Creative Financing Q&A: LLCs, Negotiations & More

Don’t have enough cash? Try creative financing! No credit? Try creative financing! Ran out of conventional loans? You already know what we’re going to say...One of the most knowledgeable real estate investors around, who pretty much reinvented the subject to deal, is Pace Morby, and he’s here with us today!
Pace invites four guests onto the show to ask him their most burning questions about subject to deals, creative financing, legal protections when investing in real estate, and how to negotiate with a seller. Even if you’ve never thought of doing a creative financing structure, Pace may convince you that there’s good reason to be educated on them, as it could help you save thousands in closing costs and allow you to scale your real estate portfolio much quicker.
~~~~
Join BiggerPockets for FREE:
www.biggerpockets.com/signup
~~~~
Watch “Triple Digit Flip” on A&E:
www.aetv.com/shows/triple-dig...
~~~~
Follow Pace on Instagram:
@pacemorby or / pacemorby
~~~~
The Intro to Subject To Real Estate:
www.biggerpockets.com/blog/20...
~~~~
The Essential Elements of the Creative Financing Toolbox:
www.biggerpockets.com/blog/cr...
~~~~
Follow BiggerPockets on Instagram:
@biggerpockets or / biggerpockets
Episode 529
Show notes at: www.biggerpockets.com/show529
0:00 Intro
1:26 Do Market Cycles Influence Creative Financing?
4:37 2022 Housing Market Predictions
10:14 How to Comp Profits for Buyers
17:53 Should You Form an LLC for Real Estate Investing?
22:15 Optimizing with a Virtual Assistant
29:07 Buying with an Adjustable Rate Mortgage (ARM)
34:26 Negotiating with a Tough Seller

[@brendapolar8506]

Pace your ability to explain things is brilliant And simple. Thank you! So very grateful for your amazing Guidance . All the best in years to come.👍

[@Crowowl11]

I second that emotion. Keeping it simple, is keeping it concise, pure & full of integrity which is irresistible!

[@BLAKRAINBOW]

These questions were all the questions I had! Thank you for choosing to air these basics for those of us who didn’t go to business college!

[@JonnyMReck]

This is great and what Pace says is true - just make sure you also factor in closing costs like transfer taxes and title costs. You don’t want to get far along into negotiations and then realize you’re unable to perform due to not considering this

[@TJ-th9hw]

Fantastic episode! Thanks Pace for sharing your insights into creative financing.

[@richruelas]

I have learned so much from you Pace! this is only the 2nd vid I have watched and i am blown away. Thanks again!

[@anthonystevens6538]

I love this. I'm just starting my journey and I love the content and I learn everyday. Thank you all for the knowledge!!

[@fyremondragon8852]

Thank you for sharing your experiences and knowledge. Learning a LOT with just this episode. Would love to see and learn more!

[@InspiredInvestor]

Pace has golden nuggets of information for days 💰💰

[@rtmoorer2]

Wow. This bigger podcast is massively brilliant in the ability to help with creative buying and selling of homes. Wow! Thank you

[@rickymarquez2468]

Pace really explains everything very clearly. Thanks a lot. 🙏

[@real.estate.justin]

Pace is an absolute juggernaut in the 21st century. Content always fire - Big ups BROTHER PACE !

[@karimkarachiwalla7073]

So much great content. Every podcast is a gem! Keep it up.

[@christianrathbone9931]

Loved the net deal/partnership model. Great way to sell the deal and save yourself a large margin. 👍

[@ronkeobaro1647]

Thx a lot Pace! Impactful teaching!

[@taryneburke5794]

So much amazing content! Thank you!!

[@diagnacamilo2378]

Love it!!!! Such a great advice!

[@BJNeyer]

Love what you're saying, but you are somewhat mistaken on your LLC advice. In Kansas, and many other states, we have a strict liability statute. If you personally do something that creates a liability, your LLC can be pierced putting your personal assets in jeopardy, and it doesn't matter what you hold your property in. Now, if you have your property in an LLC, you hire a third party to work on the property and they create a liability, then yes, your personal assets are protected since all they can go after is the LLC. It is better to have a $1M umbrella liability coverage since you can throw that at them and they will go away. I have this from an asset protection attorney.

