How to Buy a House With $0 Down, A Scam or No?

How much are you buying this house for?

Wait, what? Why? So it turns out we found the secret to buying a home for $0 down.

Is it a scam?

Is it real? It felt a little thick. That's what we're going to go find out.

People like, you're crazy. You're crazy. You're crazy. You're crazy. I was told I was crazy for four years. And then last week one of my good friends that called me crazy for four years was like, how do I do what you're doing?

How can you buy a house with somebody else without the bank getting involved, without getting into trouble? What about deed titles? Who actually holds the mortgage? What happens if you pay for the mortgage and the guy wants to take the back?

We're going to break this down for you.

Imagine this. You want to buy a house, but you don't have the 20% to put down. I mean, the average house in the US costs a couple hundred K. That means you'd have to have 20k to put down. What if you could buy a house without a down payment? And the other scenario is, let's say that you are in a house but you're underwater. You can't sell it. You need to get out of that thing. But nobody's buying it. Apparently this guy has the answer.

Let's go check this out.

Huh? This is Pace. He basically pioneered this thing called cool creative financing, or what he calls Sub two deals and flipped a bunch of houses and became so famous that HGTV called and wanted him to do a show called triple digit flip. What does he do? His secret is called creative financing. And we're going to find out exactly what that means today. And is it even legal?

Do you want to learn about sub 2 in the fastest way humanly possible? How fast do you think we can do this?

Pace a minute probably.

Okay, 60 seconds to figure out how to buy a house with $0 down. Let's see if you could do it.

Okay, cool. So I've got a house seller lives in this house. Seller has two things. They have a mortgage separate document and they also have a deed. A deed is a receipt of ownership. Two completely separate documents. I Pace, or maybe you watching this in the video. Where I would go to find a deal like this is I would call sellers that are on expired listings, people who have already tried to sell their house but real estate agents failed to do. So we call, call this seller and we say, hey, looks like you tried to sell your house unsuccessfully. I'd love to just give you an Offer of taking over the mortgage payments. Are you open to that? And I'd say 80% of the time the answer is yes. Oh my gosh, I would love to do that. I do a lot of these stories on my YouTube channel. And the seller says, how does that work? I go, well, the mortgage stays in your name. You move out of the house and the deed gets transferred to my name through a title company. And the title company issues insurance to make sure that all the paperwork was done and everything was done. Legally, I now have official ownership. Ownership, owner of that property is now gone. They are no longer the owner. I am. And I can go find a tenant to go move in this house and make those payments on my behalf. That's subject to. The best part about this though is I literally have never had my credit checked on any house I've ever bought. Even my personal house, 3 million dollar home, commercial buildings, we buy all creative finance. No credit has ever been pulled. You don't have to have credentials. Right. When you go and you get a mortgage at a company, what do they ask? Or a bank? They go, what's your W2? What's your tax returns? What? Blah blah, blah, blah, blah, blah blah blah. Never have given any of that away. And then I also very frequently don' use any cash or any of my own cash. Depending on it, I'd probably say 20% of the deals I do no cash and 80% of the deals I do require cash, but I use somebody else's. This is where real estate deals get done for this entire team. From here, about eight tables deep, is both acquisition and disposition. Primarily what they're doing is they're doing outreach to real estate agents and saying, hey, what do you have? Getting those under contract. And then the disposition team, which is over here, is finding buyers for those. So we're either wholesaling them, we're fixing and flipping them, which I'm not a big fan of fix and flip anymore, but we still do it for the TV show. And then buying and holding them.

You do not have real estate licenses?

Hell no. I would never waste my time with a real estate license.

But this is rare. So rare, in fact, that it turns out a whole subset of people hate pace for this exact idea. Yeah.

And your brokers hate you for this.

Yeah, and I hate them just as much. We buy so many deals. Like we'll buy three or three to 500 single family homes this year and put those in the portfolio. Every single one of those is done with zero down, either seller, finance, or subject to taking over the existing mortgage. And there's in seller finance, it's different than subject to. Like subject to is for you. Subject to would be like an SBA loan. So I'm buying that business subject to the SBA loan. They're just like in pain. But then on the seller finance side, sometimes I don't see the seller's not in pain, they just want gain.

Why are people clapping?

Because the deal just got done.

Oh, nice. Good job.

Good job.

Yes.

I want to get into the details of this. Specifically, I want to talk about the underlying risks.

Of course.

Yeah.

And break them down.

