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Talking Creative Financing at the Corpus Christi REIA - powered by Happy Scribe

All right. Jeff is an investor out of St. Louis, Missouri. I met Jeff in A Mastermind. Actually, we were in A Mastermind when we first met, and this is is just this isn't his intro but personal deal after I met Jeff. Really good, genuine dude, and smart, too. He's about investing and making money, of course, which is what we're all here to do, but he's genuinely a good guy too, and he tries to make these deals work well for everybody. And that Mastermind we're in, it's not just business. You get into a lot of personal stuff, like inside that group, and I can tell you just from sitting in that room with him, he is the type of individual that I like to align myself with, which is why we're bringing him down here to present this information to you all, because with subject to, there's a lot of nuance, and I wouldn't want to have just anybody present that information. Jeff was born and raised in St. Louis, Missouri. He's also a Marine Corps veteran, an entrepreneur, real estate investor, creative finance expert, and a mentor to aspiring real estate entrepreneurs across the United States.

Jeff integrates a dynamic mix of traditional investing advice and education with creative real estate acquisition strategies to help build and grow their brands and businesses. Jeff utilizes a blend of strategic online and offline marketing strategies in his daily activities as owner of the St. Louis based real estate investment firm Missouri Sell Now, he credits his success to out of the box thinking. His philosophies on real estate investing can be summed up with the Axiom Creative First, and his methods are available for all to learn through his mentorship program@subtoompire.com. Jeff is an avid outdoorsman and foodie. When he's not helping others achieve their financial objectives, he can usually be found at the local Mexican restaurant with his wife or dreaming up his next outdoor adventure. So join me in welcoming Mr. Jeff Kaufman to the call.

All right. Welcome, everyone. That was really nice. I just messed up my screen. That's a great introduction, right? All right, let me first go ahead and share my screen with you guys. I want to make sure that we've got this whole technical actually signed.

I got to give you permission real quick. There you go, sir. You should be able to share way.

All right, let's see how's this there you go. All right, perfect. Everybody good? All right. Well, thank you for that super nice introduction, and you are way too kind. I appreciate you having me on. This is something that I truly, genuinely love to do. I love to talk about creative real estate investing. I'm not going to waste a bunch of time with introductions. Ryan has really kind of set the bar there already. Now let's make sure that this there we go. All right. Brian has already introduced me. My name is Jeff Coffin. I'm from St. Louis, Missouri. All the rest of the good stuff. The veteran owner of Subtoompire and Subtoompire.com as well as Missouri sell now here in St. Louis, and a little bit about how I got into creative financing. And that's a really broad term. Creative financing encompasses a lot of different strategies. My main focus is on subject to deals. I love the strategy because I am somewhat of a control freak, okay? So buying a house subjectto gives me ultimate control and minimizes my risk. And so that's exactly what I'm after. But I was thrown into creative creative deals.

Well, I was thrown into subject two right off the bat, right out of the gates. The story kind of is, and I'll be brief with it, but I designed this big, huge Google Ads campaign. I was terrified for at least a couple of months to start it because I was afraid of the cost of it. So one Saturday night, after maybe some liquid encouragement, I decided to go ahead and hit the Go button. I pressed Play, and I just stood up, and I walked away. The very next day, I went about my business, and my phone buzzed on my hip, and I picked up my phone, and I had a brand new lead that had come in off of the website that I was pushing these ads to. Long story short, later that night, I went down, I went out to the seller's property, and I had my very first contract, had my very first deal under contract. That deal ended up being a subject to deal. This was a situation where the seller was she was diagnosed with a medical condition. And so what she did was she decided that and it was terminal.

That's what they told her. They told her it was terminal. Well, so she went out. She emptied her bank accounts. She went on all these vacations. She stopped paying on her home. She stopped paying on her car. It was just a really terrible situation for her. But it only got worse, because just before she called me, about a month before she called me, she discovered she got a phone call from the doctor's office that she was misdiagnosed, and this was a tumor that she had in her brain. She was misdiagnosed, and it turns out she wasn't terminal. I mean, understandable? Totally freaked out. She totally freaked out. She called me, struck a deal to kind of summarize that deal. I bought that subject too. I turned around and I flipped it. On the retail market, we call that a whole tail in some arenas. I walked away with a check at closing for $41,000. And that was my very first deal. And so instantly, right then and there, I was absolutely sold on the strategy. It wasn't easy being so new. I didn't have the network that I do now. I didn't know I didn't have any real title companies that really knew what they were doing with having a lien in place and we'll talk a little bit more and define what's subject to exactly is in just a second.

But I had trouble finding a closing company or a closing attorney and so I ended up closing that deal myself and absolutely terrifying. I was scared to death. And about a month after that one closed, going to dinner on a Friday night, walking out the door to go to dinner with my wife to Mexican by the way and I got another phone call, got another deal right then and there that night another subject to deal walked away with a $25,900 check from that deal in about 45 days. So I am almost at that point I actually have one more deal after that. To sum it up, in that first three months, three and a half months that I was in business for myself as a real estate investor, I had replaced, I had surpassed my yearly w two income. And so at that point I said this is it for me. This is what I'm going to do. So that's a little bit about how I got into it. The reason I love creative financing and particularly subject to is because number one, when I got started this, I didn't have a ton of cash.

I didn't have this big bankroll where I could go out and spend money, put down payments on houses and all this stuff. I mean I just come off of a divorce a few years earlier and you know, things were tight but I knew I was going to do this and I figured this is probably the best way for me to go about this. And so that's what I did. Number two, I get to help people that most of my I don't particularly like to call them competition because we all work together in this business but I get to buy houses that a lot of other people simply don't know how to buy or they can't buy because the numbers don't work for them. So I mean some of those houses there's very little or even no equity in some of these deals. And on top of that, I'm not in this box where I have to use one specific strategy for I go out and make a cash offer on a house and I'm not in this box where I have to do that. I can actually buy any house that I want using this strategy.

Doesn't have to it can have a ton of equity in it, can have no equity and it doesn't matter if there's financing in place. The thing that I like to tell people is you got to remember that the money has already been allocated to this deal. So my job then is to go build that report with my seller and see if they're willing to let me use that financing that's already in place. I've got that secured. The rest of it is easypeasing. So that's just a little bit about why I love it. Real quick, Ryan mentioned this. You can find us over@subtoempire.com we have a group and private coaching program that we run called the Subte Empire Apprentice Program, and you can find that at subtwempire. Comcoaching. And then you can find us on social as well. We're on just about everything out there. If you're out on Instagram or YouTube, whatever, and you go up in the search, the little search bar, just search for Sub to Empire. We're like the only ones out there with that name. All right. I don't know if anybody's on this call. I know Ryan has done a couple of subject two deals, but I don't know what level we're dealing with here as far as folks experience with it.

So I'm just going to quickly define it for you. It's a strategy for acquiring real estate whereby the buyer assumes the debt that a seller has secured through a loan. And Ryan, are you guys a mortgage state or a deed of trust state?

A deed of rust.

You are deed of trust. That's right. I'm actually doing one in San Antonio right now. So it's a strategy for acquiring real estate whereby the buyer assumes the debt that a seller has secured through a loan, a Deeder, trust or mortgage, and a promissory note without assuming the note itself or even qualifying for that loan. So we're not assuming loans. We're not going out and qualifying with a bank and trying to assume that loan. We're just simply paying on somebody else's loan. Okay, you the buyer. You simply take over the responsibility of making the payments from the seller in exchange for legal title to the property and any other consideration that might be on the table. So basically what that means is you're taking over someone's payment. And I want you to pay special attention to this line that says whereby the buyer assumes the debt. Those are the key words here. We are not assuming loans. We are promising to pay another person's debt to that person. So we are assuming debt and we are not assuming a loan. We are not qualifying a loan. So that's the key that I want you to pull out of this statement here.

