Pace Morby, a devoted husband and father of four, is not only the charismatic host of A&E’s hit show ‘Triple Digit Flip’, now in its third season, but also an innovative real estate investor. With unconventional methods, including Subject To and Seller Financing strategies, he has amassed an impressive portfolio of 2,100 doors nationwide valued at $450 million. Pace’s expertise extends to single-family homes, multifamily units, RV parks, and mobile home park pads, all acquired without traditional financing or personal funds. His insights are captured in his Wall Street Journal bestseller, ‘Wealth Without Cash’, published by BiggerPockets.
Here’s some of the topics we covered:
- Pace’s Backstory & The Journey Into Real Estate Investing
- Getting A Good Cash Flowing Deal In Florida
- 1031 Tax Exchange Details & Urgency
- Seller Finance On A 43 Unit Complex
- Looking For Leverage In A Conversation
- Not Being Afraid of Failure
- Finding Great Deals In Foreclosures
- The Existing Debt In Multifamily
- Refinancing In The Current Economic Market
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
Full Transcript Below
00;10;42;07 – 00;11;02;08
Rod
Welcome to another edition of Time. Cash Flow to Real Estate Investing. I’m Radcliffe and I’m thrilled you’re here. Well, you guys have a big treat today. So I’ve got pace more. Be in the house. And if you don’t know who he is, then I don’t know what rock you’ve been living under. But he’s host of Ian’s most popular show, which is triple digit flip in his third season.
00;11;02;11 – 00;11;15;20
Rod
He’s done thousands of real estate deals and he’s an expert in creative financing. And I’m going to kick his ass because we’re going to do the single family versus multifamily today. I love it. Welcome to the show, brother.
00;11;15;22 – 00;11;17;29
Pace
Rod, you’ve been one of my heroes for a long time.
00;11;17;29 – 00;11;20;02
Rod
I appreciate you. Now, what a kind thing to say. I always.
00;11;20;02 – 00;11;20;17
Pace
Looked up to you.
00;11;20;17 – 00;11;33;23
Rod
Think, that’s so kind of you to say that, brother. Well, so, you know, as most interviewers do in podcasts, we have you tell your story first. So why don’t we start there? For those of you, the few handful of people don’t know.
00;11;33;24 – 00;11;49;18
Pace
No, of course. Yeah. Guys, I grew up in a family of 12 kids. I was not an immigrant wearing wood shoes like Rod was, but I grew up in a family of 12 kids, father obviously working two, maybe three jobs, depending on the time of the year. Well, yeah, Phenix and Utah got.
00;11;49;18 – 00;11;50;02
Rod
It.
00;11;50;04 – 00;12;08;05
Pace
In, bouncing back and forth, back and forth. I watched my father as a contractor and I got into my twenties. And what do you think I became? I became a contractor, right? And I was a contractor for a long time. I worked for Opendoor, Offer, PAD, Zillow, all those big companies. I was open doors, first contractor they ever hired.
00;12;08;08 – 00;12;27;02
Pace
Well, so for those of you guys that know Opendoor massive I buyer and they changed the game in a lot of ways but I was their contractor so they came into Phenix, Arizona. That was their test market. I was the first person they called because at the time I was actually doing a good job on social media. I was using Instagram and my best two employees were my two thumbs and they pulled up a hashtag.
00;12;27;02 – 00;12;54;18
Pace
This was Arizona Construction. They were looking for Arizona contractors, and the name of my company was Easy Contracting, and they found me really easily. I went in their office and man alive. I was just by my company, blew up. We had 250 employees doing 20, $30 million a year in revenue with just the AI buyer. So I saw how the buyers were just gobbling up all these assets and I had a handful of other clients that were smaller clients and there was a client back 11 years ago.
00;12;54;18 – 00;13;14;06
Pace
Her name is Bethany Willis, and Bethany hired me to do all her flips and about 11 years ago she just yelled at me. She she meets me at one of her job sites. She yells at me. She’s like, What the hell are you doing? Being a contractor? I’m like, Why making money? You’re making money for the other people, that all the money is owning the real estate.
00;13;14;08 – 00;13;30;13
Pace
And she maybe two months after I met her, she showed me how to get my first deal. She made me spend money on marketing. She made me go on appointments. She taught me how to go handle an appointment. And I got started in single family and within a couple of months of getting my first deal, I got my first deal made $25,000.
00;13;30;15 – 00;13;46;28
Pace
I assigned a single family home to Bethany and she went, flipped it. And I thought, this is amazing. I get a lead. She taught me how to generate leads. I go to the house, I get the house under contract. She taught me how to do all that. I assigned the deal to Bethany and I’m thinking, Rob, this is the funniest thing about this.
00;13;46;28 – 00;14;06;14
Pace
I thought I was like, in hog heaven because I go, Yeah, making 25 grand on the assignment was amazing, but I get to be her contractor on the floor. I was so excited about being her contractor on the flip that I didn’t realize that I had just changed my entire life. And she stops and she goes, You are forever fired.
00;14;06;14 – 00;14;26;21
Pace
As my contractor, I just showed you how to do deals, you idiot. Why do you want to continue to be a contractor? Wow. This woman was like a mother to me. She was amazing. And within two months I was doing creative finance deals because I had another woman. Her name is Eileen. She was my s-cross. Or she’d been doing creative finance deals for 41 years before I met her.
00;14;26;23 – 00;14;42;27
Pace
And she was asking me, Hey, I see you doing all these deals. It’s amazing. You’re open up escrow on all these transactions. This is awesome. Where all your leads coming from, what do those leads look like? And she asked me, What am I doing with my leads that had no equity or the sellers wanted too much money? And she taught me.
00;14;42;27 – 00;15;05;24
Pace
Subject two She taught me seller, finance and man, I just gobbled up 41 years of information so quickly with her. And I basically have spent most of my ten year career doing almost nothing but creative finance deals. So today I have 300 single family homes in the portfolio, all sub two and seller finance deals, and we have 1500 multifamily doors between.
00;15;05;24 – 00;15;13;20
Pace
Some are we have two RV parks, two mobile home parks and the rest of them are mid-sized multifamily, B class, all seller finance, all subject to.
00;15;13;22 – 00;15;14;27
Rod
The multifamily as well.
00;15;14;27 – 00;15;16;13
Pace
Yep. All the multifamily too. You got to.
00;15;16;13 – 00;15;20;01
Rod
Stick with the lane that you stick with. You’re not buying anything unless you get that creative.
00;15;20;03 – 00;15;40;19
Pace
I stuck with the lane. It just, you know, I’d done a bunch of bird deals just like I’m sure you’ve done a lot of bird deals and refinances and it’s such a massive pain in the ass. And when you see a good deal, you know, you’ll see an asset. For example, I saw a clip you were talking about recently, some guy talking about how he’s selling all his his properties in Florida because the insurance is going through the roof.
00;15;40;22 – 00;15;42;06
Pace
And you are dude, you’re an idiot.
00;15;42;08 – 00;15;44;21
Rod
I hopefully that’s what I said because he was an idiot.
00;15;44;21 – 00;16;03;16
Pace
Yeah, you you very intelligently were like, I will take anything I can get in Florida. The insurance is going to work itself out. And so there’s been times where you’ve seen good deals. I’ve seen good deals, but the interest rate just kills the the ability to cash flow. And so that’s been my experience is that a lot of times I’ll see a seller that’s in pain.
00;16;03;19 – 00;16;12;26
Pace
They’ve got motivation, but the interest rate doesn’t match up with my ability to buy at the purchase price. So I just have gotten into a habit of just going directly to the seller and working on seller finance terms.
00;16;13;02 – 00;16;16;23
Rod
You know, I told you before we started recording, I’ve done a ton of subject to myself. Yeah.
00;16;16;24 – 00;16;17;21
Pace
You know.
00;16;17;23 – 00;16;21;20
Rod
Not to your level probably, but at least 100, I think back in the day, maybe a couple.
