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 beneath 4% connected to it with a fee that I can exit and money circulation instantly and not using a credit score test. And I pay lots of occasions 85 to 99% of retail worth. So all people wins. The sellers get more cash, the brokers receives a commission fee and I don’t should 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 carry you the inspiration, motivation, and tales you must hear to kickstart your investing journey. Rookie viewers, do we now have a present for you guys at this time. We’ve obtained the one and solely Tempo Morby on the Actual Property Rookie Podcast. If you happen to don’t know Tempo, Tempo is well-known within the BP neighborhood, however Tempo additionally has a brand new e-book out referred to as Wealth with out Money: Supercharge Your Actual Property Investing with Topic-to, Vendor Financing, and Different Inventive Offers. Tempo comes on to interrupt issues down all about inventive financing.

Ashley:
Yeah. He additionally talks about… He offers this golf analogy as to why it’s possible you’ll be enjoying this actual property sport with only a putter when it’s best to have all your golf equipment. So I believed that was a brilliant 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 truly walked via the way to get a deal at this time, as in get a deal in in the future. So the primary purpose we now have on, as Tony talked about, that Tempo simply wrote a e-book, Wealth With out Money. So head to biggerpockets.com/wealthwithoutcash to pre-order this e-book. Be sure you pre-order earlier than Could 2nd. Tempo truly goes via what you get with the pre-order apart from simply the e-book. And let me let you know, these are alternatives. I feel 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’ll be able to actually get on a tv present with Tempo if you’re one of many fortunate winners right here. Tempo additionally, along with the e-book popping out, he’s obtained a bootcamp popping out with BiggerPockets about inventive 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’ll be able to be taught extra in regards to the Inventive Finance Bootcamp.

Ashley:
And naturally, if you’re only a rookie investor and need to be taught 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 shall be beginning those self same dates over the summer season.
Tempo, welcome again to the present. The final time we obtained along with you, we had been truly dwell at BPCon and obtained 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 basically. Orlando.

Tony:
Yeah.

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

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

Tempo:
I noticed that. The final night time because the cap celebration. I’m tremendous enthusiastic about that.

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

Tempo:
Wow, that’s cool.

Tony:
You bought some huge footwear to fill at this time, 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 all people in the entire BiggerPockets management, it was simply so cool to hang around backstage and do this podcast. So thanks a lot for having me again.

Tony:
No, after all, brother. We’re right here to speak about one thing particular at this time, proper? Tempo, you’ve got entered uncommon air as now an formally printed BiggerPockets creator. Clearly, we’re going to speak about your new e-book, man, Wealth With out Money: Supercharge Your Actual Property Investing with Topic-to, Vendor Financing, and Different Inventive Offers. However earlier than we do, man, you’re clearly the king of all issues inventive finance, so we thought it’d be cool for the Rookie viewers simply to form of get a fast breakdown of what it truly means to do a deal topic to, what’s vendor financing, and form of what are a few of these inventive 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 inventive financing. Once I began investing, I didn’t even know you would 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 inventive financing? Let’s begin with that.

Tempo:
I feel 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 these items that inventive finance I feel may be very daunting for folks 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 income with inventive finance, perhaps much more. I’ve by no means seen a transaction ever an identical to a different transaction due to how inventive you might be with it. However what precisely does that imply?
So should you have a look at this, right here’s what you’ll see. You’ll see that there are all… The whole lot 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. Occurring 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 attempt to get this actual property agent to assist me work a cope with this vendor. Or B, direct to vendor. You’re going to the vendor direct perhaps based mostly off of a ache level like probate, foreclosures, expired itemizing, no matter it might be, and also you’re working leads.
So right here’s the place inventive finance is available in. What I realized is that once I was doing nothing however conventional lead gen, I might’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 mix of each of them, which was C. It was both A, the vendor needs an excessive amount of cash. And even brokers run into this on a regular basis the place an agent will go speak to a vendor, vendor says, “I would like you to listing my property.” The agent sees that the property’s price $300,000 by comping it after which the vendor says, “I would like $350,000.” So you’ve got 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 inventive 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 an increasing number of 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. If you happen to’re a rookie, write this phrase down, expired listings. You need to go get a topic to deal at this time? 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 home-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’d 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 should take?

