Good morning, everyone. What is going on? It is Nathan Payne. Other people call me real estate Nate and I wanted to talk to you guys today I want to hit you with the truth, okay? Because a lot of the times real estate investors, gurus, if you want to call, I don’t believe I’m the guru, but a lot of influencers paint real estate as like beautiful, there’s nothing wrong that could ever happen. That is absolutely not true, especially since the market shifted. And I wanted to be completely transparent as I always am with you guys, let you know how I just lost $26,000 Okay, that sucks, and it hurts. And I want to tell you how it happened, why it happened and what the heck you can do to never let that happen. I lost $26,000 on a subject to deal now everybody paints subject to is some great thing, and it is good. But if you do it wrong, you’re gonna get rocked like I did, okay. And I was riding on the coattails of believing that the market when I did this deal was going to continue to stay at least stay the same. But because of where we are in Utah, values of properties have plummeted. And a lot of people are getting rocked. And that’s just what the sad reality real estate is. Am I in a bad mood? Heck, no, this is what happens. I know I’m going to make millions and I’m going to lose, hopefully I don’t lose millions. But that’s just what’s going to happen. Okay, like when you’re in real estate, when your business bad things good things happen, you have to mitigate those issues and hope they don’t happen. But that’s why I’m making this video is to tell you guys what I did wrong, and what you can do, so you don’t have that issue. So this was a subject to deal. And I want you to know that by the end of this video, you’re going to know how to do a subject to do and how to make sure you do it right and make sure you don’t make the mistake that ended up costing me $26,000. Now I’m not like done with this deal. I’m not giving up because I think there’s some things you can do. But I’m just gonna give you the juice to give you the truth on what happened. So stay tuned, because you’re gonna find out exactly what is a subject to deal not only what a subject to deal is how to structure it the right way, how not to structure it, how I did, and you know how to protect yourself and I’m going to explain my situation of what I did wrong. So stay tuned. Okay, I’m not going to take too long, but I’m going to give you give you the juice all right
so first of all, what is subject to Alright, so creative financing is a way to purchase properties, a subject to is when there’s an existing mortgage on the property, instead of you having to go get a loan out, you just assume and take over the payments of the mortgage, the existing mortgage that someone has, okay, that’s what this deal was. I was negotiating with someone around March April time period and eventually went under contract. And like may or July, June July, okay. Like right before the ship happened. Okay. So I negotiated to take over his mortgage payment. All right, and that was fine. Alright, and I’ll explain a little bit more of the deal that’s subject to create a seller carry back or seller financing is when the seller owns the property outright. And you just make payments to them. They had a mortgage on the property. All right. So that’s what subject to is. All right. If you need more clarification, hit a chat box g bt PT. That thing will tell you everything you need to know or just Google it. So how do you structure a subject to deal? Well, you want to be able to structure it so you can take over the payments and that you can rent out the property for more than the payments are or sell it to someone else. And you can cashflow you want to have a long enough term. Sometimes this is where this has bitten me in the butt. But it hasn’t until now, you know, they say when you’re doing a subject to deal you need a real guys that have done it for a long time. They say you need at least five years. That’s what they say they’re like, Dude, don’t do anything less than five years do five years. That’s what you have to shoot for. I know, we all can’t get that. But that’s what they say. So long enough term, at least five years. So you don’t get caught in a bad situation like I did by not having a long enough term, you want to make sure the purchase price, I mean, the purchase price is whatever as long as it makes sense. But the payment whatever interest rate the down, it’s not the people usually say to put less than like 10% down on a substitute or nothing. So I put down probably about like 8% on this deal is like 20,022 Plus closing costs. So it turned out to be like 26. So that’s kind of how you structure it, you make sure that the payment that you’re covering is low and that you can rent it out for more that the term is fine that you know you have enough time to do a balloon payment if that’s necessary, and not a lot down. Okay. So that’s how you structure the deal. But before I move on to my next point, I want to let you guys know that if you go over to investor dr.com Right now, you can get all the resources you need to do a subject to deal I have all the contracts available in our mind map for lease options subject to creative seller, finance, anything you want. It’s all there and I give it away for free. So this is how not to do it. Let me explain the deal. And this is how I got rocked. Alright, so I was talking to the seller and there’s red flags from the beginning, but I kind of just pushed him off because I trust people when people say they’re going to do something, I trust it. So I was talking to this guy when he was telling me hey, I’m a contractor. I want to flip this house but I don’t have the money and I was like okay, well I can buy your house subject to I’ll give you the downpayment that you need to use towards putting to the house and then once it’s fixed up, we can sell it and anything above a certain price. Let’s split Okay, I’ll was trying to be fair. So the house at the time in Utah was worth about 600,006 2600 to 620,000. In its current condition at the market, it was like 550. So I bought the house at a purchase price of 520. Because I knew that if the guy didn’t do anything to the house in the market stayed the same that the House would probably be able to sell for, we could list it for like 515, we’d break even if he didn’t do anything, right. That was kind of my bet, because I knew the ARV was like 620, we had enough space in the house needed, you know, not that much work other than he needed to put the money in. So he was like, Look, just give me the money down. I’ll put it into the house, when you take over subject to you, you own the property. But the issue that we had here is he stayed in it because I believed that he was going to fix it up. And I said, Okay, fix it up. How long is it going to take? You said, it’ll take me two months. I was like, Okay, great. So you fixed it up, we’ll give you the money. And then you’ll move out. And once you move out, I’ll give you some other I’ll