00;16;21;26 – 00;16;24;12
Pace
You’re in the top 1% of 1%. That. Yeah, for sure.
00;16;24;12 – 00;16;40;13
Rod
Yeah, I did a lot and I’ve done a lot of seller finance deals as well. And you know, I think it’s it’s an incredible strategy. In fact, you know, it’s one of the things I teach if you you know, if you’ve got an elderly seller that’s got a free and clear property, for example, and you don’t offer seller financing, you’re doing them a disservice.
00;16;40;13 – 00;16;57;13
Rod
You are, you know, with with taxes, you know, if they’re if they’re fully depreciated on their property, you know, they’re going to end up with $0.70 on the dollar at best when they’re done. And, you know, you can, you can have a conversation with them, something like, you know, Mr. or Mrs. Seller, you know, I’m going to give you enough of a down payments.
00;16;57;13 – 00;17;15;12
Rod
You know, I’m serious and I’m going to pay you, you know, three, four or five, six, 7% interest. You’re going to get, you know, whatever it is at the bank, it’s less than that. And you’re only going to pay taxes on what you get every year from me. So your payment for me is, you know, a lot of times an elderly seller is going to be afraid of high risk investments.
00;17;15;12 – 00;17;26;19
Rod
So their money’s going in the bank, which you know, is not you know, it’s paying better now than it was. But, you know, that’s going to come back down as well. And but you can you know, you can double or triple the money they’d get monthly from the bank.
00;17;26;19 – 00;17;28;14
Pace
And it’s on an asset that they already understand.
00;17;28;14 – 00;17;30;08
Rod
That’s right. They’re happy with it. They’re yeah.
00;17;30;08 – 00;17;44;26
Pace
They get it. They understand it. They’ve owned it for 20 years or what have you. Right. Like the filter that we use when we go out, we’re buying primarily direct a seller. And the challenge with I know that a lot of your students, I collaborate with a lot of your students as well. They’ll do direct a broker.
00;17;44;26 – 00;18;05;20
Pace
Sometimes brokers just don’t understand creative finance, right? And so it’s like playing telephone, where you’re calling the broker and asking the broker to educate the seller on tax implications when the broker didn’t never learn anything about tax implications. Correct. So I primarily go and we filter 25 years of ownership or longer, and the property typically will also filter.
00;18;05;20 – 00;18;08;26
Pace
They don’t even own the property in an LLC. They own it in like their personal name.
00;18;08;26 – 00;18;10;02
Rod
That’s how long it’s been, that’s.
00;18;10;02 – 00;18;23;03
Pace
How long it’s been. And they’ve owned the property. They’ve refinanced it a couple of times, just extracted the cash out of the deal. And so we call them up and we say, Hey, we want to help you with a retirement plan. We want to upgrade you from the landlord to the lender.
00;18;23;05 – 00;18;23;22
Rod
Nice.
00;18;23;22 – 00;18;47;19
Pace
And we want to use this asset as the safest investment you’ve ever made. But remove your ability, remove your responsibility of dealing with the tenants, etc.. And that’s what we do. We go directly to the seller and it’s taxes they care more about. Okay, if I can avoid the broker and if I can avoid all the crap that goes into selling these properties and more importantly I get I can avoid the capital gains tax without doing a 1031 because that’s the that’s the craziest thing.
00;18;47;19 – 00;18;52;21
Pace
People are like, well, they’ll just 10:31 a.m. like they now they own another asset. They’re not retiring.
00;18;52;28 – 00;19;13;15
Rod
Exactly. And you know, and with a by the way, he’s talking about a 1031 tax deferred exchange where you have to you know, you have to pay within a certain amount of time, identify the property you’re going to buy when you sell your property, and and you have to close on it with a certain amount of time. And what that does is it can create a sense of urgency where you’re paying too much for a property as well.
00;19;13;16 – 00;19;35;01
Rod
Okay. And so, you know, thank God they’ve brought back in bonus depreciation. Of course, we’ve got cost segregation now with bonds 200 back to 100%, thank God. But, you know, I’m going to tell you that I don’t I don’t like having that kind of pressure. And you can eliminate. I love your script, by the way. That’s an awesome script you just shared for four owners.
00;19;35;01 – 00;19;36;17
Rod
And you do that with multifamily as well.
00;19;36;18 – 00;20;06;27
Pace
Multifamily, you know it, work it. What’s great about multifamily, you know this better than I do. You’ve been in the game longer than me. The sellers are typically savvy with seller finance. Yeah, because a lot of times they acquired the asset with some for some form. Yeah. And so they get it right. They’re usually business owners that are deploying capital for their own tax reasons, whereas I would say single family, I could argue that single family is actually more challenging to do sub two and seller finance on because you’re educating a single family homeowner who actually doesn’t know much about real estate.
00;20;07;01 – 00;20;20;04
Pace
The only asset they own is that one thing. So when you’re negotiating some sort of seller finance stuff, they’re like it goes over their freaking head. Whereas, you know, 50 unit or larger owner, 95% of the time they know what seller finance is.
00;20;20;09 – 00;20;46;17
Rod
Sure, you know, there’s no better financing than seller financing. There’s no credit report. You know, if you’ve got a challenged asset that’s not stabilized, you know that you’re going have a difficult time getting traditional financing. And there’s no better there’s no better financing. You dictate the terms. I mean, I’ve done seller finance deals where I haven’t paid anything down payment, I’ve done seller finance deals where I’ve made a payment for a year because the property was trashed and I told them it was the truth that, you know, we want to stabilize.
00;20;46;17 – 00;20;55;15
Rod
I got to stabilize the property before I make payments to you. And it was the truth. Now, another thing that’s big with retirees, retired sellers is seller bonding, Right? Don’t you agree?
00;20;55;19 – 00;20;56;07
Pace
100%.
00;20;56;07 – 00;21;12;08
Rod
You focus on the relationship first and the asset second. Because, you know, when people get older, the relationship driven. Yeah. And so, you know not to take advantage of them. I’ll frickin hunt you down. But but to create a win win situation, you bond with them and you’re able to create fantastic deals. I’m sure you’ve done that. Yes.
00;21;12;12 – 00;21;24;19
Pace
Yeah. I’ve got a guy named Mario in San Angelo, Texas, where three years ago he was listed with a broker. It’s a 43 unit, multifamily, kind of a good little base hit for a lot of most people. Right. I know you’re going for a much larger assets.
00;21;24;21 – 00;21;26;08
Rod
Does great. 43 is great.
00;21;26;08 – 00;21;43;11
Pace
43 is a good one. It’s good when you can now afford a manager on site, which is nice. So we see it’s listed for 3 million bucks. It’s listed for six months. Broker can’t get the number. So we call on month five. Usually I’ll call a broker and I’ll say, Hey, looks like it’s been on the market for a while.
00;21;43;13 – 00;22;01;10
Pace
I might not be your best offer, but I want to let you know that I’m going to offer seller finance. We submit the offer to the broker 90% of the time. The broker doesn’t even show the seller the seller finance offer because they don’t understand it. And they don’t they’re too embarrassed to say they don’t. Right. And so that deal goes expired.
00;22;01;10 – 00;22;09;23
Pace
We just call the seller directly, Mario. That deal, 43 units, zero down 4% interest with a 50 or no, no balloon, no shit.
00;22;09;27 – 00;22;11;05
Rod
But why?
00;22;11;07 – 00;22;27;04
Pace
Why why would Mario do you do that? Now we’re in the process of buying his stock is another one with him because we’ve been now we’ve owned it for two years. He’s seen payments come across for two years. We build the relationship right? Not only is he selling us a second asset, but he’s also become our private money lender on other projects.
00;22;27;05 – 00;22;27;26
Rod
Well, because.
00;22;27;26 – 00;22;30;15
Pace
He get he understands. Right. The bond that you’re talking about.
00;22;30;15 – 00;22;32;03
Rod
So how do you do 50 years?
