Pace Morby (00:04:11):

I would calculate and think, “Man, these guys have got to have seven to 10 million dollars that they’re flipping houses with. I can’t save up seven to 10 million dollars. This is bonkers.” I came from a blue collar family. What that means is that blue collar families, we work with our hands to make money, right? That’s the blue collar trades.

Pace Morby (00:04:28):

And my dad taught me real estate is the greatest thing to ever get into. Meanwhile, my dad never got into real estate. It was just my dad would talk about real estate and all the things that got him excited. I started fixing and flipping houses for other people because I was a contractor. I started a construction business because my dad was a contractor. I followed in the footsteps of my father.

Pace Morby (00:04:49):

And so many other people on this show, listening to the show right now, you guys are in the vehicle that your parents essentially led you down into, right? And I can tell you, it was the wrong vehicle for me, for as long as I drove that vehicle. I was a contractor for over 10 years, flipped over 7,000 houses for other people. I should have only done that for a year to learn everything I needed to know. And the way that I actually got into my first flip was very powerful.

Pace Morby (00:05:16):

This lady comes to me, her name’s Bethany Willis. She says, “Hey, Pace. You’ve got a great reputation in town. I see your Instagram all the time. You’re showing before and afters.” This is kind of how I got my good reputation is using social media. Guys, if you’re not using social media for your business, that’s like McDonald’s not having a sign on their building. How do you know it’s McDonald’s? How do you know they’re selling a hamburger?

Pace Morby (00:05:36):

If you are trying to run a business and you’re not using social media in the modern era, it’s like McDonald’s without any signs. Nobody will show up. Okay? Nobody knows what you do. I use social media a lot. She saw my social media, she’s like, “Oh my gosh, you’ve got a great reputation. I checked around town. I want to hire you to manage and run my fix and flip.”

Pace Morby (00:05:55):

I was just the contractor, right? These people would buy their houses. I would literally just run the construction. The estimates make sure that budgets stayed on time. Everything on the back end. And one day Bethany Willis comes to me and she goes, “Pace, why aren’t you in real estate?” I’m like, “What are you talking about, Bethany? I am in real estate. I’m flipping all these houses.”

Pace Morby (00:06:16):

And she goes, “No, no, no, no. I am in real estate. You work for me. And I’m the one in real estate.” And I was like, “Oh my gosh.” It just hit me like a ton of bricks, like, “Wow, I guess I’m not in real estate. I’m a service provider for other people who are in real estate.” Bethany grabbed me by my shoulder and she’s like I could feel her fingers digging into my shoulder still to this day.

Pace Morby (00:06:40):

And she was like, “You need to go get your first fix and flip.” And I was like, “Well, I don’t know how to buy them.” She’s like, “You don’t know what a hard money lender is?” I go, “I guess I’ve heard of it. But is that like a loan shark? Is that somebody who’s like I go down to the mafia pit house and I beg somebody for money. If I don’t pay them back next week, they cut off my leg?”

Pace Morby (00:06:57):

She’s like, “No, no, no, no, no, no. Hard money lenders mean that they’re lending on a hard physical asset.” And I was like, “Okay, what does that mean?” She’s like, “A hard physical thing is a house. So they’ll lend on the house, not on your credit.” I was like, “Wait, I don’t have to have credit? I can do this … No way. Where do I find these people?”

Pace Morby (00:07:18):

She’s like, “Pull up your phone right now and Google hard money lender Phoenix.” I’m like, “There’s no way it’s that easy.” And then, dude, it was like hundreds of hard money lenders on my phone. It was like this big epiphany hit me. It still seared into my brain today. Anytime I want something, I just Google it. It’s not that freaking hard, and people overcomplicate it. I was one of those people.

Pace Morby (00:07:38):

I went and did my first fix and flip, made $19,000, and I was like, “This is crazy.” And then I started wholesaling. I made $25,000 on my first deal, and I made $50,000 my first month, and I’m like, “What have I been doing with my life?” I’ve been kicking on construction. I was like the best known contractor in all of Arizona. Meanwhile, I was just making everybody else filthy rich.

Pace Morby (00:08:02):

That’s how I got into traditional fixing and flipping and wholesaling. And sorry for the long answer, but that’s how I got into it. And then how I got into unconventional or creative ways is I’ve always been a creative guy. And when you get into wholesaling, and fixing and flipping, you start going, “Okay, well, how do I do more of this faster?” The only answer anybody would give me was, “You have to just go buy more houses, and get more crews and go borrow more money.” That was the only answer.

