In Florida?

Ashley:
New York.

Tempo:
Okay, New York. So New York could be contract for deed or a land contract, so relying on what legal professional you went with. And so they maintain it in limbo as safety for the vendor. Now, why don’t I simply try this on a regular basis? Why don’t I simply try this in a method the place I do an executory contract? It’s even easier, proper? It’s like, “Nicely, now the vendor has safety.” The issue with that’s that the client doesn’t have the power to write down that property off on their taxes using depreciation. So if I’m an actual property investor, one of the engaging issues to me is definitely while you’re model new and also you’re a rookie, you really need money circulation. However when you get to a degree of money circulation the place it’s paying to your bills and your life-style and workers and all that type of stuff, the primary motivator for me to purchase properties is not money circulation. The principle motivator for me is to purchase as many properties as I can so I pay $0 in taxes yearly.
And so if I purchase on an settlement on the market, that’s what we name it in Arizona or a land contract in Florida or contract for deed in New York Metropolis, they’re all the identical factor. They’re simply referred to as one thing completely different per state. Precisely the identical factor. Umbrella time period is executory contract. And should you guys are watching this or listening to this, you possibly can kind in Tempo Morby executory contract on YouTube, and I’ve much more details about it. However you probably did an executory contract as a result of what that does is it retains the vendor even at a better degree of safety, however what it does is do a disservice to the client the place the client not can use that property as a tax profit.

Ashley:
Yeah, we did it the place it was held till the again taxes had been paid off. So it was held as type of leverage for that. After which as soon as the again taxes had been paid off, then it went into the Farm LLC, after which it was continued the cost. So it’s like a mixture of them, I assume.

Tempo:
Yeah, we name {that a} relationship contract. A relationship contract means you guys are relationship for a sure period of time till you resolve to finalize and get married. And so that you dated, you had been relationship and also you had management and also you had been in a relationship. After which when that factor, no matter that set off was, typically it’s down cost help, typically it’s an IRS lien, typically it’s a mechanic’s lien, typically it’s a tax factor like what you’re speaking about Ashley, after which as soon as that’s cleared and dealt with, then the deed will switch into the client’s identify and consummate that relationship contract.

Ashley:
Do you assume for anyone that’s perhaps going to be in a scenario like that, to make it possible for that type of set off occurs within the tax yr that they’re buying the property in order that for these tax benefits, their identify will probably be on the deed for that present tax yr that they purchased it?

Tempo:
You should utilize depreciation in any yr you personal a property. So even should you resolve to not make the most of depreciation on, let’s say I purchase a home, 123 Foremost Avenue, and I resolve, “Oh wow, I’ve already worn out all my earnings this yr from the opposite homes I purchased, however now I’ve 5 or 6 homes that I don’t actually need for tax advantages,” you possibly can at all times save these for subsequent yr or the yr after. So that you’re not pressured to make use of depreciation within the first yr you personal the home. It’s an excellent query. For those who want the tax advantages, then sure. For those who don’t want the tax advantages, then you definately don’t want to fret about that and you may wait till the next yr.
Man, I may speak about taxes for actually 4 hours. It’s one of the intriguing issues that like, “I haven’t paid earnings taxes in seven years,” and it blows my thoughts. Folks go, “Nicely, how do I earn more money?” I’m going, “Preserve more cash.” Instantly a method to make 30, 40% more cash than what you’re making at the moment is don’t give 30% of it to the IRS. Preserve it. And the best way we do that’s by being… Isn’t it bizarre? We get incentivized to put money into actual property. The IRS is like, “Right here’s a bonus. Go put money into actual property. Preserve your cash simply so long as you set into an funding.” What? It’s loopy. In order that’s the rationale why topic to is so alluring is as a result of now I’ve the deed in my identify similar to you probably did, Ashley. You simply had a hiccup the place now your hiccup was taxes.
Tony’s reference or query is discussing the hiccup between a vendor being overly involved about having anyone have the deed of their identify and the mortgage within the vendor’s identify. That’s simple to beat by one in every of two issues. One, be a extra credible and higher negotiator, which is me, or two, say, “Okay, nicely in case you are fearful about having the deed in my identify or my identify on title whereas your identify is on the mortgage, why don’t we simply do an executory contract the place we maintain the deed in limbo till I execute on a sale or refinance or pay the property off?”
As a result of what you get… Even when, Ashley, your legal professional saved that property in limbo for 25 years, that’s a conventional land contract, contract for deed bond for deed, settlement for gross sales, simply once more executory contract, in the event that they saved it in limbo, you at all times have management of the property. And guess what you get? You get all of the money circulation, you get all of the appreciation, you get all of the mortgage pay down. Let’s say to procure it topic to, and your tenants are paying down that present mortgage, you get the credit score for that. The one factor you don’t get is the tax bonus or the depreciation. And so it’s 90% pretty much as good as a topic to deal, however man, 90% is fairly cool too.