00;22;32;06 – 00;22;36;23
Pace
It’s a great little story. So Mario is.
00;22;36;25 – 00;22;39;20
Rod
He’s a retiree, right? He’s in his 70. No.
00;22;39;22 – 00;22;42;26
Pace
He was. How old would you say, Mario was? I think he was very 45.
00;22;42;26 – 00;22;44;00
Rod
50. So young. Okay.
00;22;44;01 – 00;23;04;29
Pace
Yeah, younger guy. Okay. Here’s the story. He he says we my team calls him directly. Hey, Mario, would you take seller finance? He says, Yes, I would, but I want to meet the person in person face to face if we’re going to work out some sort of deal. And so I fly to Dallas, drive to San Angelo, where the asset is, and we go meet with him in the parking lot.
00;23;05;01 – 00;23;22;19
Pace
He did not want to go toward the property because he had his kid inside the escalate. And I was like, it’s kind of weird. Like, why doesn’t your kid just go hang out on the playground, come to find out? I couldn’t get anywhere with him. He wanted he wanted 20% down, which I never do 20% down on seller financed deals.
00;23;22;26 – 00;23;28;22
Pace
He wanted 8% interest in like a five year blend. I’m like, Mario, like, there’s no there’s nothing for me here.
00;23;28;28 – 00;23;30;08
Rod
The numbers would I could get.
00;23;30;08 – 00;23;48;10
Pace
A better deal going to the bank and more importantly, I could choose the asset if I was going to go to the bank. And he says, Well, what? Anyway, we couldn’t get anywhere. And then I noticed this kid. Now we’re 45 minutes in the conversation. I notice his kids still on the escalator. Mike, Bro, tell your kid to go hang out on the playground equipment.
00;23;48;10 – 00;23;59;16
Pace
He says, Well, I would, but my kid hates this property. Like, you know, And then I see this window of opportunity. Here I go. Why does your kid hate the property? Says, Well, let me put it to you this way.
00;23;59;19 – 00;24;19;24
Rod
So we interrupt this episode with a quick word from our sponsor, CRI Capital. Now, if you’re an accredited investor, you definitely want to listen up. We’ve got a beautiful asset in San Antonio where we’re assuming 4.2% interest debt. That’s right, 4.2% interest debt, and it’s got seven years left on it. Now, this property was previously under contract for 26 million.
00;24;20;00 – 00;24;41;20
Rod
That contract fell through. We’re getting it for 20 million. So now here’s the thing. We’re paying 100,000 a unit, the property right next door to this one sold for 137,000 a unit. That’s almost a 40% discount. Now, what else makes this super exciting is it’s approximately a mile away from another 296 unit complex we already own. And we know this area very well.
00;24;41;20 – 00;25;01;29
Rod
We love this area. Now, this new property’s actually quite a bit better than our existing property. For example, the units are larger, they all have fireplaces and washer dryer hookups and this property sits on a large beautiful lake. Actually, 38 of the units in this complex are lakefront. Nancy San Antonio is one of the best markets in the country to invest in right now.
00;25;01;29 – 00;25;24;03
Rod
It’s continually growing. And I’ll tell you, the conservative returns that we’re projecting for this property look fantastic. So if you’re accredited seriously, either get on a call with our team or register on our portal and check out the webinar we did on this. You can go to see our capital icon that’s Cree capital dot com or text the word partner to seven two, three, four or five.
00;25;24;06 – 00;25;36;03
Rod
Again to check it out, go to see our recap little dot com or text partner 272345. Check it out it is really something. All right let’s get to it.
00;25;36;05 – 00;25;53;23
Pace
Seven months ago the reason I decided to put the property on the on the market with the broker is because it was my son’s birthday. My wife asked him, What do you want for your 12th birthday? His answer was, I want my dad to love me as much as he loves his tenants.
00;25;53;25 – 00;25;56;00
Rod
Got a little leverage there.
00;25;56;02 – 00;26;17;04
Pace
right. So I worked out a deal with him, and I said, Mario, what if I could tell you that when your son is 62 years old, this asset that he hates today, he will receive a check for me for $11,000. The final payment on his 62nd birthday as a symbol of your love. Every single month you’ll get a check for $11,000.
00;26;17;07 – 00;26;18;25
Rod
That’s good. says.
00;26;18;28 – 00;26;36;02
Pace
Bro. So good. And Eric came with me. For anybody who can’t see it, you guys can’t see Eric. But Erica is in my videographer. He travels with me all over the country. This is roughly three years ago. We interviewed Mario Mars crying because the solution was so powerful for him because he goes, I want to retire. I’m younger.
00;26;36;02 – 00;26;52;10
Pace
I want to retire, but I can’t retire unless I. 1031 And if I turn 31, I now have a bigger asset and a bigger problem. Right. And you know this too. Most of these sellers are not big institutions with massive teams. They’re mom and pop guys that are replacing the toilets and the lightbulbs themselves.
00;26;52;11 – 00;26;52;29
Rod
Right.
00;26;53;01 – 00;26;57;13
Pace
And so this guy’s Mario’s missing all his son’s games. He lives in San Antonio.
00;26;57;13 – 00;27;01;11
Rod
He was self-managing, self-managing everything. Well, that’s why son hated it.
00;27;01;13 – 00;27;02;17
Pace
His his son hated it.
00;27;02;17 – 00;27;06;26
Rod
I mean, a 42 unit. You’re going to be live in their basically. Yep. Managing it. Wow.
00;27;06;26 – 00;27;27;12
Pace
Yep. And he he didn’t have any other management whatsoever. So he would drive up two or three times a week to this property. And he had a lot of people that were on government assistance inside the property as well. So he just had all sorts of wacky things going on, mental health issues and whatnot. And so of course when we did the deal, I said, let’s structure it where you’ll make a lot more money.
00;27;27;12 – 00;27;38;18
Pace
You get 4% on your money and you’ll continue to get payments even past your death. And he’s like, amazing. So his it was something he gave his son his the promissory note for his birthday.
00;27;38;21 – 00;27;40;28
Rod
wow. That’s brilliant, brother.
00;27;40;28 – 00;27;41;16
Pace
Freaking cool.
00;27;41;16 – 00;27;58;10
Rod
Brilliant. Yeah, cool. So as as real estate investors, you know, I like to tell students that we are problem solvers. And, you know, when you can look at something creatively in our space, I don’t care what asset class it is. And you put on your creative hat and you come up with solutions like that, I mean, success is inevitable.
00;27;58;10 – 00;27;59;20
Rod
Well, that’s a brilliant solution.
00;27;59;21 – 00;28;17;24
Pace
It’s fun, man. I mean, this game, like, well, even, you know, the 2000 houses you had before, you, you know, you lost all those. What’s great about everything that you’re doing now, what you did before all this is, is a journey of self-discovery like how creative can you be? How many deep relationships can you create, how many skill sets can you acquire?
00;28;17;26 – 00;28;20;13
Pace
It’s just this big, fun video game we get to play every single day.
00;28;20;14 – 00;28;39;05
Rod
I freaking love it, man. I mean, listen, I’m not afraid of failure. I’ve. I’ve, I’ve, you know, I call them seminars and I’ve built 27 businesses in my career, several worth tens of millions of dollars. Most spectacular, flaming seminars. But, you know, we fail our way to success, right? I got to meet the billionaire billionaire owner of Spank Sarah Blakely.
00;28;39;05 – 00;28;46;26
Rod
You’ve probably met her as well. I have that. She’s great. She told me that her dad used to ask her on a weekly basis, her and her brother, what have you failed at this?
00;28;47;04 – 00;28;47;22
Pace
So great.
00;28;47;22 – 00;28;49;08
Rod
What a great question to ask your kids.
00;28;49;09 – 00;29;04;29
Pace
Way better, way better, way better. I mean, it’s changing the paradigm. And what’s funny is that you and I, we probably had to learn to fail and be okay with it in her twenties and thirties, because most of the time what I was doing in my twenties before I, before Bethany grabbed me and said, Get your ass in a real estate.
