Ep 171 - Our Journey Episode 3 - 12 Ways to Buy & Sell Real Estate

Our first deal as Realtors took us eight months. We were pretty much burning through our savings that we'd built up over the years. That is when we looked into real estate investing. We took a class with a local real estate investor. Out of the strategies presented we chose short sales and mortgage assignments. The reason we chose those was mainly because of the time of the market plus those strategies required no money and a lot of time and we had both. They were the game changers for us. Listen in and find out what were the pros and cons of short sales and mortgage assignments.

Download your Free Private Lending Report here: www.freedomcapitalinvestments.com/lending

Download your Freedom # worksheet here:  www.freedomcapitalinvestments.com/worksheet

Click on the Social Media links below and listen in on our Private Group Conversations about how to achieve Financial Freedom through a consistent pipeline of passive income investments:

https://www.facebook.com/groups/freedomthroughpassiveincome

https://www.linkedin.com/groups/14048250

—————————————————————————

Some of the pros of this part of our career in real estate were:
1) These two strategies that we chose, there was no money out of pocket, except for actually running the business, and it was the right strategy for that time in the market. 2008 was just prime for short sales and mortgage assignments.
2) Mortgage assignments were very fast compared to short sales, and it helped avoid foreclosures on the market, so it helped the areas in which we were doing this strategy.
3) We were able to get the fee for our services.
4) the sellers they're not leasing the property so they don't have to do repairs. 

Some cons were:
1) Short sales are very, very long play
2) another con is it's dependent on lots of bank guidelines, delays, approvals, red tape, etc.
3) For the mortgage assignment, cons on the seller is now dependent upon the buyer performing
4) The risk of possibly triggering the due on sale clause

Join our groups on Facebook and LinkedIn.

https://www.facebook.com/groups/freedomthroughpassiveincome

https://www.linkedin.com/groups/14048250

www.FreedomCapitalInvestments.com

Invest Smart.  Live Happy.

—————————————————————————

 Connect with us here:

FB personal pages
https://www.facebook.com/Flipster
https://www.facebook.com/dani.lynn.robison

LinkedIn personal pages
https://www.linkedin.com/in/fliprobison
https://www.linkedin.com/in/danilynnrobison

Instagram personal pages
https://www.instagram.com/fliprobison
https://www.instagram.com/danilynn23

TikTok  personal pages
https://www.tiktok.com/@danilynnrobison
https://www.tiktok.com/@fliprobison

Transcript

Hey everybody! Flip and Dani here, founders of the Freedom Real Estate Group Family of Companies like that. Yeah. Flip and Dani here. I think everybody's fine with your normal intro. I'm not. We’ve done 160 of these here. I'm kind of trying to be a little fresh here, but it's not working. Anyway, I'm just going right back to my normal. Anyway, welcome to another episode of our podcast and our podcast is called Freedom Through Passive Income. There we go. 

Welcome to another episode. And this is a part of our series. This is a 12-part series and this is number three of our journey. And this one is called 12 Ways To Buy And Sell Real Estate. And this one, I really liked this because this is what changed. This has changed, this is what changed the game. Yeah. And so obviously, we're going through this 12-part series, this is number three. And we've already talked about what we did before and how we became realtors. And so when we got our realtors license in September of 2008, I'll remember that and then so now well "Yay, we're realtors, let's go do deals and make money." But as you heard in the last episode, we didn't really have that inner circle. Yes. And we finally did get a lead. And it was a buyer. And while it was our only lead. So that was the golden goose. And we did no matter what the golden goose wanted. Yeah, we did it. And so we finally, we did find them a house. They were incredibly emotional. But we did find them a house. And when that house closed? Well, we had a check. Yeah, we had money coming in. 

So that was our first deal. And it only took us eight months. Yeah. So to say only eight months. And so we were pretty much burning through our money. All of our savings that we'd built up over the years and to do what we wanted to do, which is real estate. And so now we're always looking like okay, one deal every eight months is probably not the best idea for a career. And so that was when you had said, What about real estate investing? And then so then you emailed three, I don't even know who the other two were, by the way, I can't remember it. But I know that it was three emailed three people that were teaching real estate investing. And one actually replied, Yes. Thankfully he was close by.