Ashley:
Yeah. I believe that’s so nice to make clear these two issues for everybody as a result of they’re two utterly completely different choices in that one side. And that’s the place it goes into what your individual objectives are, your why or what you’re attempting to attempt for in actual property and if the tax benefits is a very massive factor and also you went and did the land contract and also you realized, “Oh no, I’m not going to get any of these tax advantages. That was the only real motive that I used to be attempting to get into actual property anyway.” So I’m actually glad we went by way of it and clarified that.

Tempo:
Yeah. I imply, that is the factor, is I may speak about executory contracts, arbitrage, lease choice, all these different methods. There’s so many methods to purchase actual property. All it comes all the way down to is that this, distill this all the way down to one thing quite simple. If I’m taking part in golf, am I going to win or defeat my opponent if they’ve a full bag of 14 golf equipment if I solely have one membership? No, as a result of should you perceive golf, you’ve acquired a driver to hit the ball actually far. You’ve acquired a putter to simply put it 2 or 3 ft or a few inches in some conditions.
You think about attempting to chip a ball with a driver or attempting to get a driver to hit a ball out of a sand entice? Primarily what individuals are doing is that they’re exhibiting as much as an actual property transaction with a putter. When anyone like me exhibits as much as an actual property transaction with a full bag of golf golf equipment and so they take a look at, “What’s happening? How can I assist the vendor? How can I assist the agent get their commissions? And the way do I get into this take care of no credit score verify, no credentials and really utilizing, if I have to, if I have to deliver cash to the desk, deliver a non-public moneylender?” And all that comes all the way down to is all the choices. So executory contracts, like what we talked about, proper?
So Tony, vendor’s prepared to do a topic to deal, however they’re overly involved about their safety. Simple. Executory contract, proper? Vendor desires to promote the property to me, however they need to make it possible for I’m as credible as I say I’m. Okay, do a relationship contract like Ashley did. Say for six months, let’s do an executory contract the place I’ve management of the asset and after six months it converts to a full sub to deal as a result of now I’ve proven you for six months I could make my funds on time, handle the property and put a tenant in the home. This isn’t even doable in a money transaction. None of that is doable.
And so all these sellers that need too excessive of a purchase order value, guys, I’ll pay, in some conditions, 50,000 to $70,000 over a retail ask. An agent has one thing listed at 600 grand. And to ensure that me to get into that take care of no cash out of pocket and actually low rate of interest, I’ll go, “Nicely, what’s the quantity that will get you enthusiastic about giving me the phrases that excite me?” And so they go, “Nicely, we have now it listed for 600, however should you purchase it for 650, we’ll do a no down and 0% curiosity deal, or a 2% curiosity or a 3% curiosity deal.”
“Nice. I provide the lever in your aspect that will get you excited and also you give me the lever on my aspect that will get me excited.” You may’t try this in money. And so to distill this all the way down to probably the most fundamental model, is that if I discuss to 50 individuals or 50 alternatives, whether or not it’s coming from a wholesaler, an agent, or on to a vendor or a probate legal professional referral or wherever the supply of the lead comes from, let’s say I collect 50 leads, everyone is providing a money provide, you’re going to get two offers out of these 50. I’m going to get 10, proper? That’s all this comes all the way down to, is how can I’ve extra instruments to deliver to the scenario to assist everyone concerned? I’d say the most important drawback with artistic finance… What do you guys assume is the most important drawback with artistic finance?