00;29;05;02 – 00;29;09;09
Pace
I was avoiding failure at all costs. At all costs. I was afraid of it.
00;29;09;09 – 00;29;25;20
Rod
And most people do. Most people are afraid of failing. And, you know, a lot of analytical people, for example, and in my space more than yours, a lot of engineers, a lot of engineers, a lot of it people. And, you know and I love you. I know you know who you are. I love you. And you also know how you have to check off every frickin box before you make a move.
00;29;25;20 – 00;29;43;00
Rod
And you know, and I give the analogy, you know, you can drive all the way across the United States at night with your head light only seen 60 feet in front of you. And you know you can make it. You know, other people have made it before you, but you got it. You got to actually take that first step and make it happen and recognize that that’s how it is in both of our businesses.
00;29;43;00 – 00;30;01;26
Rod
Frankly, you’re not going to know the whole path like that, Dr. Martin Luther King said. You take that first step and faith the next step will be revealed. Right? Right. So, yeah, love it. So so give us some examples of creative financing for for people that that you know just some some some examples I’d love to hear some some things you’re.
00;30;01;28 – 00;30;23;14
Pace
Seeing here in single family which you know I have 3000 in my portfolio. I have done, I don’t know, probably two or 3000 creative finance deals in single family. Now we focus a lot more on RV parks and some fun stuff. I’m I’m exploring fun asset classes at this point. Right. Nice. So in single family you’re typically dealing with in a sub to seller somebody subject to, you’re taking over their existing payments.
00;30;23;17 – 00;30;40;21
Rod
hold on one sec. So subject to is somebody got a mortgage and you basically step in and take over their mortgage. That’s that’s basically it. You’re not assuming it. You’re buying it subject to that debt. And a lot of people are worried about a do on sale clause. I’ve never seen a mortgage company exercise to do on sale clause.
00;30;40;21 – 00;30;48;05
Pace
I’ve had five and five. I’ve had five. But we’ve you know, we do a lot. Yeah. Okay. I’ve had five and I’ve seen ten total including my five.
00;30;48;05 – 00;30;50;00
Rod
No kidding. And out of thousands.
00;30;50;06 – 00;30;55;08
Pace
thousands. But I’ve never seen the way you overcome the do on sale clause is really simple, but we want to talk about that today.
00;30;55;08 – 00;30;56;20
Rod
A land trust or something in the name.
00;30;56;20 – 00;31;04;17
Pace
You could you could do a land trust, but it’s really it’s even more simple than that. You did the deed, the property back to the owner and you repurchase it on a lease option.
00;31;04;19 – 00;31;09;00
Rod
that’s it. Just use a lease option. Usually I used land trust. I had hundreds of land trust.
00;31;09;00 – 00;31;09;24
Pace
Yeah. Land trusts are a great.
00;31;09;24 – 00;31;21;06
Rod
Tool because that gives you anonymity. And and you know, we’re going a little deep on this, but, you know, subject to is a great way to take over a property that really, you know, doesn’t get it hasn’t got as much equity as you might need.
00;31;21;09 – 00;31;40;10
Pace
Right. And I look at it and I go, you know, there’s people that bought in 2007 before the market crashed. Right. And they had all this equity. The market was going up and then the market crashes. You look at those people, if they would have just kept their assets, right. A lot of the guys when they were losing the equity in their assets are just getting rid of everything, letting they’re like, I have no equity.
00;31;40;10 – 00;31;59;11
Pace
Let me give it back to the bank guys. Every single one of those people I talked to that had fixed rates on those houses look back and go, Why the hell did I do that? Yeah, my tenants would have paid down my properties for 15 years. My, my, my interest rate was actually locked in and I would have been able to raise my rents probably six times over those 15 years.
00;31;59;14 – 00;32;21;22
Pace
Guys, the the value in a subject to deal is never really the equity. It’s the ability to acquire a really low rate, locked in and getting good cash flow. And so if you want a single family home today like today, right now, there’s a handful of places you can go, go on land, watch WSJ.com. I love land watch because Land Watch has 13,000 creative finance listings right now.
00;32;21;22 – 00;32;43;04
Pace
Like, really right now we go and land watch dot com right now click on owner financing of 13,000 listings right now, which is awesome. That’s RV parks, that’s gas stations. That’s everything you can imagine. If I want a single family home, here’s where I go. I go to expired listings. So I just go to an agent. I go I go, look, do you know how many expired listings happen every day, by the way, in the country?
00;32;43;07 – 00;32;45;19
Rod
I’m sure it’s it’s insane. Insane numbers.
00;32;45;23 – 00;32;54;17
Pace
Maricopa County, where I’m at, Scottsdale area, It’s 40 a day. All right. So 40 real estate agents get fired every day. So they tried to sell the house for six months.
00;32;54;17 – 00;32;54;25
Rod
Right.
00;32;55;02 – 00;33;12;27
Pace
40 of them fail every day. And therefore get fired. We just called the seller directly and say, hey, did anybody pitch you to just take over your payments? Right. So where we get a lot of our for Plex’s six plex is that kind of stuff. In fact my camera guy Eric right here just sold me. He assigned me a four plex, a duplex and another single family home.
00;33;12;27 – 00;33;13;21
Pace
Just the last like.
00;33;13;25 – 00;33;14;10
Rod
You.
00;33;14;13 – 00;33;16;22
Pace
Know, he’s he found them expired listings.
00;33;16;22 – 00;33;17;13
Rod
Sell them.
00;33;17;15 – 00;33;35;00
Pace
Yep. Expired listings. Got him locked up sub to assign them to me and I just bought them. Right. So anybody can do this camera guy. Anybody can do this. So expired listings is really good. The challenge with expired listings is you have to go through an agent to get access to them like good quality ones. So if you are an agent or you have a friend that’s an agent, get your expired listing lists.
00;33;35;00 – 00;33;47;00
Pace
Another place to get a foreclosure is holy moly. Foreclosures are like the greatest thing. Why could they sell on the market? Because they didn’t have any equity. Just take over their freaking payments the and save these people from foreclosure.
00;33;47;00 – 00;33;55;29
Rod
Foreclosure? Yeah. Yeah, I used to. Just so you know, I don’t know if you knew this. I used to knock on doors of people in foreclosure every night for about 8 to 10 years. Wow. Yeah, about 500 houses.
00;33;55;29 – 00;33;57;25
Pace
This is probably why you locked up a lot of sub two deals.
00;33;57;26 – 00;33;59;21
Rod
I did sub two deals back then.
00;33;59;21 – 00;34;00;17
Pace
Like crazy.
00;34;00;17 – 00;34;04;00
Rod
I did. I was a broker. I was able actually. Where are.
00;34;04;00 – 00;34;05;00
Pace
You trying to get listings or.
00;34;05;00 – 00;34;18;19
Rod
Were you trying to do listings as well? I did, but I did listings for a while and then I met somebody like. Like you, your lady that helped you and like, hey, stupid buy. So don’t, don’t list them, you know? And so I started buying them by 500 there. But yeah.
00;34;18;21 – 00;34;19;29
Pace
Thank goodness somebody.
00;34;19;29 – 00;34;26;15
Rod
Hey so are you having some trouble with Countrywide funding? You know, I help people, you know, with this and. yeah, that’s why I did it.
00;34;26;16 – 00;34;27;07
Pace
Where did you do that?
00;34;27;09 – 00;34;28;04
Rod
Denver.
00;34;28;06 – 00;34;29;08
Pace
You lived in Denver?
00;34;29;12 – 00;34;30;20
Rod
Yeah, living in Denver 30 years.
00;34;30;20 – 00;34;34;07
Pace
I just. I see you as a flip flop guy in Florida for your whole life.
