If you want to learn about creative financing methods for real estate investing, then this is the podcast for you! In this episode, Billy Alvaro interviews Zachary Beach from Massachusetts about how to use lease options, seller financing, and sub-to's to get the deals you want. This is a great episode for anyone who wants to learn more about how to finance their real estate deals.-What is creative financing?-How can creative financing be used to buy a property?-What are the benefits of seller financing?-How can a Sub 2 be used to create equity?-What is the process of rent to own?-How can COVID be used to find motivated sellers?-How is education important in creative financing?-What is a sub two deal?-How can you get started in creative real estate KEY POINTS Approximately mentioned @ 00:00:22 Creative financing is when you use alternative methods to fund a real estate deal, such as seller financing or lease options. This can help you get more deals done and put more money in your pocket. Approximately mentioned @ 00:14:41 Creative financing gets fun when you transition to seller financing, where you could do a Rap Morgan or a land contract. And now, uh, you have somebody paying you for 30 years on these deals. Approximately mentioned @ 00:20:40 The education process for sellers and buyers is key to success when using creative financing methods. This can be done through face-to-face education, online funnels, videos, seminars, and webinars. Approximately mentioned @ 00:25:58 Zachary Beach has been in the business of creative financing for 8 years and his father-in-law for over 30. They have a wealth of experience and knowledge to share with those who want to get into the business. Through their coaching program, they aim to help others learn how to creatively finance properties to get the best deals possible. Approximately mentioned @ 00:37:24 One objection to seller financing is that the seller may not want to act as the bank. A possible answer to this objection is that the seller can structure the deal in a way that is beneficial to them, such as a high interest rate in ten years from now. Check out Zach's gift to you https://wickedsmartbooks.com/unstoppablerei/ Then connect with Zach on Instagram https://www.instagram.com/smartrealestatecoach/ And after that head on over to... https://easysell411.com https://billyalvaro.com https://billyssecrets.com Who knows maybe you will be our next partner? To get some neat (and FREE) Tools | Tips | Tricks to help you in REI!
If you want to learn about creative financing methods for real estate investing, then this is the podcast for you! In this episode, Billy Alvaro interviews Zachary Beach from Massachusetts about how to use lease options, seller financing, and sub-to's to get the deals you want. This is a great episode for anyone who wants to learn more about how to finance their real estate deals.
-What is creative financing?
-How can creative financing be used to buy a property?
-What are the benefits of seller financing?
-How can a Sub 2 be used to create equity?
-What is the process of rent to own?
-How can COVID be used to find motivated sellers?
-How is education important in creative financing?
-What is a sub two deal?
-How can you get started in creative real estate
KEY POINTS
Approximately mentioned @ 00:00:22
Creative financing is when you use alternative methods to fund a real estate deal, such as seller financing or lease options. This can help you get more deals done and put more money in your pocket.
Approximately mentioned @ 00:14:41
Creative financing gets fun when you transition to seller financing, where you could do a Rap Morgan or a land contract. And now, uh, you have somebody paying you for 30 years on these deals.
Approximately mentioned @ 00:20:40
The education process for sellers and buyers is key to success when using creative financing methods. This can be done through face-to-face education, online funnels, videos, seminars, and webinars.
Approximately mentioned @ 00:25:58
Zachary Beach has been in the business of creative financing for 8 years and his father-in-law for over 30. They have a wealth of experience and knowledge to share with those who want to get into the business. Through their coaching program, they aim to help others learn how to creatively finance properties to get the best deals possible.
Approximately mentioned @ 00:37:24
One objection to seller financing is that the seller may not want to act as the bank. A possible answer to this objection is that the seller can structure the deal in a way that is beneficial to them, such as a high interest rate in ten years from now.
Check out Zach's gift to you
https://wickedsmartbooks.com/unstoppablerei/
Then connect with Zach on Instagram https://www.instagram.com/smartrealestatecoach/
And after that head on over to...
Who knows maybe you will be our next partner?
To get some neat (and FREE) Tools | Tips | Tricks to help you in REI!
Billy Alvaro 00:00:00 What's going on, guys? Episode 103 unstoppable Rei Wealth if there's anything that gets my blood going, gets me revved up, gets me super freaking excited, it's creative freaking financing. And today I'm interviewing Mr. Zach Beach from Massachusetts. Dude's been in the game for eight years, but his fatherin law has been in the game for like 30. And now, uh, these guys are tearing it up. They are doing deals. Creatively lease options, seller financing, subto. If you guys want to learn, you want to earn, you want to get more deals converted and uh, make more money in your pocket, serve the community, serve your sellers, and serve these buyers, by all means, listen to this podcast.
