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- [00:00]
A
Hey, guys. We are buying two more boutique hotels along the California coast here with Summers Capital. 45 rooms off Market in Catalina island and a second deal up in Bodega Bay, which will make a total of eight boutique hotels owned and operated. Our investors get passive income tax benefits. And the best part is, unlike investing on Wall street and a lot of these other asset classes, like multifamily, our investors get to go and stay and experience these boutique hotels firsthand to see how their money's working for them. And so if you want to learn to see if we can help you before this opportunity fills up, you can go to summerscapital.com invest to book a call with my team. Again@summerscapital.com invest to book a free call with my team. Now let's jump into the show.
- [00:37]
B
The intention of somebody. It's like, I start and I stop is somebody who did it because I wanted one deal. The person who sticks with it are. The people are like, I'm not in this to do deals. The deals will come. I just want to work on myself. I want to go do cool things. I want to be around cool people. I want to be part of the pleasure, the pain, the challenges, all that kind of stuff. And they look at, like, a video game, and you go as hard as you possibly can. Other people are like, man, I made three calls and I didn't get a deal. It's because your intention was to get a deal. Your intention wasn't to improve yourself and to obtain a skill, a relationship, or a resource. If that's not your intention, you're going to be the start and stop type of person.
- [01:14]
A
All right, guys, welcome to another episode of Report Today. I got someone who's been on the podcast not once, not twice, but three times now. He is the king of sub two. I got my man Pace. Morbi Pace. Welcome back to the show.
- [01:27]
B
Rich Summers. I got to tell you, this office is insanity. Guys. This dude has a building insanity side of a building. You've never seen anything. Like, I walk in here, I'm like, this is insane.
- [01:36]
A
And a lot of people don't realize this. This office is 130 years old. So you can see the original brick behind you, the original archways up here. And they used to manufacture goods and products here. It was an industrial building. They roll it down to the ships and the train tracks, which is right behind us. But the cool takeaway is this. The s and P500,500 companies and businesses established in the 1950s, they put together that group 80% of those companies are no longer in business. But this building, 130 years later, is still printing money. And that is a really, really good lesson. Because real estate is a timeless, timeless investment vehicle.
- [02:10]
B
It's timeless. And here's the thing is like there's this big wave right now of buying businesses, right? And I buy businesses as well. But I'm also getting rid of a business right now. I have a business of virtual assistants. And with AI, I have a virtual assistant company, 300 employees. We're selling that company off right now because technology is completely destroyed. That business, completely destroyed it. I'll give you a good example. If you're cold calling five years ago, you're going to hire somebody from the Philippines. You'll pay about a thousand to thirteen hundred bucks a month for a full time Filipino to do cold calling for you. They'll generate, in a month. They'll generate about 60 leads for you in a month. You have to manage them, train them, bonus them, keep them excited, motivate them, all of those kind of things. There's now A I, for $249 a month, will generate about 300 leads a day. 300 leads a day. So why do I say that is because while buying businesses is cool and owning businesses is cool, real estate is timeless. It always has been, it always will be. This, this building, case in point.
- [03:11]
A
And in addition to that, I mean, depending on what asset class you're in, a lot of these asset classes are evergreen. There's never going to be a replacement for two things. A place for people to sleep and a place for people to store their belongings. That's never going to go anywhere, regardless of AI, you know, so anyways, a lot of good stuff I want to cover here. I want to get into AI, I want to get into wholesaling, I want to talk about subject to creative financing. But first things first, man. And by the way, by the way, I feel like every time we do a podcast, we always have a, a crowd. We got about 30 people here. The first time we did a podcast was out in Scottsdale, uh, at my luxury Airbnb out there in the Speakeasy.
- [03:48]
B
Yeah, that was sick.
- [03:49]
A
We hosted a meetup out there. There was like 300 people there. And then last time was in Nashville and that was at a conference with, with a lot of people in and out. So I don't know what it is, man, but you bring them out.
- [04:00]
B
You bring them out.
- [04:01]
A
Well, you bring them out. We always bring them out. But anyways, first thing first, man, I got A lot of. A lot to cover here. I recently put out a video on Instagram about a week ago. It got a lot of engagement, a lot of comments. And you were talking about how most of your team is female, and you said back then that they're just the better person for the job. My team, I gotta say, my team is here right now. Mostly female as well. Do you still feel this way, that women are the better for the job?
- [04:29]
B
Yeah. In fact, those comments on those. That Instagram thing were all dudes just hating and just having a hard time admitting that they're wrong. Women are better leaders in a lot of situations. They are always about we, we, we. Men are very much about me, me, me. Now, I've got some great male leaders, but for the most part, my entire top of my companies is always female run. I always have felt that way. Maybe it's a personality thing. Now. There's a lot of comments that were like, well, you just don't know how to manage. You're not a great leader. That's why you can't attract a strong man. I was like, all right, says the guy that's living in his mom's basement. Your mom is in charge of you yet again. Another proof that women are better leaders than you because you're living in your mommy's basement. So shut the hell up. But, yeah, I feel that exact way I come into your office.
- [05:16]
A
Yeah. Mostly female.
- [05:17]
B
Mostly female. They're. While we've got 50 people hanging out, they're all cranking and working and getting things done, and the dudes are all fluttering around doing nothing.
- [05:24]
A
Yeah, yeah.
- [05:25]
B
Sorry, guys.
- [05:27]
A
No, it is a true thing. At least. At least in my. My small sample size, I feel that is the case. I feel they have better work ethic. I feel like they are less sensitive, more open to constructive criticism, and I think just harder workers and just, like, better work ethic overall, which is big when you're trying to grow a company.
- [05:48]
B
Well, at the end of the day, like, what do you like? Lauren, right?
- [05:50]
A
She's your.
- [05:51]
B
She's on.
- [05:51]
A
She's great. Oh, my gosh, a player.
- [05:53]
B
She's an a player. She reaches out to me. She's communicating with me. Dudes are like a dude in that same position. Like, where you at? She's like. She's so nurturing, caring, attention to detail, making sure she takes care of my people. Like, your customer will feel that. And at the end of the day, do I want my customer to communicate with a female, or do I want my community, my customer communicate With a male, for me, personally, all day long, it's going to be a female. And we do like, we're using AI. Case in point, we're using AI to do cold calling a lot for our real estate business game.
- [06:24]
A
It's a female voice.
- [06:26]
B
Of course it is.
- [06:26]
A
Yeah.
- [06:26]
B
Because the effectiveness is way higher. Females prefer to talk to females. Males prefer to talk to females. I have millions and millions of calls, millions of calls in AI. It's not even close. And when you look at all the other people that are using AI too, it's like 99% of people choose a female voice over a male voice. It's more effective. People prefer to do business with a female.
- [06:46]
A
Yeah. It's the same reason why when you go to any sort of hospitality, whether it's a hotel restaurant, typically the person, the hostess, the first person that you talk to or is bringing your table is typically going to be a female as a reason for that question for you. You mentioned last time we spoke that that you give leadership positions on your team equity.
- [07:08]
B
Yeah.
- [07:10]
A
In the real estate that you guys buy. Yeah. And you mentioned something that. That I have since implemented. And you did, because I was doing it before, but I lost a couple team members. And so I was like, dude, there's got to be a better way. And you said, rich, I do phantom equity. Are you still doing the phantom equity? And how do you. How do you lay that out?
- [07:28]
B
Yeah. So phantom equity, basically, it means you get shares in the company if you're around for a certain period of time. Right. You've got to earn it, you got to stick around, et cetera. And the other thing that I'm doing also is, like, in my lending business, for example, my lending business is not a company that I plan on selling. Right. We lend a lot of money out, and there's profit share there. So what I've been testing as of last year is I show my team members my exact P and L every single month. My draw. What does it cost to have the building? Other people's payroll. Like, I literally am just.
- [08:03]
A
What do you mean by other people's payroll or what others are making on this?
- [08:05]
B
Yeah, because they're gonna. They ask each other anyway.
- [08:07]
A
Yeah.
- [08:08]
B
Right. Whether you want it or not, your employees are talking to each other. So how much are you making? And how much are you making? And I did it, and I deserve a raise. So I just started putting it out there, and I'm like, I'm just gonna pay everybody the exact same way, but I'm going to incentivize them the same way as well. Based on what? How many loans we get in, how they're serviced, etc. So I'm testing out a new model of profit share where there's complete transparency of exactly what it costs to run the company. And what's happening is my employees are so meticulous about every single dollar that we're spending now, because now in their mind, it's like, that's my money.
- [08:43]
A
Yes.
- [08:44]
B
Where in companies I don't do that. People just think because you have a company that you have money sitting around in the bank account, we could go buy a $10,000 camera. We could do a thing. We. Well, let's just buy. It's no big deal, guys. It's a big deal when it. 20% of that is your profit share. So that's not a $10,000 camera. That's a $2,000 cost to you, the employee. And so we're having a lot of fun on the profit share side of things as well. But phantom equity is working well. I also have left that up to my. To Molly, who's my coo.
- [09:11]
A
Molly's great, by the way.
- [09:12]
B
She's phenomenal. So what Molly does is she. I go, you are in charge of this 20%. I'm not. If we go by, we just bought an RV park two weeks ago, we closed on at 2.3 million. So out of that 2.3 million, what is that? $460,000 of that acquisition goes to the employee pool. Molly is in charge of that. And so people have to stick around for five years in order to get the phantom.
