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 stream instantly with no credit score examine. And I pay lots of instances 85 to 99% of retail worth. So everyone wins. The sellers get extra money, 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 every week, we’re deliver you the inspiration, motivation, and tales it’s good to hear to kickstart your investing journey. Rookie viewers, do we have now a present for you guys at present. 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 e-book out known 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 sport with only a putter when you must have your entire golf equipment. So I assumed 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 how you can get a deal at present, as in get a deal in sooner or later. So the principle motive we have now 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 moreover 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 may 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 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 in case you guys head over to biggerpockets.com/bootcamps, you may study extra in regards to the Artistic Finance Bootcamp.

Ashley:
And naturally, if you’re only a rookie investor and wish to study something and every thing 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 acquired along with you, we have been truly stay at BPCon and acquired to do a stay 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 truly going to Common one night time too? They rented out Common Studios.

Tempo:
I noticed that. The final night time 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 feel it was one of the best performing YouTube video for the Actual Property Rookie Podcast additionally.

Tempo:
Wow, that’s cool.

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

Ashley:
Yeah.

Tempo:
Yeah, I simply was so excited to hang around with you, guys. You guys have been nice to fulfill. And Tony, your partner, and simply everyone 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, in fact, brother. We’re right here to speak about one thing particular at present, proper? Tempo, you’ve gotten entered uncommon air as now an formally revealed BiggerPockets writer. 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 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 sort of get a fast breakdown of what it truly means to do a deal topic to, what’s vendor financing, and sort 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 wish to make certain we get the viewers one of the best stuff.

Ashley:
Yeah, let’s begin with what are the choices for artistic financing. After 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 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 artistic finance I feel 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 alternative ways to generate profits with artistic finance, perhaps much more. I’ve by no means seen a transaction ever an identical to a different transaction due to how artistic you will be with it. However what precisely does that imply?
So in case you take a look at this, right here’s what you’ll see. You’ll see that there are all… Every part begins with a vendor, proper? No matter deal you’re working, there’s all the time 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 by hook or by crook, A or B. That’s mainly it. Occurring market, I see one thing on the MLS or Zillow and I’m going to achieve out to this actual property agent and I’m going to attempt 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 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 artistic finance is available in. What I realized is that after I was doing nothing however conventional lead gen, I’d’ve to generate about 50 leads for each two offers that I did. Why? Properly, generally the sellers should not motivated. They don’t wish to promote in any respect and there could also be simply kicking tires. However what I discovered as a rule, it was both A, B, or a mixture 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 checklist my property.” The agent sees that the property’s value $300,000 by comping it after which the vendor says, “I would like $350,000.” So you’ve gotten mainly unrealistic sellers, proper?
After I first began Ashley, I additionally didn’t know that folks may get a tough cash mortgage. I assumed a tough cash mortgage was like a mortgage shark.

Ashley:
With the baseball bat?

Tempo:
Precisely. Like they’re going to interrupt your kneecaps in case 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 an increasing number of and extra proper now, particularly in case you look in Maricopa County the place I stay, I stay 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 wish to go get a topic to deal at present? Go after expired listings. Sometimes, brokers are representing a vendor. The agent has six months usually in 99% of preparations to promote that home for the house owner. And if they’ll’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’ll get these expired listings? What are the steps they must take?

Tempo:
So first off, I’d make associates with actual property brokers as a result of the simplest and the free least expensive technique 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 totally free, okay? Second place I’d go is I’d go to perhaps PropStream. BiggerPockets has an amazing software program as nicely. There’s so many alternative 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 wish to attain out to brokers for the needs you simply talked about. What am I saying to them to get them to take me severely and really give me deal stream?