Yes. And he was right there in Austin, Texas. Yeah. So we were living in Little Rock at this time. Yep. And so it was Phill Grove, for anybody who does know the real estate world and you're an active real estate investor, and you know us and our journey, then you know who Phill Grove is. And he is based out of Austin, Texas, he made millions of dollars, he had this huge, huge, huge, gigantic house that he bought as a foreclosure. Yeah, yeah. And he's a tech genius, too. Anyways, he's really, really, really a great guy. And he's really you got us started on our investing journey. And it was a class, and there were 12 ways to buy and sell real estate. And that's why we named that this episode. That name because it's why we became an investor in the first place. That's right. And so I really was attracted to that. Because the very reason why we're doing this series for you is because so many people don't know where to start. They're not sure if they want to be active versus passive. And even if they do want to be active, or passive, and they know that they don't know which active they want to go. And they don't know which passive they want to go. So we're sharing our story with you. And I related to that, when, when we were starting out, we're like, I don't know what to do. But 12 ways to buy and sell real estate surely gives us enough options that we can choose what's best for us. And I loved that class, it was at his house. So it was probably I don't know, 30 people there in his movie theater room was super, super cool. Got a lot of information. And ultimately, out of the strategies. We chose short sales and mortgage assignments. And the reason we chose those was because of the time of the market. Yeah, right. We're in the middle of 2008, the great recession, the big crash. So short sales and mortgage assignments were the way to go. So well. Two of the other reasons why we went with short sales and mortgage assignments at the time were out of the 12. These required no money. Yep. And a lot of time. Yes. And we had both Yes. And so it was great. And so we took that and we ran with it, and we mainly ran with the short sales, and we were getting less, and this is 2008. So before you go on, though, do you want to explain what a short sale is?

It's a sale that's weee it's really short. Just no, no, it's when it's when a property is. So the property is valued at say it's valued at 100,000. But their mortgage is at 140. Right? And so they can't sell it because they can't cover the mortgage and they don't have the money to pay the difference in the two and so they negotiate with the bank to do a short sale and the bank agrees with the seller. Yeah, that they will allow them to sell it and it'll make the note whole. Perfect. You like that? Yes. Thank you very much. It went too far down the road. Yeah, for those that didn't understand what it was. I had to dust that one off it’s been a while since I've had to explain that. But anyway, so we went into that because this was 2008 or actually, this was 2009 by this point, and you couldn't throw a stone and where we lived, you couldn’t throw a stone without hitting a short sale, they were everywhere. Yeah. And, so we started talking to a lot of people and started talking to banks. The one bad thing about and this is why we sort of went from the short sales to mortgage assignments is because the short sales, we were doing those and we had like, I don't know, it's like four or five that we had. We went through a lot more till we got to four and five, we got the four and five that we're really working on. And we're working on them hard. Yeah. In fact, one we even my whole family went over to the house and we cleaned the entire house second, two story house cleaned the entire thing, no electricity, no water, nothing at this house. Yeah, let me just say there was some things in that house that I never want to ever see you again in my life. But anyway, and because we are working on this, we're going to sell this property and we were going to make some money on it. But the bank at the last minute said, You know what, never mind. And they stopped the short sale and just foreclosed on him like the next week, it was something stupid, and oh, man, we are so mad. But at the same time, we're also starting to learn these mortgage assignments. And so we got these four or five that we're working on before at this point now and then we started doing these mortgage assignments and we lined up a mortgage assignment, we got the seller.

Hold on. You have to explain what a mortgage assignment is. Dani, what is a mortgage assignment?  Flip likes to get ahead of himself? Can you tell? Does everybody know what's in my mind? So a mortgage assignment is when the example that you said $140,000 is what they owed, right? But the value at that point in time is $100,000. Now that's a pretty extreme example, but we're going to use it because that's what you explained the short sale, let's just say that Flip has this $140,000 mortgage, well, what we can do is we can just assign his mortgage to a buyer that can't get approved for a loan, which are everywhere right now because of the lenders tightening all the requirements. So now there's Joe over here that says yes, I'll just take over Flip's loan, I don't care that it's $140,000 I plan to live there forever, the markets eventually going to get better, and then I'll refinance it. Flip goes, well, that's way better than a short show, it's going to be on my record or foreclosure. That's definitely going to be my record and hit my credit. So yeah, so absolutely. Assign my mortgage over to Joe who wants to buy this property, and he's going to now take he's going to note, make the payments and take care of the house. So it's not a lease, it's actually going to be owned by Joe. Is there anything that I missed? I'm trying to let there's so much.