00;34;34;08 – 00;34;48;06
Rod
No, dude, I lived in Denver for 30 years. I owned 500 houses there. Wow. And bought a couple hundred in Memphis. Biggest mistake in my life. And then, you know, 1300 here in Florida. But wow. So where are your single family assets? Just out of my own curiosity.
00;34;48;06 – 00;35;13;10
Pace
Okay, So I’ve got my largest swath of single family is in North Carolina. Okay. And then I’ve got a lot in Atlanta. Okay. And then I have a ton in Arizona, as you can imagine. That’s my backyard. I started in Arizona, but then I started my creative community. I have a creative community. And what ended up happening is people just started feeding me deals and all over them all over the U.S. And I saw like four years ago, North Carolina, just the massive migration this be before COVID.
00;35;13;13 – 00;35;20;17
Pace
I saw the massive migration that was happening in North Carolina. Florida. Like people talk about how COVID changed Florida, dude, Florida’s always going to.
00;35;20;17 – 00;35;23;24
Rod
Keep them away. Now, I’ve never had traffic jams like we have here.
00;35;23;24 – 00;35;26;18
Pace
Yes, Sarasota is bonkers, but it’s crazy.
00;35;26;20 – 00;35;36;16
Rod
But so let me ask you a question just for again, for my own edification, how you effectively manage a single family portfolio that’s long distance.
00;35;36;18 – 00;35;44;09
Pace
I so I have two traveling asset managers, and underneath those asset managers we have property, a nationwide property management company. And my.
00;35;44;09 – 00;35;45;18
Rod
Nationwide property, yeah.
00;35;45;18 – 00;36;03;22
Pace
There’s a company called Mind Property Management, NY, and they’re nationwide. They’re one of the only three that are in all 50 states. And so we have property management by mind and then too traveling asset managers. So what they do is they homeschool their one girl. Her name is Heidi Silva.
00;36;03;24 – 00;36;05;04
Rod
This is one of your asset managers.
00;36;05;06 – 00;36;23;04
Pace
She’s full time with me. And what she’ll do is if we have like a mid term rental or an Airbnb, she’ll go set the property up and then she disconnects and leaves and she’ll go to the next one. Right now she’s living in Montana at my RV park, we just bought a $5 million RV park seller finance, so she’ll go set up, get a manager in place and then she’ll move on to the next one.
00;36;23;07 – 00;36;28;13
Rod
So in your single family portfolio, how much of it is long term rent versus.
00;36;28;13 – 00;36;32;29
Pace
80% long term rent, just boring old stuff, which is the right way to go?
00;36;33;01 – 00;36;33;28
Rod
Well, sure.
00;36;34;00 – 00;36;39;25
Pace
You know, because I see a lot of people, even me, I had 75 Airbnbs in Atlanta, Georgia, and now I have zero in Atlanta, Georgia.
00;36;39;25 – 00;36;41;27
Rod
Did you get your computer?
00;36;42;00 – 00;36;44;08
Pace
No, I didn’t sell any of the assets. I kept them all, but I.
00;36;44;11 – 00;36;45;22
Rod
Just transferred them over.
00;36;45;22 – 00;36;48;03
Pace
I converted them to midterm rentals. Yeah, well, midterm.
00;36;48;09 – 00;36;49;08
Rod
So midterm. It’s good.
00;36;49;10 – 00;36;57;13
Pace
Yeah, because you can do six months, like almost. No, you can stop you from doing a six month rent. Right? So I did. I converted them to midterm rental. I have.
00;36;57;13 – 00;36;58;27
Rod
Noises and things like.
00;36;58;27 – 00;37;14;13
Pace
That. Nurses, a lot of insurance companies. interesting. So if you build a relationship with insurance companies, what’s happening is, you know, a family gets a hot water heater floods and they now have to go live in another house for four months while the restoration company comes in and fixes it so that the insurance companies will fill your house for you.
00;37;14;13 – 00;37;29;07
Pace
I like it, Ali. Solutions is the name of the company there. Nationwide. There’s like 50 of them. So if you build a relationship with a company like Ala Solutions, you go, Hey, here’s my 25 houses. They’ll put your houses on their dais and then they’ll fill your houses. I’ll give you a good example.
00;37;29;07 – 00;37;31;02
Rod
You shifted your Airbnb to this midterm.
00;37;31;03 – 00;37;34;04
Pace
Yep, I probably have five Airbnbs. I don’t love Airbnb at all.
00;37;34;04 – 00;37;34;27
Rod
Right. Right.
00;37;34;28 – 00;37;45;23
Pace
I think it’s I honestly I look at Airbnb and I how much how many times I have to change my furniture and deal with the Karens who are complaining about a socket going out or some stupid complaint.
00;37;45;23 – 00;37;46;10
Rod
Right.
00;37;46;12 – 00;38;02;19
Pace
I don’t have that with my long term rentals. My tenants for the most part, especially my multifamily stuff, they just want to be left alone. But Airbnb is is just bona fide Karens that are like, They’ll threaten you Rod, if you don’t do X, Y and Z and waive my cleaning fee and such and such. I’m going to leave you a one star.
00;38;02;19 – 00;38;03;11
Rod
Review, right?
00;38;03;13 – 00;38;05;11
Pace
I got out of that business as fast as I could.
00;38;05;11 – 00;38;14;21
Rod
Yeah, yeah. I’ve got a brother that’s got some cabins up in the Blue Ridge Mountains and those probably do pretty good. They do good. They do good. But, you know, there’s a lot of a lot of brain damage.
00;38;14;24 – 00;38;21;16
Pace
I would say that every Airbnb I have single family is the same amount of management as a 30 unit apartment complex.
00;38;21;22 – 00;38;39;23
Rod
Wow. Wow. I hope you heard that. That’s that’s yeah, that’s pretty significant. So back to creative financing for a minute. Yeah. You know, in the multifamily, I mean, I asked you, you know, give examples you said subject to, of course, seller financing. Anything else come to mind in the creative financing world underneath that umbrella.
00;38;39;23 – 00;39;02;00
Pace
Yeah. So like land contracts, contracts are deeds, bond for deed, those kind of things. So lease options. So we call those executory contracts like the umbrella term for all of those bundle of terms is called an executory contract. So for the people that don’t know an executory contract, as it’s where I buy, let’s say I want to buy a multifamily deal from you about a big 500 unit in Houston this way they have existing debt.
00;39;02;03 – 00;39;09;18
Pace
The debt that’s associated with multifamily is, you know, even better than I do. That debt is typically watching that asset through like a hawk.
00;39;09;18 – 00;39;10;06
Rod
In a big way.
00;39;10;06 – 00;39;29;24
Pace
In a big way. So what we do is we’ll do a contract for deed, so the deed does not transfer in the sale. I just control the deed. So they’ve signed the deed over to me. We put the deed in a safety deposit box, so I control it. I’m effectively the owner. I get all the tax benefits, I get all the depreciation, I get everything, I get the appreciation, the mortgage paid down.
00;39;29;26 – 00;39;45;07
Pace
The only thing different is I just haven’t recorded the deed. If I if I record the deed, that’s where the bank figures out that I transferred the ownership interest. Yeah. So executory contract, the way the reason it’s called the executory contract is legally we have not executed the contract entire entirely.
00;39;45;07 – 00;39;49;12
Rod
So it’s not even the, it’s not even executory deed, it’s an executory contract.
00;39;49;12 – 00;40;01;23
Pace
Correct. And the seller. So you would sign over the warranty deed to me we go through a title company. Title company gives me title insurance, everything. We just don’t record the deed at county recorder’s office.
00;40;01;25 – 00;40;06;20
Rod
Have you ever done any creative financing where the seller stays in the deal?
00;40;06;22 – 00;40;07;07
Pace
Let’s see.
00;40;07;07 – 00;40;09;12
Rod
It’s becoming more and more common where.
00;40;09;18 – 00;40;11;02
Pace
When they partner with us on the back end.
00;40;11;02 – 00;40;17;10
Rod
They’re having trouble raising equity, for example. So the seller stays in for a chunk of the of the of the equity.