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 needs 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 e-book known as the Morby technique, which is a technique I created about 5 years in the past. We gained’t go into that at present. However there’s so some ways to generate profits. The 2 main belongings you wish to go after are topic to and vendor finance. So what you’re doing is in case you’re going to achieve out to an agent, what you wish to do is you wish to begin off the dialog all the time 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, “Properly, 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 they usually personal the home free and clear, would they be open to vendor financing the property to me?”
Now the agent will hesitate. Generally they’ll go, “Oh. Ah…” You go, “Look. By the best way, I’m not going to barter the gross sales worth. I’ll even come as much as the quantity that the vendor and you’re in search of. 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. After I would go after these 50 leads, two offers flip into money and one other eight offers will get achieved with artistic. I discovered that using artistic 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 price and 4X my monetization.
And by the best way, it’s means simpler to purchase a property, topic to, than it’s with money. Approach simpler. The one motive why persons are confused by topic to is as a result of it’s not all the time talked about and it’s new. It’s sort of like when Ashley and I each realized, “Oh wait, individuals aren’t truly money patrons? Like 99% of persons are not shopping for with money?” They’re truly, in case you use the right wording, you’d say, “I’m a tough cash purchaser.” We’re not money patrons, we’re laborious cash patrons. We purchase homes to flip them utilizing laborious cash. So it’s similar to studying a brand new language.
Topic to sounds complicated, nevertheless it’s truly means simpler. It’s quicker to shut out a title firm. There’s 5 much less individuals concerned. It’s means simpler to get below 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 occurring, that are all of the difficult elements of a money transaction. And so in topic to, you don’t have any of these issues. So it’s means simpler for me to go to a home-owner and say, “Your asking worth is just not the issue for me. Whether or not you’re prepared to do phrases or not is my important concern.” It’s like, “You’re not going to barter my gross sales worth?” 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 not likely shopping for your home. I’m shopping for the rate of interest connected to your home. That’s actually what I would like. Your home simply so occurs to come back with it.”

Tony:
Tempo, a lot, a lot good data there, brother. A lot. And I simply wish to pause for a second as a result of I wish to make clear just a few issues for our rookies earlier than we maintain 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 completely different from going to a standard financial institution to get financing on a property?

Tempo:
After all, yeah. So let’s take a look at it like a automobile. Let’s say I wish to go purchase a Toyota Prius and I’m going to a financial institution to go get a Toyota. I’m going to the automobile dealership. The automobile 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 via a mortgage they usually see in case you’re worthy sufficient to purchase that automobile. Okay, nice. In a automobile transaction, very similar to an actual property transaction, you’re paying over retail for each home.
By the best way, are you aware 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 any case 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? Nevertheless it takes months to undergo that course of. So I take a look at that and I’m going, “If fairness is just not the principle purpose within the very starting, fairness will construct over time, my tenants can pay down over time, actually what I wish to do is keep away from going via the financial institution.” So why don’t I simply go to any person that has a Toyota Prius and say, “Hey, do you’ve gotten a automobile 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 automobile 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 in case 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. Owners 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 navy. They go to promote to an actual property agent. How a lot does it value to promote a home via an actual property agent? 3%, 3% and one other 3 to 4% in closing prices, dwelling warranties, inspection objects, 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 strategy of topic to. I take the deed, proper? As a result of right here’s the massive distinction. If I’m going to Craigslist proper now and I begin calling folks that personal Toyota Priuses, you’re going to run into some folks that personal them outright, they paid money for these vehicles. And also you’re going to run into some individuals that also have automobile funds on these vehicles.
Vendor finance means the the automobile is paid off and I can simply say, “Hey, I’d like to purchase your automobile on funds. What funds do you wish to arrange the place I simply make you a month-to-month cost and also you develop into my financial institution?” That known as vendor finance. Vendor is financing me, vendor finance. After which topic to, I simply go, “Oh, you’ve gotten a automobile cost. No downside. I’ll simply take over the automobile 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 automobile, however the cost stays in your identify. We keep away from all of the financial institution charges.” The one person who makes cash after I go get a brand new financial institution mortgage to repay your present financial institution mortgage are two banks. You don’t make any extra money and I positively don’t make any cash. So what am I doing going and getting a brand new mortgage to repay an previous mortgage? Why don’t you simply let me take over the previous mortgage?
I’m not name speaking about assumptions. I’ve by no means gone via a credit score examine. No one’s ever checked out my job historical past. No one’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 any person 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 cost that works for the vendor.

Tony:
Tempo, earlier than you go into vendor financing extra, I simply wish to notice that once you have been on on episode 236, we did undergo as to why a vendor would do this. Like why would they belief any person taking up their funds? So in case you guys wish 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 employ the third get together servicer, all these issues. So in case you actually wish 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. In all probability 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 appears to be like like your home has been listed for over 100 days and money patrons are already telling you this isn’t an excellent 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 worth. 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 smart for each of us?” 50% of the brokers say sure. 50% of the brokers say no.
So the 50% of brokers that say no, are you aware what we do, is we put them in our CRM and we observe 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 up funds. Did your agent ever deliver that as much as you?”
“Nope, my agent by no means offered your supply to me.”
“Nice. Would you be open to letting us take over your funds?” They go, “You’d be prepared to try this?” So the paradigm shift for me was like the identical paradigm shift you had Ashley once you went from studying from one particular person that purchasing money is how actual property traders generate profits to realizing that 99% of actual property traders don’t use their very own money, they use personal cash or laborious cash. There was that complete gentle bulb second of like, “Oh my gosh, what have I been lacking?” It’s the identical factor with me. After I acquired into artistic finance, I used to assume that sellers can be not open to this. After which once you even have the dialog with the vendor, the vendor is like, “Wow, you’d be open to that?” It’s the polar reverse of what you’d 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 home,” most house owner’s homes should not 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 via an agent. 95% of homes should not on the market, nor will they be for the following couple years. So what you’re doing on this state of affairs is I’m in search of brokers which have listings which are over 100 days after which we begin reaching out to the agent saying, “Hey, I’m a money purchaser. Nevertheless, if this home was an excellent match for a money purchaser, it in all probability 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 they usually get excited on the prospect. The opposite 50% of brokers which are 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 feel would make me nervous, is that if Tony and Tempo comply with 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:
Properly, there’s a handful of issues. That is the place perhaps we get just a little bit into the weeds in case you’re okay with it. In each single state, there’s one thing known as an executory contract, okay? You guys have heard of them below completely different phrases. Land contract, contract for deed, settlement on the market, some of these issues. You guys ever heard these phrases earlier than?