Tony:
Lack of expertise.

Ashley:
Yeah.

Tempo:
The primary person who doesn’t perceive it’s the licensed agent.

Ashley:
Having that center man.

Tempo:
Nicely, what it’s is that they get a license. So all my companions are licensed. I select to not be licensed. However all my companions are licensed. There’s a profit to being licensed. However we see quite a lot of actual property brokers that aren’t skilled by their dealer or no one’s speaking about it at their brokerage. They’re not hanging out with different actual property buyers. So when anyone brings a possibility to their shopper, topic to, vendor finance, executory contract, lease choice, arbitrage, regardless of the technique is, the agent instantly goes, “I didn’t hear about this in actual property faculty. My brokers by no means introduced this up. That should imply it’s unlawful.” And so what occurs is the brokers will not be educating themselves and so they’re not studying, “How do I double or triple my commissions by bringing extra instruments to my sellers?” They’re not going on the market and studying that on their very own as a result of no one’s telling them to take action.
And so, one of many massive issues that we’re doing this yr is our initiative, an enormous objective I’ve is I’ve three attorneys and myself going across the nation and we’re creating continued schooling programs for licensed actual property brokers in order that they will study topic to from attorneys and from myself. Arizona’s first, Georgia’s second, Florida, Texas, et cetera. We’re going round and instructing by way of their continued schooling course that their brokers are in a position to approve, and so they get their continued schooling credit studying topic to in vendor finance. So as a substitute of me complaining concerning the business and saying, “My gosh, why aren’t these brokers doing this?” I’m going, “Why don’t these brokers know this?” It’s as a result of anyone’s not taking the workload on their again and stated, “Let me go educate them legally in how to do that correctly.”
And extra importantly, educate the brokers to show their brokers. So as soon as a month, we have now an agent class in my workplace. So long as you’re a licensed actual property agent, it’s free. We often get 1,700 people who enroll. We are able to solely let 300 individuals within the door. We do that without spending a dime, six hours as soon as a month. I usher in an legal professional and an escrow officer that’s been doing artistic finance for 48 years, I imagine. I simply give and provides to the business as a result of what finally ends up taking place is then brokers deliver me offers and so they go, “Oh my gosh, I had no thought I may do that.” In order that’s actually the most important drawback with the business. It’s not even the sellers. The sellers are enthusiastic about these alternatives. They find it irresistible. Vendor finance helps mitigate capital beneficial properties. The sellers get more cash. The sellers get a share and a return and securitize funding towards their very own actual property that they perceive. Might you inform I may speak about this for like 25 hours?

Tony:
Yeah.

Ashley:
Yeah.

Tony:
But it surely’s a lot good things, Tempo. There’s so many angles to it, which once more, which is why I believe individuals have to go decide up a replica of your guide, Wealth With out Money. You speak about quite a lot of this in there.