- [09:36]
A
The phantom equity. So it accrues, but it does not get realized until five years.
- [09:40]
B
Right. But if you stick around for four years and nine months and three days, not. It's gone. 100% of it's gone.
- [09:46]
A
Yeah. And I think a lot of people listen to this podcast might ask, okay, well, why do you do that? Why do. Why do you give up a piece of the pie? We do it. I mean, I do it on the investment side. So 20% of this summer's capital GP. 20% of that is a manager's LLC. And so the leadership positions on my team participate in that. And then we also do some rev share for some of the other streams of revenue. But people might ask, why do you do that? It creates an alignment of interest for the deals to go well. It creates an alignment of alignment of interest for the projects to go well. But also, I think as you grow a bigger and bigger thing, the. The main. The biggest Lever that you can pull is bringing on high quality team members and attracting the best talent a players. And in order to do that, you got to take care of these people.
- [10:30]
B
Yeah, it's really challenging. So as you build a team, you'll find people that have zero risk tolerance. They don't ever want to build a business. They also don't have the ideas that a visionary like you will have or a visionary like I will have. But they want more. Right? And so they hit a ceiling. So what will they do? They'll hit a ceiling and they'll go, well, the only way for me to make more money is to leave rich or leave Pace. Go leverage how much I'm making for richer pace and go and tell this new company, this new boss, hey, I make this much money here, if you hire me at this, that's their only leverage. And so that you've trained them, you built them up for three or four years, you've basically gambled and invested all this time, energy and effort into this person and they've done a lot for you too. Why would I want that person to leave? And so those people get equity in the company, they will stick around. Now, what's cool about equity is this. It changes their mentality of I'm an owner. And so when they see misbehavior in the office, they catch that, not you. And so people ask me, how do you get so many things done? How are you all over the place? How are you building these things? I'm like, I'm not, I'm not building anything. I built it up to a certain point. I found the right people to take that 20% and make sure that it's divvied up equally. And they then create a culture that does not require me, which is an ownership culture. They own the company just like I do.
- [11:48]
A
I'm curious because one thing that I've, I've learned as I've grown is, you know, bringing on a players constantly, you're constantly resetting the bar and then there's always going to be a weak link. You got to identify the weak link and if that weak link can't catch up, you got to replace them. And every time you reset the bar, the entire level of the team really, really levels up. And then a new door opens up, a new opportunity unlocks itself. And so I'm curious for you, like, you know, knowing that this game is all about hiring the best team members and the best players, what is the best way for you to source top, top tier players?
- [12:19]
B
Okay. So if you're in the real estate space, there's an incredible company that I really like using. I'll give you guys a cheat code. The name of the company is Bullpen Re dot com. Bullpen Re dot com. So Bullpen, they will go headhunt for you the specific traits and the specific experience that you need. So for example, my portfolio manager manages. You know, I'm not a, I'm not a billionaire, but I've got half a billion in real estate. Half a B, half a B. I needed somebody that had experience at the billion dollar amount to be my portfolio manager. So I went to Bullpen and I said, I need a fractional portfolio manager. And so they found somebody for me that was willing to work 15 hours a week managing my portfolio and managing somebody else. And I eased into finding this, getting this person full time. I finally got him full time. He's been with me now two years.
- [13:07]
A
And they just act as like a asset manager.
- [13:09]
B
Yeah, he's a, he's a portfolio manager. I have an ass. I have asset managers underneath him. So portfolio is like we have multiple buy boxes, right? We have RV parks, we have mobile home parks, we have all sorts of things. So he's over everything and then have asset managers over each individual bucket. So here's the answer. Answer is go find the right person with the right characteristics that you need right now. Don't train the top level person. If they don't come in and know more about the position than you do, then you're hiring. You're hiring the wrong person. If you have to pay somebody six figures and you're teaching them how to do your job, then you're hiring the wrong person straight up. Now the next phase of that is now that person will now attract the next quality person. You don't have to do it.
- [13:49]
A
That's so good.
- [13:50]
B
And why? Because they. A future portfolio manager wants to work underneath a guy who managed $5 billion in portfolio, right? So I'll like in copywriting, you guys have copywriters. You guys outsource to copywriters. Copywriting is so incredibly powerful. Emails, websites, marketing, all the things I went and bought, I went and basically got the greatest copywriter I could afford. And now I've got four copywriters that work underneath them. They didn't come to work for me, they came to work for that copywriter. So when you pay for the right person in the right position that already has the experience and you go, damn, that's a lot of money. You probably have the right person that person will attract the next two or three people because they want to learn from that person. They want to be mentored by a higher level copywriter, a higher level portfolio manager. And so one thing I learned multiple times, I've been kicked in the teeth. I know you have too. When you pay peanuts, you get monkeys. And if you don't pay appropriately, you'll get the wrong people. And you. But I'll build them up. I'll build them up. I'll build them up. No, from the top. You got to go top down. Hire the best possible you have. I see your people, dude. You got badass people.
- [14:58]
A
A players.
- [14:58]
B
Yeah. You got a players.
- [14:59]
A
Yes. Yeah, that's, that's the game. And that's what I'm learning as I, as I grow.
- [15:04]
B
And then also, I mean, you look at donkeys and thoroughbreds should not hang out with each other. And your thoroughbreds, if there's a donkey in the office, your thoroughbreds don't want to be in the same stable as a donkey. And so what will happen is it messes up the culture. And what will happen is if you don't fix that and get that donkey out, those thoroughbreds would leave to another stable. It's subconscious, but they're like, we. This invo. This is not a great place for me to grow. You have everybody on your team's an A player, which means you're. You will attract higher level people over and over and over. Because people want to be a part of some Cool.
- [15:36]
A
Yeah. And I think that's the part of, like, entrepreneurship that a lot of people don't realize from the outside looking in. But a lot of the decision making that goes on is, is having those tough conversations. And sometimes it might be with someone that's been with you for three, four years. Uh, and they might be the weak link. And it's like, dude, you gotta have a tough conversation. Every time I've delayed that conversation, it's always just kicking the can down the road. And then finally when I do have the conversation, replace a better talent, it resets the bar. I'm like one end you. Why did I not do it sooner?
- [16:04]
B
Yeah, I have a hundred times. A hundred times. Now, here's what we do different, because I am kind of a sissy with this, because I love people and I know you do too. What we do is when we hire people, we don't hire people. We give them a 30 day start. Like, hey, you're. You're a temp for 30 days. And then you'll have A second, we fire you and then we'll see if we rehire you. So you have a 30 day contract with us. If you make it through 30 days, you'll have another follow up interview, see if we actually hire you full time.
- [16:29]
A
That's really good.
- [16:30]
B
Yeah. Because otherwise, I mean, you know, dude, like, you know, within a week, two weeks, how people operate, how they communicate, how they dress, how they show up, what excuses they have, or if they're one of those people that go, oh, hey, I see that your job is falling behind. Let me pick up the slack without telling anybody. Right. Because you'll see somebody that goes, I'll do that person's job, but I'll take credit for it. That's not how you want that culture. You want people that have each other's backs, and so you can typically find those characteristic or character defects within 30 days.
- [16:59]
A
That's so good. I like that. I want to switch gears, man. So last time we chatted out in Nashville, I feel like there's been so much of a change in the. The landscape, everything that's going on, Real estate, space, politically, you know, there's a big shift happening. They're calling this the greatest transfer of wealth in American history. You know, you got 40 million baby boomers retiring in the next six years. Currently they hold about 51% of America's wealth. And a lot of that wealth is about to change hands. It's happening right now. And love them or hate them, we got a real estate investor that just took over office. The Republicans took over the House, and they control the Senate. So there's going to be a lot of real estate and business friendly policies that are put into place over these next couple of years.
- [17:38]
B
And so, yeah, like, they just, they just brought 100% depreciation back, which is awesome.
- [17:42]
A
Yes. Is that official?
- [17:43]
B
It's official.
- [17:44]
A
It is official.
- [17:45]
B
Yeah.
- [17:45]
A
When did you hear that?
- [17:46]
B
Less than a week ago.
- [17:47]
A
Okay. Because I know as of last week, I was talking to Amanda Hahn and she was like, hey, it's very close to coming back. I didn't know it was official as
- [17:54]
B
of, like, Friday, I think it was. Really? Yeah.
- [17:55]
A
Okay. That's huge.
- [17:56]
B
Yeah.
- [17:57]
A
I'm curious for you, man, because obviously 100% bonus depreciation coming back is huge for business owners, real estate investors. Depreciation is one of the biggest levers that you pull investing in real estate. But I'm curious for you, with the new administration and with this new landscape that's going on, what other opportunities do you kind of foresee in the real estate space.
- [18:17]
B
Okay, so number one, let me address the transfer of wealth. I want to make sure people understand what that means. So you've got the sellers, right? All these people retiring, they've got hotels, they've got houses, they've got businesses, they've got RV parks, mobile home parks, whatever it is. How does that wealth get transferred? The conduit that transfers to you, the buyer, the real estate investor, is seller finance. Like the best thing for these sellers that are retiring is to continually get a payment from you every single month and get the highest possible price and also help them avoid capital gains tax. The only vehicle that that transfer checks all of those boxes is seller finance. So I would look at anything that you want to buy. Seller finance is by far going to be the thing and I'll tell you why. I don't think the Fed is going to lower rates significantly this year. I think we're at like 6.8% right now. I think we'll probably get somewhere around 6% by the end of the year. It's not enough to make a significant change. We got to be in like the 5% range for home buyers to like change. Like that world will get lit back on fire.