00;40;17;12 – 00;40;26;20
Pace
I’ve had sellers, I’ve had sellers come in and say, we’ll sell you the asset, but we want 10% of the back end when you go and sell it. We don’t want to be involved in the cash flow or the management.
00;40;26;27 – 00;40;27;27
Rod
interesting.
00;40;27;29 – 00;40;31;21
Pace
You’re talking multifamily, so people are having a hard time. What do they have a hard time raising capital.
00;40;31;21 – 00;40;41;19
Rod
And capital capital, you know, people with the economy the way it is and you know, and there are some deals going south in our space right now with bomb by word. Yes, we’re seeing we’re seeing that.
00;40;41;19 – 00;40;43;05
Pace
Yeah, the market is having a hard time.
00;40;43;07 – 00;40;46;02
Rod
I mean, bridge debt, you know, a lot of operators use bridge debt.
00;40;46;07 – 00;40;55;19
Pace
Those syndicators back three years ago thinking the market is just going to continue to go up as if they’re not going to have any problems with the bridge debt. And that’s all coming due this year. A lot of it’s coming due this year. No, I.
00;40;55;19 – 00;41;17;06
Rod
Know. I mean, we got to scream and deal under contract right now. By the way, if you’re an accredited investor, text partner, 2723, four, five. We’ve got this asset in San Antonio. It’s a 200 unit a mile away from a 296 unit. We own much nicer than the other one we own, which is killing it, but we’re getting it for 100,000 a door and the one next door sold for 137.
00;41;17;09 – 00;41;20;21
Pace
Ooh, wow. Is it? What’s the problem is are the syndicators having a hard time?
00;41;20;27 – 00;41;31;17
Rod
They ran out of money. Just ran out of money. And the units are larger than our other asset. They have all the fireplaces. They all have washer dryer hookups. That’s on a lake. 37 units on on the lake. I mean, it’s a school we had.
00;41;31;19 – 00;41;53;15
Pace
We had. So I have a deal in Springfield, Illinois, similar to this 256 units seller ran out of the seller, ran out of money. He actually owned the property for 25 years. He went and did he got a construction loan to renovate the whole property because he had been sucking out all the cash flow for 25 years. He’s like, crap, I better go get a loan, fix it up, runs out of money.
00;41;53;17 – 00;42;03;13
Pace
Wow. And he comes. We run into him. Very similar to your situation. Was your person a syndicator? And they just ran out of capital to renovate? Yes. And so what’s the structure of you doing it?
00;42;03;13 – 00;42;07;13
Rod
I mean, you’d see the trash. Are they off?
00;42;07;16 – 00;42;15;18
Pace
They’re keeping you on that. They’re keeping themselves on the debt so that it makes the lender happy. You’re keeping them involved in the deal and you’re basically taking out your.
00;42;15;22 – 00;42;18;11
Rod
No, no, no. you’re talking about the creative financing. No, no, no.
00;42;18;11 – 00;42;20;14
Pace
How how are you getting into the dealer deals?
00;42;20;16 – 00;42;32;23
Rod
We’re assuming we’re assuming low end. sweet. Okay. 4% debt. I mean, I spent seven years left on it. Yes, big deal. Again, if you’re accredited, check this deal out. That’s a phenomenal deal. Capital scam or tax partner.
00;42;33;00 – 00;42;34;14
Pace
And San Antonio’s blowing up.
00;42;34;14 – 00;42;50;16
Rod
We love San Antonio. But anyway, so. So back to the strategy. That’s not the case in this deal. But that’s that’s just a screaming deal because of the market conditions right now. But, you know, I mean, these guys that have this bridge debt, which isn’t the case in that deal, but the guys that do, they either have to sell or they have to refinance.
00;42;50;16 – 00;42;51;21
Rod
Yeah. And neither one’s.
00;42;51;21 – 00;42;55;21
Pace
Easy, right? How is how is refinancing easy rates nearly impossible for them?
00;42;55;22 – 00;43;10;21
Rod
Yes. You know, I don’t know if you know this. If you wanted $100 million rate cap in 20, 23 years for 3%, so your interest rates are not going to go up more than 3% for three years on a $100 million loan. It was $23,000. Wow. That same rate.
00;43;10;21 – 00;43;11;23
Pace
Cap, that’s so low.
00;43;11;24 – 00;43;18;06
Rod
Last time I checked, ten years. I’m sorry. Ten months ago, that same recap for one year, forget three years was 2.3 million.
00;43;18;06 – 00;43;24;20
Pace
Yeah, I just had somebody come to me in December, Rod, and they said, hey, we’ve got a, we’ve got a rate cap, we’ve got to buy, we’ve got to pay for.
00;43;24;20 – 00;43;25;11
Rod
Right?
00;43;25;14 – 00;43;30;19
Pace
And it was a little over 2 million bucks. Yeah. And all it was to extend was like nine months.
00;43;30;26 – 00;43;31;06
Rod
wow.
00;43;31;06 – 00;43;33;06
Pace
Some crazy low number. Yeah.
00;43;33;08 – 00;43;50;09
Rod
I mean that’s killing a lot of deals. So there’s going to be there’s going to be some pain. Now, the lenders are working with people if they are creditworthy borrowers, is what the Fed put out there. So but I’m excited. I think there’s opportunity coming. Do you believe like there’s there’s operate well in your space single family. There’s a huge backlog.
00;43;50;12 – 00;43;56;08
Rod
There’s 3 million housing units were short. Soon as that interest rate comes down, I think single families are going to exploded. And do you.
00;43;56;14 – 00;44;13;27
Pace
I think it’s going to explode. I think we’ll see a growth from, let’s say, interest rate. They just extended. They said they’re not going to touch rates until June or July now. Right. Who knows? I mean, you got all the political crap that’s going to go on this year. For sure. It’s going to be a circus. But let’s say that rates do come down a point, two points.
00;44;13;29 – 00;44;15;29
Pace
Hell, even three points if there’s a miracle.
00;44;15;29 – 00;44;16;16
Rod
No chance.
00;44;16;23 – 00;44;18;25
Pace
If if you had a point and a half.
00;44;18;25 – 00;44;19;06
Rod
Right.
00;44;19;09 – 00;44;36;21
Pace
The market’s going up 15% in 18 months and maybe even faster a grade. And so for me, what I’ll do on a lot of my single family properties, I’ve been waiting for that opportunity. I’ll just do a big cash out refinance or I’ll sell 1031 a lot of my stuff into a bigger asset. It’s going to be a great opportunity for people who have been buying.
00;44;36;24 – 00;44;41;01
Rod
And so you would still. 1031 even with 100% bonus depreciation and cost?
00;44;41;03 – 00;44;42;07
Pace
Yeah, I would still 1031 You.
00;44;42;08 – 00;44;59;18
Rod
Really there’s I mean it’s very often the numbers are similar. I mean we you know, you’re basically not going to pay tax on that gain if you cost saving bonus but that’s I don’t I don’t like to have the pressure of having to buy something. I think that’s what scares me the most, because then you’re forced into buying something, but it does fall back on.
00;44;59;19 – 00;45;18;21
Pace
I think the difference is in a lot of multifamily. You guys are doing less transactions and we’re doing in single family. That’s true, right? So we have a lot more deals going through, less dollar amount, right, Right. Less dollar amount through the year. Like you might buy $200 million in real estate in one year. I might buy $50 million in real estate, but I did 300 transactions.
00;45;18;21 – 00;45;27;11
Pace
Right? You did, too. Right? Right. So it’s a different world. So 1030 ones for us are really easy. They’re simple because we have a pipeline coming through. I can identify very quickly.
00;45;27;12 – 00;45;37;15
Rod
It makes sense. That makes sense. Yeah. All right. So you ready to have your ass kicked? Yeah. Mean, I’m totally kidding. Guys. He’s probably going to school. Me. But let’s talk about single family versus multifamily.