[@oakjim206]

So in Kansas, a LLC really only works if you are completely hands off your investments? That doesn’t seem correct?? Because anything you do could be seen as “creating” a liability. Sounds like instead of an LLC in Kansas, you might want to setup a C corporation or another that actually protects you personally.

[@BJNeyer]

@@oakjim206 Not just Kansas, but ANY state that has strict liability statutes. Even if you form a C Corp, you can be held liable if YOUR judgement resulted in the claim. Also, C Corp. pay double taxes, first when the corporation earns it, then when you pay yourself from the corporation. Get over the idea you're going to get sued. If a judge thinks you made a bad decision, he'll pierce the LLC, or C Corp. I maintain my remotely managed property in an LLC, but I also keep $1M in an umbrella liability policy.

[@spldrong]

What if your LLC is owned by a holding LLC in Wyoming? Also, do both, a 2 mil umbrella costs me less than $40/mo

[@BJNeyer]

@@spldrong If you've set it up so they can't find someone to serve with papers, then they can't sue. But most states require an agent for the company to live in the state you're incorporated in. I can't comment on your case as my knowledge is general. Now this year Bigger Pockets had a couple of podcasts with asset protection attorneys. One sounded very good, but it would cost you $10K at least to set it up.

[@spldrong]

@B.J. Neyer Prime corporate services (place that Morby recommends) set me up with that... WY holding LLC owning my state LLC... so basically just 2x LLC, cost less than $1000, and I hire them to also be my agent, so that my name is on nothing. I very never been sued, so I can't tell you for sure if it works, but this is the way Anderson, Pace Morby, and several others have sworn by, so I really wanted mine setup this way. Before them I had a quote for 2k and change and 3k and some change, I felt that was too expensive, so that's why I've had the umbrella policy.... but im not gonna cancel that, will actually get a second for the operating LLC

[@dscrmortgagegal]

Love listening to your wisdow and knowledge Pace ☺️

[@aliciamarana]

Wow! Such great info! More of these!

[@oh_ohvideos]

Awesome episode we need more sir pace

[@ona1r]

Enjoyed this one, thank you for the info

[@RichardMPM]

biggerpockets have trouble finding bad hosts. Great episode !!

[@ericknadler326]

✌🏼Pace is world class 🌎…When are you having him back?

[@dawnconyers5169]

Great episode--thanks!

[@michaelsherron7815]

Awesome, priceless content!

[@richarddevarennes9909]

So much value!

[@antonio-demetrius3744]

Pace...Now that what's up. Good info...🙏🏽👏🏽👏🏽👏🏽👏🏽👏🏽

[@gigawatts6667]

No way your part bigger pockets now? Thank you for all the information as always.

[@taureanjohnson6737]

Outkast in the background. The man has amazing taste.

[@yolimonty4898]

AMAZING SEÑOR PACE

[@babettekern7161]

Seriously good content.

[@JonnyMReck]

Re: LLCs - yeah, these are important but it’s amazing how many people on Biggerpockets focus on this instead of actually buying real estate

[@reyessuarez4978]

My favorite guy!!

[@satlaone]

Suggestion on finding a virtual assistant and how to monitor their work?

[@TheHamm1124]

“Train” lol 😆. Very big fan of yours also

[@garrettmay7631]

Fantastic information

[@VWZLOCZ]

This is gold

[@TechOutAdam]

Snap Pace apart of the BP group now? Man I remember when BP first started in my city, I went to one of the first events. Great to see how far BP has come.

[@jjsupremeorta15]

Why?

[@ronkeobaro1647]

Please can you recommend which virtual assistant I can use? That has been my draw back.

[@joannegarcia4531]

How do you handle the situation when you have to catch up payments, how do you protect yourself before using your money to pay arrears?

[@jw557]

💎 s. Appreciate you Pace. All Facts. Added a VA 2 months ago. Felt like a dummy for not doing it 2 years ago.