Tempo:
Can I let you know one thing that I did concerning the guide as a result of I’m not… I hate to say this, however I’m not an enormous reader. What I did is I made that guide so particular. I made each chapter will get a three-hour deep dive on the context of that chapter by me making a video companion information. Form of like once I was studying the Bible for the primary time, I’m studying the Previous Testomony, I’m like, “What the heck is happening within the Previous Testomony? This factor is the weirdest factor.” These bizarre names and other people stabbing one another, It’s like, “Why is the Bible telling me about all this bizarre stuff?” After which anyone got here to me and goes, “Hey, learn this companion information. It’s a companion information that helps you perceive the context of every chapter at every verse within the Bible.” And swiftly the Bible turned tremendous cool to me and it was so enjoyable.
So I stated, once I write a guide, a guide with BiggerPockets, I need to create a video companion information. So each chapter will get three hours of context on whiteboards and breaking down offers. The primary chapter of the guide, verify this out, that is so freaking cool, I usher in a dwell viewers to file this video companion information in my studio proper over 15 toes away. I’ve acquired like 15 individuals in. I’m going, “All proper, guys. Welcome to the Video Companion Information with BiggerPockets” and my telephone rings. I look down at it, and it’s a vendor that I’ve been negotiating with on a deal in Boston, Massachusetts. He says, “Hey, Tempo, I’m on the town in Arizona. I believed perhaps I may simply cease by your workplace and we may finalize the small print of my deal.” I’m going, “Yeah, come over. I’m recording. For those who don’t thoughts, simply come over to the studio.”
So for an hour and a half, I broke down my pitch, my negotiating, and I lock up a dwell deal within the first hour and a half of the video companion information proper there for the BiggerPockets. Whoever buys and pre-orders that guide, you’ll get that. The vendor’s like, “Wow. So that you’re simply going to barter with me proper right here with cameras in my face?” I’m going, “What higher place to do it?” The viewers is sitting there like, “I can’t imagine Tempo is pitching and simply purchased a duplex in Boston, topic to, in an hour.” Then I went by way of each objection he had. He had six objections. I went by way of each single one in every of them dwell, with a dwell vendor. After which we signed the contract, he leaves, and now I already personal the property. So if you wish to actually study topic to in vendor finance, that guide goes that will help you. However the video companion information you get with it’s a masterclass. It’s so superior.

Ashley:
Is that only for pre-order, Tempo? I need to make it possible for’s clear.

Tempo:
It’s just for pre-order, yeah.

Ashley:
Yeah. Everybody, simply pre-order to get that, as a result of that’s going to be large worth to everybody. So that you guys don’t need to miss on the market.

Tempo:
Yeah, and I’ve acquired like chapter 17 is concerning the legalities of topic to vendor finance lease choice. I’ve an upcoming class coming in two weeks the place I’ve two attorneys and my escrow officer, and we’re doing a six-hour breakdown of how offers are accomplished legally and referencing the IRS’s web site. The IRS tells you as a purchaser and a vendor learn how to deal with your taxes while you purchase or promote topic to. Then there’s all kinds of laws that references topic to nationwide. It’s in every single place. So I’m going by way of and I’m doing a six-hour class on that. And so they get that six-hour class that’s the companion for chapter 17. So chapter 17’s eight pages, however you get a six-hour authorized class connected to that chapter for the pre-order.

Ashley:
Tempo, we’re working out of time right here, but-

Tempo:
All the time. It’s basic with me.

Ashley:
… for our Rookie viewers, I need to give type of an instance, a state of affairs. So simply think about that you’re sitting on a park bench, you haven’t any cash, no mobile phone and it’s essential do an actual property deal at the moment to have the ability to eat tomorrow.

Tempo:
Simple.

Ashley:
What would you do? Simply type of break that down for us actual fast.

Tony:
And no present contacts, Tempo. You may’t faucet into the individuals that you just already know. You’re ranging from zero.

Tempo:
That is simple. I didn’t understand it was simple. Once more, again to Ashley’s reference earlier, it’s like I didn’t know what I didn’t know, you recognize? I personal a nationwide title firm, so I perceive how title firms work at a reasonably deep degree. There’s at all times a advertising and marketing division in each title firm, okay? Have you ever guys ever accomplished lunch and learns with title and escrow officers? Like they arrive in and so they pay to your meetups and stuff like that, or they sponsor issues for you?

Tony:
No.

Tempo:
You’ve by no means accomplished that?

Tony:
No.

Tempo:
Okay. For those who guys are doing meetups in your native city, get a title firm and say, “Hey, do you guys have a advertising and marketing division I may discuss to?” They’ll are available and pay for all of your meals, all of your advertising and marketing, the whole lot.

Ashley:
Wow.