By the way, if you all have questions as we go through this, if we can I got a ton to go through here. I'd like to kind of if we can just kind of stack those questions up and we'll figure out a stopping point at some here.

Yeah, hey, if you all want, you could throw them in the chat and then whenever Jeff's ready, we'll come back and get to him.

Okey doke. All right, first thing we all need to know, subject to is legal in all 50 states. You're going to see people in Facebook groups, you're going to see people out there telling you that it used to make me so mad, I'd wake up in the morning. That was my morning activity. I'd get a cup of coffee and I'd sit down and I'd read through some of these Facebook groups. I used to get so angry when I'd see people talk about subject to and its legality. But it is something that you could do in all 50 states. It doesn't matter. So if you're a virtual investor out of Corpus, you absolutely can do a deal in Wyoming. All right? So this is really something very important to me. This is how I define, this is how I interpret subject to deals. And for me this is the perfect statement. This is earning enough of a seller's trust that the seller is willing to deed a property of which they have an enormous personal stake in to me, in exchange for the promise of managing that gift in a reliable, trustworthy and diligent manner. What that means to me is I'm making a promise and the seller is trusting me enough to follow through that promise.

And I'm one of those people. If I can see that it's not going to be a deal for me up front, if I have any inkling of an idea that I'm not going to be able to pay that very first mortgage payment or any payment thereafter, I'm simply not going to do the deal. It's not worth it. It can get you in a lot of trouble and it can really make your life kind of a living hell. It really can because you're essentially becoming sort of business partners with a seller when you do a subject to deal, especially if it's going to be something that you hold on long term. And there's the bullet points that I was talking about, by the way. This is going to be available to you. These slides are going to be available to you later on. All right. Some of the benefits of subjectto investing. Number one, no bank qualifying. As I said previously, we are not talking the only reason we're talking to a bank is if we've got to get information on the loan that's currently on that property and we do that through a limited power of attorney.

It's possible to buy real estate with very little money. In fact, I take it even further. I have been paid several times for taking over a property subject to. So it's not only possible to buy it with very little money, it's actually possible to get paid to buy somebody's property subjectto. And again, I'm kind of repeating myself here, but you can buy houses that many of the other investors would pass on, certainly wholesalers. And that's possible because, well, I don't know if we have any wholesalers in the panel here, but when a wholesaler goes out and builds a list to mail through our AI printmail but when an investor goes out and builds a list to mail and they're a wholesaler, not an investor, but a wholesaler generally their very first criteria is they need all this equity. I would say a lot of them, when they build that list, they may make their minimum equity requirement like 50%. That doesn't even cross my mind. I don't even think. I just send mail to sellers so I don't need that requirement. I don't need that much equity. There is no limit to how many properties you can buy, subject to as many as you want to own.

If any of you are W two employees, we know that there's a limit on how many properties you can buy as a W two employee using your own credit. And that number is ten. Just flat out ten. Subject to you can own as many as you want, doesn't matter. And then of course, you'd have all of the tax advantages just as any legal title holder would have. You can take the depreciation on the property, have all the other capital expenditures, all of that good stuff you can use to your advantage. Finally, interest rates on owner occupied homes. If any of you have a commercial loan right now through a lender, you know that your interest rates are substantially higher than an owner occupied mortgage is. So right now it's perfect time for you guys to really start thinking about buying subject too, because we're coming off of all time low right now. The money that lenders are lending is essentially free. It's free money. And I can say that because if we hedge that against inflation, what the inflation rate is on a yearly basis, inflation by far outpaces what these interest rates are being secured at right now.

So your interest rates are always going to be lower on 90% of the time. They're going to be lower on owner occupied homes. All right. There aren't many pitfalls to own a home that you purchase subject to. But if you don't like owning a home, well, guess what then you're responsible for all aspects of the property when you take legal title. You're responsible for insurance, taxes, all the repairs, maintenance, grass cut, all of that stuff. You're responsible for all of it. Okay? So none of that is left to the seller when you take legal title. HOA Dues. I forgot that one. This one is kind of a slippery bullet point because there is actually a way that you can pull equity out of a deal. But it's going to be very tough to find somebody who would be willing to lend. Let's say the house needed repairs and you wanted to do that through a secured second mortgage. It's going to be tough to find that person we actually have inside our coaching program. This was one of the things that we really focused on because a lot of people simply don't get into this business or even use a strategy because they know that they can't do this well.

So what we did was we went out, we secured a bunch of private lenders that actually do this for us that are happy to take second position. And so right now we're looking at just a little over a million dollars that we've got available to us for our students who has ever heard of the due on sale clause. All right, so you're going to hear a lot about this as well. When you go out there and you start researching subject too. After this presentation, you're going to hear all kinds of things about how the do on sale clause, about how you need to protect yourself with a do on sale clause. Just all this different information, it's going to confuse you. So I'm going to clear that up for you today right here. So what is the due on sale clause? The due on sale clause is a provision written into every single deed of trust or mortgage that is recorded with the county. You'd be hard pressed to find any mortgage or need a trust that does not contain this provision. This allows a lender to call a note due upon the transfer of legal title of a property.

If that transfer takes place without simultaneously paying off the note at the time of that transfer. Everybody clear on that? Everybody good. You transfer that deed into another entity or a trust or something like that, you have triggered the due on sale clause. So there was a law, it's called the Garn Saint Jamaine Act of and essentially it spells out nine different exemptions or exceptions to that due on sale clause that lenders cannot enforce if they meet any of these nine exceptions. I've got a link here. As I said, you guys are going to get these slides. But essentially as investors, we trigger the do on sale clause every single day. It happens every day in this business. It is not uncommon at all. I mean, I've done it literally. We're working on this deal down in San Antonio. This will be deal number 74. Okay? But I'm going to show you a trick on how to avoid the due on sale clause. All right, this is it. Keep watching. Make the payments. Very simple. Number one reason that notes get called is because payments are not being made. I've only ever known one person that has ever had a note called due or that the due on sale was actually enforced.

And it's later found out. I was like, man, I was trying to find reasons why. What is going on? I can't believe they would do that. And I was actually paying on a mortgage with that same mortgage company. It was aquin at the time. And come to find out, he wasn't making his payments. He was not making his payments. So you want to avoid the do on sale clause, just simply make the payments. The due on sale clause is very rarely, if ever, enforced. This is the number one reason for something like that to happen. To you. So I don't care what anybody tells you 99.95% of the time, this is never going to be an issue for you. So don't worry about it. Marketing. Now this is kind of a stripped down group of slides because we're limited on time. But this section, when I give this presentation at a weekend seminar or something like that, this marketing section alone takes an entire day, if any of you are marketing. The best piece of advice that I can give you if you are actively marketing right now number one, all of those dead leads, let me make sure I'm not.

All of those dead leads that you previously thought that you couldn't make a deal out of, go back and follow up with those leads, those deals with no equity in them that you thought, I can't make a deal out of this because there's no spread. I can't make any money off of this thing you can absolutely make money off of. The follow up is a very important and active aspect of my business. This is how we go through. And once a year or so, we go through our leads and we just revisit them because people's minds change all the time. With marketing, definitely. I know we don't have the marketing slide up here, but with marketing, go through your old leads and revisit those. Reach back out to those sellers. Number two, the leads that you have coming in, the leads that you have coming in require that you doesn't absolutely require you to do this. But this is what we do. We always think creatively first. Most of the time when a lead comes in the door, our immediate thought is, okay, we've got to have this spread. We've got to have this. We're going to go out and we're going to make this cash offer.