Billy Alvaro 00:00:38 Because that is going to bring you welcome to Unstoppable Real Estate Investing Wealth. My name is Billy Alvaro, aka the Unstoppable BA, former billion dollar mortgage banker gone bankrupt, turned professional real estate investor, where each week you'll learn the tools, strategies, systems, and secrets myself and other highly successful real estate investing entrepreneurs use to start, grow and scale their businesses, creating massive profits and how you can too. And we'll teach you how to put those profits to work so you no longer have to get ready to finally experience financial freedom and generational wealth. Now let's get started.
Billy Alvaro 00:01:22 What is going on, everybody? Welcome back to another episode unstoppable, uh, unstoppable Rei Wealth. I'm your host, Unstoppable BA, here to bring the heat again here with a gentleman. I'm going to introduce it a second. I'm going to love interviewing this dude today. I'm going to tell you why. Because there's a lot of one trick ponies out there. I used to be one of them. The guys that go out there and they had to do one thing. They had to wholesale the property and maybe fix and flip. And I can tell you, over the last three years, with the amount of marketing we've been doing, I've realized that we've been flushing a lot of our money down the toilet with our lead marketing generation. Because there's a lot of these leads that the people, they don't want the cash offer. But if we were to offer them an, uh, alternative creative financing, some sort of creative way to make the deal work, to get the sellers to get what they're looking for, for us to acquire that deal, we'd be making a shit ton more deals happening. So today, without any further ado, mr. Zach beach from Massachusetts. East coast boy. What's going on, Zack?
Zachary 00:02:20 Billy M I'm excited to have, some fun here. As I was listening to you, I'm sitting there thinking like, yeah, there are so many deals we hear there's consistently so many deals that you're thrown away because you have the buy box, right? You have a buy box for the flip and the wholesale. And there's so many of those deals that are passing by. So by the end of today, hopefully what we can do is open up the audience perspective to think a little bit more creatively and start slapping on at least one extra deal a month. That uh, could absolutely change the game for most people's. Real estate business dude, with the amount.
Billy Alvaro 00:02:53 Of marketing we're doing, we're driving in on average about 400 calls a month. And we're bringing in 18 to 22 contracts. Simply wholesale fix and flip. Some buy and holds as well. But I don't think I know when we start really integrating the creative side of the financing piece. And that's why I'm really interested in this conversation today because I'm going to learn and earn and interview you and give you some profitship.
Zachary 00:03:16 But it's going to be a good.
Billy Alvaro 00:03:17 Experience for me, for the listeners after. So let's just get into it for people that don't know and everybody listening should. What the hell is creative financing?
Zachary 00:03:26 Yeah, I know. I'm glad we're starting here. Let's start with the basics. Let's start with the foundational level and we'll start building things up. So the way we look at creative financing is creative financing is buying real estate without large down payments, without going to banks, and without personally signing and guaranteeing debt. Now I know that's like extremely broad. So when we break down creative financing even further, we really operate in three different ways that we buy, we buy on lease options, which is really just the ability to control an asset without ownership. If you think about it, we control the asset. Title doesn't transfer, but it gives us the ability to now go ahead and sell this property, uh, to what we would consider a tenant buyer. And we'll hit on the buyer side in a minute. The second option is owner financing or seller financing. It just simply means that the seller is willing to become the bank primarily target free and clear or debt free homes. If I was looking at like a wholesaler fix and flip, somebody's pipeline coming in to be the deals that the sellers have, high equity and are not willing to take $60 to $0.70 on the dollar, but, instead they would rather take more over time. And then, and then the last, which is probably, I would say the most controversial, but probably the most misunderstood and everybody else has the most questions, and that is buying properties subject to the existing loan. So again, if I looked at your pipeline, it would be the people that have little equity in the deal or even potentially could be upside down at this market. I know I read this about 30 days ago and they said it was roughly 300,000 plus. People are underwater now that bought within the last twelve to 18 months. So those are perfect people for, uh, us to go ahead and acquire the asset. Really what that means is you close on it, you take title, but the mortgage remains attached to the seller's credit. So we're not paying that off. And if anybody has ever done a traditional closing, there's actually, on the closing documentation, it does say subject to, uh, on those documents. So that's a very normal transaction. especially going to be in today's market because, uh, as us, as real estate investors, we have access to loans that are in the twos and threes right now, because those are created over the last 24 or 36 months where some people won't have access to anything more than 6%. So, very big opportunity, especially in today's
Zachary 00:05:47 market.
Billy Alvaro 00:05:49 Yeah, we just picked up two of those in the last month, subject to two and a half percent, three and a half percent loans. They were great. A little bit of money down $15 to $20,000. It wasn't 100% financing, but still decent deals, great cash flow, the whole nine yards. All right, so we got your trifecta, you got your lease option, you got your seller finance, you got your sub two. That's the basis of your creative financing deals, right? So let's go through now. I want to really break this shit down and give the list some real nuggets. Let's break down the first one. Zach, a lease option deal, you mentioned earlier, you can control the property, but you don't own the property, but then you can sell the property. How the hell does that work?