Tempo:
Each department of my title firm and each title firm I do know has a month-to-month funds of about $10,000 that they will go and do luncheon lunch for mortgage officers, actual property brokers, and actual property buyers, okay?
So what I’d do, I’m sitting on a park bench. The very first thing that I do is I stroll to a any title firm. There’s as many title firms or closing attorneys in each state as there are Starbucks. They’re in every single place. Drive round. Google it. Simply stroll down the road. You can’t go a mile in Phoenix, Dallas, anyplace with out seeing escrow title, title in escrow, closing, no matter. Stroll in there and say, “Can I discuss to anyone in your advertising and marketing division?” And what does the advertising and marketing division do? Their whole job is to get buyers like me, actual property buyers or actual property brokers and mortgage officers, to ship recordsdata to their title firm.
I even challenged BiggerPockets to doc this by the best way. I stated, “Guys, I can present your viewers learn how to… Get a digicam man on me for six hours. I’ll begin on a park bench, no mobile phone, not even a greenback.” They had been like, “Nicely, you can begin with 100 bucks.” I’m like, “No, I need any cash.”
I’m going to the title firm and I say, “Are you able to guys pull a listing for me?” The perfect place to get a free listing with free telephone numbers the place you don’t must pay for skip tracing? Your advertising and marketing division at a title firm. Any title firm will do that, okay? And what you say is you go, “I need all of the expired listings which have expired within the final 60 days and I need all their telephone numbers.” In Phoenix, that’s about 600. That’s too many individuals for me to name in at some point. I can’t name 600 individuals in a day. So I’m going to now make that listing even smaller. So I say, “I need people who have bought their house between 2018 and 2021.” Why? As a result of all of them have 3% rate of interest on common. I then additionally need to make it possible for they’ve a VA mortgage or an FHA mortgage. Why, Ashley?

Ashley:
Low down cost in order that they don’t have a ton of fairness.

Tempo:
Increase. So now I’ve acquired a listing of individuals that attempted promoting in order that I already know they tried to promote. Their listings expired, so I didn’t have to inform them that their home wasn’t price what they had been attempting to get. The market instructed them that. The agent instructed them that. I then make it possible for I get rates of interest on the rates of interest I need to purchase a topic to deal. After which I make it possible for they don’t have fairness. You place these 4 filters on it, you’ll get a 600 identify listing all the way down to in all probability 80 to 100 individuals, okay?
What I do is I then name these individuals and I say, “Hey, my identify is Tempo. I see your own home was in the marketplace. I’m simply questioning what had been you searching for in the marketplace that you weren’t in a position to acquire?” And I let the vendor discuss. The vendor says, “Nicely, the agent couldn’t do that. The agent this, the agent that. Blah, blah, blah.” I’m going, “Nicely, good factor is I’m not an agent. I’m an actual property investor. And whereas most individuals which have submitted gives to you, tried to purchase your own home with money, I include a special set of instruments. I’ve the power to take over funds and get you the quantity it’s essential get out of that home.”
By the best way, I’ve already accomplished this earlier than a number of occasions and I’ve recorded and documented the entire thing. We did this three months in the past. So that you’ll get a vendor. Inside 80 calls in at some point, you’ll get in all probability 4, 5 individuals which might be prepared to do a take care of you that day. I’d then have the title firm print out the contract for me. I’d then both A, ask anyone on the title firm to drop me off or take me to the appointment, or B, I’d do a DocuSign by way of the title firm to the vendor utilizing their computer systems.
The following factor I’d do is as soon as I’ve the contract, topic to, taking up the mortgage, I’d name anyone that does Airbnb. I’d name anyone who does sober dwelling. Primarily sober dwelling. That is the simplest one to do, sober dwelling. I’d name up one in every of my sober dwelling operators and say, “Hey, I do know you’re searching for extra homes to lease. I’ll allow you to lease this property from me. Put your sober dwelling facility in right here, however I want a deposit at the moment on the lease. I want a primary and a final month’s deposit.” I can take cash proper there, money, earlier than I even shut escrow on the deal and I should purchase my meals, I should purchase an Uber, I can get a mobile phone, I can do no matter I have to do. In at some point, I can have cash in my pocket from skinny air.
That listing is a assured. For those who went to a title firm, acquired that listing, made 80 calls and also you couldn’t get a vendor to say sure, then you definately didn’t make a single name. There’s no different believable motive why you wouldn’t get a home beneath contract, is that you just actually simply didn’t do the work.