Tempo:
So first off, I might make buddies with actual property brokers as a result of the best and the free most cost-effective technique to get them is simply get them from an inventory agent or an actual property agent who has entry to the MLS as a result of they get that info at no cost, okay? Second place I might go is I might go to perhaps PropStream. BiggerPockets has an excellent software program as effectively. There’s so many various methods to drag that up. We get ours from PropStream.

Tony:
Tempo, simply actually rapidly. To not go too far down the rabbit gap, however say I’m a model new investor, I’ve by no means achieved 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 significantly and truly give me deal circulation?

Tempo:
Okay, cool. That is nice. That is the place I’ll tie that each one into your query. So both A, I used to be operating, I’d go generate 50 leads, I might 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 needs an excessive amount of cash or the vendor has an absence of fairness, or a mix 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 effectively, however I received’t go into them as a result of we solely have restricted time, however like notation agreements and lease choices and all of these sorts of issues.
One other technique I speak about within the e-book is named the Morby technique, which is a method I created about 5 years in the past. We received’t go into that at this time. However there’s so some ways to generate income. The 2 major belongings 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 capable of 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 on 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’re on the lookout 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 achieved with inventive. I discovered that using inventive finance topic to, which we will soar into what that’s in only a second, and vendor finance, using these two methods, I may 4X my conversion charge and 4X my monetization.
And by the best way, it’s approach simpler to purchase a property, topic to, than it’s with money. Manner simpler. The one purpose why persons are confused by topic to is as a result of it’s not at all times talked about and it’s new. It’s form of like when Ashley and I each realized, “Oh wait, folks aren’t truly money patrons? Like 99% of persons are not shopping for with money?” They’re truly, should you use the right wording, you’ll say, “I’m a tough cash purchaser.” We’re not money patrons, we’re onerous cash patrons. We purchase homes to flip them utilizing onerous cash. So it’s identical to studying a brand new language.
Topic to sounds complicated, nevertheless it’s truly approach simpler. It’s sooner to shut out a title firm. There’s 5 much less folks concerned. It’s approach simpler to get below contract. There’s not often inspections, there’s by no means any value determinations, there’s no banks concerned, there’s no mortgage payoff requests, there’s no functions. There’s none of that occurring, that are all of the sophisticated elements of a money transaction. And so in topic to, you don’t have any of these issues. So it’s approach 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 keen to do phrases or not is my essential concern.” It’s like, “You’re not going to barter my gross sales value?” No, I’m not. All I would like is I would like the rate of interest. I inform sellers on a regular basis, “I’m probably not shopping for your own home. I’m shopping for the rate of interest connected to your own home. That’s actually what I would like. Your own home simply so occurs to return with it.”

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

Tempo:
After all, 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 totally different from going to a standard financial institution to get financing on a property?

Tempo:
After all, yeah. So let’s have 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, effectively 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 have a look at your job credentials, they have a look at your W2. They have a look at all of the issues identical to you do via 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’re paying over retail for each home.
By the best way, have you learnt each home-owner pays over retail for each home that they purchase? No home-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 extra charges and all of the shifting bills to get into the home, each home-owner begins by shopping for a home underwater, proper? However it takes months to undergo that course of. So I have a look at that and I’m going, “If fairness isn’t the primary aim 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 via the financial institution.” So why don’t I simply go to anyone that has a Toyota Prius and say, “Hey, do you’ve got a automotive fee on that Toyota Prius?” They usually 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 via 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 making an attempt 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 attempt to purchase it for a job switch or perhaps they’re getting redeployed in the event that they’re within the army. They go to promote to an actual property agent. How a lot does it price to promote a home via an actual property agent? 3%, 3% and one other 3 to 4% in closing prices, residence 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 lots 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 those who personal Toyota Priuses, you’re going to run into some those who personal them outright, they paid money for these vehicles. And also you’re going to run into some folks that also have automotive funds on these vehicles.
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 fee and also you turn out to be my financial institution?” That is named vendor finance. Vendor is financing me, vendor finance. After which topic to, I simply go, “Oh, you’ve got a automotive fee. No drawback. I’ll simply take over the automotive fee precisely what it’s. I’ll log into your account, I’ll make the fee 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 fee 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 undoubtedly 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 via a credit score test. 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 straight with a vendor and we construction a fee that works for the vendor.

