Zero to Millions with Creative Financing

Yeah, bring Sergio up.

Sergio, come on up from Florida.

All right, everybody give him a round of applause, hey! All right, now everybody boo him. Boo!

Just kidding. If we can get a handheld for Mr. Sergio. Sergio is the one I was referring to earlier. He came into Smart Real Estate Coach. Nick and I were driving in yesterday and he goes, no, I think it was like 15, I thought it was 17. So before we had Associate, before we had the JV program, before I wrote a book, before any of that took place, he was a, I guess you'd call it a mentor client or a coaching client, 'cause that's all we had.

Yeah, that's pretty much all we had. It was pretty early.

All right, so give these guys your background, kind of back when we met, 'cause you're going back 10 years. What was it like? And then I got a few questions in between.

Yeah, so actually I saw Chris through, I think one of your YouTube videos. Stuff that you were doing. And, uh, you know, it seemed interesting. I've done real estate before. I've done some wholesales and flips. And, um, I was a registered nurse full-time at the time, and I had just gotten my real estate license. And, um, I, you know, saw Chris on YouTube and, uh, gave him a call. I emailed him, and then he called me, and we got on the phone. And, you know, I thought it was really interesting. I needed— I needed something. I was pretty much broke. I had just, um, gotten a divorce. I was giving my ex like 60% of my of my income. And I was like, shit, you know, I need money. So, um, that's when we— yeah, we got together.

Um, and then at lunch we were talking about, which I had forgotten, your— our first deal together, which was— how long did it take? And then talk about that deal a little bit because it's kind of unique.

Yes. So I started doing like anything else expired, like he teaches, uh, for sale by owner. And I found the lead. Um, I live in Florida, so I live in— by— it's called Titusville, but, uh, this was in Cape Canaveral. on a for sale by owner sign. And I called them up, older elderly couple. They lived in Lake Mary, which was about maybe an hour and a half from that property. They use it as a vacation home. And I asked them, I said, listen, would you consider selling on lease purchase or maybe seller financing? And they, they were savvy because they owned other properties. They're like, well, you know, we want to list it, but we'll give you a chance. So we had like 2 months to get this done.

That's right.

Yeah.

Yeah. And, um, we were able to sell the deal right around the 30-day mark, a little bit after.

So it was contingent upon a buyer.

It was contingent upon a buyer, right?

Everybody, correct, brand new, you don't want to— most of your deals are going to be contingent upon a buyer, so you're not taking on anything. So that's what he had to do.

Yeah.

So we marketed, got a buyer that had, that had, um, owned his own company. This was a great fit for him. This was right on the beach too, um, ocean view, very nice property. And, um, yeah, got in the We got on the call with Chris, structured it on a seller finance. We were going to keep it, and then we just decided to— because the buyer didn't want to pay what we wanted him to pay, so we just basically assigned the deal over to him. And the whole thing was $52,000 on the spread.

That's correct.

Yeah, which was amazing.

You didn't tell me you had how much in the bank when this happened.

Like $25 in my account. I was pretty broke.

Yeah.

Motivated.

Very motivated. Very motivated.

So I remember the numbers, roughly speaking, just to give these guys an idea. The owner financing deal, he structured a payment of $15,000 and change to the seller.

To the seller, right.

Was it principal only? I think it was.

Yeah, it was no interest.

Principal only. And then the buyer called, who was kind of savvy and well-versed in real estate, and said— we were asking like $22-ish, $23,000 somewhere.

Something like that.

He said, that's too high. So he and I powwowed and said, okay, then just tell him we'll sign him the agreement. He can take over the $1,500 payment. He was ecstatic.

Yeah, he was very happy. And it was a great property.

That's pretty good for 10 years.

Yeah, that's not bad. Better than mine, that's for sure. Um, yeah, I mean, it was like in the 3-somethings is what, uh, what we sold it for. And, um, now that property, even 2 to 3 years afterwards, was worth like $800,000, which is crazy. We probably should have just kept it, but it's okay, it's okay, it's okay.

Hindsight in real estate, always, right? Keep it.

Now that seller, the older gentleman, has financed a few deals for him too since then. Yeah, he was a private lender. Super nice people. Yeah. And out of that deal too, I needed some furniture. So they had furniture in there and I just basically incorporated on with the seller financing the furniture, which I still have on my now rental. And my sister still has furniture too, so it was a great deal.

Yep.

I mean, it's ugly furniture, I mean, according to my girlfriend, but, but it was good for me, so it was free.

So $52,000 down, is that what you said?

Yeah, and yeah, it was his first deal.

So first deal, $52,000 down. What was it, didn't Rusty have his first deal was like $55K down too? Apparently this first deal, good. What was your first deal? Uh, how much amount down?

Uh, it was an AO.

Mike, Mike, come on, eat it.

Sorry.

First deal was an AO, $110,000 down payment.

Yeah, how much did you pocket?

Oh, $55,000.

Yeah.

Yeah, he beat you.

It's okay. No, I love it.