Pace Morby (00:08:29):

And that’s when I found a guy in town who charged $50,000 to teach creative finance, like subject to seller finance, novation agreements, $50,000. I go pay this guy $50,000, stupidly. Guys don’t ever spend $50,000 on a real estate education. Don’t ever do that. I do believe in mentors. I have my own mentors. I think mentors are amazing. But if somebody’s charging you $50,000 and they’re not giving you like 100% guaranteed success for $50,000, walk away.

Pace Morby (00:09:01):

In 10 days, I found out I knew more about real estate than this guy here local that I paid … He gave me a discount, because I complained. I was like, “Bro, you haven’t done a deal in 10 years and you charged me $50,000? You haven’t done a deal in 10 years.” So he gave me $2,500 back as an apology. So I paid $47,500.

Pace Morby (00:09:22):

And here’s the thing is I’m actually grateful for this guy. I don’t have animosity towards him. I just don’t think it was worth the money, but it was still worth the money, and here’s why. Because it showed me that these other things were possible.

Pace Morby (00:09:34):

And even though he didn’t have modern technology of how to find the deals and how to do the deals, that is the guy that sparked my brain and told me, “Here’s the path you can go down to triple or quadruple the real estate deals you’re doing with the same amount of leads you already have.” And so that’s where I started down the path of creative finance, was this guy who was a three month mentorship. I think I spent a week with him and I never went back.

Robert Leonard (00:09:59):

Why didn’t you just partner with people? I know you said you didn’t have enough capital, you didn’t feel like you were ready to do it, but why didn’t you go to them with a partnership? Was it just you didn’t know what you didn’t know at that point? You didn’t know you could do that?

Pace Morby (00:10:09):

Isn’t that crazy? That’s the answer, is that I didn’t know what I didn’t know. I mean, I didn’t know what a hard money lender was. Or at least I knew, I heard of it, but here I was working for Opendoor, Offerpad, Zillow, all the biggest fix and flippers in town. Nobody wanted me to know. I had one guy, his name’s Brian came to me. This is like, I’d say nine years ago.

Pace Morby (00:10:28):

Comes to me and he goes, “Nobody wants you to know how to do real estate investing because they’ll lose you as a contractor and you’ll become one of the biggest investors in town.” I’m like, “Are you serious?” He’s like, “I can see it, man, the second you figured this out.” And I go, “Well, teach me,” he goes, “I’m not teaching you.” I’m like, “Oh my gosh, nobody will teach me this stuff.”

Pace Morby (00:10:48):

Partnering is something that I scream from the mountaintops now, because people, I feel like the first thing you should do when you get into real estate is make five to 10 friends that are also in real estate on the same path. So you guys can leverage resources and you guys can kind of crowdsource information from each other. But I didn’t have that.

Pace Morby (00:11:04):

Everybody that I was around was keeping their thumbs on me. They didn’t want me to learn anything, because I, knowing very little about what they were doing, was now held beholden to just being their contractor and providing massive benefits to them and their family.

Robert Leonard (00:11:19):

I grew up in a blue collar family like yourself. My dad’s a mechanic. And so because he’s a mechanic, he has all kinds of friends in the trades as well. I went the college route, but all of my friends went into the blue collar trades. Some of them own plumbing businesses, et cetera. And they’ve always said that, they’re like, “Hey, real estate, I don’t know anything about it, but I own a plumbing business. Why don’t we go kind of do this deal together? You can run the real estate side of it, I’ll do the rehab, and then we can kind of figure it out together.”

Pace Morby (00:11:42):

Super smart. I see most people nowadays are getting their first deal going that route, is like I’ve got a handful of people that I talked to yesterday. I traveled to Texas and did a bunch of stuff yesterday. And a lady goes, “I’m not good at talking to sellers, but what I do is I just go drive around town and I take down all the ugly houses addresses.” I’m like, “Oh yeah, you’re driving for dollars.”

Pace Morby (00:12:01):

She’s like, “Yeah, I didn’t even know it was a thing, but the person I bring all the addresses to, she then invites me over to her living room and she just calls the people with the ugly houses right there in the living room. And we’ve done three deals in the last 30 days.” And I’m like, “Man, I wish I had that. I wish I had that when I was starting out.”

