How to Make Money From Other People's Deals
Pace Morby walks through how to make money from real estate deals in private sub2 communities without buying the property yourself. He covers bird dogging, flipping, and partnering with private money lenders, breaking down deal structures and closing costs.
Hey Pace, I'm brand new to sub 2 and I'm seeing a ton of seasoned members posting these deals in the group. How can I make money on this?
This is a great question. Pops up all the time. Guys. If you're brand new, come over here. We're going to whiteboard this all out. Here's what's happening. When you see these private Facebook group posts, right? People are getting deals and they're making these posts. You see them in our creative finance with Pace Morbi Facebook group. You see them if you're in the sub2 community. If you're in the sub2 community, you're going to see hundreds of these deals. On average we have about 400 deals posted in that Facebook group every single day. 400. So if you're brand new like Zach, you're going to be really overwhelmed and you're not going to understand what the heck you can do from other people's posts. So let's walk through it. Number one, let's figure out where did these deals come from so you understand the back history and what this person who brought the deal to the table is actually trying to do. That sub 2 member, somebody that's in the private community has gone out and they have marketed either A to a real estate agent or B directly to a seller. Just kind of depends. Is an off market deal or an on market deal on market? Usually a little bit easier because agents want to talk to you. This sub team member probably called agents that have 100 plus days on market. They probably use a software similar to Dealsource IO and they spent two to three weeks negotiating with this agent to give this property under contract.
Okay.
Or B, the sub team member got directly in touch with the seller. Maybe the seller's in foreclosure. That sub 2 member used deal sauce to find foreclosures and they went out and they negotiated, they followed up, they negotiated, they followed up and they did all of this work to get a contract.
Okay.
So now they're in an agreement and they go out and they get a contract on that property.
Cool.
So they of course, let's say they get the contract for $250,000. This person has obviously spent time, energy and EFF and they've obtained skills and they've obtained momentum in their business. They don't want to sell the property for 250, they want to sell it for more. And so what they do is they go into our private sub2 Facebook group. Maybe sometimes they post them on creative listing dot com.
Okay.
If you guys ever want to see deals, you can go to creative listing.com as well. So they might post them on Creative Listing. They post them in private Facebook groups. They post them in Facebook. They post them everywhere you can imagine to try and sell these deals. Now you, Zach, are one of the people that saw that deal, and you go, what the heck can I do with that deal? Well, let's go through that. That's the purpose of this video. You can either a find another buyer for it.
Right?
So that would be called bird dogging. If you guys want to learn how to do bird dogging, where you're the middleman of the wholesaler and you're the middleman to the buyer, we'll give you guys some training down below. We'll give you guys a link. You guys can go learn what bird dogging is and how. People do this with me all the time. So you can be the bird dog, Zach. You can find a buyer that's looking for particular houses just like that. Go. Hey, guys, I have a deal.
Cool.
You can b flip that property if there's enough meat on the bone. Zach, you're brand new. Are you in a position right now to go and flip properties? Yes or no?
No.
No, you're not. Why? Because fixing and flipping properties requires contractors capitalization, which means raising money. Flip properties without money out of my pocket? Yeah, of course I can, but are you in a situation where you know how to raise that money yet?
No.
No. And even if I taught you, you would probably feel a little bit scared to go do that right out of the gate. Oh, my gosh. I'm taking on somebody else's money.
Right.
The third thing that we can do is we can hold that property in our portfolio. I think you're in a situation, Zach, where you're starting to say, I want to just buy property, put it in my portfolio and make the cash flow. Is that correct? Correct.
Okay, cool.
So that is where we are at right now. This is for you. Now, bird dogging is cool, but you already have a job. You're not in a bad financial situation. Usually people are bird dogging because they're like, I want to get a deal right now. I want proof of concept. I want to be able to make some money right now. And I also hate my job or I like my job, but I wrecked my car and I need a down payment for my car. Something along those lines. They need quick, fast money.
Okay.
Doing bird dogging is what I would call today money, because you can get paid in like, six to seven days. So this is today money. Flipping is tomorrow money. This is going to take three to six months and then this is forever money. Money that will come in for forever as long as you hold that property. Got it. Okay, so here's what's going to happen. This person, let's say it's a sub two deal. This person, let's look at that post. You got it?
Yeah.
Is that a sub 2 deal you pulled up?
Yeah.
Okay, cool.
And what market is it in?
They. Oh, it just went away. It was in Florida.
Okay.
It was in Florida. Okay, cool. So you don't want to own in Florida. So first and foremost I would keep you out of Florida because you're not in Florida. But we can look at the numbers regardless.
I just found one in Las Vegas.
Okay. Vegas. Okay, cool. So this is what this, our sub two member has.
Ooh.
Four and a half, four bed, two and a half bath. With the two car garage. I immediately start thinking pad split.
Yeah.
Why do I think pad split? Because it's almost 2,000 square feet. Ooh, it's in an HOA. I don't want to do pad split in an HOA. So that kills out my. My exit strategy. So if you want to focus on co living or pad split, I would immediately get rid of that deal as a hold for you. You know what I would do? I would go back to here. I would find somebody else that does want that deal. Because you don't want to hold that property. Because you've already told me you want to do co living.