We flip flop it. We do exactly the opposite, especially if it's got a mortgage on it. It's got a mortgage on it 100%. We are going to try and make that seller our financier, first of all, because the deal is already funded, right? So approach every deal with a creative mind first. It takes a little bit of a mind shift to get there because our natural instinct, I think, through all the social media and the posts and pretty much everything that we're taught in all these seminars, is how you can flip it, how you can make this money without the spread. Think creatively first and it can be done on most deals. If you have a seller who's open to that, understand that the deal has already been funded. I've touched on this a little bit, but if you can get that through your head and accept that the money is already there, it's just waiting for you to go and grab it. It's just waiting for you to build that rapport with the seller and the trust with the seller that you need in order to take that note, start with the seller first, and then again, shift your focus to building rapport and trust with that seller.

That's really the secret sauce to all of this, is trust and rapport. That is it 100%. When I first started doing these deals, I was awful, absolutely awful at talking to people. So this strategy or thinking creatively like this, it does require you to know what you're doing. It requires you to know what you're talking about. And so once you fully understand it, you are able then to go out and speak intelligently to these sellers about this process. I was on the phone this morning with a lady locally here in St. Louis for 25 minutes, and in that time we were able to come to terms on a subject to deal. We'll close that in mid March. If you would text this, text calc, calc to 63620 513, 30. I have a subjectto calculator. I designed it specifically for subjectto deals, and it's an Excel template is what it is. So every time you double click it, it will open up a brand new sheet for you, a fresh sheet. And it's strictly four subject, two deals, and it's got four different exit strategies at the bottom of it. There's no offer generator or anything like that.

It's strictly for you to use when you're doing your due diligence on these properties. So I can give you a little bit of an idea about what your exit strategy is going to be. Also, I think, if I'm not mistaken, I think I set this up so that you guys get a link to these slides as well. So go ahead and text that if you want this information. Everybody good? Everybody got it? Give me a thumbs up. All right. That'll be live for a while. So I'll send these slides over to you, Ryan.

Yeah, I'll put that in the chat real quick, too.

Okay, my criteria now, this is my criteria for buying a house subject too. It's very general. I do have some more in depth requirements depending on the market, the state of the market, depending on the area and things like that. But this is a very general line of questioning that you can ask yourself. One is, can the house pay for itself and how much can it afford to pay? So if you get into a deal and you run the calculations through that calculator and you see that you're going to come up short on your monthly payment by a couple of bucks, well, obviously that house isn't paying for itself. And then if it is paying for itself, if it's covering the note and there's some leftover, how much is left over? How much can it afford to pay you? So for me, I set a minimum monthly cash flow standard. All right, so can I get the deed for little to no money out of pocket? In many cases, like I said before, I don't spend a lot of money. I think the most I've ever pulled out of my own pocket was $8,000 to buy one of these properties.

Now there are going to be different ways to avoid pulling money out of your own pocket. Like I do have a handful of lenders that lend on these things. But in some cases, like I said, I actually get paid to take over these properties. Will any repairs move me into negative equity territory and I should amend this? How much would that hurt? How far into negative equity territory am I willing to go? My general rule is I will buy homes in negative equity with negative equity up to about 3%. That's generally where I'm at sometimes. If it's in a really good appreciating market, I would be willing to go higher than that. If I know that the market's trajectory is up, that would be something that you need to be really careful about. But still, I would still never buy it. If it's not cash flow, I'm okay with negative equity. It's just got to be cash flowing. And also if it's moving into negative equity territory, it has to have very little. I mean, it has to be almost move in ready, maybe paint and carpet. That's about it. Is there any front end income?

So how am I going to dispose of this property? And am I going to be paid when I dispose that property? Dispose of that property for me, I was into lease options quite a bit. That's all I did. I have since then. We actually were selling off our last three lease options. Within a month they should all be gone. And I've moved straight into owner financing. I actually own or finance people. What comes with owner financing? Usually larger down payments. So oftentimes when I do owner finance somebody, I do get a nice sizeable down payment upfront. Is there a monthly spread? This wouldn't be called real estate investing if there wasn't a monthly spread. So it's got to be there. Is there a spread between the purchase price and the in sales price? Again, you could live with one of these. And if this question confuses anybody, let me know. But only you can live with two of these things. But you must have one. You must have the monthly spread. The house has to be able to pay for itself. I have been known, not very often, but I have been known to go out and purchase a property that has no equity in it.

And I know it's not really going to appreciate in that particular area or that particular market. And so I will simply purchase that home for whatever the agreed upon price and then I will resell that home for that same price plus whatever closing costs might be. Now I've not made any money on that. I've not made a spread on that. But I have made sure that I have monthly cash flow, my minimum monthly cash flow on it. All right. All right. Example, criteria for buying, subject two. We work in areas where we have the largest buyer pool. We work in a demographic with the largest buyer pool. And that's obviously middle class, middle to middle, upper class homes. So also if you're looking for hot or semi hot markets as well. So that's where the places where properties are selling, that's where we're buying houses at. No different than any other investor. We got to have good schools. Good schools are super important. I would definitely wouldn't go below a C grade school. This right here is what sells houses is locations. Great locations, sell houses. And then of course, we'd like to have a relatively low crime rate.

There's plenty of research out there that you can go out and look at that information. What you see here is exactly what I offer. After I tell you this, you're going to understand why I am able to beat out all of the wholesalers out there that are or other investors that are having trouble buying houses or having their offers rejected. My offers range from 90% to 95% of current fair market value. Which fair market value is going to be well, let's just call it its appraised value. It's going to be its ARV minus repairs. That's essentially what fair market value is. And I'll buy it 90% to 95% if the property is occupied. That is a very enticing offer for somebody who lives in the property but is super motivated to sell. The property is vacant. I will offer 80% to 85% of the fair market value. And obviously, if a house is vacant, there's a little more urgency to at least at least in my eyes, a little more urgency to get rid of the houses. But sitting vacant, I think a vacant house is one of the worst. It terrifies me. For me now, this is not for everybody else, but for me, the area must have a buyer pool where there are good jobs and the buyer pool can afford at least a 10% down payment.

Because remember, I do owner financing as my exit strategy. This does not apply if you're doing rentals, if you're in a rental area or if you're doing lease options, generally lease options, you don't usually get as much of an option payment as you do with down payment from owner financing. Okay, yeah, so good point. I forgot to put this in here. This may exclude many first time home buyers. A lot of first time home buyers simply do not have a 10% down payment. That's what those government programs are for, which is kind of a good thing, because if you think about it, if you've got people that have owned a home before, they are a little more experienced in how it works and they're okay with they're taking on the property, they're doing all the repairs, all the maintenance everything. So this strategy would exclude a lot of those first time home buyers. This is actually changed. My minimum monthly cash flow used to be 250. It's now 300. I can get that pretty easily in my market. So I would say that the first major bullet point is pretty much non negotiable. And I think that's probably where each of you really should consider adopting those, maybe even into that second bullet point.

If you're going to look at subject two, but definitely those first four smaller bullet points, those are a must. It just is. Unless you're buying really cheap houses in rental areas, which is okay too.

Crash shacks. Yeah.

My negative equity criteria house has got to be moving ready. I've already talked about this possibly flooring. It's got to be great schools and it got to be great locations, period. I just can't get into deals that are going to be hard to move. So if I'm already taking that risk moving into negative equity territory, I'll go 3% negative equity max $250 a month cash flow and a historical growth trend in that neighborhood or in that market. When not to buy subjectto, this is probably even more important than actually going out and buying subject to. There is a saying in the subject to community that just because you can buy something subject to does not mean that you should all the time. Number one, when you have problems with the seller, if they are unmotivated, or if a seller gives you any idea during your first couple of initial conversations that they are going to become litigious on you, like they may say something like, well, my sister is a lawyer, or I'll have her go over this, or if this goes bad, I'll take you to court. Just avoid those people. That's my general rule.

