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Wholesalers are either sinking or swimming. Today, many wholesalers have to pass on deals they otherwise would have gotten because of stricter regulations from the banks.

But not all wholesalers are falling victim to the bank’s strict regulations. All you need to do is set up creative financing that gives everyone a win.

Today, more than ever, it’s easier to get sellers and buyers on board with creative financing options.

In this episode, Zach Beach, Amazon Best-Selling Author and coach at Smart Real Estate Coach, joins me to discuss how to leverage creative financing to put more deals in your pipeline.

Here Are The Show Highlights:

  • The “2008 Secret” for building a truly recession-proof real estate business (2:20)
  • How to triple your real estate business (even in the middle of a Crisis) (2:49)
  • The trick for buying properties — even if you don’t have good credit or 6 months of reserves (3:31)
  • Why Banks will bankrupt your real estate business (5:39)
  • The biggest rookie mistake investors make that’s costing them a boatload of moolah (6:27)
  • Why bigger, more expensive properties are much easier to deal with than smaller, cheaper properties (6:45)
  • How to create massive wealth on the backend of deals (and hedge your bets at the same time) (14:06)
  • The “S-word” that always leads to high profits — regardless of the type of property you buy (20:22)
  • How to transform $1000 a month to close 1-2 wholesale deals every single month (21:25)

To grab your free copy of the Amazon Best Selling Book, “The New Rules of Real Estate Investing” head over to http://NewRulesForFree.com.

If you want to set up a 15 minute strategy session with Zach and his team, book your meeting at http://SmartRealEstateCoach.com/Action/. Or if you want to learn more about Zach’s work, check out his YouTube channel at https://YouTube.com/SmartRealEstateCoach.

If you're ready to put the power of wholescaling to work for you, then head over to https://JoeEvangelisti.com/downloads to get your free “Business In A Box” downloads.

Or if you're a true action taker, ready to blow the lid off your results. You can apply now to work with our team to build the business of your dreams faster than you ever thought possible. Go to http://realestatemoneymindset.com to apply and change your life.

Do you want to become a successful wholesaler and help support the show? Then, share this with two people and go to wherever you listen to podcasts, subscribe to the show, and leave a 5-star rating and review. We will pick one of the top five star comments and give away free swag and goodies.

Read Full Transcript

You're not a rookie real estate investor anymore. In fact, you're probably doing a small handful of deals each month, but you're killing yourself to make it happen and to top it off, if you take time off from your business, you don't make any money. That's because you don't have a real business, yet. We're about to fix all that. If you're a can do action taker, the whole scaling podcast will teach you the tips, tricks, and systems you need to generate massive revenue, build your team and give you the financial freedom you've dreamed of in any market in the US. This is WholeScaling.

(00:43): An exciting guest today on the show, Zachary Beech is joining us tax, got a background in creative financing, subject to purchases, all kinds of good stuff, and the best part about it. I think this interview, we had a brief conversation before hitting record here, I think is going to be that being able to do it in today's environment, right? Scaling and growing a business in today's environment and some creative methods that I think that our listeners will be able to get on some takeaways that we'll be able to get them, to help them launch different pieces to their business. Get more creative, get more substantial with what they have going on in these Corona times, right. And be able to help scale. So welcome to the show, Zach, I appreciate you being on them. Hey Joe, I'm excited to be here as always excited to bring your audience some great value, especially in today's society.

(01:28): We need to talk to positivity. We need tactics that work right now in order to be able to, you know, build businesses, create profits and be the successful ones. So that way, when Corona ends, we come up the other side in a better position than we went in. Love a man I've been saying that for weeks. So let's just, without even Joe, just jump right into it. Like what's working now that maybe wasn't working as well, six months ago that your clients, your, your mentor, your mentees are able to go out there and crush. What angles are they taking? That's helping them advance themselves. Yeah. So you actually had my father-in-law Chris on here about a week or two ago. So he covered a lot of the basics. So of course recommend you go back and take a listen to that as we'll dive into some more nitty gritty right now, but buying and selling on terms.