Ashley:
I actually need to have a follow-up episode the place we have now one in every of our listeners who really does this and contacts us and inform us how they acquired their first deal simply by doing this.

Tempo:
Oh, that’d be nice.

Tony:
Yeah.

Ashley:
Yeah, that will be tremendous cool. So whoever does that, tell us.

Tempo:
For those who guys ever need to do that, I’m throwing this on the desk, should you ever need to run a contest the place anyone comes and spends a day with me and does this by my aspect, I’ll take them out within the subject, we’ll each begin on a park bench and I’ll stroll them by way of and present them learn how to do it. I’ll stroll to the title firm, I’ll present them learn how to get the listing. I’ll do half the telephone requires them and doc the entire thing after which have them come on. I’ll do no matter you need. It’s the best method to get a deal at the moment, receives a commission at the moment that I’ve ever considered.
Now, I may assign that deal too, however I don’t do quite a lot of wholesale anymore. Most likely 85% of what I do is purchase and maintain, I maintain the whole lot primarily. And I’ll do some assignments, however not quite a bit. 15% a month perhaps, in all probability nearer to five%. I’d maintain the deal. However you can assign it to anyone like me in at some point and I’ll pay you cash proper now. 5 grand for an task, 10 grand for an task, 15 grand for an task.

Tony:
Ash, that may even be a cool episode for me and also you to go to Arizona with Tempo and see if we will knock that out in a day for our Rookie viewers.

Tempo:
That might be sick.

Ashley:
After which he sends us out on our personal and we compete who will get the deal first.

Tony:
And see who will get the deal first. That might be fairly cool.

Tempo:
That might be cool. Or you can even do a dwell viewers the place you’re like, “Hey, let’s arrange on the title firm and have Tempo make the calls and have a dwell viewers of 10, 15 newbies sitting there and watching us do it.” After which right here’s what occurs. Motion will get different individuals to take motion. So when individuals are within the room with me making calls, they’re like, “Oh my gosh, that’s it? That’s all you’re doing?” Yeah, it’s so easy that the most important motive individuals fail is as a result of they overthink how easy it truly is.

Ashley:
What I consider proper there while you stated individuals taking motion makes others need to take motion, I consider Forrest Gump when he begins working, and by the top he’s simply had all these different people who simply begin following as they need to run too.

Tempo:
Critically. That’s actually what this business wants, is extra individuals which might be taking motion such as you guys and main the cost and creating communities. As a result of all of us study by way of… We’re all monkey see, monkey do. Like I can not learn to body a home by watching YouTube. I’ve to be on website and watch individuals decide up the hammer. “Why are you utilizing a screw gun versus a hammer on that scenario?”
“Nicely, as a result of the angle right here and I can’t get the angle of assault, so I’m utilizing a screw gun to go…” You must study on the job and other people must be prepared to allow you to study by your aspect. And so I’ve at all times let individuals go on appointments with me, go to title firms with me as a result of that’s how I study, and that’s how I assume everyone else must study as nicely.

Tony:
Tempo, I simply need to let individuals perceive how impactful these methods will be if accomplished the correct method. So what number of offers have you ever accomplished or what number of models do you’ve gotten proper now at the moment which might be topic to?

Tempo:
I imply, I’m in every single place. Take a look at this board, proper? Most likely this yr, my goal is to purchase one other 500 single household houses this yr.

Tony:
Wow.