All right, real quick now, fast forward today. Give these guys a picture of what things look like, because broke nurse didn't know where to go. Yeah, today, 10 years.

Yeah, today I, um, It's me, a partner. We got 4 employees. They're all overseas. We do about 50% wholesale and 50% buy and hold. We have close to $10 million in assets. And we just got— actually, I didn't even tell you this, but we just got a letter of intent approved by a broker for a 268-unit multifamily in Houston.

Nice.

So we'll see how that goes. It's a start.

Yeah.

Anybody have any questions for Sergio? And then we're gonna bring up some current members. This is—

this was his path shortened, but you guys have any questions while you got him?

This is— we've got a mic.

I may have missed it, but from when you were broke to your first deal, how long was that?

Oh yeah, that was about 30 days.

30 days?

30, 30 days. Yeah, something like that. Not even, it was less because once I started dialing and for sale by owners, I was close to Cape Canaveral and everything. I actually had one of the girls, um, when I was a realtor, I was, um, I was part of an office and she lived in Cape Canaveral, so she saw that for sale by owner and called me, and then that's where we— so it was right away. Yeah, it was right away.

How many dials were you making when you started?

Wow, I was, um, remember I was doing this as I was a nurse, so on my, on my breaks I would dial on the weekends, I would dial. Then once I started traveling as a nurse, when I was doing more dials, again, on my breaks, as I was in between patients, I would just— if I had to step out, I would step out.

Weekly, do you remember?

I don't know. I would say I would set up at least— it was small, but $30 to $50 a day is what I would do. I would do it on a dialer. And that's kind of how I started. And eventually I had a VA and make my, you know, make the calls and everything.

But yeah, so you were using a dialer and making calls yourself?

And making calls myself.

Yep.

Okay, so probably someone's brain you can pick on break about that journey, guys. Cool, cool journey, right?

Yeah, man.

30 Days to $50K. You love it? 30 Days to $50K.

Amazing.

There's your book.

Yeah, I should, I should.

Yeah.

Any other questions, you guys, for Sergio?

Yeah, go ahead, Carlo. Might as well just hang out down here.

You wait.

I've learned.

Look at that.

Ask and you shall receive. Not a question, but more of a comment. I hear people say, oh, well, like you said, I should have held it. I would have, you know, the spread would have been several hundred thousand dollars. But realistically speaking, at your present moment in that time slot, You needed cash now. Exactly. And so hindsight, yes, 2020, but that wasn't your lane yet.

Exactly. Yep.

Right. So like right away, just thinking about myself and anybody else who might be new, it's like, okay, yeah, I want to get to this place here, but what do I need right now? And let this be my education, my tuition, fill in the blank, because more will come, right? So just want to throw that out there.

Yeah, Kyle, it's huge because Rick and I have talked about this a lot. When Rick first left a government job, what was it? Replace income.

Right?

And now he's getting to a point where he's like, OK, now I can get creative. Now I can maybe take more sub-2s for 20 years and be the bank for 20— so yes, everyone's a little different. Fast, slow doesn't matter. But it'll be customized for you.

Yeah, real estate is a journey for sure. It's an evolution.

By the way, in 34 years, which is last month for me, do you think there's a few times where I said, Oh, if we kept it. Kim says it all the time, drives me nuts. Well, then we couldn't or didn't want to or whatever. It's different, right? So you can't go backwards in real estate.

You'll beat yourself up.

So the phone conversations when you were doing wholesale versus creative financing, a lot easier talking to people about creative financing compared to wholesaling because you're offering them more money?

Yes.

It just, again, it depends on their motivation and what they need now versus can they wait. It just depends.

Yeah, yeah, because I know, Dan, you do wholesaling.

So I've never done a call for Creative Fund, but I know when you talk to wholesale— repeat that, how much you're gonna give me? Yeah, you know, because they— it's basically— and I'll never say this to a client, but basically wholesaling is like a pawn shop of real estate. Yeah, anyway, you know, so they— it's, it's, it's, it's tougher than I would think. That's why I I'm really motivated to do creative financing because I think it's a little more fair for the client. Steve, I think it's a little more fair for the client— sorry, for the client. When, when, you know, you don't— you know, when you do wholesale, you kind of feel a little off because you're not offering them as much as they really wanted. But in creative financing, like you guys say, it's a win-win for everybody. And, you know, in the conversation that I was going to say earlier, that when you talk to them about creative financing, I don't think we should be ashamed to tell them that we make money from doing this. You know, it's not like we don't do it, you know, we don't just do it for the heck of it. So because I, I think a lot of people are embarrassed to say that they're making money off creative financing, you know, these people that I don't want to pay a realtor commission. But we need to inform them that we are making money on this deal.

They'll ask if they want to know, and some do ask. 1 out of 10 or 20 ask, and it's an easy answer.

Yeah. So I'm just curious about your 200 and whatever it was unit deal. Was that a syndication or was that just all you? This one here came from a broker, and it's off market, and we're not syndicating it.

Wow.