(02:13): So that means we don't use our own cash. We don't use our own credit. We don't ask investors for money. So we buy a lot of properties on contracts. And what we then do is we sell properties typically through a rent to own program, or we can enterprise it depending on the type of deal we structured at the beginning with the seller. So this business was built after LOE. My father in law got crushed in Oh eight and he said, Hey, I'm never going to sign personally. I'm not going to overleverage myself and I'm not going to go to Bex. So what we do is we structure this entire business around that. So that way it could be recessive resistant. Of course we'll be recession proof, recession resistant. So this type of business has worked very well during the current climate, which means like when we were climbing up to now, because markets of, for mostly appreciating and now with coronavirus and things, starting to kind of tip off the other edge, our business has accelerated.

(03:06): And actually over the last 90 days, we've tripled our business as far as deals, both us and the associates or the students that you alluded to. And that is for a couple of different reasons. Well, number one, if we don't go to banks and banks right now with one of the main bottlenecks for people to be able to buy houses and then eventually sell because they've tightened up their basically their requirements. Most people now need a seven 50 credit score. They need roughly 20% down, especially on jumbo loans, which we could cover on that, which is very niche down as well. And they need six to 12 months in reserves. Well, I don't know many people that have all of those qualifications. You have to be pretty much perfect. So as soon as base tight non buyers, now there's less buyers out there and now sellers sit on the market significantly longer. So now sellers looking for solution. So right now just our techniques are taking away banks, taking banks out of the picture. And that way we could continue to do transactions with both buyers and sellers stay offline. And that's why the business has accelerated because more and more people need creative solutions.

(04:12): I love it, man. You said a mouthful there, but there's a lot of takeaways, just small ones. Like one is video, the bank being, you know, the hindrance to getting deals done, right? Like people think of banks and times, and I'm like, Oh man, you know, it's going to be easy. It's going to, but the restrictions are changing and they're changing rapidly. And even people that are doing volume with banks are getting pushed back. And that happens in every time when there was an economic crunch. And I think people rely solely on banks thinking that they're going to be recession proof. And I had lines of credit and I have a great loan officer. And until things change until they're so they're available until they're not available. Right. Nothing's set in stone on that side. Yeah,

(04:47): Absolutely. I mean, I just was on a podcast last week and work and it was on a multifamily. So they raised a ton of capital and they use banks and he said, you know, I'm actually, it's been more, it's been harder and hardest for us to do deals because a lot of the banks now are making it way more restricted for us to be able to buy these properties. So now somebody that actually has a large amount of assets that can no longer be able to acquire properties, even though they've proven themselves. We had an associate of ours that also he buys itselves on terms, but also does fix and flips. And he had one of his credit lines pulled from, so he can't do as many fixing flips Z as he likes. So his business just dramatically changed because now he has to either go look for hard money loans, which are going to be a lot higher and interest and pay a lot more points or he could buy more properties on terms, which is what I continue to suggest to them. But people's businesses completely change if they're relying on banks.

(05:43): Now you said something else that I love. And I want to point out too, because I want to get deeper into it. I think it's funny. I think you're fine. Well, I mentioned that, I think we talked about this very briefly a couple of weeks ago, but the fact is that most people that I find, I mean, we coach wholesalers all over country. We have operators and partners all over the country, just like you guys do. And I think it's just a psychological thing that when we get into higher priced homes, jumbo loans, like you mentioned, things like that, it's just natural to be a little bit more intimidated for some reason. However, I find that some of the best deals are in the bigger loans, the bigger deals, the bigger value of property. Right? So talk about that jumbo piece a little bit. You guys buy on terms, any different that goes into a jumbo loan than a traditional, our conventional loan or an FHA.

(06:27): Yeah. And I do want a second. Like when I first started making phone calls and finding properties, I was always timid and not calling on the higher end properties because I'm like, yep, they're going to think I'm of an experience, whatever, but the truth is that what I found and this isn't always, but what I've found is that people that have higher priced homes are more open to creative financing because they understand dynamics of money. And typically it's a second home or they have other resources. So they don't need to use all of the equity out of that property in order to go buy another house or it's going to be a lot more fluid. But what we've noticed over the last say 90 120 days is that jumble loans are few and far between now. So you have in the qualifications of a jumble loan are significant.