Tony:
Mm-hmm.

Tempo:
Okay, that’s known 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 gentle mainly. It’s the precise strategy 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 means you wish to maintain it. The deed stays in limbo till the client pays off the home, sells the home, or refinances the home.

Ashley:
After I did a topic to deal, we truly had the vendor signal over the deed, nevertheless it was by no means filed. Our lawyer nearly 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 lawyer you went with. And so they 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 means the place I do an executory contract? It’s even less complicated, proper? It’s like, “Properly, now the vendor has safety.” The issue with that’s that the client doesn’t have the flexibility to put in writing that property off on their taxes using depreciation. So if I’m an actual property investor, one of the crucial enticing issues to me is definitely once you’re model new and also you’re a rookie, you really need money stream. However when you get to a degree of money stream the place it’s paying to your bills and your way of life and staff and all that sort of stuff, the principle motivator for me to purchase properties is not money stream. 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 known as one thing completely different per state. Precisely the identical factor. Umbrella time period is executory contract. And in case you guys are watching this or listening to this, you may 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 stage 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 have been paid off. So it was held as sort of leverage for that. After which as soon as the again taxes have 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} courting contract. A courting contract means you guys are courting for a sure period of time till you determine to finalize and get married. And so that you dated, you have been courting and also you had management and also you have been in a relationship. After which when that factor, no matter that set off was, generally it’s down cost help, generally it’s an IRS lien, generally it’s a mechanic’s lien, generally 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 courting contract.

Ashley:
Do you assume for any person that’s perhaps going to be in a state of affairs like that, to ensure that that sort 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 in case you determine to not make the most of depreciation on, let’s say I purchase a home, 123 Major Road, and I determine, “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 may all the time 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 definitely 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 crucial intriguing issues that like, “I haven’t paid earnings taxes in seven years,” and it blows my thoughts. Individuals go, “Properly, how do I make more cash?” I’m going, “Hold extra money.” Instantly a technique to make 30, 40% extra money than what you’re making at present is don’t give 30% of it to the IRS. Hold it. And the best way we do that’s by being… Isn’t it bizarre? We get incentivized to spend money on actual property. The IRS is like, “Right here’s a bonus. Go spend money on actual property. Hold your cash simply so long as you place into an funding.” What? It’s loopy. In order that’s the explanation 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 any person 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 if you’re nervous 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 lawyer 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 all the time have management of the property. And guess what you get? You get all of the money stream, you get all of the appreciation, you get all of the mortgage pay down. Let’s say you got 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 completely different choices in that one facet. And that’s the place it goes into taking a look at what your individual targets are, your why or what you’re attempting to attempt for in actual property and if the tax benefits is a extremely 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 motive that I used to be attempting 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 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 in case you perceive golf, you’ve acquired a driver to hit the ball actually far. You’ve acquired a putter to only 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 lure? Basically what persons are doing is that they’re exhibiting as much as an actual property transaction with a putter. When any person like me exhibits as much as an actual property transaction with a full bag of golf golf equipment they usually take 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 take care of no credit score examine, 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 the entire 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 needs to promote the property to me, however they wish to ensure that 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 worth, 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, “Properly, what’s the quantity that will get you enthusiastic about giving me the phrases that excite me?” And so they go, “Properly, we have now it listed for 600, however in case 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 all the way down to essentially the most primary model, is that if I speak 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 lawyer referral or wherever the supply of the lead comes from, let’s say I collect 50 leads, everyone 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 all the way down to, is how can I’ve extra instruments to deliver to the state of affairs to assist everyone concerned? I’d say the most important downside with artistic finance… What do you guys assume is the most important downside with artistic finance?

