How To Determine a BAD Real Estate Deal

How do you determine if a lead is a BAD real estate deal? Is it a bad comp? Can you underwrite it? Did the wholesaler send you little to no info? In this video, I break down how to determine if a deal is bad or good using a real world example.
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🚧🚧🚧 DISCLAIMER 🚧🚧🚧
❎ I am not a CPA, attorney, insurance, contractor, lender, or financial advisor. The content in these videos shall not be construed as tax, legal, insurance, construction, engineering, health & safety, electrical, financial advice, or other and may be outdated or inaccurate; it is your responsibility to verify all information yourself. This is a KZbin video for entertainment purposes ONLY ❎

[@ereckharrison]

Hilarious seeing Pace in this mood. As a father, i have those days too when you’re extra spicy lol 😂.

[@chitwnyawdman]

Extra cranky lol but I understand

[@shakaguru1896]

Hahaha!!!!😂

[@robertruschak7083]

$500,000 : you got to be kidding for a duplex in that area . Did you even hit the 1% rule for rent rolls

[@TheGood200]

😂😂😂 lmao facts I get it, - Dad with a two year old

[@justinskelly2514]

Yep! Love it, I can relate lol

[@DiqaunColeman]

I'm not sure how many newbie real eatate investors will realize how invaluable this 1 piece of content/video is. To be honest, I personally would of paid someone who knows how to underwrite deals like this $5k for 2 hours to teach me everything Pace laid out in this video. Thank you so much Pace. This is my 3rd time coming back to this video as a reference.

[@jerryshield7945]

He tore that wholesaler a new one 😂 I didn't know depreciation and appreciation were separate nor how to calculate them. Pace once again you're amazing man.

[@andyscorner101]

You had me LOL when you were shouting at this wholesaler for not doing his job, and you were 100% correct. I was a RE Broker for 20 years and saw many people with RE licenses doing exactly that, namely, NOTHING. They would give me paperwork with hardly any completed information pertinent to the deal and expect me to give them numbers so they could go back to the seller and complete the transaction. I'm alluding to P&S and Creative Financing deals that went south, along with my hair ( from pulling it out), and plenty of Antacids for the stomach pains they gave me. I'm still laughing. Good job on this one. It's not easy being me, is it? 😂

[@brendanlyons3688]

Great clip Pace! This is actually really well explained. And you did it quickly! Thanks for the nonstop nuggets ✌

[@ElLeNoir..ELconomics]

Lol😂😂 I was going through the whole deal with you as you was talking I'm answering to the phone

[@PaceMorby]

There ya go!

[@nickthegreek2233]

We ended up keeping it, got it at 0% interest and came up 100k on the purchase price

[@DiqaunColeman]

Most people probably overlooked the name of the person who sent Pace this deal but I caught the name & wanted to see if Nick would jump in the chat & you did. Shout out to you my friend!

[@GaryRabatin]

Why did you waste Pace’s time sending this to him? It made you look silly. No wonder you ended up keeping it because those terms would have never brought forth a Buyer. This was clearly not a Hole In One Offer, more like a hole in none offer.

[@RioEstateAgent]

Awesome Video Pace! I'm new to your channel and I'm wondering if you have a video where you explain the 7 reasons why you invest. I'm familiar with most of them but curious to get your take on why you use those 7! Thanks!

[@totallyhuman182]

We just ignoring paces collar 🤣🤣🤣

[@johnny.b.]

Pretty sure it’s popped purely for this video 💪🏻 lol

[@NicolasReyes3]

This is gold man you’re best. Thank you for this. I just can’t stop watching so much valuable info right here I got headaches of watching countless hours of your videos

[@nandingpanelo]

Thanks Pace and community

[@DocK1ll3r]

No Way!! Nobody is going to believe this, but the person that was trying to sell this home came to me asking me about managing it for him as an Airbnb (this is what I do full time). Very unique layout, and interesting property. So funny to see Pace looking at it and hearing his thoughts after I walked through it about a year ago. So cool

[@romi929]

Wow !!! For a newbie This is gold !!! Thank you Pace!!😍

[@Goatsportscontent]

This was my deal 😂 we ended up getting this at 0% interest and giving the seller 100k premium on the purchase price instead.

[@gusdominguez9024]

Is this real?

[@Goatsportscontent]

@@gusdominguez9024 yes. Nick is my business partner

[@Crowowl11]

Tell us more on your story

[@Goatsportscontent]

@@Crowowl11 what would you like to know

[@Crowowl11]

The whole deal! Perhaps a video reply to Pace and show your numbers

[@sethanderson9617]

Ooooh! Pace is feeling spunky today! Love it!✌

[@lorenzofevola2223]

You care a lot about your viewers ! Thank you for breaking down a duplex. I am considering getting another after a very successful 2021 deal or going bigger . Not sure what to do , this helps evaluate .