- [19:19]
A
And by the way, by the way, if you would have told any real estate investor 36 months ago that the rate environment would more than double for 36 months straight and there would not be a big crash in real estate prices in most markets around the country, a lot of people would have thought you were crazy.
- [19:34]
B
Yeah, they would have called you a fear monger. And I, in 2022, January 2022, I made a YouTube video. I said the Fed is going to raise the rates. Everybody's going to get their ass kicked. That is doing big syndications that have have temporary debt. And this year I think $1 trillion is going to come due on those commercial investors.
- [19:51]
A
Yeah, there's a lot, a lot in the multifamily side. And you and I both know a lot of bigger name operators in the multifamily side that have not been doing any distributions for quite some time.
- [20:02]
B
Yep, I actually.
- [20:02]
A
And some of these deals are going back to the bank.
- [20:04]
B
I'm in an L, I'm an LP position and which means I invested in somebody else's deal and I did it in 2021 and they stopped distributions in 2023. They haven't paid distributions in two years now. They're like we're just gonna fire, sell the asset. I mean, luckily I'm only in it for a Hundred thousand.
- [20:21]
A
At least I get your equity back or a majority of it.
- [20:23]
B
Yeah, maybe. Yeah, maybe I will. And so they're sitting in there saying, we just need to get rid of this. We're hemorrhaging money now because the rate's gone up. They have a, they had a floating rate, so their rate goes up and now they can't cash flow. There's a lot of syndicators that are getting their asses handed to them because of that. Is it a good opportunity? Maybe, maybe it's a good opportunity. But for people that are watching this, you're probably not in a position to go buy a $500 million, $100 million multifamily unit that's going to go into default. I would still focus on the smaller assets. There's so much opportunity. Boutique hotels all the way down to RV parks, mobile home parks, all that, all of that kind of stuff. The cheat code. Here's the cheat code. If you want to, if you want a cheat code real quick, go to crexi.com c r e x I dot com, type in owner finance. You'll see boutique hotels, RV parks, mobile home parks, land, all on seller finance, where these sellers are like, I want the price I want and I'm willing to do seller finance. That's a good place for you guys to start. Go, go get one asset. Don't worry about the big trillion dollar defaults that are going to happen.
- [21:16]
A
Yeah, and, and, and you're exactly right there. I think a couple things here. I saw this trend in 2021. I was investing in multifamily before I got into the hotel space. And it got so overheated that every multifamily deal had 35, 40 property tours and 25 offers. And by the time you got to best and final, some of these groups were overpaying like 4 or 5 million dollars over these pricing guidances. That these guidances didn't even make sense to begin with. And so I saw what was kind of happening. And, and now you're seeing a lot of these groups kind of in trouble. Some of these deal. I mean, I just, I just talked to an investor, one of our investors last week and he's invested in 17 syndications. And he said that half of them on the multifamily side have gone back to the bank and all the investor equity completely washed out. And so I saw that kind of happening back in 21 is. And that's when I decided to shift over to the boutique hotel space where there's just a Lot less competition. And you can actually go in and pick up deals at a discount from
- [22:14]
B
some of these retiring actually add value. Add.
- [22:17]
A
Yes.
- [22:17]
B
Whereas like a lot of people are doing syndication on multifamily deals. They go, oh yeah, we're going to add value and raise rents. Well, first and foremost, rents deflated the last couple of years. So there's all these people adding value that is not actually giving them rent increases to over overcome their interest rate increases. In what you're doing with boutique hotels is you can actually add significant value. A complete different experience. And as people are kind of making departure from Airbnb as a consumer, they're going to the boutique hotels. Like, I don't really want to stay at an Airbnb. I want an experience at a, at a hotel that has all the features and all the accommodations. Now your Scottsdale Airbnb is insane. It's like an air. It's like a freaking hotel by itself. But the boutique hotel is a great place to navigate the last couple of years away from the Airbnb and the single family type of stuff, because you actually can add value.
- [23:06]
A
Yeah. And to that, to that point, that property in Scottsdale does do really well, and you can still do pretty well in Airbnb. But it's gotta be a unique property. It's gotta be something that's different to the marketplace. It's gotta be a unique stay. The days of like just doing a four bedroom single family home and furnishing it with Ikea furniture and thinking it's gonna cashflow, that that's not gonna work.
- [23:26]
B
That was me, by the way. That was me. And this is why I'm not a big Airbnb guy, is because I couldn't, for me personally, this is a personal decision. I couldn't scale an Airbnb model knowing that I had to make everything unique and I had to do all that stuff, that's not what I wanted. There's other people that crushed that model. I chose to go away from it. I wanted to go to a model that I didn't need to see the property deal with the design, deal with any of that kind of stuff. High demand and I could scale it. And I feel like with what you're doing with boutique hotels, I think that's definitely something you can scale because you have way more doors. You're not giving a unique experience on every single door. You're giving one unique experience at the total property, which is amazing.
- [24:04]
A
Yeah, no, absolutely. And big picture, I mean, like, Scott's location is important with what we do. So a lot of real estate investors, traditional real estate investors, they like to go into these landlord friendly areas like Florida, like Texas, like Arizona, because of landlord tenant laws. And I get it. But with the boutique hotel model, we kind of think opposite. We like the bureaucracy, we like the red tape. And so for us we're buying primarily in California coastal because there's tight Airbnb,
- [24:30]
B
really great deal right on the coast, what like a year and a half ago?
- [24:34]
A
Yep. A bodega bay.
- [24:35]
B
Yeah, frickin awesome property.
- [24:37]
A
But like with the Scottsdale property, that property crushes. But I never want to own a boutique hotel in Scottsdale and compete with the 6,000 short term rentals out there in that market. But you said something which is, which is interesting. I think this is opportunity right now. You said seller financing. With all these boomers that are retiring, what makes a good candidate for seller financing? And it's a retiring a seller that wants too much money or, or that. But also they're not looking to take the proceeds to roll it into another opportunity, but instead they're going to retire and they prefer the cash flow ongoing and in a reduced tax burden in retirement.
- [25:08]
B
Yeah, a lot of people don't understand how powerful that is because when people want to retire from real estate, most of these investors that you're buying the properties from, they don't have a portfolio like me and you and you, where it's like we have teams. Most of these investors are small mom and pop. They manage these properties themselves for 30 freaking years. Now they want to go sell. If I want to sell and avoid the, the capital gain, I have to do what I have to sell or I have to either sell or finance or I have to 1031. If I'm 1031 ing, am I retiring? No, I'm actually having to starting over. I actually get into a larger asset. So basically it's like you tell somebody, hey, it's okay to get divorced from this guy, but this, that's been cheating on you that you want to get rid of, you have to, you have to divorce him and then marry another guy that's going to cheat on you even more.
- [25:59]
A
That's pretty good. That's pretty good.
- [26:01]
B
That's basically what a 1031 exchange is.
- [26:03]
A
Yeah.
- [26:04]
B
When you're retiring. Right. When you're, when I'm here, I'm where I'm. I've got like six 1031 exchanges going on right now with single family going into RV parks. For me, I got all the time in the world but if I'm 65 or 75 years old and I actually want to get out of the real estate game, the only way for me to get all the money and avoid the taxes is seller finance. It's the only way.
- [26:24]
A
Yeah. Unless you're Grant Cardone. Grant's going to be 67 crazy this year, that guy. And by the way, he's. He's just getting warmed up.
- [26:30]
B
I agree. Yeah.
- [26:31]
A
Do you. Do you think that he was just down here doing a meetup? Do you think that he's doing this big California tour right now?
- [26:38]
B
Yeah. I saw you guys together. It was cool.
- [26:39]
A
Do you think that he's going to run for governor? California?
- [26:42]
B
I think so. I mean, you get to a point where you're worth a couple billion bucks and buying real estate is cool, but at some point you got to have a larger purpose.
- [26:49]
A
Yeah.
- [26:50]
B
And I think Grant would actually be
- [26:51]
A
a pretty good leader.
- [26:52]
B
I think. I think Grant would do a better job than Gavin, whatever his name is.
- [26:56]
A
I agree.
- [26:56]
B
And unless you guys, you guys all fan again, Gavin Newsom here, All my California people. No. Okay. Okay.
- [27:03]
A
A lot of heads shaking out there.
- [27:05]
B
Who's keeping that guy in office? That. That's the question. Holy crap.
- [27:09]
A
Yeah, but I agree with you. I don't, I don't think at age 67, you go and do all this campaigning up and down California and bust your ass when you already have like, all this other stuff going on. Unless. Unless you're going to run.
- [27:22]
B
Yeah, he's going to run. And I mean, there's people that are gamers.
- [27:25]
A
You're not going to say it.
- [27:26]
B
I'm a gamer. You can hand you $5 billion. You're going to go do cool tomorrow. You're going to go work, you're going to go create value. Grant's never going to stop. Right. That guy has dragon's blood running through his body. He will never stop. Give him all the money in the world, he'll never stop. So he's going. He's going to go for governor for sure.