give you another down just when you get out incentivizes you to get out. So once you get I’ll give you a little bit of down and then we’ll list the house and he gave us like another three months. So we have like a five to six month balloon period. Terrible idea. Terrible idea. We’ve done it before in the past, and it’s worked out this did not work out in our favor, because because what happened in the shift, and because of what the seller did and how I got screwed. So what happened is I gave them the money down, purchase the home and the guy took the money. And then we followed up with them were like, Hey, are you fixing up the houses? Again? I’m working on it. So it came up to two months when it was supposed to be fixed. And he needed to vacate the property. We go and see the house. Nothing’s done. Okay. Is that a surprise to you? It shouldn’t be. But I’m going to so it was a surprise to me. We were checking in one of my employees. I wasn’t even looking at this deal on which I was doing other things. He was like he was assuring me that was going on the guy lied to all of us. And we just didn’t check. That’s terrible idea to when we signed the guy we had a scope of work that he had to complete for this to make sense. We told them and he signed what he said he was going to do he signed it didn’t do anything he said he would do two months is up. And now it’s time for us to give him his balloon or not balloon but the other down for him to move out. He’s like, I need that other piece of money. Because it’s been two months. But I said you didn’t do anything. You didn’t fix up the house like that the contracts void, like you’re not getting another down when you use the down that I gave you not towards the house, but you bought whatever the heck you bought with it. So he’s all upset. He’s like you didn’t give me my money. I’m not moving out. So luckily, we’ve had him sign a lease agreement. So he was a tenant and we can evict them guys. I don’t know, I just feel like, I just feel like I didn’t feel right for some reason to evict them. I mean, he had no money. I know he rocked me. But he didn’t have any money to move out. And I was like, I just felt bad. I mean, I knew the market shifted, it wasn’t our fault that you went from. It wasn’t his fault wasn’t my fault that the market went from the ARV being 620 to literally like going to like five like 520 like that was the ARV. So I just struggled with wanting the victim. And that’s the thing. If you guys are going to do a deal like this, you got to evict the person and just be like, Hey, this is what’s going to happen. If they don’t move out, I will never do a subject to deal again, where they stay in the house. Never ever ever again, if you want to do subject to you vacate that house, and then we close because there’s too many problems. This is already this has happened once before, where I’ve trusted people and they say they get out and they don’t. And it’s very frustrating. So don’t do a subject to deal where someone stays in the house because the eviction process. It’s messy, because they’re on title. I mean, they they look like they wanted to there’s just problems. Okay, that’s a problem we had for some reason, I did not feel good about evicting the guy when I could have what happened is, you know, the balloon period came up, we were trying to figure out ways we actually listed the house for sale on the MLS. But unfortunately, all the offers that came in, were in the guy wouldn’t let us show the house really either. So all offers that were coming in without really being able to see it were way lower than what we technically owed on the property. So the guy took the house back because the balloon period, I don’t know, I don’t know if it’s a foreclosure or whatever, he just recorded a deed of trust. And now I don’t own it anymore. And I’m out on the $26,000 that I gave. So I look at the situation and I gave money to someone that said they would do something, they didn’t do anything. And they got the house back. And I’m just sitting here like, well, there goes my dough. And it’s frustrating. And it was a mistake I made number one don’t trust people that say they’re going to move out of the house. It does not happen. I’ve done this many times on wholesale deals and half the time I say 90% of time they do not get out when you they need to okay do not trust people. Number two, do not do a balloon period, that’s six months a year, it’s not a good idea because the market can shift I mean, we were riding on the fact that it would stay at least the same. It’s not how it is properties have plummeted or dropped in Salt Lake to like 100 $200,000 on upper like higher tier properties are like that are more expensive. Okay, so get a longer bloom period, the payments luckily we didn’t make have to make any payments on the property because he was staying in there and that was the agreement. He had to cover the mortgage while I stay there. So he stayed we didn’t make any payments. The only thing that were out was the down and I would do way less than 26 down. I thought he was gonna To put into the house, so we would have an asset that was like improved, but he didn’t do anything to it. So having someone sign a scope of work doesn’t do a dang thing. We took this to an attorney. And he’s like, Well, your contract says that it’s a you purchase it as is. But there’s a scope of work. So we’re like, Well, yeah, that’s why we put the scope of work in there. Another thing is, if you would have fought this and sued this guy, first of all, suing people is very, very expensive. Okay, I know, one of my buddies dad was was in a lawsuit for two years lost, and he’s out 50k. Okay, so you don’t want to get in a situation where you’re suing someone on a contract that you believe was well written, that someone can interpret and be like, That contract sucks. So anyway, I think it’s important to give you guys the truth, I think I’m fine. Like I’m not upset by any means. It’s a learning experience. Like I said, I’ll make millions and I’ll lose some along the way. That’s just how it goes. But you can learn from my experience, and don’t do subject to deals or creative financing deals where the person stays in it, they will have problems, be ready to evict them if you do if they do stay and don’t decide before like for me, I was just I didn’t know where he was gonna go. And I didn’t want to do that to him. And I felt like the market shifting was not his fault, even though he didn’t keep his end of the bargain. But I’m still going to reach out and say, hey, look, this is what happened. We’re going to pursue this and we’ll see what happens but very, very interesting situation. I thought I’d be way more upset to lose that type of money but something in my heart something inside me it’s like hey, look, it’s it’s all good. Like this guy is going to have to live with the fact that he took your money didn’t do what he said he would do and then took the house back and thinks he’s he’s in the right so anyway, wish everyone the best.