Every type of deal you do is going to have risks. There were a bunch of risks that I was concerned about. Like what happens if I actually do this deal and then they don't agree to subject to or what happens if I do this deal on subject to and then I can't sell it. But Pace remedied some of those. The devil is in the details here. There's a lot of ways that I see that you could mess this up. So pay super close attention throughout this video. Making sure you don't go longer than the 10 day period in order to lose your down payment is a huge micro detail that can have macro level results.

Yeah. And what's great is that you'll have the contract with the seller. You have 10 day inspection period. So I have an out for 10 days. And I have 10 days to find my buyer.

Oh God.

That's zero risk. Yes, but what happens if I go past the 10 days my buyer has now put in earnest money before my 10 days is up.

Yeah.

So if we breach contract, the seller gets that earnest money, I walk away. Still no risk.

What if you don't have a buyer yet?

No, I would go into contract without a buyer. But I wouldn't go past my inspection period without a buyer copy.

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Hi, Cody.

What's going on, man? Nice to meet you.

So I was just telling Cody that you are one of our franchisees, but you started out becoming. You were my friend on the TV show.

Never did any real estate in my life before this.

Okay, I want to rapid fire some questions.

Go ahead.

Ready?

Let's do it.

All right.

How many phone calls did it take for you to get your first deal? Or how many doors knocked?

Did it go?

Did it take for, you know, not.

As many as you think. If I'm gonna put it in a number, I would say 50 to 100 calls landed me my first deal.

So we go from 50 to 100 calls to your first deal.

Yep.

And now he's doing three to five deals a day.

He's seeing three to five opportunities a day and one of them turns into an actual contract.

And that's mostly getting done. Not by picking up the phone anymore. By sending a text message to a list of people you get from where?

Facebook, a list of people you get from Astro and sub two students. I mean, half of our deals are with Astro and stuff too.

So on acquisition side. So the acquisition is you're looking for an opportunity in this role in their franchise model. They're looking for contracts that are already contracted. Okay. So his brother, who has more of a rambunctious personality than Slater, is typically going to have the guys, somebody in.

Acquisition for me, you know, he, this, this is the guy that got his degree in finance, his favorite movies, wealth of Wall street and wanted to be in.

I could tell, bro. Yeah, I can tell.

And so coming over here, it was, it was a breeze having, you know, honest and open conversations with agents and Astro students. You know, one thing that he's really done well and something that I didn't.

Do so well when I was on.

The side is his repeat agents.

Why are you good with repeat agents? Besides the fact that slight red flag, your favorite movie is Wolf on Wall Street. We're going to like asterisks that major concern.

I think with like in the business world, if you work With a business broker that finds a deal for you, and then you close on that deal. That business broker is like, that's a performer. Okay, I just got a $80,000 paycheck. We're selling that dude a business. I'm going to go find that business again. So now what happens is this team shows them through performance. Now the agent goes back to their rolodex and goes, where else can I find a deal to sell them?

If you're listening and wondering, what kind of agent is this? It's not a secret agent. We're talking about real estate agents. Basically, what you're seeing happen here is these two guys have made it so easy for a real estate agent to move one of their problems into solutions that the guy's going to keep calling him again and again for him to move more problems into solutions. The house that he had previously, nobody would buy, but the seller of the house wants somebody to buy it. These guys now have a solution where those kind of hard to sell houses can become sold houses again and again and again.

How much are you buying this house for?

I actually don't know.

Wait, what? Why?

Because I didn't buy the house. I bought the mortgage rate.

What do you mean by that exactly?

I found a seller that didn't want the house anymore, and I said, let me just take over your payments. Seller says, no problem. I've got a 2.9% rate. Here you go.

So how much do you pay for this house on a monthly basis and how much can you rent it for?

I'm paying. The mortgage is $1,400 and I can rent it out for $2,100.

How long did it take you to do that?

One day.

One day?

Like what?

How does that happen?

Somebody notices that the previous homeowner tried to sell the house with an agent. Agent got fired. That becomes an expired listing. You call the seller the same day it becomes expired. You tell the seller, we'll take over your payments. Seller says, yes, you get a contract on it, and you close escrow the next day. So literally in 24 hours, this deal was. We found the deal communicated with the seller, went to the title company, all within 24 hours, closed escrow, and then.

In two weeks, you take over the house.

Well, in two weeks, the tenant who's in here right now will move out of the house, and then I take full control of the house.

Makes sense.

And kicker, the broker or here, the agent gets a fee. So they get to take a commission based off these two gents buying the house. And this is beautiful because theoretically, you don't even have to be real estate licensed in order to do this.

According to Pace and his team, Jake buys the deal. The agent is getting paid their 3% standard real estate.

Except you guys are not licensed.

You're doing the wholesale.