Because as I said before, this is a long term relationship that you're getting into here. More than likely I like to hold onto these properties. And so I just don't deal with litigious people. If there are problems with the house and unmotivated for any reason, I would still make them an offer. But I definitely wouldn't want to do a subjectto deal with somebody who's not motivated. They're going to turn around more than likely, and they are going to be just a huge pain for you later on. So they've got to be completely 100% on board with you. I like to say that I need to make them a part of my team. They need to be on my team. The next one problems with the house, if you've got a subject to deal, a lot of times these things have really thin margins anyway. So if there's a property you're looking at buying subject to, but it needs a bunch of work, obviously that's going to put you into negative equity territory and it's going to be really risky for you. Stick with these decent houses. If you've got a really crappy location and that's a very broad statement.

There's situations with geography, there's situations with the neighborhood itself, but if you got a bad location, I would avoid it. Problems with the numbers and I forgot to put this in here as well. Don't buy subjectto just because you can. The numbers always must work in your favor, period. Because remember, if those numbers don't work in your favor, you've made a promise to this seller that you are going to be making those payments. And so the house always has to pay for itself. I do want to go back to the very top dealing with the sellers. If I haven't rammed it down your throat enough, this is not something that you want to rely on your sales skills. If you're a salesman and you're trying to go in and do the hard sale with these folks, that's not the strategy that we're looking for here. Because as I said, these people need to be on your team. You need to be locked up with these folks and leave the sleazy sales tactics at home. It's just not a good way to if you end up selling them on this and then it turns out that they don't like what you sold them and get sellers remorse and then next thing you know, you've got a real problem on your hands.

Sorry guys, I'm kind of back and forth here because I moved this little screen down here. I'm not going to get too in depth with this. I just want you to understand that there are a couple of ways that you can actually purchase these properties and one of those ways is through a trust. Now, I wasn't completely sold on trust when I first got into this because I was actually putting all of my properties into each one of those into its own LLC, which is something that I still recommend if you're going to use LLCs. But with trust, they're so flexible and there's so much that you can do with them. Things that I just don't have time to get into tonight. But when I was putting all those properties that in my LLC's, one per property. One LLC per property in my state, you have to file a tax return on every single LLC that you create. So what kind of problems did I create for myself? I had 21 different LLCs. 21. She cut me a break. That tax bill was in the range of about $8,000 on these. And for us that was a huge hit.

Enormous. I don't have to worry about that with a trust today I actually have two LLCs and that's only because of the way that they're taxed. One is taxed at a different term, capital gains and self employment. The other I use strictly for long term capital gains. So I have two LLCs, but you really only need one. I know that a lot of people go through some of these programs where they go out and they build this big elaborate corporate structure, which is fine, it works. But if you're just starting out, you need one LLC and then learn how to use a trust. Honestly, it's one of the greatest tools. It's probably the last. It's probably our last safe bastion, if you will. Like in the real estate world, a trust is just a fantastic tool to use. Let's see what we got here. All right, number one, let's step back. Everybody understands I'm not an attorney here. I'm not advising you. That's my little disclaimer. Should you buy in a trust or should you buy in an LLC? Hey, Ryan, how are we doing on time, by the way?

You're good, man? Okay, go ahead.

All right. There are benefits to both are relatively easy to set up. Generally, the tax consequences are about the same. It just depends other than, I say, the tax consequences, not the CPA consequences. I don't know if you guys have to file tax returns on every LLC in Texas or not.

Yes, we do.


Unless they're pass through.

Yeah. Generally the tax ramifications are exactly the same whether you set up a trust or an LLC. Both methods are 100% insurable. Although I'm biting my tongue a little bit because today I got notified that and what I mean by insurable is both title insurance and hazard insurance. But I am biting my tongue a little bit today. I have my very first refusal to have a title policy underwritten on a subject deal I'm doing here in St. Louis. But both methods are generally 100% insurable, and I had nothing but positive results from either method other than the CPA LLCs. They're legal entities created to provide limited personal liability. They must be operated correctly. You have to have an operating agreement, all of that good stuff. They're recognized in all 50 states. Process varies from state to state, but it doesn't matter where you're at. They're relatively easy to create. It's just some of the fees associated with them are definitely going to vary from state to state. I got two students in California that I have advised. Please do not start your LLC in California because it's $800 a year just to maintain it. There it is.

Yeah. These are the different fee structures, reporting requirements, and ownership requirements. You may have to have a registered agent. I can act as my own registered agent in Missouri. Anyway, all this information will be out on your Secretary of State's website. If any of you are doing foreign deals and you have Canadian investors not foreign deals, virtual deals and you have Canadian investors, just understand that Canadians investing in the US are subject to double taxation if they use an LLC. This actually should say or a trust so they can't avoid it. Advantage of using an LLC limits personal risk. Very easy to set up, pass through taxation in most cases. Management flexibility if you are a manager managed LLC, meaning that you single member LLC, but let's say you want to bring somebody else in, you have a lot of flexibility in that operating agreement to manage how you run your LLC. Definitely insurable. I don't think any insurance company really has a problem ensuring an LLC. And what have we got? Disadvantages, expense and hassle. So let's say that we're buying a house. I don't know. Let's say that we're buying a house. We decided that we want to put a property, whether it's subject to or not, we want to have an LLC created for that house that we've purchased in another state.

Well now some states are going to require you to register that LLC as a foreign entity. Some of them will, a lot of them have regulations on the books that there's an exemption for real estate. Now imagine multiply that by ten. Or just imagine that in your own state you have ten properties down in Corpus Christi. There's a lot of expense and a lot of hassle to keeping these things running. You got to track every single one of those. All the expenses in each one of them. Each one of them should have their own bank account. I mean it gets really crazy. Registration fees or keeping LLCs in good standing can get really expensive. Registered agent fees, annual filing fees, and for us, a separate tax return for every single LLC. This can get pretty detailed. I'm going to try and strip this down. So what is a trust? In our world, we are talking about land trust. There are only eight states that actually have statutes on the books for land trust. However, we can create in all of the other states. I do this in my own state, we can create revocable or grantor trust.

They're essentially living trust. They're intervivos trust. Okay? That's all intervivos means. They are revocable trusts that are set up exactly like a land trust. And so you have the same protections. You just can't call it a land trust. Now that trust can be interpreted. You can interpret that trust based upon the rules of one of those states that does actually have land trust statutes. You see how I can get a little convoluted? But yeah, in our world we're talking about land trust and it's nothing more than a contractual agreement. This is not an entity. This is a contractual agreement between a grantor and a grantee that allows the grantee, who is going to be the trustee to take title two and hold the asset in trust on behalf of the grant. Or the grant tour is going to become the beneficiary of that trust. They are going to move into that position. So there are three positions. There are two primary positions in a trust that's the trustee and the beneficiaries. And if you have ever done any kind of estate planning, you've heard these terms thrown around. But the point is that it's a contract.

It's a contract between a grant or a guarantee that the guarantee will hold title. It's usually a third party outside third party that is going to hold title to this property. So that removes you or your LLC as legal title holder to the property and it transfers that to the trustee. And outside independent third party you're still going to maintain control of that property because you or your LLC, your entity is going to be the beneficiary of that trust. All right? Now I say here that trust themselves are not taxed. I only say that because trust actually can be taxed. But the way that we set it up, it all has to do with your trust agreement. Okay? So how your trust agreement is laid out will determine whether or not that trust will be required to go out and get a tin the taxpayer identification number. Taxes are passed through to the beneficiaries, which in this case would be your LLC. Or if you're maybe you're buying this home to live in yourself, it would be you. Beneficiaries can be real persons or many different flavors of corporate entities. And there's a list of those entities.