[@scottw.6609]

Thanks for the knowledge Pace!

[@PaceMorby]

Any time, Scott!

[@alj8629]

@@PaceMorby uradumby25 - Around 15:57 - can you explain to me how (or what number/percentage did you multiply by) to get the 7 years upfront depreciation of $127,272

[@andresruizbriseno302]

Pace, great video. Is the 12% COC rate something you use for all your investments or does it depend on location for you?

[@SpaceCase47]

Love to see Spicy Pace! Thanks for the video!

[@marksimon8393]

I couldn’t stop laughing at this video 😂 Pace is pulling out all the stops to solve this equation with limited to no information in the picture is hilarious.

[@tailtappinfishing2919]

Love his sense of humor😂

[@ryleyr9305]

Wouldn't the rent be higher because they're 2 seperate units? Didn't think rentometer incorporated that

[@ryleyr9305]

If the rent is really that low, that's embarrassing for the wholesaler

[@perlaargyle9343]

I think he couldn't get the numbers perfect on the rent estimate website cuz the wholesaler didn't give him any info in terms of how many beds/bath

[@cyndigreenwood3272]

@@perlaargyle9343, It shows what the front house is on Zillow. It was a 2bd 1 ba.

[@Lootalot]

This earned my subscription

[@PaceMorby]

Thanks Chris!

[@Lootalot]

No, no, thank YOU! Truly.

[@michaelmartinez6660]

I love this fkn guy! Only person I can listen to and not get tired of lol and he’s a G for keeping it real!

[@brookeshelton9923]

Super helpful!!! ❤

[@PaceMorby]

Glad it was helpful!

[@MichaelF7]

Pace got the collar popped up, Beast Mode!

[@donaldjohnson8522]

Nice break down Pace Morby I would say it be wiser to put 20 than 15 percent

[@paparuda1968]

Good video Pace! Thank you for this one!

[@PaceMorby]

You're welcome!!

[@donaldmorckel1684]

LOVE The " PACE VIBE " music at the end of this video lesson ....... who is that ?

[@paulgomez3318]

This was hilarious and refreshing to watch lol. 😂

[@shibby189]

Good grief, I would love to have a drink with Pace some day. Love this guy!

[@perlaargyle9343]

Except he doesn't drink 🤣🤣

[@Goatsportscontent]

Spoiler alert we renegotiated and pace wanted the deal The terms of this deal ended up being: 600k purchase 0% interest 50k up front 25k end of year 1 25k end of year 2 No monthly payments for the 1st 36 months and after that 1100 per month 12 year balloon.

[@gusdominguez9024]

So what about this deal made you think, "yes, this is a good investment"? The rents are low and the property price is severely inflated. I don't mean to offend, just want to see what you see in it that I don't.

[@Goatsportscontent]

@@gusdominguez9024 cash flow bro. The terms we got are awesome. We don’t make monthly payments for 3 years and it will rent for 2500 a mo. The return over 12 years until you balloon out is huge. This is a longer term plat

[@uradumby25]

@@Goatsportscontent 2500 each side?

[@cyndigreenwood3272]

I still don't see it as a good deal. I estimated the rents to be about $2,800 as long term rentals. 2,800 x12 is 33,600. So at that rent rate you would only cash flow 7ish K the first 2 years. At the end of 12 years not even including the fact you are paying another 50K or the fact its 1100 for 9 years.. you will only get 403,300 (in rent) at the end of 12 years when the the balloon payment is due. The only way I see it working is if you Short Term Rental it or even Medium Term. OR sell it at some point. The cash flow would be nice during that time, but that Balloon scares me.

[@aaronwhite7754]

@@Goatsportscontent So to escape the balloon profitably you gave the tenants a balloon or plan to sell the home correct?

[@justinlau3960]

20% cap ex. Is that high?

[@b3198]

It’s a bad deal. Why overstate how bad? A 1/1 unit and 2/1 unit will rent for more cumulatively than a 3/2 unit.

[@lauraculotta708]

Great information!!

[@Hawksforever99]

I should've waited till after watching to comment lol...looking at that place from satellite and the Street view, my personal opinion is that as a renter, i wouldn't pay 3 HUNDRED per month for that place, much less the break even for the $3,046 + other fees...and then you'd have to give the seller your entire year's cash flow almost (assuming you could get what you'd NEED to for rent). Donny walk away from deals like this. RUN!!