Zachary 00:06:29 Yeah, so a lease option, it's probably the simplest way to get involved in the creative financing. What you're simply doing is you are putting an option on the property. Now we do it slightly different., and this would be probably one of the biggest takeaways when it comes to lease options, especially because I've kind of analyzed the rest of the market out there and it's very few people are teaching it this way. And that is when you buy a property on a lease option, what we would have, uh, you do is actually buy the property for the amount of equity that the seller has in the property, plus paying off the loan. So let me walk you through this. So the average person would go to a property owner and buy a property at a very specific price. So it's like, I'm going to go ahead and put a lease option on your property for $200,000. But instead, what we would recommend is go ahead. Assuming, say, this same seller has $150,000 balance or loan on the property so they have 50 grand in equity, what you would simply do with the seller is you would buy the property, lock in their equity of 50,000 and then tell them that you're going to go ahead and pay off the loan on or before a specific time frame. See what this does. This simple change in language in the agreement allows you as the investor, to be able to accumulate principal pay down. Because every single month that you're making a lease option payment, you're the one that's actually benefiting from the principal pay down. Let me walk you through this. When you acquire a property or a lease option, typically there's going to be a mortgage on this property and that mortgage payment that you are contractually obligated to make the payment on. Because what a lease option simply is, you're agreeing to take, uh, over any and all responsibilities of this property for a certain period of time until you exercise your option of purchasing the property. So we put an option on the property, um, for an equity position. So when you buy this property, you're going to be making a simple monthly mortgage payment out of that mortgage payment. Typically it's principal interest, taxes, insurance. So then every month that we make the payment on the property, we're going to get the benefit of the principal pay down, not the seller. Because if you bought it for a purchase price and you had to pay them off in three years, the seller would actually be getting the benefit of that principal pay down. More and more equity in that deal. That
Zachary 00:08:58 in itself, um, especially if you're a brand new student, that in itself, you have the ability to get into a deal, little money down. Typically on a lease option, our rule of thumb, um, is if we're going to put money down, we want title. So say little money down on the deal. If not, uh uh, if zero. And you don't have to worry about complicating it by transferring title. In the scripts when you're talking about a seller, tend to be a lot more simple because the seller is like, all right, I'm still remaining on title. I don't but trust this guy as much to transfer title with little money down. So you can get into these deals and then still have the ability to start building an equity, uh, into that property. And then what we then do is on all of our lease options is we then sell them on a rent to own basis. Because once you have this property under agreement, you have equitable interest in the property. And that just simply means that you now have the ability to go and sell this property. You have the ability to market the property because we're not licensed agents. So we have to get equitable interest in the property in order for us to find this buyer. We go ahead and we find that buyer and that's when we start collecting on what we would call our three paydays, which would be a non refundable, deposit upfront, monthly cash flow. And then when this deal cashes out, we'll have equity built into that property and we'll be able to receive that on the back end as well.
Billy Alvaro 00:10:14 So it really is the door open, at least. Options is like the basic, the easiest form to get in breaking into creative financing. I mean that's in a nutshell. But when you're doing these deals, how often do you in the middle, the guy who's doing the sandwich, how often you get screwed from the guy who's buying it from you. And they're like, I want to make it. They stop making payments for you. And now you have deals in the pipeline. You're obligated to make the payments on behalf of that seller.
Zachary 00:10:42 Yeah, so, great question. I would say, us, compared to the rest of the people that talk about rent to own is that we actually have about 80% to 90% success rate when it comes to our buyers. And there's a major difference in our philosophy which changes how these deals turn out. So there are plenty of people, and maybe you've interviewed some of them, that will tell you to place a tenant buyer in a property or sell the property at least option collect a non refundable deposit from a buyer and then who cares if they go ahead and qualify? Because what you're going to do is then you'll collect, their nonrefundable deposit will go hard, you'll be able to keep it, and you'll kick them out and place another property, another person in that property.
Billy Alvaro 00:11:23 I don't like that.
Zachary 00:11:26 Morally and ethically, it just doesn't make sense to us. We're a family business. I actually bought my first house, meaning with me and my family lived in a lease option. So I understand the work that it takes to get in these houses. So legally that may be okay, but more than half that's the of on our route. So we have done everything in our power to create a very systematic process utilizing multiple third parties to ensure or greatly predict that we have the right person that's going to actually buy this property. Given there isn't a dramatic change in their employment or they have to relocate or there's a death. Those things that we can't predict. So about 80% to 90% of our buyers actually get to the finish line and cash us out. But of course, we are dealing with people, so there is definitely defaults. And when those defaults happen, uh, as you know, Billy, that opens up another opportunity at that point in time for you to create a better deal. And there are many different ways in which we pivot, like restructuring the deal with, uh, the seller or just simply exiting out of it. We're now placing another tenant buyer in that property. So another potential,, income stream.