Yeah, I'm probably just going to breeze right through this one. But essentially you have a few players inside of a trust. One is the trustee. Something happens to that trustee, they name a successor trustee, someone who's going to take over. It's the same as with beneficiaries. They are generally going to name successor beneficiaries. You have a position in there. It's not used all the time. We only use it in certain circumstances. But the position is called the director. And what the director does, a director is sort of the same thing as a manager would be in an LLC operating agreement. So he gets to direct which way that LLC is going to move forward. The director is the same way. He basically strips all of the rights, not rights but all of the direction from the beneficiaries and it's put on his shoulders. So there are definitely scenarios where this can be really helpful, especially in Texas. And somebody wants to remind me, I'll show you how this if we have time at the end of this, I'll show you how a director, you could do a really clean sale down in Texas using this strategy.

This is a very small list of advantages of using a trust. I could probably talk for literally, I could probably talk for a day about the advantages of using a trust. But number one is anonymity. And when we say anonymity, we don't just mean that you're building a list, let's say. And you see that these trust starts showing up as you're building this list and you try and filter that. We generally try and filter those trusts out, a lot of us do to get to where we can find at least an LLC or something like that. To send mail to anonymity is way more than that. What you got to understand is that this is a private contract between parties. So once that property is transferred into this trust, everything that happens after that trust is if that property is still an asset of the trust and controlled by the trustee. Everything that happens with that property afterwards is totally private. A trust does not get recorded. There are some states that require you to file what's called a certificate of trust or Acknowledgment. I've seen a couple of other names. I've seen a couple of other names that it goes by.

But everything that's in that trust happens in private. The government doesn't know about it. Nobody outside, nobody in the public can see it. It is 100%. My trusts are sitting in a filing cabinet behind me here, and I can go in there and I can manipulate and do anything I would like to do in these trusts. That's legal, of course. And that's what we mean by Anonymity. It's not just hiding your name as owner of a property. That's not just what it means. There's so much more involved in it. Privacy, again, those two kind of go hand in hand. But everything that you do in that trust is 100% private. They are extremely flexible. There are things that you could do inside a trust, and that because it's private. You would never be able to do without either paying fees or paying the government off or whatever it is paying the ransom. There are tons of things that you can do inside of trust that are super flexible. They're versatile. You can use them everywhere. Like I said, like I said at the beginning of this little section, your beneficiary does not have to be an individual.

It can be a corporate entity. So let me just tell you how we have our set up. Every property that I buy gets put into a trust. I don't know if you guys can see it. I have a little laser printer right here, right behind me. I'm touching it. Every single property that I buy goes into a trust that is printed off of this printer. It cost me $20 maybe for ink and paper. So it goes into this trust. The only thing that I'm really paying for is my title work and the deed transfer inside that trust. I'm going to name my trustee. A lot of times it's just me personally, and I do recommend people name the trustee as an actual human. But the beneficiary who pays the taxes in that trust is my corporate entity. It is my LLC. Essentially, money comes in, the taxation is filtered through that trust, and the LLC pays the taxes on it. But I have one LLC. That's the point I'm trying to make. I have one LLC for all of these different properties. All right, this is not a correct statement. There is no registering a trust unless you're in a state that requires you to submit an acknowledgment of trust or certificate of trust or something like that.

And really all that is letting the county know who to contact if they have questions about title or something like that. But quite honestly, most times that changes and there is a little bit of upkeep. But again, that is all determined by what is inside your trust agreement. All right, I know it seems like we're not talking about subject two, but this is a huge factor when we're buying subject to properties. And this all goes back to that Garn St. Germain act of go out and read up on that. It's a really interesting read. As it turns out, banks actually like to make money too. And so back in the 80s when interest rates were when they jumped up to 17% to 25%, they had all of these loans out there that were really sitting at really low interest rates. They're like three, four, five. Well, the banks realized that a lot of those notes were transferred and so what they started doing was they started enforcing to do on sale clause and foreclosing on these properties so that then they could turn out they could foreclose on that property, turn around and relen on that property at 17% versus the 3456 that they were lending at is predatory.

So just a little history lesson there disadvantages of using a trust. Obviously, if none of you have ever used a trust or have never heard of this strategy, there is a learning curve with it. It took me a while to really grasp the concept and grasp the different positions inside of trust. And to this day, traditional title companies, they generally have a problem understanding these things. Even more so than buying creatively itself. If you're doing it in a trust, you've really thrown them for a loop. So it pays to have a very good title company that understands these. It can be really intimidating, it can be a tough sell. I say that because a lot of people what they'll do, a seller will ask you hey, what's the process here? How does this work? And I will generally say, well, we come to terms and we're going to transfer that property into a trust. Sometimes, not very often, but sometimes they will want to dig into the structure of the trust. They want to know about a trust. Well, as soon as you do that, you open up a bag of worms and they're like a deer in the headlights.

They just freeze up. So if you have to get into the weeds with them, it's going to be generally a tough sell for you and you may end up switching to just putting it in an LLC. This is absolutely happening to me right now. I could show you the text messages. Assets inside of trust are 100% insurable. The problem is finding an insurance company that knows how to set up a homeowner's policy correctly. Now this applies to title policy as well. And every insurance company, as far as homeowners hazard insurance goes, every insurance company is going to have a different way that they like to do things. But there's a proper way to do these things that I simply don't give them the option. I know how they need to be set up and I just don't give them the option to force their opinions on me. Anyway, you're going to have some problems for sure. Especially if you're using some of your run of the mill standard insurance companies. You might have some problems setting up an insurance policy. All right, let's see. All right, I'm going to make this one quick too. How to talk to sellers with these things.

This is probably the most besides insurance, this is probably the most requested question that I get. And honestly, I really don't have a really genuine cookie cutter response to this because quite frankly, we all have different talking styles, different mannerisms, all that good stuff. So this is something that you really needed to you're just going to have to go through this. You're just going to have to learn how to talk to sellers about this stuff. I will tell you, first of all, some of the things to avoid. Do not get technical with these sellers on this stuff. You can explain it exactly like this. If you're considering doing this, you explain it as Mr. And Mrs. Seller. This is a normal sale. We're not doing anything outside of the norm. The one thing that is not traditional is that financing that's there. We're going to start making payments on that loan. That's it. And then you just don't want to get super technical with them. Most people, I would say, first of all, as real estate investors, we're looking at maybe 1% of the entire population. As our target market right now, take a little bitty fraction of that one or 2%.

Those are the people that are doing subject to deals. And so this is not well known by the general public. It's just not something that they're used to. So don't get technical with them. Don't fake it till you make it. This is one area I would generally say I'm the type of person I jump off a cliff and figure out how to deploy my shoot later. This is one area where you have to be very truthful and you have to be 100% open and honest with them. If you don't know something, let them know you don't know. Don't try and jumble through it. They're going to figure this out. They're going to figure out that you don't know what you're talking about. But this is definitely a subjectto that I would if you're going to get into this, if you think that this would work for you or this is going to benefit you, I would definitely study up on it. For sure. Never ever make a promise you know you can't keep. Not only is it going to get you a bad reputation, but it can actually get you in a lot of legal trouble as well.