There's a lot on there. And I'm sure people are going to have questions and yeah, I'm trying to be simple. That's essentially it. Yeah. So he assigned a mortgage over to him. So now Joe is paying this guy's mortgage? Yes.

Yep. And for those of you advanced enough to understand what a subject is, we are going to be talking about that in the next episode. But essentially, a mortgage assignment is wholesaling a subject to. That right there will answer every single question that you possibly could want to know if you're an active investor and you will know some of this in our little tagline back then if we were taking unsellable sellers and finding and selling them to unloanable buyers. Yes, that's right. Yep, yep. And so anyway, so we're working on the short sales. And then all of a sudden, we started working on a couple mortgage assignments, we found the seller, and like two weeks later, we found the buyer boom, next week, we're the two weeks later we were closing. And the seller is happy because they're often they don't have to worry about their payment anymore. Buyers are happy because he's now got a house to live in and couldn't get before. We're happy because we just charged him a fee to get that house. And boom, we're on our way. And I'm like, wait a second, we just made X in the last three and a half weeks. And we're still working on these four short sales that we've been working on for the last four months. And so we just dropped those short sales like a bad habit and went straight into mortgage assignments. That's right. Yes. 

So some of the pros of this part of our career in real estate was number one, these two strategies that we chose, were no money out of pocket, except for actually running the business. Obviously, we still had to run the business. And it was the right strategy for that time in the market. Right. 2008 was just prime for short sales and mortgage assignments. And he Flip explained why we like mortgage assignments better.

Yep. And mortgage assignments are a solution people didn't even know about. Yeah, I mean, there were so many neighborhoods around where we lived that when they bought them in 2004. They were getting 110 to 120% mortgages. And because they were rural, I hate that word. So they 're out of town. And so there were all these programs that were giving them 110 to 120% of the value of the property. So now they were not only underwater, even if they would have done 100% loan, they were doing 110%, 120% loan. So there were just neighborhoods, we knew where to go. Yeah. And we're just like, hey, we can help.

That's right. And then, of course, we always like to say it was the least worst option, right? When we were talking to Flip, the seller who has a market value house of $100,000. But he owes $140,000. When you're explaining the short sell versus foreclosure versus mortgage assignment? Well, to Flip the seller, the least worst option was the mortgage assignment. So that was a pro and Flip was able to get the highest price. Yep, there. And for us, and them, everybody. It was very, very fast. Compared to the short sale.

I think the quickest, because we all said the next thing, after like, a couple months, we had a pool of buyers. Yeah, got anything? Yeah, don't think and so the second we got a property, we knew who to talk to boom, right away. I think the fastest was like two weeks. Yeah, from getting it under contract to getting all the paperwork done and getting it closed at the title company. Yes, it was. 

So another pro was it helped avoid foreclosures on the market. So that was a time in our history, where the more foreclosures the more if an appraiser is going to do an appraisal on a certain part of a subdivision or something. If there's dominant foreclosures, they have to use the foreclosures as value, right. So even though there are some sellers who did not have to go through a short sale or foreclosure and were able to sell our property, their values automatically went down just because of the foreclosures and what prices those. So that really kind of helped some of the market because we didn't add another foreclosure in that subdivision. And we actually sold a property at the like, $40,000 above what it was valued at that point in time. So it really kind of helped the areas in which we were doing this strategy that was a pro. The buyer gets ownership of a property when otherwise they couldn't, because again, the lenders were so tight in 2009 / 2010. Yeah, that, people that wanted to buy a house couldn't.