[@Oneofone88]

Amazing 🤩 content

[@MoSellsATL]

Great episode, as a realtor I have been told multiple time net listings are illegal. It might have changed but I’ve been in the business for about 10 years now so I guess it must have been a problem

[@izaactorres5741]

Awesome

[@andresbustamante7463]

Pace is the best

[@sharonpace4466]

On the notion agreement are you just using either a private lender or your own funds if you have them to renovate the property?

[@hanuraob]

For new home buyer or investor.. do you suggest to buy residential home as primary residence and then go to Commercial real estate investment or directly go to commercial real estate ? .. i initially thinking about buying a home..Then learned about four Plex residential multifamily with low downpayment but banks or lenders saying in this market FHA offers may not accept by sellers as competition is high.. so with conventional loan still need 25% downpayment ..So I am thinking to go directly to CRE with 25% downpayment .. but I still need to think about primary residence with decent school ratings..so suggestions please..

[@LuG8911]

Hahaha this guy had me as soon as he said "I sent them off to play jiu-jitsu" 🤣

[@TheresAlpha_In_Moxy]

In a novation agreement, when I sell it to my buyer, who pays closing costs and fees?

[@kohlhobbs7121]

Do you have a video on offloading tasks?

[@elchanongoodman6478]

Let's see pace some more

[@cmdv42]

💯💯💯

[@drjeanduret]

Pace I like your program.How can I be part of it .I did follow you in bigger pockets and Brent Daniel.Jean

[@andresloera711]

The problem with virtual assistants though is, like you mentioned, they're typically not American, don't speak very good English, don't know the local real estate market, and people don't like being solicited by strangers who hardly speak English. I paid a virtual assistant for like 4 months and only got one deal from it and just barely broke even. It's difficult to get good skip tracers, virtual assistants, etc. Let me know what your experience has been, thanks.

[@collinbaptiste5619]

I'm having the same problem right now, but the seller is off market. 😮

[@PrashantSingh-iu8nq]

Great informative session Pace..kudos However I have a question - why would seller go for Seller financed? in traditional sales, at the end of the deal, seller gets the FULL amount in their hand..where as if its seller financed then he will get only the monthly installment..whats there for Seller in Seller financed? Especially if seller has equity on his / her property ?

[@jeffersondraper781]

It saves them on taxes and they make the interest instead of the bank. More money in 2 ways.

[@PrashantSingh-iu8nq]

@@jeffersondraper781 Thanks that is really helpful.

[@andrewnielsen8032]

Awesome video man, really like your podcast with Brandon and David as well on creative financing! Can you shed some insight on the paper work side of things after locking up a deal, like how do we draw up an official contract with someone. Just hire a real estate attorney to draw up all the paperwork after the deal or do you have say a blank template so you can quickly get it done or what??

[@real.estate.justin]

Be sure to find a real estate attorney locally that is comfortable and understands your needs first. There are many out there who will look at you - deer in headlights. seek the property title and attorneys and you should do okay ! '

[@reyessuarez4978]

Im a new investor! If you partner with the seller fix the house , they get there asking price in the example was $165,000 who pays for closing cost?

[@real.estate.justin]

part of the negotiation my dude! you can offer it, if it sweetens the deal and pushes them in your favor. if not, simply split it like a normal deal. However, make sure you have your terms clear and precise. and use a good title company or attorney

[@313-4Hitchens]

Im a newbie in this business. Should I set up an LLC before I do a buy then buy the property under the LLCs' name. Or just transfer the deed to the LLC after the buy.

[@real.estate.justin]

SET UP AN LLC PROPERLY FIRST! - check out PCS ( prime corporate solution ) they can set you up with an LLC - might also need to pay for the state fee. - either way, check em out. but If youre serious about business, just do it. hint: dont put your name in it ..haha good luck

[@user-jm9rk3nj8d]

2:15🎉🎉🎉🎉🎉

[@jaysmith6910]

Where is a great place to get a virtual assistant for Cool calling

[@ateesband6116]

Novation sounds like a joint venture. Is it the same thing?