Tony:
Tempo, earlier than you go into vendor financing extra, I simply need to word that if you had been on on episode 236, we did undergo as to why a vendor would do this. Like why would they belief anyone taking on their funds? So should you guys need to be taught 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 celebration servicer, all these issues. So should you actually need to be taught extra about topic to, return and take heed to that episode.

Tempo:
Yeah, so what I’m basically doing is I’m going to householders 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 patrons are already telling you this isn’t match for {the marketplace}. You’re asking an excessive amount of cash. I shall be one of many solely patrons you’ll communicate to that don’t care in regards to the buy value. So if I may get your commissions paid, would you be open to speaking to your vendor about me taking on present funds or making a fee 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 straight and say, “Hello, we tried speaking to your agent about this home two months in the past and speaking about taking on funds. Did your agent ever carry that as much as you?”
“Nope, my agent by no means introduced your supply to me.”
“Nice. Would you be open to letting us take over your funds?” They go, “You’ll be keen to do this?” So the paradigm shift for me was like the identical paradigm shift you had Ashley if you went from studying from one particular person that purchasing money is how actual property buyers generate income to realizing that 99% of actual property buyers don’t use their very own money, they use non-public cash or onerous cash. There was that entire mild bulb second of like, “Oh my gosh, what have I been lacking?” It’s the identical factor with me. Once I obtained into inventive finance, I used to suppose that sellers can be not open to this. After which if 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, after all, identical to if I walked into my neighborhood and knocked on my neighbor’s door and mentioned, “Hello, I’d like to purchase your own home,” most home-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 inventive and even itemizing via an agent. 95% of homes will not be on the market, nor will they be for the following couple years. So what you’re doing on this scenario is I’m on the lookout 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. Nevertheless, if this home was match for a money purchaser, it most likely already would’ve offered. Nevertheless, 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 footwear and we’re doing a topic to deal, that is the one factor that I feel would make me nervous, is that if Tony and Tempo comply with a deal, topic to, the place Tempo is taking on 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 below totally different phrases. Land contract, contract for deed, settlement on the market, a majority 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 implies 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 customer’s identify. The vendor places it into a security deposit field or no matter approach you need to maintain it. The deed stays in limbo till the customer pays off the home, sells the home, or refinances the home.

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

Tempo:
What state was that? In Florida?

Ashley:
New York.

Tempo:
Okay, New York. So New York can be contract for deed or a land contract, so relying on what legal professional you went with. They usually maintain it in limbo as safety for the vendor. Now, why don’t I simply do this on a regular basis? Why don’t I simply do this in a approach the place I do an executory contract? It’s even less complicated, proper? It’s like, “Nicely, now the vendor has safety.” The issue with that’s that the customer doesn’t have the power to put in writing that property off on their taxes using depreciation. So if I’m an actual property investor, probably the most engaging issues to me is definitely if you’re model new and also you’re a rookie, you actually need money circulation. However when you get to some extent of money circulation the place it’s paying on your bills and your way of life and staff and all that form of stuff, the primary motivator for me to purchase properties is not money circulation. The primary 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 totally 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’ll be able to sort 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 the next stage of safety, however what it does is do a disservice to the customer the place the customer 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 form 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 fee. So it’s like a mixture of them, I suppose.

Tempo:
Yeah, we name {that a} courting contract. A courting contract means you guys are courting for a sure period of time till you resolve to finalize and get married. And so that you dated, you had been courting 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 fee 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 customer’s identify and consummate that courting contract.