(07:15): Like I was alluded to earlier seven 50 credit score, six to 12 months in reserves is pretty insane. Plus 20% down, it starts to get crazy where you have like one to 3% of people that can actually do that. So it takes a lot of the people that were on the fence. There were originally a large pool of buyers that were on the fence now are eliminated. They can't even go qualify for that loan anymore. So what we noticed now is we have these high end properties that are sitting on the market because they don't have the buyers. So we now are calling and contacting these large homes and saying, Hey, you, you don't really have many buyers that can qualify for you. But what we can do is right now, we could help one of our potential buyers. Some of that self-employed need seasoning.

(07:59): Someone who just needs a little work on their credit, maybe as a seven 20 credit has six months of reserves instead of a seven, 15 as four months. And as a large down payment. And they just need some time in order to work on one of those three aspects and you can sell your property for, you know, market value. You'll have a buyer on the property, they'll have significant skin in the game and we can help work with them and get them to a point at which they can qualify. So right now you have nobody in the traditional market, but right now we have a large pool of buyers that could get you to the finish line, as long as you have some time and have the ability to wait for the large majority of equity. I like it. So you're actually getting motivation on both sides, right?

(08:36): I didn't think about it that way when you first mentioned it, but you're getting motivation on the seller side because the traditional buyers just aren't out there. Like they used to be. So there's less of them in the pool and it's harder for them to sell their more higher priced houses. But then on the buyer side, you're also getting motivation because those people are almost qualified, not quite there, but they're financially stable

(08:56): Enough to take down that property. So you're putting them into a rent to own type of concept, right? Yeah, absolutely. So you are good but buys that may and even need like six months, right. If somebody is like, has, I don't know, 15% down, they're just like, Hey, if I just get my next bonus from my job in the next six months, and I got 20% down or I'm sitting at like a seven 30 credit score, and if I just go through one, maybe two rounds of credit, 12 months later, I can qualify for this house. So it's just, you're taking so many buyers that were literally on the fence that they were shifting towards. They could get traditional financing to now they're shifted off of it due to the banks. So now they just, they're looking for alternative options, which then has that same effect on the seller.

(09:35): They just, they can't sell the properties as quickly. Of course this is very market dependent. I mean, if you're in like LA or DC or, I mean, I don't want to go on to say New York city, cause that's a hot bed right now, as far as coronavirus, but there are still markets that are very hot and are architecting to move forward. It's just, there's still, even in these hot markets, so many opportunities to be able to help out more buyers, more sellers. So our typical listeners are real estate investors. They're either doing wholesale or they're trying to get into wholesale. I look at this as a different, you know, ancillary kind of related business that they could be speaking to the seller, speaking to their buyers with to make those connections. How do you advise people to get started? If say they have some experience in doing transactions and now they want to implement these terms offers and stuff like that.

(10:20): Yeah, I think it's perfect. I mean, if you're already used to doing wholesale, you're outta used to contacting people, speaking on the phone, doing marketing, things like that. And most actually most wholesalers have a significantly larger marketing budget than we even recommend. I mean, we spend less than a thousand bucks a month and acquire now typically four deals in house and another 30 plus around the country. But if you're already used to the phone skills, that's where usually the biggest hump is. So I bet you that if you're listening out there and you're already doing wholesale deals that you have thrown away, a lot of deals that you could potentially do, creative financing. For example, you talk to somebody and they're not willing to take 60 cents on the dollar and their property, but would rather get full price on it and have the ability to wait for their equity.