Billy Alvaro 00:12:36 Yeah, I mean, you guys are underwriting it the right way up front. You're really qualifying the buyers that are coming in, the potential buyers that are coming in on the upfront basis, which you're not getting garbage in that. It just jamming up.
Zachary 00:12:48 It's more expensive to deal with the default than it is profitable to have people leave your house. Uh, that's how we've always looked at. I would always rather place a buyer in the property that is consistently paying us and not have to worry about them than to think of, hey, how can I get this person out of my property to get another non refundable deposit? It's opportunity, cost that sucks in the entire team when you deal with the the default and you got to deal with the turnover. So if we can best, like you said, underwrite it,, at the beginning, then everyone can now move on to the next deal and accumulate more properties into our portfolio and keep those deals flowing.
Billy Alvaro 00:13:26 What's the average spread between and I know it's going to be different in each one, but give me an average spread between what you're given to the seller and what your buyer is given to you. What's that monthly note look like?
Zachary 00:13:38 Yeah, from a monthly standpoint, our average is roughly $308. So on monthly cash flow, every property will be different. But,, if I just took I'll give you the averages of our family company, uh, because it's going to vary based on our students, but our family company. So our average non refundable deposit is roughly $26,000. Upfront. Our average monthly spread is about $380, and our average cash out equity in our property is roughly $35,000. So our family does right around 74 grand per deal.
Billy Alvaro 00:14:11 What's your average span between the time you guys execute on the subject, to or actually lease option in this case, and by the time you get rid of it out of your portfolio in the back end when your tenant buyer buys it? What's that timeline look like on average?
Zachary 00:14:26 Yeah. No lease options. It's roughly 24 to 36 months for our lease options. When we're doing sub twos and owner financing, that's when things get fun. And that's what we're heavily,, focused on right now. Because now our sub twos don't have timelines, meaning there's no end date on those bad boys. So you can now have the ability to do rent, to own, and then transition to owner financing, where you could do a Rap Morgan or a land contract. And now, uh, you have somebody paying you for 30 years on these deals. Um, that's where creative financing gets fine.
Billy Alvaro 00:14:59 All right, so let's get out of the child's plane. Let's leave the lease options. Let's get those to the side. Let's go into the next one. Let's get into seller financing because you got me revved up here. Seller financing. Let's go shoot at a meet.
Zachary 00:15:10 Yeah. I love Seller financing because we're primarily going after sellers that are in good financial standings. We primarily niche down even further when I talk about seller financing, and that is debt free or free and clear properties. So these sellers, their motivation is not financial, meaning it's not they're in dire situations. It could be financial because they want to make more money. Um, they're not willing to take, like, maybe the owner finance or the wholesale offer or the fix and flip offer that you guys are giving them, or they just don't want to deal with realtors too, because that's 6% off the top. I mean, on average, we're helping these sellers net anywhere from 5% to 15% more just by going creative. And we're able to do so because of some of these terms that we create. So when we go ahead and acquire a property from a seller that is debt free, we then are going to look at a couple of different terms. There'll, uh, be more, but if we had the basic ones, one would be purchase price. So what are we agreeing to for purchase price? Monthly payment on a lot of these deals where you can get 0% interest rate on these loans. So that means that every monthly payment that we make, which of course we're collecting from our buyer and then we're making the payment, uh, is 100% principal. It goes directly off that principal balance and then the time frame. So when we look at our seller financing deals, though these tend to be especially the 0% interest. These are going to be somewhere like the 60 month range. There's going to be balloons typically attached to them. We've of course restructured them once we get in there. Those ones would uh, typically have a balloon attached to it. And then if we're doing long term deals, then of course most sellers going to be looking for an interest rate basic amortization schedule. What's that in itself? Uh, I want to use the word manipulated, but that in itself can be adjusted because you could be paying on a uh, 40 year amortization schedule. Uh, on some of these deals you could be paying, low interest rates, you could be doing steps there interest rates. Like for the first two years we're going to pay principal only and then we're going to pay two and a half, then we're going to pay five. And then you can structure some of those even more creatively where you promise a high interest rate in ten years from now, but you sell it off before then, we even have to pay the interest rate. So, some of that's just
Zachary 00:17:24 negotiation, and structuring throughout that process. But of course, with that comes a lot of additional benefits, Billy, which is you have ownership now, you get depreciation, you handle things differently. Now when you have the tax benefits associated with these deals as well.