So keep that in mind. And this is not just the subjectto deals, obviously, that's with any deal you do here's another thing that I don't do. A lot of times we'll get a question, well, how long is this loan going to stay in my name before you pay it off? And generally speaking, I actually did this this morning, generally speaking, I do not like to give a timeline. I certainly am not going to put it in writing. The problem with promising to pay off somebody's mortgage in a certain amount of time is that you have no idea what the market conditions are going to be when you go to sell that property or when you want to pay that loan off. It may be a seller's market and you can get rid of it really quickly, but if it's a buyer's market, that thing is going to sit on the it may never sell, you never know. And so I just don't like to put those type of constraints on myself. I won't get into it. But Ryan, you're a Georgian tone guy, so putting those type of constraints, I actually calculate a loan constant based on how long I get one of these deals for, because even though that's not written in paper, if I do have to pay off a loan in five years, my loan constant is through the roof.

Right? Anyway, I'm not going to dive too much into that. Obviously, if you can sorry, I forgot I had animation here. If you can try not to give them a timeline. Just say explain it just like that. Hey, I would love to be able to give you a timeline. I'd like to get this done in a couple of years, but I just have no idea. I can't foresee the future. How to make your life a living hell. Make promises you can't keep. Reserve your very best sales pitch for your meeting with the seller. Be a closer. Guilt trip your seller into signing a contract. Scare them into doing a deal with you. Beg them to do a deal with you. And this actually should be number one. Do a deal with a legitimate seller. That is how you're going to make your life a living out. How to make your life super simple. Speak the truth, be prepared. Like I said before, understand this entire process. When the question comes up, and it will for sure, does my name stay on the loan? That's what they're going to ask you. When that comes up, you've got to be totally honest.

100%. Your name is going to stay on the loan and then you can turn around and deaden that blow a little bit. Maybe they haven't made payments in a while and now you're going to catch those payments up and you're going to start making payments on that loan. Well now you're building their credit. So you can focus on something like that. Focus on avoiding foreclosure. Talk about the speed of closing. If they are in a time crunch or if time is of the essence here, maybe they've got an auction date. I can get these done in three days. In fact, I can get this done in a day. But I might have to go back and do a title search after I buy it. And then of course debt relief. This is one of the things that I generally say that kind of puts my sellers at ease. I always tell them this is going to be a tough battle, there's a lot to do here, but there is a great reward at the end of all this. And this is absolutely paramount here. This is something that I have no leeway in at all and that is making them a part of your team.

There are going to be things that they have to do in this process, right? So you don't tell them they're going to do it. You invite them to do it. That's how you bring them onto your team. You ask them to do it. And sometimes it's not an easy conversation, but if they're not a part of my team or if I get the feeling that there's any trepidation about moving forward, I just go ahead and cancel the deal. I just won't do it. Okay. So everybody understands that a mortgage is nothing but a recorded lien. It is a voluntary lien that's placed on the property. A lot of people don't know, or some of you that have heard about buying subject too may have the impression that you're just taking over that first mortgage. You're taking on that first mortgage and you're making those payments. One of the things that we like to do differently is we actually look at when we pull Title and we have a bunch of liens on Title, we will actually use this to our advantage. This generally doesn't work with state tax liens or federal tax liens. We kind of stay away from those most of the time.

But liens can be super advantageous to you. And I say that because you can actually double dip with liens. So let's say that you're going to buy a house subject to and you run Title. You find out there's these mechanic liens, there's maybe some utility liens on the property. Mostly things that aren't super liens, super liens actually stay attached to the property no matter what. Even still you pull all those liens and you look at the deal and you go, okay, is this property still going to be able to pay for itself if I take these liens on? If so, okay, I'm going back and I'm talking to my seller and I'm going to tell my seller. I don't know why I'm getting that, but I just had to admit somebody. I'm going back and I'm talking to my seller and I'm saying, hey, Mr. Or Mrs. Seller, all of these liens have showed up, right? I got all these liens on this property. Now, I am willing to take care of these liens. I'll actually still buy the house from you with these lanes in place, but I'm going to need a little bit of a discount to be able for my time and for my time and for the money it's going to cost me to take care of these liens.

And then what I'm going to do, once I settle that with a seller, I'm now going to start contacting these lienholders, and I'm going to say, hey, Mr. Leanholder, I see you've got this mechanics lane. I'm thinking about buying this house. Are you flexible on that lien? If we can come to an agreement, would you be flexible on how much I'm going to pay, how much I can pay you for this lien? I don't think the deal is going to work if you're going to demand this full price. And so what have I done? I have negotiated on the seller side. I've negotiated that my purchase price down. And I've also gone in with my lien holder, and I have negotiated a suitable yet smaller Lean payoff. Don't be afraid of liens. There are certain liens you need to be very, very afraid of, and there are some that maybe can be borderline. But if it is an involuntary lien, there's about a 50% to 60% chance that you can actually negotiate that lien. We negotiated an $80,000 Medicaid lien here in St. Louis on a property I bought subject to we negotiated an $80,000 Medicaid lien down to $8,000.

It happens every single day. And guess what? We made a killing on that house. So don't be afraid of them. Just do your due diligence on them. All right, guys, I know I went over a lot. There probably a lot to take in if you're not used to if you've never heard of this strategy before, some of you that have heard of this before and maybe some of you that have done it, maybe, hopefully you got a little bit out of it. Again, this is all of our social links, but if anybody's got any questions, I am totally game. I'm open.

If you have any questions, you can unmute yourself and ask Jeff. Sorry I was muted. I was over here talking. Hey, Jeff, I got one for you, man. Back towards the beginning of the presentation, you were talking about how important follow up is. Do you have a specific system that you use to help you with that follow up?

It actually gets into the marketing side of it, but system wise, like tools, we use our AI black book, period. It does everything we need. It's got everything built right into it, I have used literally 20 to 25 different CRMs. Rei Blackbook is the system that I use for my follow up. But as far as individual systems for following up with leads, essentially we have a system for every type of scenario, and that's the way we look at it. So, for example, if I don't know, let's just use absentee owners, right? With absentee owners, maybe they've got a tenant in the property, all right? And maybe that tenant hasn't been paying for a while. What we will do if a seller reaches out to us in that situation, we have a program for every type of scenario like that. So for absentee owners, we have a tenant advocacy program where our tenants, we will actually work in tandem with the landlord, with the current owner and the tenants to get them moved out into another property. Okay? And then that's another opportunity. So if that's the case, I'll just break that one down for you a little bit.

If that were the case, we would talk to our landlord. We'd say, hey, we'd love to get this person out of here, but they're going to have problems where they're going, like, they're going to have problems in the next house that they're moving into. How can we guarantee that that next landlord is not going to have those problems? And so, I mean, you can negotiate that price down and say, hey, would you rather talking to the seller? How much more of this are you willing to put up with? Or would you rather maybe come down in price a little bit, give us a little leeway so that we can then help this tenant move out, maybe pay that future landlord six months in advance or something along those lines. So, big picture. Rei Black Book but inside Blackbook, we have all of these different systems set up for follow up.

Workflows, right?

Yeah, 100%.

We utilize them down here, too. What's that?

It's just crazy. I was actually looking through there today. I used to get really crazy outside already. A Black Book I would do things that, quite honestly, I'm not sure that maybe they did. I'm not sure that they would know some of the things that I was doing there, I don't think, because I kind of find different alternative ways to do things. But I've stripped it down quite a bit and just stuck to the basics on it. And honestly, it's just a super fantastic. I mean, the thing is fantastic. It's not a dialer like that. I don't do any cold calling anyway. But boy, the follow up, I just don't know of another tool that can follow up, like not personalized follow up.

Like it can now, the marketing and then the automated responses through the workflows and the call flows, that's the thing about that system. And Damon, who's the owner of Aria Blackwood, he's even said it, he goes, the system is only limited by your imagination on what you can draw up and the way that they keep improving it, man, I don't know of a better one out there. Okay, we got a question for Michelle. She asked, what is the process to start a sub two?