(11:07): Maybe 24, maybe 36, five years plus, but they'd rather get their price instead of taking less. Well, now you have the ability to offer alternative options, which now creates I'm sure Chris talked about this, but now that creates three paydays for you instead of getting paid once from a wholesale deal and you get paid three times the nonrefundable deposit from the buyer, you collect monthly cashflow in backend profits, which is the principal pay down in the markup. So now you as a wholesaler, have the ability to be in multiple niches at the same time and what we like to call transactions veneers. So now you get a deal that comes across your desk. You have multiple buckets, it could go in and instead of throwing that deal away, throwing cash away, you can still do play all selling deals. Just you, if you added like every four or five of these deals, do your repertoire. You can build a nice portfolio, nice cashflow and create a really nice portfolio of the next five to 10 years. Yeah. You know, I talk about wholesalers is having a toolbox, right? Like you gotta be,

(12:04): You gotta be solution oriented. And the challenge is a lot of times, you know, it's hard to figure out what the problem is in order to create the solution. That's number one. But once you figure that piece out, being able to offer multiple options on the backside, I've found historically is going to be way, way better than just a traditional, Hey, here's a cash offer. Here's a retail listing. I think this is just one more tool that a lot of folks don't even think about and they could add into their arsenal. Does the house have to be in great shape? Do you guys buy these properties that need work sometimes on terms and how does that type of thing work?

(12:35): Yeah, so they run the gamut. Our properties, majority of them are nice movement, ready homes. They typically don't need a lot of work, but we have bought in plenty of properties that we call a handyman specials. So we'll buy the property and a, a fair price or a little less than retail. And then what we'll do is we'll sell the property to a tenant buyer with the intention that they're going to be putting work in the property. So that way they can receive equity as well. But they'll put the work in the property. We're not spending the money to do it. They do the upgrades, they do everything. And then they eventually go qualify for a loan. So as you said, it is definitely a solution as game it's, it's figuring out what the seller's problem is, and then provide a solution. And then same with a buyer, a buyer, that's a contractor self-employed as well. And to put in the work them more than okay, of buying a property that they get to put some sweat equity into I in order to qualify for their loan. So you can find some solutions through a lot of different, a lot of different ads.

(13:32): I love it. I mean, I feel like it's almost the ultimate solution is tool. I think it's next level for a lot of people, as far as being able to get all the moving pieces together. But I think once it gets done, people understand that you're getting paid up front, you're getting paid monthly, you're getting paid at the end and it creates just a nice, almost like an annuity type of you know, program for people that are in an investment business.

(13:53): Yeah. We're all engineers. We have only been talking about like one of our techniques to have you start diving into owner financing. We're taking title on the property and the seller is holding the note. And primarily we niche down even further into owner financing. And that's, we typically buy properties that are free and clear this way and are getting principal only payments on the house, not interest only principal payments. So you're creating massive amounts of wealth on the back end, but also hedging your bets against these types of environments. So if you get five year owner pride to deal with large principal pay down, if the market shifts you're still okay, because you have so much leverage against the market. That's where all of these different little techniques that we put into play are going to create a great portfolio that you're going to have. That is very resistant. I guess, most markets,

(14:39): I know I'm going to put you on the spot here and but give us a case study, give us something that you've done recently, give us some numbers on a deal like that, where, you know, you guys have done seller financing with principal, pay down and had the conversation go

(14:52): And you know, how did the seller, you know, what type of seller were they, was it an investment property or a primary home? Like give us some examples of one of those things and the reason I'm putting you on the spot, Jack, that goes, I think a lot of our listeners truly, and this gives you some time to think, but I think a lot of our listeners truly think that some of this shit is smoke and mirrors. And some of it is like, it's a unicorn thing that it could never happen. But I mean, you know, I have fallen into these side deals throughout the years where, I mean, I own eight duplexes in class, a town, 10 miles from here where an old guy met me on the scene. We looked at the properties and I just, I basically said to him, what would you consider being the bank?