00;45;37;15 – 00;45;56;05
Pace
I love this conversation because, like, I’ll have dinner with Grant Cardone and this guy. There’s two things that he talks about. I actually disagree with his good points on them, but I think most people or most people, not me and not you and not Grant, I think most people, they’re the greatest thing they should do is own their personal home.
00;45;56;05 – 00;45;57;05
Rod
Well, for sure.
00;45;57;07 – 00;46;12;25
Pace
You know, him going around saying, it’s not an asset. I’m like, well, say that to everybody in the world, that their largest cash is sitting in their personal home. They don’t have the advantages that you and I have in understanding real estate and that they could deploy that capital somewhere else more efficiently. So I disagree with him on that.
00;46;12;27 – 00;46;33;07
Pace
If he’s talking about you and me, yeah, there’s a big argument. Yeah, single family. The other thing is I avoid single family like the plague and just focus on multifamily. I get the points on it, but I look at it and I go, I started in single thing. I wouldn’t have known anything about title companies raising capital, Deeds notes, nothing.
00;46;33;07 – 00;46;39;16
Pace
I would have done nothing about how to manage contractors if I didn’t get my my teeth cut on single family.
00;46;39;19 – 00;46;44;13
Rod
Touché. And I agree with you completely. And it took me 2000 single family houses to get them.
00;46;44;16 – 00;46;46;08
Pace
You probably waited too long.
00;46;46;11 – 00;46;47;07
Rod
Yeah. You think?
00;46;47;07 – 00;46;52;28
Pace
I think you probably. If you got to one, not even a hundred, what would you think would have been the cutoff for you? 50.
00;46;53;00 – 00;47;09;05
Rod
22. 50. Obviously, you know, my, my students and I was bragging about this a minute ago, either somewhere between 190 and 200,000 units that we know of. We can’t even keep track anymore. But almost every single one of them started with a house. Yeah, they started with a duplex. You know, it’s very, very rare you get somebody does their first deal.
00;47;09;05 – 00;47;30;03
Rod
It’s 100 unit complex. They have a handful of those. But but it’s rare. The point is get freaking started. So I agree with you completely in in, in the fact that, you know, the point is to start right and if it if if your courage you know we all have a courage muscle right and it grows as we do things right and you know, for most people they have to start with something small.
00;47;30;06 – 00;47;37;18
Rod
But and I get that, you know, I get that question, should I buy a house? Should I buy a duplex? I’m like, yeah, just get free. Can start. Yeah, right. You were in agreement.
00;47;37;18 – 00;47;53;09
Pace
I love that you said 20 to 50. I think that that is the right number even for me. Yeah, because I waited too long. I was probably at 150 single family before I jumped into multifamily. Yeah. And my gosh, literally 20, probably 20 single family. Not even 20.
00;47;53;11 – 00;48;00;24
Rod
You could listen if you did 15 5 to 10. Yeah. And then they go into a larger property in the large agreed in larger property.
00;48;00;26 – 00;48;13;13
Pace
And because you’re not really acquiring real estate, you are acquiring real estate. But I would argue that the greatest thing you’re acquiring in single family skill sets, resources, relationships. Agreed. And those three things. And courage.
00;48;13;13 – 00;48;26;07
Rod
And courage. Yeah, because you’ve done it, you’re like, this is all there is. I see with my students, you know, when they get their first multifamily, you know, six months in, they haven’t got some. They’re whining. I got a kick in the ass or eight months, sometimes even a year. And then the.
00;48;26;08 – 00;48;26;23
Pace
Mindset.
00;48;27;00 – 00;48;36;11
Rod
Then they get that first deal. Next thing I know, they have three. Yeah, my what just happened, my sense is that law of the first deal, you know, and it’s all mindset. The whole thing is mindset for sure.
00;48;36;14 – 00;48;43;00
Pace
Yeah. So I argue that single family is one of those things where your courage muscle doesn’t have to be as large.
00;48;43;01 – 00;49;03;27
Rod
No, it doesn’t. Less zeros, man. Less right. Less risk. So I agree with you for sure that it’s a great place to start. So check out pace more. Be when you’re ready to start in a single family space for sure. Yeah. Yeah. And he’s pretty easy to find. But but you know I think everyone progresses to multi yourself including.
00;49;03;28 – 00;49;08;14
Pace
100% like it. I think at some point I will not have a single, single family home in the portfolio.
00;49;08;14 – 00;49;14;12
Rod
A pain in the ass I mean I yeah I that’s why I asked you how you manage them. You’ve got a national management company. But here’s the thing.
00;49;14;13 – 00;49;15;08
Pace
Even then it’s in pain.
00;49;15;08 – 00;49;34;14
Rod
And here’s the thing with single family. The thing that, that, that killed me and kills a lot of single family investors is if you have a vacancy, you’re going to, you know, and let’s see your cash flow in 3 to $500 a month, you’re going to pay 3 to 5000 to fix it up. Right? You’re going to lose two or three months of rent.
00;49;34;14 – 00;49;50;25
Rod
I mean, average. And you’ve just eaten up your cash flow for a year, sometimes two years. Yeah. And so that’s that’s what kills a lot of single family long term rental owners. You know, aren’t sophisticated that that that, you know, may rent to the wrong person or even even if.
00;49;50;26 – 00;50;07;27
Pace
I see a lot of them will go rot. I’m sure you’ve seen this too they’ll go get like five rentals and they’re making, let’s say, $500 a month each. Right. So they’re at 2500 bucks, Right. And they go, okay, perfect. I can tell my wife to quit her job now because I’ve got some money coming in. You get one vacancy, you get to vacancy, you’re done.
00;50;08;03 – 00;50;09;03
Rod
It wipes out.
00;50;09;06 – 00;50;09;24
Pace
Everything cash.
00;50;09;25 – 00;50;35;02
Rod
Flow. It wipes out all that cash flow for a long time. And that’s the problem. And, you know, when I had the reason I crashed and burned in 2008 nine was 800 houses, but it was the logistics I had. They were 2 hours north of me, two hour south of me, everywhere in between here. Okay. And and so, you know, if if I had a maintenance issue at one and I had several apartment complexes as well, if I had a maintenance issue at one of my apartment complexes, everything’s the same.
00;50;35;02 – 00;50;53;29
Rod
We pa parts, you know, plumbing parts, electric parts, HBC appliances, the maintenance guys in and out in an hour. Yeah, well, if you had to go an hour one way, hour and a half, one way, go see what’s wrong, then find a Home Depot or a Lowe’s where we have an account. And I don’t know about you, Pace, but if anytime Rod’s ass tries to fix something, he ends up going back more than three times.
00;50;54;00 – 00;50;54;12
Pace
Three times.
00;50;54;13 – 00;51;12;05
Rod
Right? Exactly. So what took an hour at one of my apartment complexes? Took all day at, you know, one of these 800 houses. And these were C class houses. Yeah, as a B, C, and D, you know the difference in. Yeah. And C class house. They’re older, tougher demographic, a lot more maintenance. Yep. And so the maintenance is what really killed me.
00;51;12;05 – 00;51;32;06
Rod
And then the coup de gras was I, I didn’t pay attention to tenant demographics back then, you know, if they had, you know, they had a decent credit and a job and they paid a deposit back then I got four months rent deposits. You know, I let them rent. Yeah. Well when I look back on it, I had a ton of contractors, I had a ton of plumbers, electricians, drywall ers, painters.
00;51;32;06 – 00;51;33;20
Pace
And guess what happened in 28?
00;51;33;22 – 00;51;35;06
Rod
They didn’t have work, MAN Yeah, they.
00;51;35;06 – 00;51;35;21
Pace
All lost their.
00;51;35;21 – 00;51;47;01
Rod
Jobs. Cliff Yeah. And so, you know, now I literally, when I buy an asset, I will look at where each tenant literally look where they work and gauge them for recession resistance, you know, because.