[@APortaA1]

I have a deal I want Pace's input on. Does he offer a consultation for a fee?

[@eddiekeech9227]

Do you still think it will be 36 months before a slow down?

[@kohlhobbs7121]

If I was looking for an acquisition assistant to manage finding deals should I pay them by commissioning deals lets say 50$ per successful acquisition of worthy deal?

[@oakjim206]

$50 seems extremely low personally, but there might be some laws regarding fees/rewards if they don’t have a real estate license. However, if someone keeps finding me successful deals and all I would have to pay is $50, that’s a huge win. LOL! But they will eventually realize their worth and hopefully setup a contract with you going off a percentage of the sale. Always reward the people who find you rewards.

[@michaelsherron7815]

Question how do you go after a municipality if they "stole" your first SF investment house via deceptive means, that you bought in the LLC name? My wife feels that if we bought in our names we would have more sympathy or legal options for going after the City. I'm at a lost and exhausted with trying to get some compensation for their "theft."

[@aprilwelsh9796]

I am just trying to get into my first home to actually live in. I live in a very expensive area in Santa Cruz California. I’m a single mom and need help with creative financing. Does it exist in Santa Cruz?

[@pugaoscar]

Wow

[@reodconstructionfacilities1619]

What a great job!

[@cameronsuniversalinformati4849]

👍

[@gbamele7]

How to do seller financing with apartments investment

[@real.estate.justin]

rental apartments? like, own the building right? - if so, Its the same thing.... You can seller finance ANYTHING. .. Agree on a price, set the terms for the deal, Deposit, monthly payments, any interest? etc. and youre off to the races...

[@tlpalm77]

In the last example, I'm trying to understand the novation agreement, I don't fully comprehend the concept, is this if the person that wants to purchase it doesn't have money or a way to get a loan? is it assuming that this person has $165,000 in cash?

[@tlpalm77]

Is this a way for someone to get a house when they have no or very little money?

[@ttownsupreme2183]

A novation agreement is a creatively done fix in flip In a fix and flip:You buy at a price where with holding costs,closing costs,repair expenses you still stand to make a profit by putting it back on the market with renovations&improvements etc Novation Agreement: Instead of purchasing the property from the seller at a discount to make renovations and then put on the market (this is where it differs) The seller keeps the property in their name/possession.You do your renovations without actually purchasing the property.Beforehand you and the seller agree at a price(usually the as is price) and when the renovation is done and put on the market and sold...the seller gets their number you make everything else.

[@dax7192]

👍👍👍

[@user-nc4cx4gw2z]

Hello there 👋, how are you?

[@jstaschman420]

Heard the word Novation and still don't understand how this is a novation.

[@Tonnyy11]

😂😂😂 you don’t play Jiu Jitsu

[@JasonMorford]

As a prior telemarketer, I would never use the word "novation" simply because it starts with the word NO and you don't want the word no on their lips. Just because it starts with the word no makes it easier for them to say no. Partnership is so much better.

[@pamelacharles1455]

Hey team have a potential deal I want to live in a 17 unit 4.2 mil- completely paid off seller want 50% down, we are discussion balloon terms - needs some help

[@FreedomxYT]

What city?

[@jasonhowell8]

Here's hoping the bikini calendar has pictures of Laura, not Pace. Lol!

[@jonnyharrison1179]

I enjoy pace but this video was to manufactured. He clearly invited his students on the show and fed them questions

[@DR-rx4lk]

36 month slow down. Got it wrong my dude

[@ckkendrick7861]

Seller finace is crap, who the hell would do that and why would they do that , the seller wants there money now, i dont want payments for the next 20 years , hell some people will be died by then, lots of realtors in my area said they dont work, you can always ask but waste of time

[@andrewnielsen8032]

Dude I don't want to see your bikini calendar!! Lol

[@joser6703]

This guy should be the permanent host of the BP podcast. The bald guy is so annoying.

[@omantha1]

Least informative BP episode...