(15:26): His and his response to me was what our bank rates today. And I said 4%. And he said, yeah, I would do that. So we have hundreds of thousands of dollars of financing with this guy, his entire retirement portfolio for almost 10 years now, we've had it at 4% interest, which I thought was a steal. But you're saying to me, you've got principal pay down with zero interest. That's correct. Yeah. Yes. So walk me through that. Walk us through that. Sure. I get why you asked this question because we get this all the time. Like why would a seller ever do that? And then the truth is you found a solution. You provide the solution to their challenge, and you just happened to create terms that allowed you to be profitable as well. So an example in order to finance the deal that we did, I was speaking to a seller.

(16:10): He lives out of state he's over in Indiana. And we bought this property in Connecticut because we're over here in Southern Rhode Island, Southern new England, mid to Rhode Island. And this was a family home that they've had for about 20 years. They decided because of a family event that they were no longer going to be coming back to Connecticut, probably don't want free and clear. It's like a $400,000 hall. I believe that's exactly bought it for about 400,000 or three 99. And we structured a thousand dollar principal only payments on this house because what happened was this Connecticut there's large taxes originally. I think we were sitting at like 1800 a month. And I said to him, Hey, I don't think I'll be able as credit spread on this because the taxes are so heavy on this. So he responded back to me and just said, okay, well, what's it going to take in order for you to be able to create a spread on this property and want to be able to buy this?

(16:59): And I said, a thousand dollars, I said, okay, so thousand dollars principal or banner. So a thousand dollars a month comes off of that purchase price every single month, we then close on it typically. And in this case we did as well. We paid a transfer tax because it's hard to go to a seller and say, I want to get a principal and payments. I'm going to put no money down on this house. And then you're going to pay the transfer fees. So we've made the transfer fees on the property. We then took title on the house. We then placed a tenant buyer in the property. And actually there's another twist on this, but we placed a tenant buyer of the property. This is on a Lake, it's in a nice town. The buyer at the time was self-employed, just needed time in order to become seasoning, put down $20,000 upfront.

(17:40): And eventually it would collect about $60,000 throughout the process. And then we're able to create a spread of roughly a $500 a month on that. So I don't have all the numbers in front of me. If you do go to, I can tell you this, if you do go to smart real estate coach, a YouTube channel. So YouTube slash smart real estate coach, we have over a hundred deals, structured Sundays, over a hundred of that. So you can go and take out so many different deals. I believe this was labeled as like Lake view. So go check it out. So we placed a tenant buyer of the property. This deal is going to have over six figures, as far as total profits. Our rule of thumb is if the properties at least 48 months, which this is a 48 month term with a balloon payment of 48 months, if it has at least a thousand dollars principal only payment.

(18:27): And if the property is over 199,000, you're going to get six figures on this deal. That's our rule of thumb. So the cool thing about that aspect is so you sold off the house. Actually, we had a secondary suite over our garage and at the time we actually inherited the tenant. Who's a family friend. So we're actually able to create an additional $700 a month cash flow because we kept the tenant in the property. We sold the main house on a rent to own. And once the tenant buyer and be used as a carrot, once the tenant buyer reached a certain amount of nonrefundable deposit, they would then be able to inherit that tenant or take up the entire property. So they could either offset their monthly payment to us, or they could you know, bring a family member and it took up the entire property.

(19:15): So really Karen it's easily, I think it's a $130,000 deal all in if it goes the full 48 months. So it sounds like to me, there was like five people that won that, right? You got, you got a tenant buyer, you got a tenant over the garage. There's you guys the sellers. I mean, so I mean, you're creating opportunity for everyone involved, which I think is one of the big plays that people miss is like, how do I create a win, win, win structure? Like the buyer, the seller, if it's a wholesaler, you have to win. If it's you're buying on terms, you have to win. You just given us a good case study of somebody where everybody wins. Everybody's happy at the end of the deal and you guys made money. I always say, so our deals in Southern new England are roughly $78,000, all three pages.

(19:56): So if we get a property under contract you're on average going to be roughly $78,000 in all three paydays. If you look at us nationwide, you have a low of $50,000 in the lower end areas, and you have an upwards of $250,000 in some of the higher end areas and the hot markets in California and DC and Florida and New York. So these are a wide range of profits, but they always say we're able to create great profits on these deals because we're able to find solutions that most others can not create. So if you can create solutions to people's problems that most others can't, that's why you're able to create these massive three betas. I love it, man. So you see guys got the solution piece locked down. What do you do for marketing on the front end? Are you guys doing direct mail?