00;51;47;03 – 00;51;52;29
Pace
Yeah, those blue collar contractors, recession hits you, houses are not being built. All sorts of things are up and nobody has.
00;51;53;01 – 00;52;10;29
Rod
That’s it. That’s what happened. Yeah. And so, you know, it was like it was like the perfect storm for me, you know, It was crazy. I was at a 30% loan to value in 2006 and seven. I wow. And, and, and when it all crashed and burned by the end of 2009, the portfolio was upside down. That’s how much it crashed here.
00;52;10;29 – 00;52;11;22
Pace
That’s crazy.
00;52;11;22 – 00;52;12;18
Rod
Yeah, it was.
00;52;12;18 – 00;52;14;21
Pace
It was. Was this in Florida or this Colorado?
00;52;14;21 – 00;52;28;20
Rod
Right here in Florida, up and down the coast of Florida here. Wow. You know, and of course, you know, we don’t have any state income tax here. So the property taxes are a little proportionately higher. And I had some properties in wind in flood zone. So insurance is higher. that impacts cash flow.
00;52;28;27 – 00;52;29;23
Pace
it kills. It kills.
00;52;29;23 – 00;52;46;28
Rod
You. The cash flow is what killed me. And that’s why, you know, I wrote a book about this and how to create multifamily. Don’t remember the name, how to create lifetime cash flow to multifamily properties in the and the subtitles. The new rules are real estate investing, which is not a new rule, but but that’s what I called it and that’s is focus on freaking cash flow.
00;52;47;03 – 00;52;51;08
Pace
Could somebody have convinced you at 20 houses to pivot to multifamily?
00;52;51;10 – 00;53;06;27
Rod
See, that’s the thing. You know, I had I had and I bought 2000 houses with a small team, right. You know, just an accounting person. And, you know, we had our own management company and and and it was just easy. I mean, I could buy houses in my free can.
00;53;07;00 – 00;53;08;20
Pace
It’s kind of like where you hit. I just.
00;53;08;20 – 00;53;14;08
Rod
Got lazy. Honestly, it was lazy. That’s honestly what it was. That doesn’t sound that doesn’t make any sense.
00;53;14;10 – 00;53;24;18
Pace
I think it kind of does. But like, if you think about how hard you were working to get to that point, you probably it was more like a breath of fresh air. You’re like, okay, I found something that works. I can stay in this vein for a little while.
00;53;24;18 – 00;53;40;18
Rod
It was again, it was easy for me. I didn’t have to shift anything I was doing, you know? And I’m like, I’m like, Dude, you owned 500 houses. That’s insane. I was working to make it bad. I just kept going and I thought, Yeah, of course I thought I was. But yeah, now he wants, you know, here’s something painful.
00;53;40;20 – 00;53;56;24
Rod
I had 500 houses in Denver that I sold to buy down here. You know, if I still had those 500 houses in Denver, I would be netting bottom line net $1,000,000 a month. Wow. Yeah. But I wouldn’t have met my the love of my life, of course, so. But it’s all good. It all, it all.
00;53;56;24 – 00;53;58;14
Pace
And you wouldn’t have a six building compound, right?
00;53;58;15 – 00;54;01;22
Rod
I wouldn’t have this awesome freaking compound. I wouldn’t be having a wonderful.
00;54;01;22 – 00;54;04;20
Pace
You wouldn’t have converted your garage into a frickin badass gym.
00;54;04;21 – 00;54;05;19
Rod
Yeah, All of that.
00;54;05;24 – 00;54;09;06
Pace
This place is like a paradise, man. You live in paradise.
00;54;09;09 – 00;54;23;03
Rod
I am. I’m blessed. I’m blessed. I really like it here. Although, you know, I’m single now, and I joke about this, you know, I’m an hour south of Tampa, and the old people live in Tampa. Well, their parents live here in Sarasota.
00;54;23;05 – 00;54;25;11
Pace
my gosh.
00;54;25;14 – 00;54;28;24
Rod
So I’ve been thinking about getting a place in Miami just to have some energy.
00;54;28;26 – 00;54;30;13
Pace
Of course, but it’s a good spot.
00;54;30;13 – 00;54;36;06
Rod
Thank you for that. But so how do people get a hold of your pace?
00;54;36;08 – 00;54;54;06
Pace
You know, our YouTube, we are really the only YouTube that focuses on creative finance. I think there’s a couple of smaller ones that will try here and there. So if you want to learn more about creative finance, we give addresses, settlement statements. I bring my attorney on all the time. Every single deal I’ve ever done has been passed off by my attorney and he comes on to the YouTube channel frequently.
00;54;54;06 – 00;55;09;14
Pace
So if you guys want to learn some of that stuff, just go to the YouTube channel. Also DMS, if you ever want to ask me a question, go to my Instagram DMS. I probably spend an hour a day in there myself answering people with voice memos. So if you guys have a question about anything, just voice memo me and I’ll give you a good answer on you on Instagram.
00;55;09;18 – 00;55;27;06
Rod
Wow. Yeah. Wow. So, you know, I’m known for mindset and psychology in 20 years for Tony around the planet. Tony Robbins. And and that’s the reason you know, that that that I’ve been blessed to have the level of success that I’ve had because I spend a lot of time focused on that because 80 to 90% of your success in anything is mindset.
00;55;27;08 – 00;55;39;04
Rod
I would love to ask you what your driver is because you are a frickin driver, dude. I mean, you know, what’s the why? What’s that? What’s driving you to jump your ass out of bed every morning and go conquer the day? What’s what is it?
00;55;39;04 – 00;55;55;13
Pace
You know, I think at your level. My level? We don’t worry about our own families anymore. I haven’t worried about them for a long time. You know, if somebody, you know, runs into a health issue, we got money to solve it, all that kind of stuff. The thing that drives me are text messages for my team. Like I got a text message from a girl that’s been on our team, named her name.
00;55;55;13 – 00;56;11;21
Pace
Shelley sent me a text two weeks ago. She says, Before I got this job, I was going to be a lunch lady because that’s how much self-worth I had. And so here I am. A year later, she’s a transaction coordinator on a lot of our deals, and she’s like, I didn’t know what real estate was. Now I’m like, I’m owning my own real estate.
00;56;11;28 – 00;56;32;22
Pace
You’ve changed my life. You have. I have a new perception of who I am. And she’s a 51 year old lady that was going to go be a lunch lady. And so I think that guys like you and guys like me, we have a duty, a responsibility to take our skill sets and some of our God given talents that we’ve honed and refined over the years are we have a responsibility to make sure that we provide opportunity for people that don’t have them.
00;56;32;24 – 00;56;38;10
Rod
What a great answer. Yeah, what a gift that is. You know, I’m blessed that I get love literally like you do every.
00;56;38;11 – 00;56;39;24
Pace
Yeah, it’s the emotional income.
00;56;39;24 – 00;56;42;23
Rod
Yeah. I mean, I’ve got a wall I’ll show you before you.
00;56;42;28 – 00;56;47;18
Pace
you’re bro, your student. I’m friends with a lot of your students. They cannot speak more highly of you.
00;56;47;18 – 00;56;51;24
Rod
Really? Well, that’s good. But know it’s. You know, you get addicted when you get that much love.
00;56;51;24 – 00;56;59;14
Pace
Yeah, I call it the helper’s heroin. Yeah, It’s this. Why don’t you help somebody get a deal? It’s like a heroin through your veins. You cannot stop.
00;56;59;14 – 00;57;10;00
Rod
Yeah. No, it’s a beautiful thing. We are blessed. Well, brother, it’s great to see you again. Yes. And really probably come out and check out your operation.
00;57;10;00 – 00;57;18;16
Pace
And please come hang out. Bring your team out. Come hang out with our team. And guys, remember, Skip the single family. Go right to multifamily. Just listen to what Rod has.
00;57;18;18 – 00;57;24;02
Rod
He’s winking and crossing his arms, toes and fingers. Was great to see you, brother. Thank you all. Appreciate it.