Right? Right.
So if you want to do cold living, that's a different question. But this is an hoa. So I would rather you go and find somebody that wants it because you don't want this for your particular exit strategy.
Okay, cool.
Let's pretend that this is not an HOA and we'll go through the motions.
Okay.
Okay.
It's a sub 2 deal, which means the mortgage is. They're taking over an existing mortgage. Oh, this is such a good deal. Sub 2 members are gangsters. That's why I wanted to credibly good at what they do.
Right.
Our community guys, we are the best of the best. Nobody in the industry even touches what we do. We are the absolute best. So the sub two members negotiated a. The mortgage balance is $430,000. It's a sub two deal. You're taking over a 2.75% interest rate.
That's crazy.
Is that a good rate right now?
Really good right now.
Okay, cool.
Do we care What Jerome Powell is doing right now? No, you see all these people making Jerome Powell YouTube videos. Like it actually makes a difference. Like why don't you buy a sub two deal from a sub two member? Yeah, Pace, how do I do that? Creative listing dot com. If you are not in sub two and you want to buy a sub two deal, go to creative listing dot com. Okay, so 2.75% rate.
Okay.
And then the exit strategy, Long term rental.
Okay.
Homestead. Perfect. This is for somebody wants to move in the house. So you would, you would basically sell this to somebody wants to live in the house, which is great. Entry fee. Okay, so this is what they're saying. The part that is confusing you is right here at the bottom it says entry fee.
Yes.
You don't know what an entry fee is?
I'm assuming that's the cost that the, the sub two member wants.
Okay, so you're really close. Entry fee. This is something I created like 12 years ago and it just changed the industry, which is awesome. Entry fee is $40,000.
Oh, is it going to go to the seller?
The $40,000 is going to go to this entire bubble of people. So the 40 grand goes to the sub team member, the agent and the seller. And you don't know how much each one of them is getting. This person, the sub2 member could literally be getting 40k by themselves. They could be getting 10k and these other 2 people are getting 30. It's a variety of things. And you don't. It's really nobody's business how much money that person is making.
Right.
I just bought a deal from Gordon, a sub team member. He made 22,500 bucks for me. So happy to pay them that.
Right.
But I always ask them like, how much of that 40 grand is yours? Okay, so the 40k is the entry fee that goes to all of those people for bringing the deal to you.
Okay.
Then you've got closing costs. What is closing costs?
That's the, all the money that's going to go towards like the title company.
Title company.
Cool.
There you go.
So you got it. Title company or the closing attorney. Right. We always, whenever we're doing sub 2 or seller finance deals, we always use a title company. What are we using? We are always using get creative title dot com.
Okay.
That is the company we use. Get creative title dot com.
Cool.
So they're going to charge usually about 1% of the purchase price. So this is going to be somewhere around 4500 bucks. Okay, so you got 4500 bucks then a TC fee. What is a TC fee?
Transaction coordinator.
There you go. Why do I want to pay that if I'm Zachary?
Because I don't want to mess up the paperwork.
You don't want to mess up the paperwork? Paperwork. The devil's in the details, right? So we want to make sure the paperwork is done properly. We hire a girl. Usually they're females in the top tier TC portion of our community, and they are anywhere between 1500 bucks to, let's say $4,000, depending on the complexity of the transaction.
Cool.
So your cost to get into the deal is about 45. You're about $46,000 to buy this deal.
Mm.
Well, Pace, you always say I can buy money. No, I can do all these deals, no money out of pocket, Correct?
Correct.
So how am I doing that if I got to come up with 45, $46,000 to do this deal?
I would assume you go to a gator.
Yep.
You go to a gator or somebody also known as a private money lender in our community and you say, hey, I'm going to hold this in my portfolio. I'm either A, you make a post. You can make a post today in sub 2, and this is going to happen. This will happen to you. So either A, I'm looking for a PML private money lender, or B, if anybody wants to partner with me, I'm looking for a PMP private money partner.
Ah.
Okay.
The difference between this is the PML, you're paying interest, 12% maybe, private money partner. You guys split the deal. So you don't have a payment to them unless there's profit.
Okay.
Okay. I always tell people, when you do your first five sub two deals and you want to hold them in your portfolio, go get a private money partner. You brought the deal, they brought the money for the entry fee. So we bought the house for no money, but we got to pay these people that brought the house to us.
Right? Right.
Cool.
So chances are this seller literally just let said take over the keys to the payment or to the house. Agent got paid 10 grand, and the sub 2 members probably getting paid 30 GS for bringing this deal to the table. So your first, like four or five deals. Zach, I would go get a private money partner. Pace, how do I get a private money partner? Well, I do have a great list down in the description down below of a bunch of people in the community that are doing private money lending and private money partnering. Who but you in the sub2 community can just make a post in the Facebook group and go, hey, guys, I have a deal. I need either a PML or a pmp. Reach out to me and let's work out the details. On your first deal, you should be giving them 50, 50. They get 50% ownership. You get 50% ownership as you scale. For me, I don't give ownership in my deals anymore because I don't need to.