- [27:42]
A
Yeah. Question for you, man. This, this is something that, that I've been really intrigued in recently, and I have a lot of friends that do a lot of home flipping, and a lot of them are really doing a lot of wholesaling right now, and some of them have completely stopped flipping homes and they're like doing primarily all wholesaling. And I was talking to one of my buddies. Him and his brother do a lot of volume throughout California and as well as San Diego. And I'm like do. Where are you finding your deals these days? And he's like, dude, 80% of these are like MLS deals. And we're locking up, you know, obviously it's a volume game. Or he's like, we're submitting 15, 20 low ball offers every single day and we might tie up one or two a week and then, and then if we don't want to flip them, we'll just bring it to our list. And they're, they're taking nice fees on it. So got me thinking, I'm like, man, I'm interested in setting up an acquisitions team. And you know, because we're, we're, we're buying real estate in California, but what about the other 49 states? And so I was interested in setting something up more so on the commercial side to go find and lock up really, really good quality deals. Like going a good going in basis is, and then, and then assigning them. So what are your thoughts on the wholesale thing? Are you doing much wholesaling? Talk about that.
- [28:46]
B
I was a strict wholesaler for eight years. I was top performer in the homevestor franchise. I'm sure you know that we buy ugly houses. I was like top two franchises in the country for multiple years in a row. I wholesaled a lot. And the problem with wholesaling is that it's really hard to scale. Why is it hard to scale? Wholesaling is hard to scale because typically the acquisition people that you end up hiring are also male. Again, I'm going back to the same shit. Yeah, yeah, I'm going to talk so much shit about men, wholesale acquisition people that are direct to seller, which is not what you're talking about. You're going direct agent. When you go direct to seller, you typically attract a male to be in your acquisition department. What will those males do the second they figure out how you're making money? They're going to start their own every single time. There's never been a time in my six year time, like six year stint of having acquisition person, I did not have one guy. Well, Pace, I know you said this was going to happen and I told you would never happen and I'm so grateful. But I'm starting my own shop next week. So if you're going to go do direct to seller and you're going to have guys going out meeting with sellers directly, it requires a personality type that is a negotiator. When you're going direct to agent and you're doing on market and you're doing long days on market, that's usually the filter we follow. We go lowball offer, 90 days plus on market. We'll send them a lowball cash offer and a sub to offer. Anybody can do that. It can be done.
- [30:10]
A
So you're saying, you're saying set up a female acquisitions team, always go direct to agent.
- [30:14]
B
Yep, direct agent.
- [30:15]
A
Do you guys take the approach of like, you just go to the listing agent directly and say, hey, you're going to double in the deal. We're going to resell and use you as the agent. But this is the number that we need to get it at.
- [30:25]
B
We say that rarely do they ever take it.
- [30:28]
A
And so, so your acquisitions team, when you. Are you doing it right now or
- [30:31]
B
this is like, yeah, I do. Directly. Yeah.
- [30:33]
A
Okay, so and if they. The agent, the listing agent doesn't double end it. Do you guys represent on the buy side?
- [30:39]
B
No. No, there's no commission get paid. I don't know why, but there's a lot of agents that are, like, bothered by that thought process. Yeah, some of my best friends teach it on YouTube. They're like, oh, double the double dip strategy. I'm like, either I just suck or I really don't run into a lot of agents that actually want to do it. They're like, I see what you're trying to do here, but I don't want to get in trouble and I don't want to piss off my seller, so I'd rather just get my commission and blah, blah, blah. Yeah, yeah, there is some advance. There is some opportunities there. But here's what I do with agents.
- [31:04]
A
Yeah, what's the, what's the, what's the flow here?
- [31:06]
B
The flow with agents is this. I'll give you a good story. So House on 4101 West Flower Street. We were a direct to agent on this. Submitting offers, Submitting offers. We were 100 days on market. 121. 4160. 180. We just send an offer every 20 days. Why? Because their pain point goes up. Their pain goes up. And their willingness to do a sub 2 deal is probably also going to go up as well. So agents will go, no, no, no. My seller doesn't want sub 2 deals. So a lot of what we do now is we wait until the agent gets fired. We then call the seller directly and go, hey, your agent didn't present this offer. Let's do a sub to deal. So I buy this house, 4101 West Flower Street. Seller just hands me the keys to the house. I'm done. A 2.4, 2.5% rate. Really good deal. I turn into a co living house, which is great. But then what we do is we call the agent after we close it. Hey, her name is Stephanie. Hey, Stephanie Pace here. Remember all those offers I sent to you on Flower Street? She goes, oh, why are you bothering me? Well, I'm calling to let you know I actually have 2500 bucks sitting for you at escrow on that house. And the way I want to release it to you is when you and I do our next deal together, I want to show you that I did do this up to deal. So what we do is we start recruiting agents. Because the business of direct to agent is never about the house. This is the problem that a lot of people are doing is they're building. They're going after the house. I'm submitting an offer on a house. No, you're not. You are not submitting an offer on a house. You are acting like you're submitting an offer on a house so you can have a conversation with the agent. The house is the excuse for you to talk to the agent because the agent will send you deal after deal after deal after deal. So at some point in Phoenix, Arizona, I think about a year and a half ago, we went from doing outreach every single day, four or five hours every single day, to now we do outreach maybe once every two weeks, every three weeks.
- [32:52]
A
Because the agents are working for you.
- [32:53]
B
The agents are working for you. Got it? You can't get that in a direct to seller model, right? Because you're going to do one deal with a seller. I have one seller. I've done two deals with one. He sold me a 43 unit deal in San Angelo, Texas, with a 50 year seller finance deal. Three years later, he sold me 100 units on the same exact terms. That's a unicorn. So if you want to build a real business, you go after real estate agents and build the relationships. Same thing with brokers, right? Like, I've got a deal. This is, this is a really good point for a lot of people. And this goes back to like the syndications and people getting their asses handed to them. I bought a deal in 20, 23, 160 units, and it was a $20 million acquisition. We bought it on seller finance, 4% interest. Where did I get that deal? A broker brought me the deal because he couldn't get the number the seller wanted. And the seller's like, I'm not budging on my $20 million. Why did that broker bring me a deal? Because I had performed on other deals prior on single family. So for you guys that are out there wanting to build a wholesale model, the only real scalable model, in my personal opinion, is if you're developing relationships with agents that are in the top 10% of agents that are actually getting a significant amount of listings, they will continue to send you deal after deal after deal.
- [34:08]
A
Now, in this example, you went direct to listing agent, and you ended up subject picking up the property. Subject to. Now give me an example to where you would decide to wholesale that same property.
- [34:18]
B
Okay, so, well, you can. You can wholesale sub 2 deals as well, and wholesale seller finance deals.
- [34:23]
A
Just.
- [34:23]
B
I make more money on assigning a sub 2 or seller finance deal than I do cash. Because now my buyer doesn't have to think about this. If I buy a deal cash and I assign it to my buyer, what does he have to go do? Get a loan. Right? He has to go secure a DSCR loan or whatever. If I go to them and go, hey, finances, financing's already locked up for you. Which person's gonna pay more money?
- [34:43]
A
Right?
- [34:44]
B
There you go. So if people are doing the Burr strategy, they'd rather do sub 2 or seller finance.
- [34:48]
A
So you'll negotiate the sub 2.
- [34:49]
B
I negotiate 20, 25, 000 assignment fee.
- [34:53]
A
But it's not a double close. You're assigning it.
- [34:55]
B
I'm assigning it right away.
- [34:56]
A
Right. You're not even sending in the emd. They.
- [34:57]
B
They're.
- [34:57]
A
They're emd.
- [34:59]
B
I'm at a point where I just. I cover the emd.
- [35:01]
A
Yeah.
- [35:01]
B
And I.
- [35:02]
A
It gives you more time to assign
- [35:03]
B
me more time, and then I also perform faster for the agent or for whoever I'm working with. Where EMD goes right away, People are sensitive about emd, so I make sure I cover that right away. But, yes, you technically can just go and assign it, bring your buyer to the table, and use their emd. As long as you're being reasonable about it, you don't want to be like, day five of your contract finally putting him emd, you get a bad reputation. Right? So for us, on my cash deals, okay, my cash deals, I'm averaging on an assignment, probably 15 to 18,000 bucks. On my creative deals, I average 20 to 25 at a higher price.
- [35:35]
A
This is your assignment fee?
- [35:37]
B
Yeah, that's my assignment fee.
- [35:38]
A
Okay.
- [35:38]
B
There's other people. Like, if you want really juicy assignment fees, like 30, 40, 50, $100,000, you got to go direct to seller. You're not Going to get really juicy deals consistently when you're going direct to agent. Agents are too smart and they got. They have a fiduciary responsibility to make sure they protect their client. So you're not going to be able to go get a deep, deep $0.40 on the dollar deal. Going direct agent. You got to go direct to seller.
- [36:03]
A
And are you guys with your wholesaling or just locking up subject to deals? Are you guys going after more expensive properties or.
- [36:11]
B
Or no.
- [36:11]
A
What price range is your.
- [36:12]
B
Is your bread and butter guys choose your. Here's the thing. There's way more fix and flippers and way more buyers in the median household price. You guys are probably a million bucks. I don't know your median sales prices here but in Phoenix, Arizona we're 425. So I try and stay between 400 to $650,000 right in that time frame that area because there's just more people flipping there. There's more people buying. They don't. Nobody wants to do million dollar properties. Now I also do assign a lot of seller finance deals to end buyers. People are going to live in the million dollar houses. So I have. That's a big part of my business too. I assign to end buyers. So if I get a $2 million house, I already know that's not going to be an investor. That's going to be a family.