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

Tempo:
You should use 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 – 6 homes that I don’t really want for tax advantages,” you’ll be able to at all times save these for subsequent yr or the yr after. So that you’re not compelled to make use of depreciation within the first yr you personal the home. It’s query. If you happen to want the tax advantages, then sure. If you happen to don’t want the tax advantages, then you definately don’t want to fret about that and you’ll wait till the next yr.
Man, I may speak about taxes for actually 4 hours. It’s probably the most 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 technique to make 30, 40% more cash than what you’re making at this time 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 place 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 identical 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 straightforward to beat by one in every of two issues. One, be a extra credible and higher negotiator, which is me, or two, say, “Okay, effectively if you’re frightened 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 standard 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 you purchased 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% nearly as good as a topic to deal, however man, 90% is fairly cool too.

Ashley:
Yeah. I feel that’s so nice to make clear these two issues for everybody as a result of they’re two fully totally different choices in that one facet. And that’s the place it goes into what your personal targets are, your why or what you’re making an attempt to attempt for in actual property and if the tax benefits is a extremely huge 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 purpose that I used to be making an attempt to get into actual property anyway.” So I’m actually glad we went via it and clarified that.

Tempo:
Yeah. I imply, that is the factor, is I may speak about executory contracts, arbitrage, lease possibility, all these different methods. There’s so many methods to purchase actual property. All it comes right down to is that this, distill this right down to one thing quite simple. If I’m enjoying 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 obtained a driver to hit the ball actually far. You’ve obtained a putter to simply put it 2 or 3 ft or a few inches in some conditions.
You think about making an attempt to chip a ball with a driver or making an attempt to get a driver to hit a ball out of a sand lure? Basically what persons 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 have a look at, “What’s occurring? How can I assist the vendor? How can I assist the agent get their commissions? And the way do I get into this cope with no credit score test, no credentials and truly utilizing, if I have to, if I have to carry cash to the desk, carry a personal moneylender?” And all that comes right down to is all the choices. So executory contracts, like what we talked about, proper?
So Tony, vendor’s keen to do a topic to deal, however they’re overly involved about their safety. Straightforward. Executory contract, proper? Vendor needs 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 courting 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 attainable in a money transaction. None of that is attainable.
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 cope with 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?” They usually go, “Nicely, we now have 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’ll be able to’t do this in money. And so to distill this right down to probably the most primary model, is that if I speak to 50 folks 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, all people is providing a money supply, you’re going to get two offers out of these 50. I’m going to get 10, proper? That’s all this comes right down to, is how can I’ve extra instruments to carry to the scenario to assist all people concerned? I might say the most important drawback with inventive finance… What do you guys suppose is the most important drawback with inventive finance?

Tony:
Lack of knowledge.

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 lots of actual property brokers that aren’t skilled by their dealer or no person’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 consumer, topic to, vendor finance, executory contract, lease possibility, 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 person’s telling them to take action.
And so, one of many huge issues that we’re doing this yr is our initiative, a giant aim 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 be taught topic to from attorneys and from myself. Arizona’s first, Georgia’s second, Florida, Texas, et cetera. We’re going round and instructing via their continued schooling course that their brokers are capable of approve, and so they get their continued schooling credit studying topic to in vendor finance. So as a substitute of me complaining in regards to the trade 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 mentioned, “Let me go educate them legally in how to do that correctly.”
And extra importantly, train the brokers to show their brokers. So as soon as a month, we now have an agent class in my workplace. So long as you’re a licensed actual property agent, it’s free. We often get 1,700 those who enroll. We are able to solely let 300 folks within the door. We do that at no cost, six hours as soon as a month. I usher in an legal professional and an escrow officer that’s been doing inventive finance for 48 years, I imagine. I simply give and provides to the trade as a result of what finally ends up taking place is then brokers carry 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 trade. It’s not even the sellers. The sellers are enthusiastic about these alternatives. They like it. Vendor finance helps mitigate capital beneficial properties. The sellers get more cash. The sellers get a proportion and a return and securitize funding in opposition to their very own actual property that they perceive. May you inform I may speak about this for like 25 hours?

Tony:
Yeah.

Ashley:
Yeah.

Tony:
However it’s a lot good things, Tempo. There’s so many angles to it, which once more, which is why I feel folks have to go decide up a duplicate of your e-book, Wealth With out Money. You speak about lots of this in there.