Right.
I. I go here, but this part is the stressful part for new people. Oh, my gosh. I'm paying interest on money, but what if the property doesn't cash flow and I still have to pay the thing? Well, that's why private money partners are valuable is because you don't pay them money because they're your partner. If the property makes money, they get paid. If the property doesn't make money, they don't get paid. And you don't have that extra burden on your plate, if that makes sense. Got it. So I would look at all of those deals and you're always going to ask the same question over and over and over. Am I going to find another buyer for this deal? Am I going to flip this deal, or am I going to hold this in my portfolio? Those are the only three ways you can make money being the real estate investor on that deal. Now, there's two other ways to make money on that deal. What are they? We already named them top tier tc.
Right.
You are not a transaction coordinator.
Nope.
You are not built for that. And to be a private money lender.
Okay.
So there's five ways to make money on any one of these deals, but three of them are actually doing something with the real estate. Two of them are servicing the deal.
Right.
Servicing it as a private money lender or servicing it as a top tier tc. Any questions before we wrap up this amazing video?
No, that was good.
Great.
So now when you're going through the sub2 Facebook group and you're looking for these things, here's what's great. There's literally five ways to make money on every one of those posts. Every time you see a Post in the sub2 Facebook group, there's five ways to make money. You can throw out at least one of them. So now you have four ways and potentially make money on that deal. And it doesn't have to be your deal. Give you a good example.
Okay.
Elena Tang, one of our students, Elena and Kirk Tang. Shout out to you guys. We love you. Elena and Kirk Tang, they join sub 2 and here's why they joined sub 2. Is it because they wanted to learn how to be the sub two member. That's cold calling and negotiating. No, if that's all I taught, that'd be a stupid mentorship. We are not a mentorship. We are a community of people that are so diverse that some people are doing this, some people are doing this, some people are doing this. But we all cohesively make sure deals get done. So Elena and Kirk Tang, they join and they go, we don't want to do any of this, any of this or any of this. We just want to buy a portfolio of houses. So we're going to buy deals from sub 2 members. We're going to have somebody else in the community and sub to do our paperwork and we're going to bring in money from a sub two member. We're literally just going to go buy 12 rentals. How fast do you think they bought 12 rentals?
Like a month.
They bought 24 rentals in 12 months. All of it. They did not have to cold call, they did not have to negotiate. They didn't have to go and pull propstream or dilsauce or do anything whatsoever. They just went out and said hey guys, we're buying deals. Other sub 2 members brought those deals to them. They brought top tier TCs to do all the paperwork and then they brought private money to the table to just hold those properties in their portfolio. They bought something along the lines of life like 7 or 8 million dollars in real estate all within 12 months. Starting out brand new, never knew anything beforehand. He was an architect and she was a therapist. 24 rentals 1 year, not a single credit check, no banks involved. There you go. And there we have an interview with them on the YouTube channel. So you have to get in where you fit in, right? Where do you fit in? You're busy with your 9 to 5, right? So I would look at and go, do I really want to have another nine to five? That's what these guys are doing is they have, this is their job right out there negotiating, doing all the things. These people can sit back and watch them do the work. Them do the work and them do the work and just buy rentals from sub 2 members.
Wow.
That's what I would do if I were you. And I know your goal is to get to $20,000 a month in net income. I would go buy 5 co living deals from local sub 2 members right here in Arizona. Gordon, you met Gordon last week. Gordon does 35 of these deals a month. I'm sorry, 35 of the deals like this every year. You don't need 35. You need five?
Yeah, I need a couple.
And Gordon's one of 200 sub two members that are local here right now. Calling, texting, negotiating, locking up deals. Do you ever have to go do this in order to build a portfolio?
No.
No. So when you're listening to my training or you're watching my YouTube videos, this is probably one of the biggest things people need to be doing is decide who you're going to be and play that role incredibly strong because you can just go, hey, bring me your deals, bring me your deals. Why would this person not be wanting to buy deals and hold them in their portfolio? Why are they not trying to be you?
I don't know.
Great question, right? The answer is very simple. When you're starting out and you don't have a job you love and you're worried about money, you're going after quick hits. 20,000, 30,000. 20,000, 30,0000. You don't care about cash flow, you care about chunks of cash. They build a machine, a marketing mechanism. They then start cherry picking onesie twosie. So they start doing, for every five deals they sell to you, they'll keep one. For every five deals they sell to somebody else, they keep one and they start diversifying. And so you have people like the Bash brothers here locally. Eddie and Tyler, love you boys. You guys are amazing. These guys primarily started out wholesaling their sub two deals. Now they're holding one in five, right? And they start scaling and scaling and scaling, right? It just depends on who you are and what phase of life you're in that you basically fit in where you should. So guys, hopefully this was valuable for you. We love you. We appreciate all the value that you give us in the comments and the feedback that you guys give us. Please let us know what questions you have about this down in the comments so we can improve what we're doing. And on the way down there, please like subscribe, share this with your mom. Tell her that we love her too.