- [36:52]
A
Someone lives in it.
- [36:53]
B
Business owner who's like I can't qualify for a loan. So like we. I have a website if you guys ever want to buy a house anywhere in the country. No bank loan homes.com and I can get you a sub to your seller finance house to move into anywhere in the country. Average interest rates like 3.5%.
- [37:08]
A
Hey guys, real quick. I just wanted to personally thank you for listening to this podcast. It means the world to me. The only way this show grows is by word of mout. If there's anyone in your circle that could benefit from this podcast, it would mean the world to me if you could share it with them via text or maybe on your Instagram story. And I'll be sure to keep an eye out on my Instagram for shares so I can reshare you on my Instagram story. Again, thank you so much for listening and it means the world to me. Now back to the show. So talk to me. How does this, how does this conversation work with the seller? So you're meeting the seller and somehow you're. You're convincing them not not only to do subject to which they probably have never heard of before. And they're going to keep the mortgage under their name. But in addition to that, you're, you're not just gaining their trust for you to do it, but you're convincing them to do it to someone they don't even know. How do you, how do you do that? What's, what's that conversation like?
- [37:57]
B
Okay, so to answer the question, let me ease into this because.
- [38:00]
A
Because most people, I mean, if I was to do it, like, it would probably be someone I really trust and I, I don't know that I would do it as a seller to like some random dude. Especially some dude with like bad credit.
- [38:12]
B
Rule number one of creat finance, don't put your brain in the seller's head. Okay? You're too smart. You're a real estate investor. You would, you would never sell me a property in the first place, let alone sub 2. You'd never sell me one on cash. Would you sell me a house? Would you sell me one of your assets? $0.50 on the dollar?
- [38:30]
A
No.
- [38:30]
B
Then why would you go and try and be a wholesaler? Because that's what you're doing as a wholesaler. You're offering 50 cents on the dollar on average. Oh, Pace. No, it's not. 70 cents minus, minus the repairs, minus, blah, blah, blah. Okay, so 50 cents on the dollar. You would never sell a house. 50 cents on the dollar. You got to convince a seller to sell their house. You. 50 cents on the dollar. People do it all day, every day. Meanwhile, I go to the seller and offer them full price for the house. Who do you think they're going to listen to? Me?
- [38:57]
A
Yes.
- [38:57]
B
So here's the answer to the question. I'm not looking for houses that don't have pain. I'm looking for houses that have pain. So if you want a guaranteed sub 2 deal right now, right now, like literally in next time we're here, have me hang out for two, two hours. We'll actually open up the laptop, we'll do it. Okay, so here's what I would do. I would go.
- [39:18]
A
If you want to do a luxury, a luxury sub two deal, oh, let's say like a three million dollar, nice property, easy, good location. What would you do?
- [39:27]
B
Okay, here's what I would do. I would go on. I use a software called Deal Sauce. You guys use MLS or whatever you want to use.
- [39:33]
A
I like that name. What is Deal Sauce all about?
- [39:35]
B
Deal Sauce is like prop stream.
- [39:36]
A
Okay.
- [39:37]
B
But just saucier.
- [39:38]
A
Okay.
- [39:39]
B
A little spicier.
- [39:39]
A
Deal Sauce. All right.
- [39:41]
B
Deal Sauce. Okay. So I go to Deal Sauce, I create a filter, and the filter is 100 days plus on market, 4% interest or less. That's the beautiful thing about Deal Sauce versus, like, the mls. I can filter by interest rate. I can filter by everything. You can freaking imagine. I can see their bank loan on Dill Sauce. I can't see that on. On mls. I can't see who they got their loan through. I can't see any of that kind of stuff. Deal Sauce will aggregate and collect all that information. So I will filter by 100 days plus on market interest rate below, whatever I want my interest rate at, and then I start submitting offers only to those people. I actually will not submit an offer. I will just call the agent directly.
- [40:18]
A
And this is. This is. These are MLS deals.
- [40:20]
B
MLS deals. Yeah.
- [40:21]
A
Yeah. Okay. 100 days or more.
- [40:23]
B
Think about. You're an agent.
- [40:24]
A
4% interest rate.
- [40:25]
B
Right. Think about being an agent. Who's an agent in here? Okay. A lot of agents in here. When do you start sweating? Day 20, day 30, day 40, day 60, usually day 90, probably two weeks
- [40:35]
A
if there's no activity. Right.
- [40:36]
B
Okay, there you go. So the magic number for most agents are like, if I'm at 81 days, I'm okay. I'm at 82 days, I'm okay. You get to 90, it's like you get to 100. You're like, I'm on the downhill side of this thing. I've got maybe 60 more, you know, 80 more days. I'm on the back end of this listing agreement, 100 days. And when they start sweating, I will not waste my time calling an agent on a sub 2 or seller finance deal until they're at day 100, because the agent will lie to you and say, my seller's not interested.
- [41:06]
A
How long is a typical list listing agreement in residential?
- [41:09]
B
Six months.
- [41:11]
A
Yeah, okay, so you're on the back end of the. The halfway point. Okay. So then you hit them up when. And what's the conversation like?
- [41:17]
B
Oh, my gosh, you guys, by the way, if you want to HEAR this, my YouTube channel, I literally just call. I just do this stuff live all the time. But I call the agent up and go. I don't even introduce myself. Most of the time. I just go, hey, Bethany, how's the listing on 1, 2, 3 Main street going? And they're like, what? Who the hell is this calling? They go, main Street? I go, yeah, Main Street. How's it going? How's the listing going? Oh, it's okay, but they're at 100 days. So typically the answer is like, it's really slow. Oh, my gosh. Have you guys talked to your seller about seller finance or, like, letting somebody take over the mortgage and getting your, your commissions paid? No, my agent, my seller's not interested in that. Okay, why? Literally, I just say why right out of the gate because I already know what the agent's doing. They're really saying, I don't know what the hell you're talking about. And I have a license and I'm embarrassed to just tell you that as a licensee, I don't know my butt from a hole in the ground. So I'm just going to tell you my seller's not interested. So I know how to navigate that conversation. I go, well, your seller will get a higher purchase price. They'll get monthly payments. I'll get your commissions paid. What do we got to do? And I start, every conversation goes differently. But that's the opening line.
- [42:20]
A
Yeah. Okay. And so, so, so if they, if they lean in, because one thing that I want to know, I mean, at least when we're doing like commercial deals is, okay, what's the seller going to do with the proceeds? If the seller needs to, to access the proceeds to pay off whatever, or they're going to roll it into another opportunity, whatever it might be, then, then in this instance, you're not going to lean in. Right.
- [42:42]
B
Seller finance in commercial is a thousand times easier than it is in residential because residential people first and foremost are not privy or savvy enough on creative finance. Whereas commercial people like multifamily.
- [42:54]
A
Well, especially in hotels, because a lot of these hotel owners, they bought their deals 20 years ago, 30 years ago on seller finance. And so they're already expecting to exit on it 100%.
- [43:02]
B
So it's super. It's not even, it's not even having to bring it up. Like they will offer it to you.
- [43:07]
A
So, so how do you qualify, how do you qualify in single family in this, in this example, right? $3 million home, you're on the phone, the listing agent, she's like, I don't, I don't know. How do you qualify if the seller
- [43:15]
B
is even a good candidate based on their interest rate? Okay, Days on market. Long, long days on market and interest rate. That's all I care about. And then the. Here's the downfall to working with agents versus direct to seller. I'm better at understanding the seller situation than the agent ever will be. Okay, My agents that are in here right now, as you guys have been Doing this business. And you've talked to agents about creative finance. How silly do they sound now that you actually understand creative finance? Super silly. They will block you from actually understanding what the heck is going on. Because this, the agent has no clue why the seller is selling. It's mind blowing to me.
- [43:57]
A
They don't even know.
- [43:57]
B
They have no clue. They're just like, well, they called me and I'm listing the house and they want to move. Cool. Where are they moving? I don't know how much. Well, they need all their money. Great. What are they putting their money into? Why are you asking? Welcome to residential. So for, for you that residential is very challenging because you will. The problem is the uneducated real estate agent in commercial, your brokers are more educated and your sellers are like, they'll tell their broker straight up, go sell this shit on seller finance. So you don't have an uphill battle. In residential. Your uphill battle is the agent. So usually the way you get around that is 100 plus days on market, your seller, your agent is like, shit, I'm not going to get paid. I need to do everything I can. So here's what I do. I tell the agent, you guys will see this on all my calls. I do probably 100 of them on YouTube every single month. The agent will go, oh, maybe. I go, why don't we just get on a three way right now? And I will literally just talk to their seller about it right there.
- [44:54]
A
How often are the agents like, all right, let me, let me ping in the seller real quick. Give me one sec.
- [44:58]
B
70% of them.
- [44:59]
A
That's good.
- [45:00]
B
If you're past 100 days. Yeah, I'll get. Somebody will DM me and go, pace. I tried this and I'm like, how many days was on market? 2. Dude, do not call agents on two days. What are you doing? Call them. In fact, if you want a sub two deal right now, call on a house that's been listed for 165 days, that has a 4% interest rate and call that agent and go, will you do creative finance? And they're going to go, tell me what creative finance is so I can get paid. I'm about to get fired in 15 days. Do you know how many expired listings happen every single month in the United States? 300,000 agents get fired every month in the United States. What does that tell you? That means 300,000 agents took a listing six months ago on the same freaking day and went six months not being able to sell that house. 300,000 of them now.