Yeah. So we're just funding— yeah, we're going to still outsource, but it's more internal. Syndication is too many people involved, and I'm just not not a fan of that.

Let's do one more, and then we'll pivot to a panel.

First of all, I want to say congratulations to you. I like your story. It does resonate with mine. The numbers are great and all that, but can you speak more about the mindset and what you saw? Because if you're a nurse and then you're getting a real estate license, like what did you see that that kept you going forward within the mindset?

Um, you know, I'm a very persistent individual, so I don't give up. Yeah, you could get discouraged sometimes, but I just keep going.

My mindset is.

I, I got to get out of this rat race. Money was a motivation for me. I, I just needed cash and, um, and then eventually pivot to more full-time. So yeah, I mean, at first it was just cash, but in reality is freedom. That's really what— you know, I don't need to be rich. Comfortable is good for me. I'm very frugal to begin with, so you could ask my girlfriend. Um, yeah, I freak out about everything. I'm like No, I don't want to pay $50 for a drink. But at the end of the day, freedom is the biggest thing. I'm able to travel. I'm able to do what I need to do. I have staff that takes care of things for me. So the freedom is spending time with family.

Sergio, I just thought of this. Didn't you also get your own house? I don't know if you still have it. He got his own house.

I still have it. That's a cool story. So fast forward after I met Chris and everything, I was in my townhouse. My landlord was selling. And we—I needed to get out of that. I was renting, so I said, "All right, I need to—I need to find something." Well, the rent had already gone up, so I'm like, "I don't want to be in a two-bedroom for X amount of money per month. That's ridiculous." And my daughter was with me at the time, so I went on Zillow. I saw a for sale by owner right around the corner from from where I was in that townhouse. Very nice house. I called him up. He actually lived in the same block. He had a couple other houses. So I offered to do a lease option at first and then buy it in 3 years. Well, actually 2 years.

Yeah.

So he agreed. I only gave him $1,500 as a down. That was my option fee. And, um, and I think the rents at the time were like $1,000. And part of that, I got a $300 credit towards the purchase. Now, the purchase was around $215,000. Um, fast forward, I went to get a, a loan. Couldn't qualify, so I said, "Listen, I need one more year." I switched over seller financing, and the roof needed to be done. So I incorporated the roof. He paid for the roof. I put that into the the what I owed him for. So from two fifteen to two thirty, I was able to refinance it. The house now today, and I rent it now, is worth around four twenty, and I have great equity. But it's a great story because I was in desperation mode because I didn't want to, you know, either pay high rent. I just wanted to own because I owned before, but after divorce and everything, it was all short-sold. Um, so that's a great story. I was able to obviously learn the principles of the lease option to pivot seller financing. It was a cool story. Yeah, sweet. It's awesome.

Yeah, it looks like that's like a whole loop around from when you first started when you were desperate And you needed cash, my question was, is when do you decide to hold it or to let it go?

So my business today is a little different. You know, like I said, 50% is wholesale, the rest is buy and hold, and we do some flips, maybe like 5 a year. Our primary now is we get inbound leads. So we're spending about $15,000 a month just on inbound leads. Our return's around 4.5x. That's for wholesale side. And the way we look at it is if it gains good attention, we'll keep it. And if it doesn't, then we just sell it to somebody else. Some of those obviously needed some work, so we fix it up, refinance it, pull our cash out, and then either rent it or lease option with a rent-to-own.

And Michelle, your plan and everybody's plan will be a little different, as I said earlier, depending on where you are. Right? If you're trying to leave a job, if you need X amount— like, everyone's different. Their palate for making a move or their palate for leaving a job or whatever is— everyone's different. So we'll customize it for everybody.

I have a question for the livestream.

Maybe I just—

Keep going. Keep going. Run!

OK. Question for Sergio. When did you form your company and how?

It's been a little over 10 years.

Eat it.

It's been a little over 10 years and I'll see. So a little over 10.

Not sure where to get started? Go to smartrealestatecoach.com/getgoing for free books, strategy calls, and a whole bunch more. We're going to help you get going the wicked smart way. We've been after this for over a decade doing exactly that.

One more question from the livestream. At some point, can you all talk taxes in terms of you make this great money, what about taxes? How much are you keeping at the end?

That's going to open up a can.

Yeah. We are not CPAs.

If that came from virtual, Zach is not a CPA. No, no one's a CPA. I think we should do that more privately because just know this. Here, here's a tip. On your lease purchase deals, you're paid day one. It's not taxable unless you want it to be, until and unless you exercise the option or it defaults. The IRS is never going to be angry if you report it earlier, but you don't have to until one of those events— you exercise or it defaults. OK? Just a tip. But the whole tax thing, you're going to want to get with Hall CPA or Pommerhame and one of the ones that we've had access to, or whoever you want that's experienced in real estate.

OK.

Just so you don't go too deep in the accounting side. Everybody will go to sleep if that happens. No offense to accountants.

Thank you, my man. Let's get him out of here. Awesome job. Give him a round of applause.

Thank you. Thanks for being here.