Tony:
Lack of know-how.

Ashley:
Yeah.

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

Ashley:
Having that center man.

Tempo:
Properly, 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 educated by their dealer or no person’s speaking about it at their brokerage. They’re not hanging out with different actual property traders. So when any person brings a chance 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 college. My brokers by no means introduced this up. That should imply it’s unlawful.” And so what occurs is the brokers should not educating themselves they usually’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 massive issues that we’re doing this yr is our initiative, a giant purpose 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’ll study 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, they usually 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 any person’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, train 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 folks that enroll. We will solely let 300 individuals within the door. We do that totally free, six hours as soon as a month. I usher in an lawyer and an escrow officer that’s been doing artistic finance for 48 years, I consider. I simply give and provides to the trade as a result of what finally ends up occurring is then brokers deliver me offers they usually go, “Oh my gosh, I had no concept I may do that.” In order that’s truthfully the most important downside with the trade. It’s not even the sellers. The sellers are enthusiastic about these alternatives. They find it irresistible. Vendor finance helps mitigate capital good points. The sellers get extra money. The sellers get a share and a return and securitize funding in opposition to 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:
Nevertheless it’s a lot good things, Tempo. There’s so many angles to it, which once more, which is why I feel individuals have to go decide up a replica 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. Form of like after I was studying the Bible for the primary time, I’m studying the Outdated Testomony, I’m like, “What the heck is occurring within the Outdated 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 any person 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 grew to become tremendous cool to me and it was so enjoyable.
So I stated, after I write a e-book, a e-book with BiggerPockets, I wish 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, examine this out, that is so freaking cool, I usher in a stay viewers to file this video companion information in my studio proper over 15 ft away. I’ve acquired like 15 individuals in. I’m going, “All proper, guys. Welcome to the Video Companion Information with BiggerPockets” and my cellphone 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 assumed perhaps I may simply cease by your workplace and we may finalize the main points 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 stay 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 consider 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 stay, with a stay 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 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 wish to ensure that’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 big worth to everybody. So that you guys don’t wish to miss on the market.

Tempo:
Yeah, and I’ve acquired 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 how you can deal with your taxes once you purchase or promote topic to. Then there’s all kinds of laws that references topic to nationwide. It’s in all places. So I’m going via 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 wish to give sort of an instance, a situation. So simply think about that you’re sitting on a park bench, you don’t have any cash, no cellphone and it’s good to do an actual property deal at present to have the ability to eat tomorrow.

Tempo:
Simple.

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

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

Tempo:
That is simple. I didn’t realize 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 corporations work at a reasonably deep stage. There’s all the time a advertising division in each title firm, okay? Have you ever guys ever achieved lunch and learns with title and escrow officers? Like they arrive in they usually pay to 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. For those who guys are doing meetups in your native city, get a title firm and say, “Hey, do you guys have a advertising division I may speak to?” They’ll are available and pay for all of your meals, all of your advertising, every thing.

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’ll go and do luncheon lunch for mortgage officers, actual property brokers, and actual property traders, 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 corporations or closing attorneys in each state as there are Starbucks. They’re in all places. 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 any person in your advertising division?” And what does the advertising division do? Their complete job is to get traders like me, actual property traders 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 how you can… Get a digicam man on me for six hours. I’ll begin on a park bench, no cellphone, not even a greenback.” They have been like, “Properly, 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 a listing for me?” The very best place to get a free checklist with free cellphone numbers the place you don’t must pay for skip tracing? Your advertising 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 cellphone numbers.” In Phoenix, that’s about 600. That’s too many individuals for me to name in sooner or later. I can’t name 600 individuals in a day. So I’m going to now make that checklist even smaller. So I say, “I would like folks that have bought their dwelling between 2018 and 2021.” Why? As a result of all of them have 3% rate of interest on common. I then additionally wish to ensure that 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:
Growth. 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 value what they have been attempting to get. The market instructed them that. The agent instructed them that. I then ensure that I get rates of interest on the rates of interest I wish to purchase a topic to deal. After which I ensure that they don’t have fairness. You set these 4 filters on it, you’ll get a 600 identify checklist 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 home was available on the market. I’m simply questioning what have been you in search of available on the market that you weren’t capable of get hold of?” And I let the vendor speak. The vendor says, “Properly, the agent couldn’t do that. The agent this, the agent that. Blah, blah, blah.” I’m going, “Properly, good factor is I’m not an agent. I’m an actual property investor. And whereas most individuals which have submitted affords to you, tried to purchase your home with money, I include a special set of instruments. I’ve the flexibility to take over funds and get you the quantity it’s good to get out of that home.”
By the best way, I’ve already achieved this earlier than a number of instances 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 sooner or later, you’ll get in all probability 4, 5 individuals which are 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 any person on the title firm to drop me off or take me to the appointment, or B, I’d do a DocuSign via 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 any person that does Airbnb. I’d name any person 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 in search of extra homes to hire. I’ll allow you to hire this property from me. Put your sober dwelling facility in right here, however I would like a deposit at present on the hire. I would like 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 cellphone, I can do no matter I have to do. In sooner or later, I can have cash in my pocket from skinny air.
That checklist is a assured. For those who went to a title firm, acquired that checklist, made 80 calls and also you couldn’t get a vendor to say sure, then you definitely didn’t make a single name. There’s no different believable motive why you wouldn’t get a home below contract, is that you just actually simply didn’t do the work.