- [45:48]
A
Now the majority of the. Those a lot of it's because the seller had a very high expectation. Right? The.
- [45:54]
B
The fault always lies with the agent. Why? Because this.
- [45:58]
A
They didn't educate the seller.
- [45:59]
B
Should have educated the seller. And you shouldn't have taken the gosh damn listing. You greedy son of a. Yeah. Do not take. Do not take listings that you can't sell. Now. It's good for me because they look stupid. When I call the expired listing, I go, your agent couldn't sell the house, huh? Yeah. All right, well, what if I could give you the number? I'm a buyer, so when we call expired listings, we just call the buyer directly go. Or the seller. I go, hi, my name is Pace. I'm sure you're sick of talking to agents. Good thing is I'm not one. I'm an actual buyer. Can we sign a con? I'd like to come over and sign a contract today. Buy your house. It's the easiest conversation on the planet is call expired listings.
- [46:32]
A
Okay, so in this example, three million dollar list price. This is a higher end property. Does this method work better if there's a. There's not much equity in the house or they might be underwater?
- [46:46]
B
Sub two, that's like hand me hand over the keys type of situation. So every time somebody hands me over their keys, they have no equity or they're underwater, they go, here's the keys to my house. I don't want it.
- [46:55]
A
Because if. If they got, let's say, $600,000 in equity, agents trying to get their commission, the seller wants to access the equity so they can move on. Now, that kind of defeats the purpose of sub 2. Right now. You have to come to the table with. With a decent.
- [47:08]
B
Yeah, that would be. So we call that a hybrid. So part sub 2, part seller finance is a hybrid deal. So they're seller financing their equity to you. So like, probably the biggest deal I've done in single family is that I have a seller, seller financing $1.8 million to me in their equity at 0% interest, no payments for 10 years. There's a thousand different ways you can skin that cat. They care. Here's the thing is you're. You're talking about a $3 million seller. These people are not destitute. They're not broke. They're smart. And they want one thing and one thing only. They want their sales price. Give me my gosh. I want to win. My Neighbor sold for 2.8. I want to sell for 3 million. They care about that, so if you give them the 3 million and give them the, and you create terms now, the terms are going to be different for every seller. Sometimes you'll get a seller like Mario, my seller just sold me a hundred units. He's like make me payments for 50 years, I don't care. All my payments are going to go to my kid anyway. What do I care? I don't need the money. I'm retired. I don't need the money. Sometimes you will run into sellers that say no, I need my equity right now.
- [48:06]
A
And how do you treat that? So like let's say in this example $3 million list price, they owe 2.4. You want to sub to the, the, the deal but hey, the seller wants the 600K.
- [48:17]
B
Okay, here's what's great. So I would never call in a 3 million dollar house if I didn't already have a buyer. Anyway, I'm in, I'm not in San Diego. For you, 3 million dollar house is a freaking tent down the road, Right? For me a 3 million dollar house is like 11, 000 square feet in Phoenix, Arizona. Who's the buyer for that?
- [48:33]
A
Unless you're in Scottsdale.
- [48:34]
B
Unless you're in Scottsdale. So who's the buyer for that property? A family, A business owner. So what I, what I do is I have a list of buyers that are not able to get a loan because they are business owners claiming zero on their taxes. I send them an email. So here's what I do. I, oh my gosh, this is so easy. I call the agent and go, would they do seller finance agent? A lot of times go, yeah, they'd be, they'd entertain it but they want a large amount of money down. Perfect. Can I get a 10 day marketing option so I can market it to my buyers list And I tell them straight up, I'm not the buyer. I just put a YouTube video about this up on my YouTube channel where I'm actually doing this. And the seller or the agent right out of the gate goes, yes, they would do seller finance but they need $300,000 down. Perfect. No problem. I'm definitely not the buyer for this house. Can I get a 10 day option and my buyer will pay me a fee if he decides to buy the deal. I then take the house, I send it out to my 2500 buyers in Scottsdale, Arizona. I go hey, who wants the deal? I got a football player. It comes to the table, goes hey, I've got $400,000 down. Can I go take a look at the house, I get paid 50 grand for doing that.
- [49:34]
A
And during that 15 day marketing process, is the deal officially under PSA or
- [49:39]
B
no, they have the ability to still sell it.
- [49:41]
A
Okay, got it. So it's a risk free proposition to them.
- [49:43]
B
Risk free for them, but it gives me the ability to market the property because I don't want to take a property and I don't have any sort of agreement on and start marketing it out to a buyer's list because then what's going to happen is they'll see that I'm marketing it.
- [49:54]
A
Dude, that's really good, man.
- [49:55]
B
Yeah. What are you doing?
- [49:56]
A
That's really good.
- [49:56]
B
So there's no risk to me, there's no risk to them. I and then I can float it by my buyer's list and my buyers are like no, I don't like it or yes, I like it. Can I go see the house?
- [50:04]
A
And then this type of deal, in this example, you can take a pretty decent assignment free.
- [50:09]
B
Yeah, I can find out how I know how much my buyers have is down payments. Right when they enter in my website. Hey, I want to buy a house on seller finance. I go, what's the maximum amount of money you have down as a down payment? I know, I can see it all in the CRM. So we'll filter. When I get a deal that needs $300,000 down payment, I'll filter in the CRM. The CRM says here's your 18 buyers have a million dollar plus down payment. We send it out to those buyers. Only those buyers come to the table. Hey, looks like this is it might be a good deal. I know how much money they have so I can add 100, 150, $111,000 depending on what I see them as a down payment that they're willing to pay.
- [50:42]
A
Yeah, that's so good man. And oh, so, so recap. Setting up a wholesale company. Female acquisition Go direct. Go direct to listing agent.
- [50:53]
B
Don't do direct to seller unless you want to punch yourself in the face.
- [50:56]
A
Okay.
- [50:57]
B
Direct to seller is a challenging thing that it costs a lot of money to. Why? Because I'm now spending money on ppc people, radio, billboard. I'm getting sellers to call me or I have to have cold callers hammering people. Now I got.
- [51:11]
A
Yeah, and now you got a lot of overhead.
- [51:12]
B
I got over tremendous overhead. I also have mechanic who's running the mechanics. But if you just look at the MLS and you submit an offer on every single house that goes over 100, 100 days on market I don't need any expensive software. I don't need cold callers. I can literally, we use a company called loi loi blaster.com that literally will take every listing that hits the market over 100 days and send them an automatic letter of intent.
- [51:36]
A
It's right to the listing agent.
- [51:38]
B
Right to listing agent.
- [51:39]
A
That's so good.
- [51:39]
B
It has a cash offer.
- [51:40]
A
And what's the name of that site?
- [51:41]
B
Lo I blaster.com.
- [51:43]
A
that's a good name.
- [51:44]
B
And what happens is it will not only send them a cash offer, will send them a sub 2 offer.
- [51:49]
A
Okay.
- [51:49]
B
And then they'll reply to our email and go, hey, I'm interested in a call who can chat with me. And then I have a girl in the office actually pick up the phone.
- [51:56]
A
That's so good.
- [51:56]
B
Yeah.
- [51:57]
A
Okay, so then now you got the gator method. What the heck is the gator method?
- [52:02]
B
Gator method is I teach people how to be private money lenders, basically.
- [52:04]
A
Okay.
- [52:06]
B
That's a whole thing to unpackage. That would take three hours to unpackage,
- [52:09]
A
but basically give me a high level.
- [52:11]
B
Okay. So anytime somebody needs money in a real estate transaction, a gator can bring money to that transaction. I give them access to about $300 million in cash. So they use that cash to go and deploy into things. So when does a real estate investor need money? Amd transactional lending. Right. Double closing. They need money when they buy the property. Any money when they refinance the property. You need money for the renovation. All of those situations, I give gators money that they can go deploy into other people's deals.
- [52:36]
A
Got it. Okay. So it's short, it's short term private financing.
- [52:39]
B
And, and then also white. I white label the DCR lender for the gator so it's like they can go to people and go, hey, I'm a DSCR lender. Even though they're not, they're just white labeling my DSCR loans and they're making a point on every single deal. Think about every brrrr investor that's using all their money. It's incredible.
- [52:55]
A
Yeah, okay, got it. So. So the gators are funding it and they could start with as little as 100 grand if they want to.
- [53:01]
B
Gators start with no money. They use my money. They literally, I fund probably 30.
- [53:06]
A
So who's bringing the money?
- [53:08]
B
Me.
- [53:08]
A
You're bringing the money?
- [53:09]
B
Yeah. It's my cash. I will fund. When gators join and like learn from me, I will fund their first 10 transactions with all my money. And Then when they get big boy stuff, I help them get lines of credit and stuff like that because they'll get to a point where they don't want. Here's what I do. It's really smart. They go find a deal, they bring it to me. I take 30, they take 70%. So I'm making money on the transaction. So I want to fund every single possible deal that they have. So me bringing money to the. To the transaction actually benefits me. Right. So they get 70%. Let's say I did a double close yesterday. It was a 400, 000 double close. We charged two points or we got paid 8,000 bucks. I made 2500 bucks, and the Gator made 5,500 bucks. They used my money on somebody else's deal. That's. That's one.