Tempo:
Can I let you know one thing that I did in regards to the e-book as a result of I’m not… I hate to say this, however I’m not a giant reader. What I did is I made that e-book 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. Type 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 occurring within the Previous Testomony? This factor is the weirdest factor.” These bizarre names and folks 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 impulsively the Bible turned tremendous cool to me and it was so enjoyable.
So I mentioned, once I write a e-book, a e-book 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 e-book, test this out, that is so freaking cool, I usher in a dwell viewers to document this video companion information in my studio proper over 15 toes away. I’ve obtained like 15 folks 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. If you happen to 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 e-book, 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 via each objection he had. He had six objections. I went via 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 be taught topic to in vendor finance, that e-book goes that can assist 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 obtained like chapter 17 is in regards to the legalities of topic to vendor finance lease possibility. 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 achieved legally and referencing the IRS’s web site. The IRS tells you as a purchaser and a vendor the way to deal with your taxes if you purchase or promote topic to. Then there’s all types of laws that references topic to nationwide. It’s in every single place. So I’m going via and I’m doing a six-hour class on that. They usually 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 operating out of time right here, but-

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

Ashley:
… for our Rookie viewers, I need to give form of an instance, a situation. So simply think about that you’re sitting on a park bench, you haven’t any cash, no mobile phone and you must do an actual property deal at this time to have the ability to eat tomorrow.

Tempo:
Straightforward.

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

Tony:
And no present contacts, Tempo. You’ll be able to’t faucet into the folks that you just already know. You’re ranging from zero.

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

Tony:
No.

Tempo:
You’ve by no means achieved that?

Tony:
No.

Tempo:
Okay. If you happen to 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 speak to?” They’ll are available in 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 finances 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 might 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 not 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 speak 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 information to their title firm.
I even challenged BiggerPockets to doc this by the best way. I mentioned, “Guys, I can present your viewers the way 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 would like any cash.”
I’m going to the title firm and I say, “Are you able to guys pull an inventory for me?” The perfect place to get a free listing with free telephone numbers the place you don’t should 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 would like all of the expired listings which have expired within the final 60 days and I would like all their telephone numbers.” In Phoenix, that’s about 600. That’s too many individuals for me to name in in the future. I can’t name 600 folks in a day. So I’m going to now make that listing even smaller. So I say, “I would like those who have bought their residence 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 fee so that they don’t have a ton of fairness.

Tempo:
Growth. So now I’ve obtained an inventory 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 making an attempt to get. The market informed them that. The agent informed 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 right down to most likely 80 to 100 folks, okay?
What I do is I then name these folks 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 on the lookout for in the marketplace that you weren’t capable of get hold of?” And I let the vendor speak. 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 provides to you, tried to purchase your own home with money, I include a unique set of instruments. I’ve the power to take over funds and get you the quantity you must get out of that home.”
By the best way, I’ve already achieved 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 in the future, you’ll get most likely 4, 5 folks which might be keen to do a cope with you that day. I might then have the title firm print out the contract for me. I might then both A, ask anyone on the title firm to drop me off or take me to the appointment, or B, I might do a DocuSign via the title firm to the vendor utilizing their computer systems.
The following factor I might do is as soon as I’ve the contract, topic to, taking on the mortgage, I might name anyone that does Airbnb. I might name anyone who does sober residing. Primarily sober residing. That is the best one to do, sober residing. I’d name up one in every of my sober residing operators and say, “Hey, I do know you’re on the lookout for extra homes to lease. I’ll allow you to lease this property from me. Put your sober residing facility in right here, however I want a deposit at this time 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 buy my meals, I should buy an Uber, I can get a mobile phone, I can do no matter I have to do. In in the future, I can have cash in my pocket from skinny air.
That listing is a assured. If you happen to went to a title firm, obtained 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 purpose why you wouldn’t get a home below 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 now have one in every of our listeners who truly does this and contacts us and inform us how they obtained 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:
If you happen to 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 discipline, we are going to each begin on a park bench and I’ll stroll them via and present them the way to do it. I’ll stroll to the title firm, I’ll present them the way 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 technique to get a deal at this time, receives a commission at this time that I’ve ever considered.
Now, I may assign that deal too, however I don’t do lots of wholesale anymore. Most likely 85% of what I do is purchase and maintain, I hold the whole lot primarily. And I’ll do some assignments, however not lots. 15% a month perhaps, most likely nearer to five%. I might hold the deal. However you would assign it to anyone like me in in the future and I’ll pay you cash proper now. 5 grand for an project, 10 grand for an project, 15 grand for an project.