(20:43): Like how are you guys getting these sellers to talk to you to begin with? Yeah, they all, we're actually, the funny thing is everybody thinks we have like this magic pill to attract sellers. We're working in the same pond. As most of you guys are expired listings for rent by owners for sale by owners. We do some niche lists, but especially if you're first getting started the business, we don't recommend that you do direct mail. Cause that's always the most expensive way to do it. We're primarily acquiring leads through having VA's make outbound calls or the investor making outbound calls or using some technology like freedom soft in order to do text messages, emails, and some frameless voicemails as well. Of course know your state laws and all that as well, but the super low that's what I said at the beginning, like a thousand dollars a month, as far as overhead before you decided to scale of doing a deal and a half to two deals a month, it can be about a thousand dollars a month. And then from there you can make some key decisions about what you want to bring in and different marketing aspects like Nick's list.

(21:41): There you go, man. So I think a lot of, a lot of listeners, you know, they think that again, there's a magic pill, there's a magic bullet there, secret sauce. There's push button success. When you know what you're saying is you just got to do the fucking work, right? And at the end of the day, they're going to find their marketing the way that most of us do firearm marketing, this is just a different you know, again, tool in their toolbox to have a conversation with the seller to try to create opportunity, right?

(22:04): Absolutely. I mean, I'm not a superhero or associates that does a bunch of deals, not heroes either is Chris. It just, we follow a very specific system that works. So if you implement the system and do the work and have the right expectations saying, all right, create a financing, you know, bias on your terms is new. It's going to take time in order for me to acquire the skills. So as long as I have the right expectations in order to implement the system, then you're always going to win. We're a huge fan is when we say expectations are, I'm going to dedicate three to five years this. So if you're in the wholesaling business right now, so dedicate three to five years to adding this to your wholesale business. Because I mean, if it took you six months or a year to create $75,000 worth of three pays, I'm going to pay you not only now, but monthly. And then over time, I mean, it's just putting the work in and you're definitely gonna reap the rewards. It's just depends on what

(22:59): I love it, man. Zach, you brought massive value today. What did I forget to ask you?

(23:03): Maybe how to get ahold of me? There you go.

(23:06): Tell the audience how they get ahold of you and where they find your stuff. There's a couple of places

(23:09): I'd love to give out and throw these in the show notes. So I know we, we threw a boatload of info at you. I'd love to get you a free, that free book that we talked about. Amazon bestselling book, just go to new rules for free.com. That's new rules for free.com right now during Kobe, we're not shipping books. So we can go ahead and get it to download right there. And then of course you can find it on Amazon. Both are Amazon bestselling books. If you want some time, I'd love to chat with you or Chris would be happy to hop on the phone with you. I just go to smart real estate coach.com/action, smart real estate coach.com/action. We'll do a 15 minute strategy call with you. It's just six simple steps that to book that call and that way we could point you in the right direction and answer your questions. Awesome stuff, man. Well, I appreciate you. We'll have all that stuff in the show notes. If you guys want to reach out to Zachary directly, you'll know how you have the links deck. Good stuff, man. I appreciate you being on the show. Thanks Jeff. Absolutely.

(24:04): If you are ready to put the immense power of whole scaling to work for you, then head over to Joe evangelists.com/downloads and get your free business in a box download. Or if you're a true action taker, ready to blow the lid off your results. You can apply now to work with our team, to build a business of your dreams faster than you ever thought possible. This call costs $500 to weed out the tire kickers, a mental masturbate, a feed. The real ballers will make back many times over on the first deal. Even if you don't get selected to work with us, you'll get a full year of access to our private coaching group, a $1,200 value and a 30 minute coaching call with Joe. So you win either way, go to www dot real estate money, mindset.com to apply and change your life.

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