[@nicktran939]

Wholesaler is nuts! trying to pawn that off to Paceman.

[@uradumby25]

Pace, thanks for doing this. Currently in Utah (luckily our drywallers do a significantly better textured ceiling). But I am seeing alot of deals like this. $510k+ duplex's, with 1200-1500 rents per side. No central air. not very nice. Only way they seem like they would cashflow would be if you could get the seller to do financing at a crazy low interest rate. Meanwhile Ohio is sell for 100-200k with 800-900 rents, or more. In a market like this, if you didnt have to put money in the deal would you accept low cash flow or would it not be worth the effort?

[@Godschosen503]

Is there any thing else that can go wrong with a subject to deal other than a due on sale clause?

[@hennmack3968]

Great content 🤣🤣🔥🔥

[@tiktokdj606]

And more than that I can buy a cashflowing property that gives me the same depreciation. If it isn't positive cashflowing why bother for the rest?

[@ParadoxxedMedia]

I would have text the dude "Yikes!" - 1 word text from me means the deal is over, don't call me back. In all seriousness, where is the value in this deal? What on earth would justify your assignment fee when there is negative value for the buyer??? I feel the seller wrote the terms and the dude signed off on it, thinking he did his job.

[@philkyles6506]

I was thinking that if the seller would give you a 60yrs loan on the house would that be a deal

[@Silversidepro]

Depreciation is actually worse than you lined out because you did not remove the land value. I know you know that and did it this way for simplicity of the illustration.

[@alj8629]

Around 15:57 - can someone explain to me how (or what number/percentage did he multiply by) Pace to get the 7 years upfront depreciation of $127,272

[@brennabustamante4686]

My question too.

[@TheCinnamondemon]

he multiplied 7 * 18,181, the annual tax deduction amount bc 7 years of the deductions are provided upfront.

[@kylekotecha153]

But how do you get the 7 year acceleration? I bought a few in cash. I need the tax breaks

[@perlaargyle9343]

Your CPA can help you with that

[@pmartbrown]

Maybe there’s 50kg of gold buried in the back yard?? Not sure how else this passed the quick UW litmus test.

[@phil1954]

Add management fees and the deal keeps getting worse.

[@Hawksforever99]

What could you even rent this place for? I didn't catch how many beds/baths he said if he even said it yet, but I'm thinking like if you could rent those place for much more than 2 grand a month, I think you're doing well, considering the shape it's in. So you'd have to give the seller your entire year's worth of cash flow. And then again at the end of year 2? Dude you need to have a talk with the seller about coming back from his dream world to reality. He's (or she is) out of touch!!

[@uradumby25]

does pace always do 20% capex each month ? In my spreadsheet I have 5% a month for general repairs and maintenance and 5% for capex - big expenditures, so i guess 10% total, I wonder if my estimate is low.

[@alj8629]

uradumby25 - Around 15:57 - can you explain to me how (or what number/percentage did he multiply by) Pace to get the 7 years upfront depreciation of $127,272

[@davidcolvin3]

not the dog shed :'''')

[@Naturalbound]

Fuck ya Pace! You tell them! Lol. Love it!

[@OffroadTreks]

Dude, I live in Boise. Someone bought this and is renting it, lol.

[@OffroadTreks]

PS: I'm from the east coast, I 100% agree with the dry wall comment. Drives me up the freaking walls. Also, these people paint all the soffit the same color as the house and not the trim color like everywhere else in the country.

[@belaad]

Pace bought it. He renegotiated the deal to 0%

[@terrilvanhemert]

🔥🔥

[@Crowowl11]

Belly laughing!!!

[@robertoinvests]

❤

[@KevSab7]

You seem in a bad mood Pace. This is not like you. Hope everything is okay 👌

[@MoSellsATL]

❤️❤️❤️

[@kimberlymihalik8820]

Drywall 😂😂😂😂

[@perlaargyle9343]

This video is 🪙 gold ! So good for seeing if something is a good deal 🙂🙌🎉

[@JohnsonOc]

Damn! It’s so funny to see Pace going bananas on this creative deal. 🥹😀

[@tariqkisyed3557]

Learnt a lot. Very simple explanation. However, your calculations aren’t correct. It should be 95000 to begin with 🥸

[@alj8629]

Tariq ki Syed - Around 15:57 - can you explain to me how (or what number/percentage did he multiply by) Pace to get the 7 years upfront depreciation of $127,272

[@cyndigreenwood3272]

Its actually 70K. 50K down, 5k for closing costs and 15K to the wholesaler. The 25K was at the END of the first year.