Very simple. The process is going to start first of all, the process starts with marketing. Everything starts with marketing. I would definitely do your homework, okay? I'm not going to sit here and tell you that there's a reason that a lot of people don't do these. It's because there's a lot to know. But if I could simplify it for you just by saying this is nothing but a normal sale, okay? But the process with that, for me is going to start with marketing. I've already been through the training. I've already been through all the good and the bad. So I've got the knowledge to get that done. But remember when I talk about mindset and understanding that if you were to be able to think creatively first before you start thinking about know what you got to do to flip this house and all the numbers and going in and just throwing this cash offer on the wall, hoping that it sticks, if you were to flip the table, if you were to flip the coin and start thinking about, okay, where is the money right now? What's happening with this? Right? Is there a loan on this thing?

And we don't just get into sub two deals. We do owner finance deals. We do it all. We do lease options, we do reps. But if you can think in your mind, all right, where's the money at? Flip the coin. Understand that the money is already there. Don't worry about it. Just get the damn thing under contract and be done with it. So I would start with continuing on with the marketing that you're doing, just working on your mind, flipping it and saying, hey, can I turn this into something creative? It's definitely going to be well, not definitely, but it can be more lucrative for you to think that way.

Michelle I think what he's saying is true with the marketing, but probably what you're asking is because I know you're already marketing and running into these situations, contract. Once they agree, if you know how to talk to them about sub two and you can explain it and they agree, then you're going to get them to sign a contract. I do it with the track. I use a Trek and then send that over to A. So most title companies down here are going to balk. There's a few that'll do sub twos, but I just go to an attorney and they draw up all the disclosures about underlying liens and everything that the Texas property code requires. So that's probably where you'll start. After you've done all your marketing and you've talked to a seller that agrees to let you take over their payments? Pretty much. All right. So also earlier in the presentation, I saw you said you wouldn't do, I think or the most would be 3% on negative equity. What got you to that 3%? What's the significance of 3%?

Well, it's just a baseline. That's all that it is. It's really going to depend upon the property. If I've got a property that if I can, maybe it needs a little bit of work, and that work is going to send me into negative equity territory. There are different factors, but if it's going to send me into negative equity territory, I would like to keep it in that 3% range just because now I'm 3% above what the home's value is. It's going to take me a year to recapture that, at least through inflation. So, I mean, it's just a baseline number. If the house is a super nice house in a great area, I'll go higher than that. Definitely. Cool.

Thanks for clarifying. If no one else is asking, I don't see any other. I got two more. So I know you were talking about with your trust on how taxes were handled. Do you have to keep certain books or how does the accounting work for doing the taxes on these subjectto deals?

Well, our trust agreements are set up so that our beneficiaries are responsible for the taxes. So it's absolutely no different. I mean, obviously the way that we set it up is that I have two different bank accounts. I just prefer it that way because one of those accounts is going to be receiving all of those funds that are going into that account are going to be short term capital gains and self employment tax. I know that. So that's just an ease of accounting type of thing. I know you can do that in QuickBooks, but I'm not that smart. I'm not that good with QuickBooks, so I chose to have two accounts. So to answer your question, the tax is no different. The LLC is paying the tax on that. It just depends on what type of tax they're paying. So it's just a simple pastor got you.

Did you do these when you first started without using, I'm sure without a trust?

Yeah, that's what I'm saying. I had 21 different LLCs at the end of that second year. It was a nightmare. It's probably the reason why today I still have refused to learn my way around QuickBooks very well. It's just the worst.

I don't blame you.

I've got a backlog of I think I'm behind by four months. I have to go in and categorize all my expenses right now. It's terrible.

I'm the same way. I finally, like a year or so ago, got a good accountant that I just sent everything to you. So what's up with that? Director for a trust in Texas?

All right, well, let me give you a scenario here. Let's say that if we got wholesalers on the call. This is very common. You get one of these leads, then you go in and you talk to the seller. And it's one of those borderline leads. It's one of those borderline deals where you would be afraid to put it under contract because you probably and you're probably certainly not going to close on it because there's a lot of risk there. It's that close, it's that tight. So what I like to do, if I can pick that property and I'll tell the seller that like, look, this thing is way too tight. I don't think you're going to be able to find a buyer for it. Good luck if you can. But if not, here's what I can offer you. Stay with me because there's a lot going on here. That director position. If that seller and I come to terms and I put this property into a trust, what I will then do is I will name myself as the director inside that trust. And remember, the director is the one that takes the decision making abilities of the beneficiaries and puts it on his shoulders.

Now he can tell the trustee what to do and what papers to sign and all this stuff. So the director is really the man. So put this property in a trust. I named myself as the director. Now what I do is I go out and I market that property. I've officially purchased that property, right, because I've taken it subject to because I've transferred into a trust. I'm now making those payments. Now what I'll do is I'll go out and I will find myself a buyer. I will present this deal to them and I'll tell them, hey, and how I'm going to bring a buyer and how I'm going to entice him is I'm going to say, hey, I can give you this deal. You can buy into this trust. I won't use the word trust. I'll say partnership. Let's partner on this deal. You can get into it for $2,500. $2,500. You're going to have control of this property. These are just example numbers. I'm going to give you control of this property. You can go in and rehab it for $2,500. I'm going to give you 80% beneficial interest in this trust, right? So now he's into this thing for $2,500.

He's going to go in, he's going to bring the funds into rehab that property. He's going to get it rehabbed. He's going to list it or whatever. He's going to sell it when it sells. I've only received $2,500. It's not a very big assignment fee, right? When it sells, he's going to get that 80%. I remain at 20% beneficial interest. My LLC does in that trust. So now we have a true partnership where I'm getting paid on the back end. Yes, it's slower money, obviously, but the whole problem is solved. It's a win for everybody. We've got the sellers taken care of. I've now have my fee. My buyer has a rehab property that he's got made his money off of. You can even get a little more creative with that too. Of course, the deal has to fund it, but you can actually include you can have as many beneficiaries in that trust as you want. So you can actually include your seller in that as well. Maybe they need 10% off the back end or something like that. So that's what I say when you can get so creative with these things. And by the way, there are no filings to do this.

It's literally all just done in private. So the director, that's when I would use that position. One of the scenarios, I would use that position when I need to maintain control real quick. If we got time, I'll give you another quick scenario. We hear people talking about like wholesalers will be flipping subjectto deals. They'll be getting the subjectto deal under contract and they'll be flipping it. Okay. And then I'll address the Texas specific one too, but they'll go and flip that deal. Well, that is a huge liability. I mean, I would never even think of doing that. It's so dangerous. We had that slide, how to make your life a living hell. That is how you do it right there. It's just a subjectto deal.

There's a bunch of people here in Texas that do they get them and then wholesale them.

Yeah, I mean, there's ways to do it for sure. But anyway, if I were going to do that and this is what we teach our students, if we're going to do that, you better be willing to stay in that deal. You better be willing to at least take responsibility for what you promise to the seller. And we do that by putting them, making them a director of the trust. If that beneficiary, the guy or girl who's the beneficiary and is responsible for making those payments, they stop making those payments, the director gets to step in, remove them as beneficiary, and then go out and name another beneficiary. Which, by the way, can really help. If we're talking about that deal that we with the little $2,500 assignment fee that we just talked about, if that rehab or your buyer that you sold it to is going to rehab that property, if he stops making those payments, you get to pull him out. He's gone. And hopefully he hasn't stripped the whole house, gutted the house. But you get to go turn around and do that again for somebody else. You can do that. Good. Last thing about this director thing and then I'll shut up.