Billy Alvaro 00:17:43 Go into on the seller financing side, the top three to five objections that the sellers have. I know they're going to be a little bit more difficult because they have a different set of objections, but go over the objection three to five on the seller financing of why would I want to sell you the property, be the bank. What are some of the objections that come up with and what's the answers you guys have?
Zachary 00:18:03 Yeah, that in itself would be an objection. Why would I sell you my property without any money down? That's one.
Billy Alvaro 00:18:14 Typically, we always go over that. Let's chop that one down.
Zachary 00:18:19 Our rebuttal, when somebody says that, of course, I don't know the motivation with this particular seller, and that was what I would lean on. But, um, some rebuttals that we could have if somebody said, hey, I don't want to send you my property, a little to no money down, I would typically ask them then, what's the most important to them? Is it your price or is it the money down or is it the monthly payment? Then they will typically tell me what's most important because I always tell them, hey, it wouldn't make financial sense for us to give you all of that, but if you could tell me exactly what matters to you, we could probably structure something that will get you to that goal. Because, uh, a lot of these sellers, they're willing to take little to no money down as long as most of them have this price that's attached. There, uh, that's in their head right now. So, uh, this leads into an advantage for each and every one of you that listen to this, that can take over right now, out. And that is, we have so many sellers out there with unrealistic expectations because of the COVID market. That's why this objection is perfect. Because there's so many sellers that thought their price on their house was what people were paying twelve months ago, 24 months ago, and now they're sitting on the market. These houses are sitting on the market for a longer period of time. So now when somebody like myself approaches them, it's, hey, Mr. Sale, you know that price you wanted? I could get you that price as long as you're willing to take your money over time. and we'll do that through monthly installments and pay off in the next 20 years.
Billy Alvaro 00:19:45 Yeah, it's not a hard sale. Once you start getting into it, it's really not that difficult. You just have to know what the objections are.
Zachary 00:19:53 It's all about motivation. Uh, and when I say motivation, again, it does have to be negative. But in creative, scientific in particular, and I can't speak for the other initiatives, I wasn't actively in those. It is all about solving people's problems. and if you can solve somebody's problem with a creative scientific deal, then you're going to have a deal. If somebody came to me and said, I need all my money right now, um, I'm willing to sell the Realtor, I'm not willing to take a discount, and I need it tomorrow, then of course, it's not a deal. The faster each and every one of us realizes when to determine it's not a deal, the faster we get more deals. So we're just constantly looking to solve problems. And once we do, it actually becomes a very smooth transition. Once you can hone in on, all right, this is the person's challenge. This is how we're going to solve it. They've been through an education process because that's pretty much what creative financing is. You have to educate them. Because our biggest objection, Billy, is that it's not normal. Right. It's outside most people's perspective to think that there's other ways to buy and sell real estate, especially your normal, everyday seller, uh, and even your normal, everyday buyer. We have to completely educate them to eliminate the paradigm that has been brought to us. And, you know, you are a banker that we've been taught that says the only way you buy houses, if you save up 20%, you increase your credit. You then go get a loan, and then you go make an offer with a Realtor in order to buy your house. Um, and the same with the seller. so it's just changing that paradigm that's our biggest objection is the education process.
Billy Alvaro 00:21:31 So before you get into sub two, I want to get into the education side. So when you guys put your process together, is it face to face education? Are you taking them through a funnel online to educate them? Are you sending them videos, take them into a seminar webinar? What does that look like the educational side to the sellers and buyers, not the students?
Zachary 00:21:52 Yeah. We have what, we created called Seven Steps to a Taking. And really a taken is just a property under agreement. Um, so we walk them through both an education process on the phone. So we always say our first call is roughly going to be seven, uh, to ten minutes at the absolute most. We just need to understand through, uh, a very specific script what their challenges, what the finances on the property, and are they open to alternative options. If we can understand that in the first five to seven minutes, then we're going to move them to an email. What's the email then? Just going to have some, like, a video on some common objections. So, uh, that way, uh, and a video walkthrough of the exact process on how, uh, what's a lease purchase, what's owner financing, what's buying a property subject to. So we have these videos that we created. So that way now we're educating them. And also at the same time they're watching. What, uh, we encourage our students to do is to take these because now they're watching you. So now they're getting familiar with who you are, and they'll feel closer to you, and it's more likely they're actually going to do the deal with you.
Billy Alvaro 00:22:55 No like and trust.