Ashley:
I actually wish to have a follow-up episode the place we have now one in every of our listeners who truly 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 wish to do that, I’m throwing this on the desk, in case you ever wish to run a contest the place any person comes and spends a day with me and does this by my aspect, I’ll take them out within the discipline, we’ll each begin on a park bench and I’ll stroll them via and present them how you can do it. I’ll stroll to the title firm, I’ll present them how you can get the checklist. I’ll do half the cellphone 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 present, receives a commission at present that I’ve ever considered.
Now, I may assign that deal too, however I don’t do lots of wholesale anymore. In all probability 85% of what I do is purchase and maintain, I maintain every thing primarily. And I’ll do some assignments, however not loads. 15% a month perhaps, in all probability nearer to five%. I’d maintain the deal. However you can assign it to any person like me in sooner or later 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 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 can even do a stay viewers the place you’re like, “Hey, let’s arrange on the title firm and have Tempo make the calls and have a stay 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 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 motive individuals fail is as a result of they overthink how easy it truly is.

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

Tempo:
Significantly. That’s actually what this trade wants, is extra individuals which are taking motion such as you guys and main the cost and creating communities. As a result of all of us study 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 individuals decide up the hammer. “Why are you utilizing a screw gun versus a hammer on that state of affairs?”
“Properly, 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 need to study on the job and folks must be prepared to allow you to study by your aspect. And so I’ve all the time let individuals go on appointments with me, go to title corporations 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 wish to let individuals perceive how impactful these methods will be if achieved the suitable means. So what number of offers have you ever achieved or what number of models do you’ve gotten proper now at present which are topic to?

Tempo:
I imply, I’m in all places. Take a look at this board, proper? In all probability 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 present have roughly 1,800 doorways in our portfolio. Not a single a kind of doorways required a credit score examine. No one requested for my job credentials. No one requested me for “How lengthy is the cash sitting in your account seasoned?” None of these questions have 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 complete 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 may’t purchase in. California, New Jersey, New York, all of the locations which are 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. Those who don’t perceive topic to and vendor finance take a look at a giant haystack they usually’re considering, “Oh, I acquired to search 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 all places. It’s the complete complete 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 essentially the most impactful after I was primarily wholesaling eight, 9 years in the past, I noticed, sure, the vendor good points the comfort and pace of a wholesale transaction by promoting their home at a deep low cost. However the actuality is after 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 charge, to ensure that the repair and flipper to promote it and generate profits. And that transaction requires that, and it’s completely nice and it’s wanted within the trade for certain.
However what occurs lots of instances, 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 stream instantly with no credit score examine. I pay lots of instances 85 to 99% of retail worth. So everyone wins. The sellers get extra money, 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 present. I feel it’s tremendous well timed as a result of there’s lots of people which are hesitant to get began, particularly in our Rookie neighborhood, proper? Numerous these people which are listening haven’t achieved any offers earlier than. So I feel this provides them an amazing, such as you stated, I assume one other device of their device belt to get began, brother. So clearly, Tempo, man, in case you can simply inform individuals the main points 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 instructed BiggerPockets, I stated, “How can we make this e-book so particular?” I feel 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 be capable of 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 e-book comes out will get mainly a 20-hour masterclass on artistic finance, two to a few hours per chapter on common, giving full context. As a result of as a lot as I like studying, I’d quite 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 patron, the best way I wanted to be taught within the very starting.
If I realized every thing on this e-book after I first began, it could’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 folks that determine to pre-order. So thanks for giving me the platform to speak about it.

Ashley:
Tempo, I additionally wish to point out that you’re doing a bootcamp too for BiggerPockets on artistic financing. So you may go to biggerpockets.com/bootcamps. That bootcamp begins this summer season. Properly 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 shall be again on Wednesday with one other visitor.