When to Use a Novation Agreement

What is a novation agreement and how does it work in creative finance? Novation agreements are always a little different, but they generally trump a typical fix-and-flip. Watch this short video to see how I tell my Golden Ticket students how to use novation agreements even in uncertain economic times.
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🚧🚧🚧 DISCLAIMER 🚧🚧🚧
Pace is 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as tax, legal, insurance, construction, engineering, health & safety, electrical, financial advice, or other and may be outdated or inaccurate; it is your responsibility to verify all information yourself.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.

[@temeculatrever6100]

I've done 3 Novations. Easiest thing I stumbled myself into. Learned it from one of your students in passing at a networking event. Might have to join the community soon.

[@Jason-o5s]

Cheer~~~the substitution of a new contract in place of an old one.😊

[@scottwhitley2242]

Jackpot! Thank You, Pace for taking the time to create this content!

[@carterbwallace]

The Pace setter at it again.

[@newwaymortgage]

Great to see you in action, brother! Brilliant lessons.

[@PaceMorby]

Thanks brotha!

[@zappleyrealestateteam6528]

@@PaceMorby in a novation agreement, if you fix and flip a property without taking title in your name, where is the guarantee that you don't get taken for your monetary investment to fix the property to be sold. I just became a Subto student a week ago, btw!!!

[@darrylgriffinsimmons1724]

Dope training! I definitely need to be at the next Golden Ticket. Thanks Pace!!

[@PaceMorby]

Darryl. Awesome! Are you a Subto student?

[@darrylgriffinsimmons1724]

@@PaceMorby yessir!

[@PaceMorby]

@Darryl Griffin Simmons Watch out for the next one and you might get a golden ticket!

[@Bobby-lp9yj]

Very informative

[@PaceMorby]

Glad you liked it

[@Dabigmothertrucker]

How should it be written??? I heard everything is in the wording

[@abeeiland2996]

Creative financing is an understatement. Genius financing including satisfying 😌 partners.

[@PaceMorby]

Thanks Abe!

[@abeeiland2996]

@@PaceMorby thank you

[@JoshuaJulyCaRealtor]

Brilliant

[@PaceMorby]

Joshua. Thank you!!

[@michaelbatista2869]

Why would you do that? Lease option it for arv + 10%. Lock in the sale price. Buyer will have to figure out rates later.

[@PaceMorby]

Lease options are for NON creative people who need a crutch of NON ownership to negotiate with a seller. Sorry but true. Get ownership... not a lease. Im not a tenant. Im an investor.

[@michaelbatista2869]

@@PaceMorby but you literally talk about making a decision between selling your deal for 415k vs 315k. You LOST over 100k by choosing NOT to be creative --- on your own deal. Just refinance. You dont need to make it a plan A. It's a plan O for someone like you. But the best move would have been to call the right play and take what the defense gave you. The correct move here would have been to refinance and weather the storm until rates drop in 3 to 5 years. The reality is --- you got caught in a flip in a price point that's not been historically kind when the ball drops. Lease options work in an up AND down economy... whether that be on your own deals OR someone else's. Also, lease options are perfect for beginners to get in this game and take 1000 swings with 0 fear of risk. It's a poor investment strategy to lose money, and MOST people simply ARE NOT ready for it. Most people don't take the time to understand the math. Most people dont take the time to make this a business. Most people ---------- they'll buy 1 house and then analyze for months, just to have a tenant do $10,000 in damages or have a catastrophic repair without improper insurance to cover the loss and lose 5 years of cashflow in year 1 and they'll throw in the towel because they do not have the money. That will surely cause someone to fail. You NEED reserves as an owner. It's absolutely essential. NOT doing so guarantees losses and GREATLY increases the likelihood of anybody exiting the business quickly. So while I absolutely agree that ownership makes sense --- I believe more so in the fact that it is our duty to teach each other, and our duty to learn all of the moves from each other. So while you may know a lot about a lot, and while we are all learning and not immune to all mistakes as investors ----- we should know when to run the play that's called and know when to audible. This was an audible moment. It's great that we can partner, but someone half-assing their education and thinking they know the risks when in fact they dont is what gets you killed. You, Pace, obviously can sustain a loss. You obviously can sustain less profit. You're mentally ready and have weathered the storm. But MOST of your students and following have not, are not, and will not be ready for YEARS. Most of them you will never hear from..most of them will never speak up. Not in a zoom. Or any public forum. You'll have anomalies and that will give your following some inspiration, but the thing that everybody reading this NEEDS to understand is that most partnerships end, and single family assets rented via a long term rental making $100 per month cashflow and then sustaining a $10,000 loss from damages and repairs without having proper insurance will take you 3 to 5 years to recover from. And most wont be around because that first loss scares the life out of them. Learn techniques to make money. Lease Option Assignments and wholesale assignments/double closes. Never lose your own money. It is ok to INVEST your RESERVES into your own properties, though ONCE YOU ARE MENTALLY PREPARED. I want to see people succeed. The reality is though --- you're giving people the keys to a rocketship when they don't even know how to get over their fear of getting on the phone. They need to become an expert of making money with no money before they take on the risk of ownership. It's literally going from elementary to the pros. But in wholesaling and lease option flipping the difficulty level is far easier. And the momentum in this business is absolutely everything. You need to be liquid to sustain ownership on your own. 10 to 15k in reserves per single family asset until you get to a large enough portfolio where the portfolio can actually sustain the losses a bad tenant will bring, and those can happen to anyone. I've found that number to be 50 units. Learn to make money with no money with no risk. Then --- when you have a little bit of money keep building. No one should be becoming an owner until they are highly sophisticated (an expert) in how to asset manage. As an inexperienced investor with little to no guidance(most people half-ass their education and never ask for help) you have no business and no right to take money from a partner who also has half-assed their education. It's the blind leading the blind. Do not do that. That would be very, very bad. I say that because I care. I want to see more people win so they can help more people. But you have to make sure you take the education piece seriously. Because if you dont do it you are CERTAIN to fail. And that certainly makes no sense. And if it doesn't make dollars it doesn't make sense. So the counter is learn to make a lot of money with no money. Assign your deals. Sell your deals. Do not partner if you are afraid to speak up. Do not partner in a financial sense if you haven't become an expert of understanding and an expert of practice. It is Ok to partner to split the cost of marketing or on a course of some sort - but only spend real money on your education. You can tell if you're an expert when a question pops up and you dont have to look it up OR second guess yourself. You just know and you're absolutely certain that the answer is correct. Mastery is an expert who has practiced for several years with an incredible amount ofsuccess. Very few can call themselves a master.

[@juliansanchezbiz]

@@michaelbatista2869 Great point but under a Novation agreement you cannot refinance... That's why it's better to do executory contracts

[@southbaywireless]

1sttttt 🎉