Zachary 00:22:56 Yeah, absolutely. So then from there, we then move them to a follow up call or a secondary call, which is more now sharing with them based upon the information we got on number one on our first call. And now they have a better understanding and more of an educated conversation now because they understand the process more. And then what we're going to do now is just share with them how we may be able to solve their problem through a couple of different options. If the seller now is open to and understands the process and is open to criticizing, ah, offer, that's when we'll move them to an, uh, appointment and then that's when we'll do it in person. Uh, we always like to, especially if you're getting brand, uh, new and real estate investing. We like the investor to invest within a 50 miles radius of where they currently are because it's already hard enough to learn creative financing and then you want to try to buy it virtually, right? Uh, which is another added dynamic. We would like at the beginning for people to buy in their area so that way they can go visit the property, get used to being used, uh, to seeing the houses, analyzing the properties, meeting with sellers belly to belly. So then that in itself too in the appointment is an education process as we're constantly now sharing with them handling objections and then we'd move to the financial details meaning we're requiring mortgage statements or we're then going to go ahead and pull comps comparables and then we can start making offers from there through the last couple of stages. The very beginning, as you can imagine, is all just constant communication and uh, bringing clarity to the seller so we can get them to a point where they're ready to eventually make a decision. And that first decision they need to make is, am I open to a different offer than the traditional sale?
Billy Alvaro 00:24:45 That was a good process flow, by the way. Let me ask you a question. Is it the same person who interviews them on the phone? Like, do you have a lead manager do the intake seven to ten minutes and then once they get that pre qual, hand it over to an acquisition manager? What does that look like in your business and how you guys are structured?
Zachary 00:25:03 We've always had a small business, me and my father in law and my brother in law, and like one additional admin and we were doing six to ten deals a month. So, uh, it was a very small net business. And then our students across the country are primarily starting as sole printers and then eventually having some admin or virtual assistants start working with them. So the student in itself would be the one that would be either making the first call, uh, or getting a call handed off from a virtual assistant, uh, with what we would call a property information lead sheet or just information about that lead. The student would then take that call and then be the one educating them throughout that process. And then eventually, as they grow and scale, you can add what we would call a seller specialist or an acquisition specialist to then replace them and then keep moving up that business owner or that student, uh, up the chain of command until they're at. A point where they're just making decisions based on deals.
Billy Alvaro 00:25:57 Good stuff, bro. Really good stuff. I could stop here and we had enough, but I want to get into now one of the most difficult, I think, um, for new people getting into the business is sub two simply because you're taking over an asset and the debt is going to remain in the seller's hands. Right? So this is an objection that when you're into this business, you're starting off new, it's going to come up. The seller is going to be like, why would I want to give you the asset and keep the mortgage in my name? So let's go through, first off, what subject to is in case the people out there don't know, educate them on the basics. And then I really want to get into how you overcome the objections of getting these people to understand that it's in their best interest to do a sub two.
Zachary 00:26:38 Yeah, I'll talk about a deal that we're literally working outside of Denver right now with, uh, one of our students. A sub two deal seller, uh, is relocating to Florida. She has a VA loan on the property, and her pain is higher, meaning her pain to move and get out of this property is higher than her objection to keeping her name on the loan. I mean, at the end of the day, that's really where subject two is coming to play. What they want to accomplish is more important to them than them worrying about their name remaining on the log. And trust me, in our agreements, we have like, three pages worth of disclosures that say, like, I understand what a subject to deal is and what's entailed with it. So breaking down the basics, though, when you approach a seller, that is typically in a financial bind. Um, when we look at subject twos and you, uh, and I were talking offline before we get on here, I mean, there was over 10 million people in pre foreclosure coming out of COVID You have over 300,000 people at least now that are upside down based upon twelve to 24 months ago when they bought homes. Some people don't have another exit other than you being the buyer, the creative investor, you being the buyer and taking over that loan. So if somebody has zero equity in the deal, then their choice is, uh, they pay a realtor and closing costs to sell this property. They come to you, and you allow them to walk away without any financial hit. And then they have to trust. Of course, that's like the number one objection, right? A seller won't sell you their house unless they trust you, especially in this situation. Because if they trusted you and they knew you were going to make the payments, then it would be an absolute no brainer. They'd be like, all right, I have to pay. So give me an example. I bought a property from a seller out here in Connecticut. He was actually a fellow banker. He used to be a banker who's retired trying to move to Washington State across the country. Uh, he refinanced his property. So they actually put a HUD lean on his house. So basically it was just a placement lien. That thing need to be paid off. When he went ahead and sold it, this seller was on the market, and if he sold the property, he would have to come out of his pocket $15,000 in order to move. So when I approached him after this property expired, I then went to him and I said, hey, good news is you can just go ahead and move off to Washington. The only difference is we're going to leave
Zachary 00:29:08 your loan in place and we're just going to take over and start making payments because we're contractually obligated to do so. And at some point in the future, we will pay you off. Because what needs to happen in an example like this when there's no equity, is the principal on that property needs to pay down over time. And then the market needs to appreciate. So we could create equity. Luckily, in our world, though, creative financing, we can manufacture equity day one because we're selling to a buyer that can't qualify for a loan, so they won't pay a premium. So then what we do with those properties is we just let those things ride for a period of time. And then at some point in time, either the buyer cashes us out or we get enough equity in the property in the next 5710 years that now we built up enough and we go ahead and sell this thing in order to pay off that seller's debt. And then, uh, we get our back end profits.