- [53:54]
A
That was. That was a wholesale.
- [53:55]
B
It was a. It was a double. It was a double close transaction because it was a wholesaler in South Carolina and you're not allowed to legally wholesale in South Carolina. So they had to double close. Hmm. And what's going to happen is over the next probably, I'd say 10 years. Mark my words. Remember this podcast, in 10 years, wholesaling will be illegal in all 50 states.
- [54:15]
A
Really?
- [54:16]
B
Oh, yeah. It's already.
- [54:17]
A
Why do you. Why do you think that?
- [54:18]
B
Well, it's already happened in 11 states. In Illinois, I can only wholesale one time a year without a license. In Arizona, I can only wholesale. If I tell my seller, I am wholesaling your property, sign here that you agree I'm wholesaling your property and you're okay with it. It has to be in the contract telling them that you are wholesaling. South Carolina is banned 100%, and there's like four other states, like Kentucky and other places that are banned 100%. You cannot wholesale whatsoever.
- [54:45]
A
Now, anything's negotiable, though, right? So, I mean, even in this instance where it's under psa, it was not disclosed up front. You could still go and create an addendum and say, hey, I'm going to. I'm going to sign it.
- [54:55]
B
Yeah, you could.
- [54:56]
A
As long as the seller is okay with it, right?
- [54:57]
B
You could do that.
- [54:58]
A
Yeah.
- [54:58]
B
Yeah, you could do that. Now, in the state of Arizona, there's a phrase that has to be in your original psa. So if you're not. If it's not in your original psa, there's a phrase, guys, go Google it. There's a phrase that has to be in your original psa. It cannot be an addendum. You have to tell them, I intend on wholesaling this property. Now here's what's happening. This is what's cool. There's a whole legal like wave of new attorneys that are coming into the business. What they're doing is they're finding people that obviously wholesale the property. They're calling the seller, pulling up county records and go, did they, can I see a copy of your contract? I think I can get you an extra 50,000 bucks. So they go to the seller, they get a copy of the contract. If it doesn't say their intention was to wholesale the property, they then go to the title company and they do a title, a claim against the title, saying, you guys should have known that this contract was not a valid contract. You still closed it and they can unravel the whole thing and take a title policy. Significant money in it.
- [55:49]
A
Interesting, interesting. So there's so more reason to wholesale commercial then. Yeah, more reasons commercial.
- [55:54]
B
It doesn't mean you can't wholesale. It just means you need to call it something else. Meaning you have to double close or you have to buy the property and resell it and you actually have to close on. I think what's going to happen in the wholesale industry is just not going to be called wholesaling.
- [56:06]
A
Yeah.
- [56:06]
B
It's going to be called something different. Doing real estate.
- [56:09]
A
Yeah.
- [56:10]
B
You know, I don't know what it'll be called.
- [56:11]
A
Yeah.
- [56:12]
B
But you've got 11 states right now that are also are currently talking about legislation passing 11 extra states in the next 24 months will go illegal. Full illegal.
- [56:21]
A
That's crazy.
- [56:22]
B
Yeah.
- [56:23]
A
All right, I want to switch gears here. So we got a couple. We get a lot of. We get a little audience here and some of my mastermind members, they got a couple of questions for you. So do a little, little Q and A. So first one is Billy Perez.
- [56:36]
B
Oh, I saw. I met Billy today. Where's Billy? He's not in the room.
- [56:38]
A
Yeah, he's not in the room, but shout out to Billy Perez. Billy is asking. It's a good question. He said you claimed in a solo video from a few months ago that I will take over 90% of the jobs we have now in the next 10 to 15 years, resulting in. In a society with UBI and oligarchs, aka property and business owners. Was this clickbait or do you really think we're heading into a future where teachers, surgeons, therapists, and 90% of every job we currently know will be replaced by AI or robots?
- [57:09]
B
It's not clickbait. I'm not a big clickbait person. If I wanted to go and do clickbait, I'd get a lot more views on my stuff. I wouldn't. I definitely wouldn't talk about creative finance because nobody gives a shit about creative finance. In the grand scheme of things, it's the most ungoogled thing on the planet. It's just. That's what I do. But I do. I genuinely. I don't believe it. It is one. I. I know it to be true. It's not a belief. It is a absolute thing that's happening. Let's just look at therapists, bro. First and foremost, this whole thing of like, well, people like to talk to other people. No, we don't. Okay. We do not like talking to other people. Okay. And I'll tell. I'll give you a good example. I'm at Starbucks the other day. I order a tall vanilla bean frappuccino for my daughter. Yeah, My kids are bougie, so I get her a little thing. The person asked me at Starbucks drive thru, would you like whipped cream with? I go, oh, yeah. Hell yeah, I'll do whipped cream. Next day, I go back through and I'm like, okay. I'm kind of preemptively saying, tall vanilla bean Frappuccino, please add whipped cream. This lady comes back to me with this snappy attitude of like, well, why wouldn't we have whipped cream? That's part of the ingredients list, of course. Oh, my gosh, damn. Can you please get a robot so I could talk to a robot? Like, f. You guys. You're already seeing it in circle K. You're seeing it in convenience stores. You're seeing it in airports. Everywhere you go, human beings are slowly starting to be removed. You just haven't opened your mother freaking eyes. A therapist, bro. Let me tell you something. The reason why I don't want to go to a therapist or other people don't want to go to a therapist. I'm like, you got your own belief system and your own trauma and your own shit. You know what I'd rather do? I'd rather talk to a robot who has all of the political or not political, but all the science magazines and all the articles and all the studies that have ever been written about this topic that I have a problem with all in its database and says, here's what we've told thousands of other people that have with the same problem. Here's what their outcome was. There's no therapist that can harness all of that data. On the planet. Kids nowadays are having less sex, not getting driver's license, not having. Dude, look at Japan. People would prefer to have a relationship with their freaking phone than they would real people. It is a real thing. It's not. This might happen. It's happening. Japan's whole entire population is collapsing because people are not having babies, bro. So sorry, Billy. You're actually cool, so I don't want to be talking to you necessarily. Name one job, Name one job that will be here in 10 years and I will show you a robot that's already doing it.
- [59:38]
A
So what about like a plastic surgeon or, or a dentist doing a cosmetic. Oh, you know, putting veneers in your mouth.
- [59:46]
B
Go to, go to Boston Dynamics YouTube channel and tell me that they don't already have a robot to replace anything that you have to say. And then there's this amazing Instagram thing page I've been following for the last four years where every time somebody says, oh well, what about a roofer, bro? A roofing robot was invented two years ago that is now single handed. They put the roofing robot on top of the roof, it will remove the shingles and install new shingles all as it's going over top of the roof. It's already happening. So people like, oh, roofers, landscapers. Okay, cool. So let's look at the transportation industry. Seven million people work in the transportation industry. Uber drivers, truck drivers, logistical people. All of those people, 7 million people. Are they going to be around in five years?
- [60:29]
A
What about pilots? There's been a lot of aviation accidents recently.
- [60:32]
B
I went to get my pilot's license. Every pilot.
- [60:34]
A
Did you get your license?
- [60:36]
B
I, I had to land in San Diego is the worst flight I've ever had. And I quit trying to fly.
- [60:40]
A
You quit? Why'd you quit? You, you got to tell me more.
- [60:42]
B
What happened on the planet.
- [60:44]
A
What happened with this flight?
- [60:45]
B
I was coming over the mountains from. What's that town you guys have in California right over the Julian? No, that's Palm. Palm Desert.
- [60:52]
A
Palm Desert.
- [60:53]
B
So I'm flying over those mountains over Palm.
- [60:55]
A
Very, very tall Mountains, about 13, 000.
- [60:56]
B
And the wind was taking control of this little plane.
- [60:59]
A
I was flying updrafts.
- [61:00]
B
Updrafts. It was 40.
- [61:03]
A
What kind of plane?
- [61:04]
B
I was flying a piper Cherokee.
- [61:06]
A
Okay. 1976 PA28 Warrior.
- [61:08]
B
Yeah, yeah.
- [61:09]
A
Okay.
- [61:09]
B
And I was having a great time with it until that happened. And I said F. Solo. No, I was with my captain. I was teaching me how to plot.
- [61:17]
A
Yeah, nothing to worry about.
- [61:18]
B
You're with he was sweating his ass off. He was like, oh, my God. He was like, 6,000 hours. He's like, he took over the yolk. He took over. And I was like, all right, I'm done. Anyway, a year ago, my son got into it and I bought, I just bought a plane. $100,000 plane. Piper Piper Warrior Hundred.
- [61:33]
A
Oh, you bought it?
- [61:34]
B
I bought it.
- [61:34]
A
Oh.
- [61:35]
B
Share seller finance. Hundred grand, no money down, no interest, no payments for two years. Bada bing, bada boom.
- [61:41]
A
That's really good. So you used your, your real estate seller finance skills to negotiate the airplane.
- [61:46]
B
I mean, all my cars, my personal houses, my friends, I buy them on seller finance too. So my son. So my son is getting into, like, being a pilot. So you look at all the Reddit forums and everybody's already talking about how within two or three years, all the main commercial companies are going to no longer have two pilots, are going to have a one pilot cockpit. The rest of it's going to be ran by AI.