Another one was, we were able to get the fee for our services. So really, when I say we were wholesaling a subject to wholesalers get a fee, right? We were brokering a transaction brokers get a fee. So we got a fee for understanding how to find a solution for the seller and for this buyer. And by putting them together, we got a fee from the buyer to be able to put the transaction together. So that was nice, that was a pro and then the sellers they're not leasing the property so they don't have to do repairs. They just literally hand them just their keys. Yes. Yeah, exactly. 

So some of the cons. Short sales are very, very long. That's why we switch from short sales to mortgage assignments.

And then another con is it's dependent on lots of bank guidelines, delays, approvals, red tape, etc. You have that's the hardest part about short sales, and being able to find the right person to talk to.

Yes. For the mortgage assignment cons on the seller is now dependent upon the buyer performing so when I sold Flip's house to Joe for and I got that fee in the middle, well Flip's happy and so as Joe but what happens when Joe starts defaulting on Flip's mortgage, so Flip is very dependent on Joe actually performing on the note so it doesn't hurt his credit.

Yep, there can be a whole episode just on that. Yes. And then there's the due on sale clause. And that's the little clause in everybody's mortgage contract that you signed, where it says and this is the key word that the bank may call the note do Yes. May if they see that you transferred it to another buyer. Yeah, in which in this case, Flip did transfer it right. It was an ownership transfer, but the mortgage stayed in place. That's why it's called mortgage assignment. He assigned his mortgage over to Joe, and there's legal paperwork, there's attorneys involved in all of this. It's pretty crazy. So everything was 100% legal. And but we always disclose, there's a Flip, there's a due on sale clause. So the bank could say, hey, Flip, I saw that you transferred this over to Joe, you didn't get her permission. So we're going to call your note but what was our line back then?

Oh, they don't care. They're there in the mortgage business, not the housing business. Yeah. They don't care if Santa Claus is sending them the check every week. Yeah, exactly. Every month. Yeah, it's just all they care about is that they're getting their monthly check. Yes,

And the business of loans, not homes, they don't want the house, they want you to pay the check. So whoever signed in, they don't care. It is very unlikely as long as the note was performing, that that due on sale clause was like a 0.000001% chance that actually happened. We had attorneys who had done 1000s of these and never had a note due. And we also went to the precaution of our attorney saying, let's just write the bank letter, we're going to put it in the check and say we transfer this note, here's the first check. If you negotiate this check, that means you approved. Thank you very much. And he kept track of all that. So there's a lot of strategy involved. And I know that we're going over time in these, this series here. So we're not teaching you exactly how to do it. But that's what we did in that environment. And what's really, really great about that is because knowing what to do in an environment that moves that's really, really, really wise to be working with people like that. And we wanted to pass on some of the knowledge that we had of a down market.

Right. Thanks to estoppel by acquiescence. Yes, that's the only thing that I know that sounds like that and that's actually more than four syllables. acquiescence.. stop it. We say we don't even talk like that. It might be in our head, but we don't put it out of our mouth. Sorry. Just kidding. All right, let's go over our quick five risk tolerance. There's a risk here. Yes, there is. Yeah, you may see a lot of attorneys when doing things like this. And we did. Fortunately, we won every time. Yes, that's right. Time availability. You need time. Yes, knowledge a lot. So now like, Oh, we did not do this without a whole lot of help. And especially on the legal side, inner circle. Well, you need the inner circle to learn how to do it. Yep, exactly. Access to Capital still doesn't need that. Do not need that. So see are some of the factors of this part of our journey of what we did? 

Why we did it, the pros and cons of each I hope it helped tomorrow is episode number four, where we're going to be talking about the subject of and wraparound mortgages to read. That's right. That's right. Well, again, make sure you head on over to our website www.FreedomCapitalInvestments.com. To join our Investor Club. Make sure you're hitting the like button. Hit the like button if you'd like how long these episodes are.

Please don't give us a thumbs down. We’re trying to get through these and then we realized  boy Dani is a chatterbox and can't get her to stop talking. But hit the subscribe button. Hit all those buttons. Give us five star reviews if you think that what we're doing is valuable and worth it. 

But we'd like to end all of our episodes with Invest Smart. Live Happy. Bye everybody.

Disclaimer: Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate, financial or business professional for individualized advice. Opinions and information on the show are not guaranteed. All investment strategies have the potential for profit or loss.

Transcribed by https://otter.ai