Billy Alvaro 00:29:58 I love it. I love it. With the subject dues that you're doing, what's the general spread on that, on those, uh, on those deals that you're doing?
Zachary 00:30:07 Generally, every property is different. I have to say that. But I would always just if I lumped in all of our deals and I looked at spreads, all of our deals average, uh, out to somewhere between $300 in spread every single month. Every single deal that we got with the subject, two deals, it's also going to be let me give you another example because this is good. This one's for you, Billy. Uh, so we went ahead and we acquired a property subject to the existing loan up here in Cape Cod, which is a great area. Uh, so these people happen to be going through a divorce. They want to exit out. The wife was on the mortgage and title. The husband was only on title. So as soon as we bought this property, we only deal with the wife. This property had a 3.5% interest rate. What we did was we went ahead and we sold the property on a rent to own to this woman she was actually trying to become an attorney and she went through our process. We had her on a 30 month sandwich or a 30 month lease option. She put down $41,000 on a, uh, 425 house, about 10% down. We then went to the seller, went to this buyer and said, hey, good news, we could actually finance this property because you've been making all your payments on time. We huh, went ahead and sold this property on a wrap for 7.5% interest rate to this uh, particular buyer, which is actually not excruciating compared to the market right now. So we're creating right now a delta of 4% on this property. Because we have a 3.5% interest rate on our original loan, we're selling in a 7.5. So we have 4% spread on this 30 year amortization. If , this buyer wants to stay in this property for the entire 30 years, the original loan will be paid off. We'd be making 7.5% for about twelve years. This is where the magic comes in. It's like you just got to get in with the best deal possible and then after that, now it's all about massaging that portfolio in order to create better and better deals creatively.
Billy Alvaro 00:32:17 Zach, tell me this was great information by the way. Like solid content that the people going to get. And I want to speak to you about, your coaching program and plug that in a little bit. Talk to me about how is it a management company, uh, is it a third party that's collecting the rents, collecting the mortgage payments? What does that whole process look like? Is it done in house? Is it subbed out.
Zachary 00:32:39 When our students are first getting started? I would say, let's say the way we built it was we actually handled everything in house. Uh, we had to bring bookkeepers and we had like 77 properties, uh, all creative at one point in time, just in house, not even with the deals going on our students. So we had at least two bookkeepers just managing those. Because you got to collect the mortgage, you got to collect the rent, pay the mortgages, and then do everything else that comes with the properties. We did just recently pair uh, up with a third party company that will actually start handling uh, because they can create a portal for your buyers now to go ahead and make payments directly in there, pay the mortgages and just kick you the spread. And the difference, which makes a huge difference for say, the average student out there doing a deal a month or ten deals a year where they're still working a full time job or they got a part time job and they're doing creative financing or doing real estate deals. So this makes a heck of a difference. So they don't have to worry about the basics of that. I know I can answer it two different ways, but as you grow and scale your company. You, uh, can do it in house, or you could certainly choose to use a third party as well.
Billy Alvaro 00:33:47 The third party is it Fsfci. Who are you using for that?
Zachary 00:33:52 Uhone of our students created this because he was dealing with he said he was dealing with some challenges, and he had him and his family in Iowa manage, like, a couple of hundred properties. And he said, hey, I have this idea that, uh, can help out all the students. Uh, uh, would you guys be open to creating a third party company? And that's what we did. So it's not processing. Natprocessing.com.
Billy Alvaro 00:34:15 Love it. Very smart. All right, bro, let's get into your other business, which is your coaching business, right? You guys are out there. You've been doing this for how many years? You and your father in law?
Zachary 00:34:24 My father in law has been doing this for 30 plus years. I've been in over eight.
Billy Alvaro 00:34:27 That guy.
Zachary 00:34:28 Yeah, exactly. Hey, yeah. You know what I mean? I was listening to, um, one of your other podcasts, and this sparked that thought, which was you talk about learning and implementing at the same time. And that's how it dramatically sped up this. That's been my entire real estate and business career, is I would learn from people like him, people like you that are ahead of me in the game. And then as I was learning, I was implementing as fast as possible. So if you listen to this, that is the fastest way to get things going. And that's why I feel as though I've been in real estate for 20 something years, but we've been doing it for eight. Uh, but, yeah, we've been doing this a long time.
