How To NOT PAY Your Mortgage! Special Clauses with Caleb Hommel

I love it because if you don't have the money, you don't have to renegotiate it down. You just go, look it, deal. Yes, I will do that.

Today we are talking about special clauses, specifically the Hommel hack. Today we are joined with Caleb Hommel and Christian Osgood, but primarily Caleb because Caleb's awesome. Welcome back to the channel. We're talking about the Hommel hack. Specifically our special clauses when we're going out buying real estate. Caleb has perfected one of them. He's done it on all of his deals. Caleb, welcome back.

Thanks for having me, guys. How are you doing?

Doing fantastic. So I'm really excited to share this because there's a lot of things that we talk about generally on the channel for price, interest rates, your balloon length, and special clauses. But we don't go too deep in special clauses too often. And There's a few rules to these that are really, really important. We have done complicated special clauses because this is all whatever you can imagine that both parties' lawyers can agree on. That being said, I regret it every single time. The more creative you get, the harder it's going to be to repeat. You want this to be simple and repeatable. Do not violate that. I promise you'll regret it. You can do some crazy deals, but the time that you spend structuring this crazy unique deal, you could have just bought 3 other really simple deals.

Now, every special clause has a specific purpose. In this case, the specific purpose was Caleb was broke, as am I, as is Christian Osgood. We never have any money because we throw it at our real estate. The problem is reserves are a good thing to have. The HOMEL hack helps Caleb build out his reserves, and it was a lot smarter because when I got started, I had no reserves and I wish I did. So Caleb, can you tell us what the heck the HOMO hack is.

Yeah, so basically the HOMO hack is not a deferred payment, none of that stuff. You just don't pay the seller for an established period of time. For my first deal, just didn't pay him for 6 months after closing. Didn't get slapped on the back at all. I just didn't pay my first mortgage payment for 6 months.

So you didn't pay your mortgage payments or you didn't have mortgage payments?

Didn't have any.

So did it get tacked on the back of the loan?

Nope.

So when does the interest start accruing?

Doesn't.

Until you negotiate it.

That is the beauty of the deal.

You structured it where you had no liquidity, you raised down payment, but you structured it where you have no mortgage payments that will start accruing until 6 months down the road. Is it always 6 months or is it whatever you can get from the seller?

Yeah, it's whatever you can get from the seller. I mean, But that one was 6 months. My second one was 2 months. It all just kind of depends. It's all— it's not really a fixed timeline. It's just you don't pay until a specific portion down the line so you can make that deal work day one. Okay.

And when you do that, you still put it in note servicing. It's everything else is still the same.

Yep.

So this is a shortcut to build massive liquidity on any asset.

Pretty much. I mean, the bigger you go on asset size, the more cash flow, the more cash flow you save up. So yeah, I mean, it's a great way to build liquidity and build up some reserves to get started.

And it's a really smart thing because it has to match the structure of the deal and it has to make sense to the seller. That's the main thing. Of course it works for you to not pay for 6 months. Why would someone accept that? On this particular deal, if I remember it correct, the first time you did it, because I know you've done this multiple times, but you— it had rental increases that were required to make the deal make sense. To meet the mortgage payments, you would have been negative cash flow day 1 if you had to service that mortgage. You needed about a 6-month time to bring the rents up, and that was the reason that you wanted to do this. There's also a little bit of CapEx that you wanted to use the cash flow to save for. Those are the 2 reasons, right?

Yep, hit it right on the head.

So how was that proposed to the seller? When you actually bring this up, how does that conversation look? Because if I'm hearing this for the first time, and I remember when I heard it for the first time, like, I doubt they're going to accept that. And you've had them accept this multiple times. So how is that brought up and why do they say yes?

Yeah, my first deal, how it kind of got brought up, I didn't plan this out or anything. It's kind of spur of the moment. The guy wanted a fixed rate. He didn't want to go interest only into AM. He's like, hey, I just want to AM it over a certain period of time, and I just don't want to change interest only and go all back and forth on that. What can we do? And I was like, well, the only way this really works is if I just don't pay you. And then he's like, okay, sounds good to me. It was kind of not something I expected to get accepted the first time either, but it all worked out that way.

So there's probably people watching this like, well, that's cool, you got it, but that's not repeatable. You did that on your second deal too.

Yeah, I did the same exact thing on the second deal, just for 2 months instead of 6. But yeah, back-to-back deals at the same structure.

You probably didn't need it. You just asked. That's your liquidity. Homel hack. And they just said yes.

Yeah, I just asked. Wasn't anything crazy. It was just, hey, let's do this.

We should start asking on all our deals. There's a few things that you can ask for. And granted, you don't want to ask for a million things, but choose a few things that you really like that are just— it's just normal to ask. We didn't do that on our first deal, but what we did a similar version of is our first deal together was 38-plex. We needed lower payments. We didn't even think to ask for no payments.

That would have been way smarter.

I hadn't met, uh, Hommel to invent the Hommel hack yet. So when we did this, we just went, okay, well, can we have $3,000 less per month in principal payment, reduced payment, reduced payment for the first 6 months? And you took that to a whole different level. And I, I think that that would have won, that would have absolutely been accepted on our deal.

Had we done that, we could have saved— I mean, 6 months, we could have saved an extra $42,000, which is serious.

That would have helped. That would have renovated, uh, well, 2 units on our way overpriced old pricing, and now, I mean, that would have—

4 units.

Yeah, probably 3 or 4 units fully reno'd, decked out, would have been just totally free and covered. So love that strategy. One of our favorite— we haven't named it yet, but where you just offset the payments. So, so say someone wants $200,000 down. We've had this before. I want $200,000 down. Okay, I can just say yes to that. However, I don't have the money today and I don't want to raise more capital. Yes, it's going to take me 2 years to give you that down payment. Well, what does that look like? I can do $100,000 down day 1, $50,000 next year, $50,000 the year after that. I love it because if you don't have the money, you don't have to renegotiate it down. You just go, look it, deal. Yes, I will do that. Here's how it's going to look. I've never got pushback on it because you're just saying yes to what they want. You're not actually changing your terms. You're just altering the timeline in which it's going to be paid. It gets very little pushback. It's very easy to propose. You can get into the deal low down. And the beauty of these deals is I always write the additional monthly payments around where the property cash flows. One of the early deals we did together was on a 7-plex. $50,000 down, $20,000 down additional at the end of every calendar year for the next 5 years. Well, $20,000 just happened to be about what the property cash flowed per year day 1. So it makes it so that your real estate buys your real estate. Once I write that first check for a property, I really don't want to have to continue to inject capital. The goal after acquisition is that the property keeps paying for the property.

But this is a huge way to build up your liquidity. On the front end because you put less money down, you have more liquidity. And then if you do that and combine the HOMO hack, you can stack a ton of extra cash which can actually go towards that down payment. So the real estate buys the real estate, and we love when the real estate buys real estate because then, per the meme, it's free real estate.

Now you can do this on any deal, and these are two example clauses. What I wanted to illustrate on both of these is this is not a high level of creativity. They're very simple. All you're doing is you're looking at a deal that other people have not been able to put together and just asking the question, how would this work for me? And there's a lot of different clauses, and it's really anything you can come up with. But if you can solve for, like we did on these, I'm low on liquidity, well, here's a couple of options. It doesn't cash flow day one, here's a couple options. You just have to put together something that works for you and answers the question. And the closer you can get to their originally proposed deal where you're saying, yes, it's going to look like X for me to be able to do that, you're going to get a yes almost every single time.

And that is it.

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