But in Texas, you can do lease options. You can't do contracts for deed that I'm aware of anymore at all. So the same strategy is how we are selling homes, owner finance to buyers in Texas. It's the exact same strategy. So essentially what we're doing is we are putting a property into a trust. We are naming ourselves as the director and then our buyer, our owner finance buyer, becomes the beneficiary in that trust. There's a couple of moving parts in there, but essentially that's what happens. It is the absolute cleanest way. There's a UCC One filing that's got to be done, but is the absolute cleanest way to do that. And we don't have to mess with mortgage reps. We don't have to do any of that stuff.

So that UCC One financing statement is what protects you, right?


That's pretty cool.

Yeah, it's totally doable. We've got one under contract in San Antonio right now. If I can think about it, we record all of our calls. If I can think about it, I'll document it for you guys and maybe send it over to you, have you take a look at it.

That'd be cool.


Well, we had a couple of questions pop up. Yeah, we got a couple of minutes. Let's see. Irma asks, prior to subject to agreement, do you make a decision to place the house into a trust and how do you handle the due on sale clause from the bank?

Well, I automatically use trust no matter what. No matter what for the money. Like I said, I've got my little printer right here. I print a trust right off of my printer and that's it, it's done. All you have to do is transfer deed into that trust. I'm going to try and figure out a way to explain this without getting too deep. With the due on sale clause, there is an exemption in the Garn Saint Germaine Act of 1982 that allows for transfers into trusts. Okay, but we're not talking about an intervivos trust. That exemption only applies to intervivos trust. It's a really common misconception that if you transfer a property into a trust, it's protected under Guard St. Germaine. It's just not true. Not only that, but that property that you've transferred into that trust, the beneficiary inside that trust has to be the resident. So you've completely wiped out Garnettamaine. It doesn't even apply. A lot of people though, and look over your shoulder. I'm not an attorney. Everybody has heard the term smoke and mirrors. You can and there are strategies for putting properties into a revocable living trust and naming the current owner as the trustee and the beneficiary.

That's generally how a revocable living trust is created. Then what you can do after that is that, like I said, once that's recorded, once the county knows about that, then you can go back in and you can resign trustees, you can resign beneficiaries and it's all private, nobody knows about it. But understand that if you ever go to court and the judge sees who the beneficiary is, and if it's some conflict with the lender, you're going to lose. You will definitely lose. But that strategy does in a sense, it is going to kind of mask things. The lender is not going to find they're going to find out about the transfer because you're going to notify them on the transfer, but it's not going to trigger anything. And besides that, honestly, I have transferred dozens of properties into LLCs, into trust. The fact is, if you make these payments hands down, you're never going to see this happen. You're never going to see this happen. The only time you might actually even get contacted by a lender is if you've not structured the insurance policy correctly. I mean, that's really it. It's the only kickback I've ever gotten.

This will be my 74th deal. It's the only kickback that I've ever got. So just make those payments.

Yeah. Irma most of the time, if you read those due on sell clauses.


The deeded trust, they say the lender may call the note due. It doesn't mean they're going to. And that may in there is like Jeff has been saying, most of the time, it is only if payments are not being made, then they start digging in. I know here in Texas, there's been like one bank, I think it was up around Dallas somewhere, and it was some tiny little community bank and they went kind of hard on doing so. Closes a few years back, but I still have not heard of anyone in the last five years that I personally know haven't happened. So just make sure those payments are getting made. Ryan of course, I belong to the San Antonio group as well, real group. And I understand USAA. If they're the lender, they always do on sale. They always take that option.

Really? I don't know. I don't currently hold a USA. USAA. I say hold a note. I don't hold a note at all. But it would be very tough for them if you structured it correctly. It would be very tough for them to even know, honestly.

Yeah, because it's computerized again, and like you said, it gets noticed if you're not making a payment. If you're making the payment, it goes through the computer, the computer logs it and a person doesn't get a hold of it usually.

Yeah. I like to say banks to kind of generalize things. Banks have two columns. They have performing and non performing. When it's non performing, that's when the bills go off. So keep it performing and you're generally going to be okay.

Yeah. And Guy said it in the comments. Lender doesn't want to make a performing note into a non performing note just to prove a point. So keep it performing and you probably won't hear from them. Let's see. We got one more from Robert wait, this one has a couple in it. How much control does the seller still have after the sub two process is done?


Okay. It says, can they still refinance? Can they still file bankruptcy? Can they cancel the subtitle process after closing and get their house back?

No. So the amount of control that they have after the deal is done is how much you give them. When I'm buying subjectto I don't generally now understand that I'm buying in a trust, so I have the option of naming whoever I want as beneficiary. If you wanted to be a partner with a seller, you could absolutely make them a beneficiary. But once this is transferred, that's it. They have zero legal right to the property at all. Period. As far as bankruptcy, it's going to depend on the type of bankruptcy. First of all, chapter 13, generally you can petition the trustee of the bankruptcy. If you're in the middle of it, you can ask them to say the seller wants to sell it. As long as the seller is not making a boatload of money off of it or something like that. Sometimes you can get that pushed through the trustee. Chapter seven, forget about it. They're liquidating everything. So it's generally not going to happen with the chapter seven. I will tell you so I've been through two of these now. It's actually subpoenaed for all of my records on that second deal that I told you guys about where I made $25,900.

That guy ended up filing for bankruptcy about six or seven months after. I just go out and check the mail and sitting at my desk, open up this piece of mail and it's a subpoena from the Eastern District Bankruptcy Court. And he filed I gladly handed over all of my documents. This guy literally gave me this house. I didn't give him Ernest money or anything. I put carpet in that house. I put it right on the retail market, and I made $25,000 on he gave me that house. You can absolutely that would be a question that I would ask your seller up front is, hey, do you have any plans on especially if they're in financial trouble, do you have any plans on filing for bankruptcy? If you do, let me know because they're going to look back at this transaction. They're really going to examine this and understand that if you made any money off of this, they're going to come after you. They may even come after me. But certainly six months is a really safe bet for your seller to file after you've sold the house. I hope that answers the question.

All right, well, we're just past 800, so I don't see any other questions.


If you have any, you can throw them in the chat box or feel free to unmute yourself. But if not, then I think we're probably going to call it a night.

All right.

All right. Well, Jeff hey, dude. Totally appreciate you coming and spending your evening with us. You dropped a ton of knowledge on there, and I know there's a whole lot more sitting in that brain. So anybody, if you all are interested, you all be sure to go check Jeff out. Check out his site. Check out his coaching programs. I know I've seen his students on Facebook and stuff, and they've been having some really good success with the information and stuff that he teaches them.

Yeah, I appreciate you guys. Let me come on here. As you can tell, I get wild tight when I start talking about this stuff. I'm sure there's a lot of questions, but by all means, check out our Facebook group subject. You can do just that. Sub to Empire and you'll see our Facebook group. There's a lot going on in there and more to come.

All right, brother. Well, hey, we sure appreciate your time. Thanks for sharing with us, everybody. I appreciate all you all coming and spending your time with us this evening. Be sure to join our Facebook group if you're not in it already. Throw any questions in there. If you need resources, haves and once since we're not doing our in person meetings right now, throw them into the Facebook group. If we can help you out, we definitely will. I know I've been throwing around some referrals in there for contractors, lenders, attorneys, all kinds of stuff. So get into that Facebook group. Get active, ask questions, post deals. I haven't been wholesaling much lately. I've got three rehabs going on right now and trying some subtitles deals and get this land development going, but throw it in there. We'll get to you whenever we get a chance.

Thank you, Jeff.

Thank you.

Thank you. Thanks, guys. Take care. Have a good night, everybody.

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