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 may 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 may be fairly cool.

Tempo:
That may be cool. Or you would 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 folks to take motion. So when persons 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 purpose folks fail is as a result of they overthink how easy it truly is.

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

Tempo:
Severely. That’s actually what this trade wants, is extra folks which might be taking motion such as you guys and main the cost and creating communities. As a result of all of us be taught via… We’re all monkey see, monkey do. Like I can’t learn to body a home by watching YouTube. I’ve to be on website and watch folks 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 be taught on the job and folks should be keen to allow you to be taught by your aspect. And so I’ve at all times let folks go on appointments with me, go to title firms with me as a result of that’s how I be taught, and that’s how I assume all people else must be taught as effectively.

Tony:
Tempo, I simply need to let folks perceive how impactful these methods might be if achieved the correct approach. So what number of offers have you ever achieved or what number of items do you’ve got 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 properties this yr.

Tony:
Wow.

Tempo:
500 single household properties, 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 test. 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 now have. And once more, you have a look at this entire whole board. If you happen to look down right here, I’ve obtained a deal proper right here in Hawaii, circled, 2% topic to deal, an acre and a half on the water. In Alaska, Anchorage, similar factor. It was over right here. There we go. Now I’ve obtained 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’ll be able to’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. People who don’t perceive topic to and vendor finance have a look at a giant haystack and so they’re considering, “Oh, I obtained to search out some money offers. These needles within the haystack.” I have 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 entire whole marketplace for me. I don’t even have a look at money offers. I don’t waste my time on money offers. Why would I have 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 spotted, sure, the vendor beneficial properties the comfort and velocity 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 may be a true win-win win. Wholesale? The vendor has to take it within the shorts to ensure that the wholesaler to get an project charge, to ensure that the repair and flipper to promote it and generate income. And that transaction requires that, and it’s completely fantastic and it’s wanted within the trade for certain.
However what occurs lots 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 beneath 4% connected to it with a fee that I can exit and money circulation instantly and not using a credit score test. I pay lots of occasions 85 to 99% of retail worth. So all people wins. The sellers get more cash, the brokers receives a commission fee, and I don’t should go to a financial institution. All people wins within the transaction.

Tony:
Tempo, what a masterclass, brother, on how folks can get began in actual property investing at this time. I feel it’s tremendous well timed as a result of there’s lots of of us which might be hesitant to get began, particularly in our Rookie neighborhood, proper? Loads of these of us which might be listening haven’t achieved any offers earlier than. So I feel this provides them an excellent, such as you mentioned, I suppose one other software of their software belt to get began, brother. So clearly, Tempo, man, should you can simply inform folks the small print of the e-book, when the pre-order begins, and all of the goodies that come together with it.

Tempo:
The pre-orders fairly cool. I informed BiggerPockets, I mentioned, “How can we make this e-book so particular?” I feel 10 folks will win a day with Jamil and I on our TV present for season 3. We’ll fly them out. One other 10 folks will be capable of do a complete class with me in particular person in my Phoenix workplace. After which all people that pre-orders earlier than Could 2nd when the e-book comes out will get principally a 20-hour masterclass on inventive finance, two to 3 hours per chapter on common, giving full context. As a result of as a lot as I really like studying, I’d relatively take heed to stuff. That’s why audiobooks are highly effective. So after all 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 e-book once I first began, it could’ve lower my studying curve down by most likely 5 years. I needed to go determine it out slowly and certainly. So I condensed it fairly powerfully and gave you guys as a lot as I probably may for the those 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 inventive financing. So you’ll be able to go to biggerpockets.com/bootcamps. That bootcamp begins this summer season. Nicely Tempo, thanks a lot for becoming a member of us.

Tempo:
Thanks guys a lot. Recognize you.

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