That's the difference.

You don't have to be licensed to do real estate. In fact, it's preferred. I'm not licensed.

You can just be the wholesaler in the middle of a seller who needs to sell and a buyer who wants to buy on subject to loans. When you're learning how to invest in anything, I like to do three steps. First, I want somebody to explain it to me. Theoretically, we had Pace do that. Then I want them to show it to me visually to make sure that I'm fully tracking. And then finally, I want to get my hands dirty on the deal. I want to go to the site, I want to talk to the owners, I want to touch the house. So we're going to go with Pace and we're going to check out a live deal with real numbers to show you can you really do this? And thus can you and I.

Let's talk about some of the costs to maybe refurb the place a little bit or clean it up or costs for actually doing the transaction. How do you cover those or how much do those cost?

When I first started in the business, people would say on the radio, you can do real estate with no money out of your pocket and no credit, no credentials. I was like, bull, you're so full of. And then when I actually learned this, it's true, I am taking over somebody else's payments. I'm not using my credit, I'm not using and credentials. And when I say I'm not using my own cash, it doesn't mean that this property doesn't need cash. It just means I'm going to use. Maybe we call them private money lenders, but they're like nurses, doctors, people that have extra cash that don't know what to do with it. I will borrow, foreclosing costs and furniture to get that property furnished with like a midterm rental or potentially just regular rental. I'll be all in $15,000. But I don't want to use my $15,000. So I'll go to somebody that says, I've got 15, $15,000 in a retirement account. That's not making me. I mean, how many people are making money in their retirement accounts?

Nobody.

Right? But if I paid you 10% interest only on 15,000 bucks and it goes back into your 401k or you're self directed now you're making that return tax free and it's actually making you a return.

I think people all the time also think if you have money, you have to use money. So it's not just that people doing.

These deals are people who don't have any cash.

Right.

It actually could just be. You and I, I think are both really cheap with our capital. We know that every dollar that we we spend needs to make 5, 10, 15, $50. And one of the best ways to do that is use other people's money even when you got it right.

And you and I are in the business, so our expectation of a return, I'm not okay with the 10% return. I'm in the business. I want a 200% return, a 400% return. So for example, if I go sell a house like this in 10 years and I have $100,000 profit when I sell the house, I'm not even going to use that 100 grand to put back into real estate. I'm going to go buy a title company or I'll go buy a laundromat or I'll do something that you're doing because my upside is so much larger than putting it into my own deals. So I go to people that have an expectation of a lower return when I'm buying real estate.

The other part that I like too is I like to buy, like you said, cash flowing businesses that generate a lot of cash. But what comes with that, we talked about this yesterday, is taxation, right? Then I got to pay the tax man and the irs and you know, I'm only comfortable with doing so much of that. And so I think real estate offsets that. Also, not that there's not any risk in real estate estate there is just like there is a business buying, but you have an asset that has a lot less variance than you do in businesses. Businesses can go up and down quite a lot.

You know, real estate, it would be.

Pretty crazy if you had a 75% loss on your real estate in a year.

That would be hard to have.

So it's kind of nice to offset the cash flow in businesses with little pieces of real estate you can have. So you got the house, you did your cool creative financing deal, you've used this private lender, so you don't have a bunch of cash out of pocket. Now you need to rent the place. How do you do that? What are the first couple steps?

Steps?

Well, you make a Decision on your exit strategy before you buy the property. Right, because you have to go, okay, I'm taking over some of these payments at 1380 bucks. What is the likelihood of me bringing in more money than it costs me? And I have 11 exit strategies that I choose based on neighborhood. It's a nicer neighborhood like this. I might do a midterm rental. I will not do a short term rental here. I don't really love short term rental anyway. Or I'll do a regular rental in other markets. I'll do like a pad split or other things. But my exit strategy here will either be a midterm rental with like traveling nurses or regular rental with regular tenants. How do I find those tenants? When I first started, I did it myself, stupidly. But you have to start somewhere. I now have a nationwide property management company. I use a company called mind property management. My N D, they're nationwide and so they're systematized in all my markets. And we go, we got a new house, we're closing escrow in a week and they start marketing for a tenant before I even own the property.

I think I'm convinced that you can buy a house for $0 down. In fact, I'm so convinced I'm going to buy an office in Austin, I'm going to try to do it subject to $0 down. Why don't you guys comment below if you want me to look at some of the deals you're analyzing. I'll tell you the things that I notice. Oh, and also, if you like this video, make sure to subscribe. When I watch Pace, you know what I see? I see a guy who got a whole universe of humans who told him, you can't do it that way. And he said it, watch me.