Tempo:
500 single household houses, all topic to and vendor finance. We at the moment have roughly 1,800 doorways in our portfolio. Not a single a kind of doorways required a credit score verify. No person requested for my job credentials. No person requested me for “How lengthy is the cash sitting in your account seasoned?” None of these questions had been ever requested. Not as soon as on any 1,800 doorways we have now. And once more, you take a look at this complete whole board. For those who look down right here, I’ve acquired a deal proper right here in Hawaii, circled, 2% topic to deal, an acre and a half on the water. In Alaska, Anchorage, identical factor. It was over right here. There we go. Now I’ve acquired a… Anchorage, Alaska, I purchased a duplex final week, 2.5% topic to deal. I’ll purchase offers from Alaska to Boston. There’s not a state you possibly can’t purchase in. California, New Jersey, New York, all of the locations which might be difficult to do wholesale. You are able to do topic to in all 50 states, and I’m doing them.
So right here’s how impactful it’s. Folks that don’t perceive topic to and vendor finance take a look at an enormous haystack and so they’re considering, “Oh, I acquired to seek out some money offers. These needles within the haystack.” I take a look at the haystack and I’m going, “Topic to and vendor finance is the haystack.” It’s in every single place. It’s the complete whole marketplace for me. I don’t even take a look at money offers. I don’t waste my time on money offers. Why would I take a look at money offers?
The factor that’s probably the most impactful once I was primarily wholesaling eight, 9 years in the past, I noticed, sure, the vendor beneficial properties the comfort and pace of a wholesale transaction by promoting their home at a deep low cost. However the actuality is once I use topic to and vendor finance, it’s the solely transaction in actual property that could be a true win-win win. Wholesale? The vendor has to take it within the shorts to ensure that the wholesaler to get an task payment, to ensure that the repair and flipper to promote it and generate profits. And that transaction requires that, and it’s completely high-quality and it’s wanted within the business for certain.
However what occurs quite a lot of occasions, or each time on a topic to deal, vendor will get the quantity they need, agent will get paid their fee, and I get a property the place I’ve an rate of interest under 4% connected to it with a cost that I can exit and money circulation instantly and not using a credit score verify. I pay quite a lot of occasions 85 to 99% of retail worth. So everyone wins. The sellers get more cash, the brokers receives a commission fee, and I don’t must go to a financial institution. All people wins within the transaction.

Tony:
Tempo, what a masterclass, brother, on how individuals can get began in actual property investing at the moment. I believe it’s tremendous well timed as a result of there’s quite a lot of people which might be hesitant to get began, particularly in our Rookie neighborhood, proper? Loads of these people which might be listening haven’t accomplished any offers earlier than. So I believe this offers them a terrific, such as you stated, I assume one other instrument of their instrument belt to get began, brother. So clearly, Tempo, man, should you can simply inform individuals the small print of the guide, when the pre-order begins, and all of the goodies that come together with it.

Tempo:
The pre-orders fairly cool. I instructed BiggerPockets, I stated, “How can we make this guide so particular?” I believe 10 individuals will win a day with Jamil and I on our TV present for season 3. We’ll fly them out. One other 10 individuals will have the ability to do a complete class with me in particular person in my Phoenix workplace. After which everyone that pre-orders earlier than Could 2nd when the guide comes out will get principally a 20-hour masterclass on artistic finance, two to 3 hours per chapter on common, giving full context. As a result of as a lot as I like studying, I’d slightly take heed to stuff. That’s why audiobooks are highly effective. So in fact the audiobook is there too. However the Video Companion information actually breaks down whiteboards and teaches you, the listener or the buyer, the best way I wanted to be taught within the very starting.
If I realized the whole lot on this guide once I first began, it might’ve reduce my studying curve down by in all probability 5 years. I needed to go determine it out slowly and absolutely. So I condensed it fairly powerfully and gave you guys as a lot as I presumably may for the people who resolve to pre-order. So thanks for giving me the platform to speak about it.

Ashley:
Tempo, I additionally need to point out that you’re doing a bootcamp too for BiggerPockets on artistic financing. So you possibly can go to biggerpockets.com/bootcamps. That bootcamp begins this summer time. Nicely Tempo, thanks a lot for becoming a member of us.

Tempo:
Thanks guys a lot. Admire you.

Ashley:
I’m Ashley, @wealthfromrentals, and he’s Tony, @tonyjrobinson, and we will probably be again on Wednesday with one other visitor.