- [62:06]
A
Now, will we ever see, you know, 150 person Southwest jet with no pilots?
- [62:11]
B
100%?
- [62:12]
A
You think so?
- [62:13]
B
Yeah. Less than 10 years.
- [62:14]
A
It honestly, I could see it because I did air traffic control for 11 years.
- [62:18]
B
Yeah.
- [62:18]
A
And there's been a lot of crashes recently. Like there was the big midair that
- [62:22]
B
everybody's talking about, dc, that Southwest one that he took back off and saved the. Did you see that the other day?
- [62:27]
A
I did see that, yeah.
- [62:28]
B
Where he like saw it on the Runway. He took back.
- [62:30]
A
I definitely think that air traffic will definitely be, you know, AI, robots, all that. It will probably be safer because human error is the, the biggest risk to air traffic control. It's human error. You, you can't, you can't account for everything. 100 of the time. You just, you're going to miss things.
- [62:46]
B
And that's really well. But like 70% of all deaths are in smaller private aircrafts in flying. And it's all 100%. Not one of it's like 98% user error, stupid shit.
- [62:58]
A
And it's typically like the doctors, the attorneys that fly twice a year and then they get up into some icing or rough conditions, do some. Or in your case. Yeah. Or in your case, going over the Palm Springs mountains. And so, so you bought the airplane and you were like, yo, I'm just gonna let my kid take over now. I'm not gonna do anymore.
- [63:17]
B
Um, so I was paying about $4,000 a month for renting a plane and pilot lessons for my son. And I'm like, how much Are the pilot, how much of the plane costs? And my. The guy who rents is like, oh, it's 2500 bucks. I was like, I'm just going to buy a plane. So I went and bought a plane. Now it saves me 2500 bucks. And I rent the plane to the pilot who has other students. And I make like 2000 bucks a month on renting the thing. So I got free pilot. So it's like, makes me like 4,500 bucks a month. And then my son will just build his hours up.
- [63:46]
A
I like that.
- [63:46]
B
I think.
- [63:47]
A
How old's your son?
- [63:47]
B
My son is 17.
- [63:49]
A
Okay.
- [63:49]
B
That's right. I think airlines. I. Guys, I am not. I. I'm really hard to convince on this. I don't know one job that's safe other than strippers, barbers. I think somebody has our straight razor on your neck. I think that that's going to last a little bit of time. But there's some jobs that will last and there are some things. But as a vast whole, the majority of people, I'd say 60% of people are not safe. 60%. So where are those 60% of people going? Landscaping, plumbing, electrical. Which is everybody's argument. Well, it's the trades guys. They're printing houses, okay? We don't need those people anymore. Robots can do all that stuff. Have you guys ever been in a freaking manufacturing shop in the last 10 years? Holy. There's two employees. Look at Starbucks right now. They have eight locations that are ran entirely by robots already. Yes. Eight of them. Baristas. We want baristas. No, we don't want baristas. We do not want baristas. We want robots that don't put soy milk in the thing.
- [64:49]
A
I. I personally. So I walk into Starbucks every single morning here in San Diego. I walk into the office. I live like eight blocks from where we are, and I. I go to Starbucks every single morning. I order the app, I go in. But I like seeing the people because, like, they all say, what's up? They're super cool, they're super friendly.
- [65:03]
B
I agree.
- [65:03]
A
And it's like kind of a family atmosphere, but I. I like that. But so I went. Was no people there. I would enjoy the experience a little bit less.
- [65:11]
B
I'm on the same page with you. The problem is the next generation is not you and me.
- [65:16]
A
They don't want to talk to anyone, bro.
- [65:17]
B
They're not having sex.
- [65:18]
A
That's. That's like.
- [65:19]
B
You also like having sex, right?
- [65:21]
A
I do. I do.
- [65:21]
B
The kids now, it keeps.
- [65:23]
A
It keeps Me alive.
- [65:24]
B
It keeps me alive too. It's literally the only reason I wake up in the morning. So me and my wife can get
- [65:29]
A
you out of bed.
- [65:29]
B
I can make out with my wife today. So I look at that. I'm like kids nowadays don't even want to socialize. So it's. They are not us. It's a completely different generation of people that are coming up. That is where the biggest change is. When people that are 18 today are now 28 in the future. Guys, it's not even remotely close to the same world.
- [65:48]
A
Okay, good question by Billy there. Next up, we got a question by Deer. Deer's over here in the room right now. What's, what's up, dear?
- [65:54]
B
What's up, dear?
- [65:55]
A
Okay, dear, ask how do you do it all balance, work, family life, etc. I feel like guys don't get asked this question enough in interviews.
- [66:06]
B
I get asked this every interview I do. Just FYI. I am fully integrated. So this morning I do a three hour zoom with my community. I then work out with my wife. Nanny comes over, my wife and I have sex while the kids are in the other room. I then I jump in the shower, I jump on a plane, I come over here, I speak on stage, do a meet up down the road, come here, hang out, jump back on a plane, put my kids in bed. How do I do it all? I have great teams. I have team members that are unbelievable. Like a players like he has. So I have an army of people that do all the things. I don't have to look at my phone, I have to worry about text messages. So think about if you could take all of that away and your company ran by itself and money was being made whether you were there or not and you could pick and choose what you want to do. That really is. You have to build teams and systems otherwise you will be a slave to your business.
- [66:53]
A
That's so good. That's so good.
- [66:55]
B
And I also, I also when I travel, I, I either leave and go back the same day. So I never sleep in another bed besides with my wife. So I, I used to do that back in the day. I would sleep in hotels as I spoke around the world. Then I said I'm not going to do that anymore. Either they come with me if I'm staying in a hotel or B, I fly there and back the same day. I have not been away from my bed with my wife and my baby. We have a little baby boy, he's still in the bed nursing. I haven't been in A hotel in probably a year and a half, something like that.
- [67:26]
A
And you spoke on how many stages last year is like something crazy, like
- [67:29]
B
180 or something like that.
- [67:31]
A
That's insane. That's a lot of time traveling and being away.
- [67:34]
B
I can't wait till they replace me with a robot. You know what I'm saying? Like, get rid of this dumbass.
- [67:39]
A
Yeah, but. But you're obsessed with the game.
- [67:42]
B
So are you.
- [67:42]
A
Yeah, I am.
- [67:43]
B
That's why you're the homie. I. I want gamers, want to be around gamers. I want to be around people like you. I want to see. I want to be around people that are pushing themselves to the next level. You've been doing an incredible job with everything you're doing. Branding, marketing. I see how happy you are with your girl. I see what you're doing at the yacht club, bro. Like, I'm so impressed by what you're doing. You inspire me from a distance.
- [68:05]
A
I appreciate that, man. That, that means a lot. And, And I think from the outside looking in, it's like one thing about entrepreneurship, real estate investing that a lot of people don't realize is it's not as smooth as it looks like from the outside. It's definitely ups and downs getting punched in the mouth at every single level. But it, you know, it's. It's also very rewarding and it gives you purpose. It gives you a reason to get out of bed every single morning. And you know, I, I can say for myself, I'm. I'm very, very, very inspired by yourself and everything that you're doing. And I'm addicted to the game. And with that question for you, last question on the show before we wrap this up, I'm curious. You have a lot of members in your Mastermind, your community sub 2. You're around a lot of people. What is that? That one characteristic that separates those who start something and then stop. Start something and fail. Or maybe they don't even get started to begin with. With those that actually are quote unquote, gamers and actually grow a big thing that's very meaningful.
- [69:02]
B
Their intention. Right? The intention of somebody. It's like, I start and I stop. Is somebody who did it because I wanted one deal. The person who sticks with it are the people that are like, I'm not in this to do deals. The deals will come. I just want to work on myself. I want to go do cool things. I want to be around cool people. I want to be part of the pleasure, the pain, the challenges, all that kind of stuff and they look at like a video game and you go as hard as you possibly can. Other people are like, man, I made three calls and I didn't get a deal. It's because your intention was to get a deal. Your intention wasn't to improve yourself and to obtain a skill, a relationship or a resource. If that's not your intention, you're going to be the start and stop type of person. It's the intention. Change the intention and you'll stick with it.
- [69:42]
A
Yeah. That's so good. That's so good. Pace. Always a fan of everything you're doing, man. Appreciate you coming on, dude. And we got to connect again. Maybe next time out in Phoenix or Montana.
- [69:54]
B
Yes, please.
- [69:55]
A
Yeah, we did what? Scottsdale, Nashville, now San Diego in Montana.
- [69:58]
B
We'll be up there in Montana. Bring you, you and your girl come up, we'll hang out on the lake.
- [70:02]
A
Okay. That would be really sick. I'm gonna take you up on it.
- [70:03]
B
Please bring your yacht. We gotta bring your yacht.
- [70:06]
A
I don't know if I can bring the boat to Montana. I don't. We. We might need a big airplane to bring it out there.
- [70:10]
B
Okay, cool.
- [70:11]
A
Yeah. Where can the folks get in touch with you, man?
- [70:13]
B
Guys, just go on YouTube and watch all my seller calls, my agent calls. That'll help you guys out in your journey. Anything I can do to help you just let me know.
- [70:20]
A
He's Pace Morby. Always, always dropping heat in game omride. Summers listeners, thanks for tuning in. We'll see you guys on the next one.
- [70:25]
B
Pen.