Billy Alvaro 00:35:04 Love it. All right, so it's all to me about the coaching business. What you guys do, what you offer, how your students can get involved. What does that look like?
Zachary 00:35:12 Yeah, so the way in which we have structured our coaching, uh, program, we call it, uh, Associate Experiences. And really what we have discovered that most students don't get involved or most people don't get involved in real estate investing for a couple of different reasons. One is they don't feel as though they have enough money. Two is they don't feel they have enough experience. And, uh, three is also they don't believe they have enough support. And, uh, then four would be enough time. So we've kind of taken all those into considerations and all of the coaching programs that we've been a part of. And really what we do is we built out this community experience that includes group coaching, one to one, and an entire community support there as well. But most importantly, what separates us is we literally place a coach, basically, inside your company, because we are going to work with you the life of every single deal in which we help you complete. It doesn't matter what market you're in, we're going to help you virtually, and in some cases, you file to, uh, work with us in person as well. And what we do is we literally just support you through every different dynamic of this creative financing deal. Because we understand that real estate can be daunting number one. But creative financing, when you have so many different levers you can pull on, can certainly be even more daunting. But we know that if we can get you moving and get you the fastest to your first deal, that we're going to have you be a creative real estate investor for life. So, we bring that massive support to the table and then do the deals with you. So that way we can put you in the strongest position possible and handle any nuance that comes into play.
Billy Alvaro 00:36:45 I love it. The curriculum overall is it eight weeks? Twelve weeks, 16 weeks. What does that look like?
Zachary 00:36:51 We bring all of our students to our 1st 90 days that we can build up that fundamentals across the board. Doesn't matter what level they come in or what program they select. And then our programs in which we work with our top level, 36 months, 24 months, down to 18 months. So we really are locking arms, these people. Um, our students become family because how much time we spend together, I probably spend more time with them than, uh, I do my own family.
Billy Alvaro 00:37:18 Good stuff. All right, so, Zach, if people wanted to get signed up, they want to check out your coaching, where do they go?
Zachary 00:37:24 I think the best next step would be, let's make sure that each and every person that listens, that once, uh, we get, uh, our first Amazon best selling book in their hands, we'll ship it out to them for absolutely free, and we can get them dialed into the model and how creative financing is done. and that way, the people that are committed and really want to make a massive change and want to use creative financing in order to get there, can certainly have their next step. So, just go to Wickedsmartbooks.com unstoppablerei. That's wickedsmartbooks. Comunstoppablerei. We'll ship you out our first Amazon bestseller book, Realtor, on your terms, and some other goodies in that package as well.
Billy Alvaro 00:38:02 Great. Freaking super ship, man. If they want to connect with you online, on social media.
Zachary 00:38:07 Where you at? Yeah, at Smart Real Estate Coach, Instagram, Facebook, TikTok, uh, you name it, we're on there.
Billy Alvaro 00:38:16 This is it. Mr. Zach, the hockey dad. Massachusetts. The guy's cranking, kicking it, making shit happen. Creative finance and doing deals. You guys are doing well, man. I interviewed your father in law. I think maybe, um, it was like six months ago or five months ago. Sharp. Dude knows his shit. Has it dialed in.
Zachary 00:38:34 Yes, he does. Yeah, he's an absolute, uh, transaction engineer. Uh, that guy knows real thing inside out. So if we let him do the deals, he still works with the students, and then I run the business that we can continue to help more and more people build and then scale their real estate businesses and make a good team.
Billy Alvaro 00:38:50 Rob, because you're, uh, sharp as shit as well, brother. You got your stuff together. Good interview.
Zachary 00:38:55 I appreciate you, my man. And I'll let my wife know that I'm sharp as shit New York thing.
Billy Alvaro 00:39:02 All right, brother. I appreciate it. I'll catch you in the next one.
Billy Alvaro 00:39:06 Thank you so much for listening to today's episode of Unstoppable real estate investing wealth. My mission is to give you, my listeners, the blueprint to success. The Insider secrets for starting, growing, and scaling your real estate investment business so you can experience and live the unstoppable lifestyle. I've made it simple for you to catapult yourself to success.
Billy Alvaro 00:39:28 Ah.
Billy Alvaro 00:39:29 Go to Billysecrets.com at billyssecrets.com. There you will find every single tool, tip, trick, strategy, system, and secret used to make millions of dollars as a real estate investment. Everything my team uses and my guests use all in one place for you to tap into so you can start, grow and scale your real estate investment business. I really hope you implement what you're learning. I hope you utilize these tools, tools, tips, tricks.
Billy Alvaro 00:40:00 Try to keep it secret.
Billy Alvaro 00:40:02 And I hope to see you on the next one.
Billy Alvaro 00:40:04 God bless. Bye.