Robert Leonard (00:12:18):

How did you get connected with those large flippers, Opendoor, Zillow, et cetera? Was it just because you were just so well known?

Pace Morby (00:12:25):

Social media. When Opendoor came into Phoenix, Opendoor, they’re obviously advanced technologically speaking. And so they came into town and they started searching hashtags, like #contractor, #fixandflip, hashtag whatever. And that’s how they found me and three other contractors. They interviewed all of us. And then I was the main guy that got the first job. And then because I had Opendoor as my contract, I then got Zillow and Offerpad as well just because of that.

Robert Leonard (00:12:51):

Wow. Yeah, the power of social media.

Pace Morby (00:12:55):

Social media.

Robert Leonard (00:12:56):

Yeah. We’re going to talk a bit more about that.

Pace Morby (00:12:56):

I would tell you social media has made me no less than 20 million bucks. No less.

Robert Leonard (00:13:02):

I want to talk a lot about social media a little bit later, but what’s crazy about social media is people … I think what people make a mistake of, and myself included, is they connect the dollars to social media. They’ll post something trying to sell something. And if they don’t sell $100,000, they’re like, “Oh, this isn’t working,” rather they’re not seeing that kind of more indirect kind of benefit that they’re getting from it.

Pace Morby (00:13:23):

It’s a trust factor, right? We do business with people we know like and trust. And so the more you put yourself out there, you will attract a very specific type of audience dedicated to you. The first thing I ever learned about creative, not creative finance, but social media was, your vibe attracts your tribe. And so what will happen is naturally your vibrations, you as a unique individual.

Pace Morby (00:13:45):

Don’t try and be anybody else on social media, be yourself. I get criticized all the time. People are like, “Oh, you put your family on there,” and I’ll just do random things that are not highly produced, whereas some of my other influencer buddies everything is super produced, and edited perfectly, and they’ve got their perfect subtitles, and I’m like, “You’re going to attract a different audience than I am.”

Pace Morby (00:14:03):

I’m not trying to go after an audience that’s not authentic to who I want to do business with. And sometimes I’ll get people to go, “Pace, I’ve been following you for two years and I have a deal for you.” This is the first time I got my first deal. In fact, there’s a deal that I’ll end up talking about today that it came from social media. It came from somebody following me for two years.

Pace Morby (00:14:25):

You cannot ever think that social media is a temporary solution. It is a lifelong pursuit, because marketing is a lifelong pursuit. Look at social media as your business cart. You’re always going to be updating it. You’re always going to be posting and talking about it. You’re always going to be passing it out. And you don’t know where the business is going to come from, but it floods in. Social media is absolutely insane what it does for us.

Robert Leonard (00:14:52):

You probably don’t know this, but one of the reasons why I have been following you is because of how authentic you are. And I like your personal brand that you have, is … And I have nothing against kind of the shirt and tie kind of more polished approach, but look at us, I’m wearing a backwards hat, you’re wearing a hat.

Robert Leonard (00:15:08):

You have a picture of a cool poster, a guy behind you. I like that, but I see too many people that are too polished on social media. And for me, that’s just kind of a turnoff. I’m more of like that authentic to me. I race motocross, I ride dirt bikes. I like to post that kind of stuff on social media as well. I’m in that same boat as you. That’s what drew me to you.

Pace Morby (00:15:26):

This is what happens with … And your audience is very authentic to you as well. They probably come from the blue collar trades, right? They have that same background. And so what I love about this is that your audience will be naturally attracted to you. They don’t know why, but they are naturally attracted to you.

Pace Morby (00:15:42):

And then what’s great about it is because you guys are kind of the same tribe, your success story will actually show them a better light on the path than somebody else’s success story. It’s a better way to operate.

Robert Leonard (00:15:56):

I don’t know the exact time period, but I went a while on this podcast where I didn’t say anything personal. It was my first time ever hosting a podcast. The numbers were getting kind of big and I’m like, “Ah, I’m not really sure if I want to share anything personal about me, I’m just going to kind of keep it about the guest.” And then over time I started to share a little bit more about myself, and it was pretty crazy.

Robert Leonard (00:16:12):

Because I started to talk about how I raced and some of the other stuff that I do, and my inbox on social media was flooded with people like, “Oh my God, I raise dirt bikes too. I had no idea you were into this,” or, “I’m really into fitness like you.” All these people were reaching out. I had no idea. And I think that, that just took my connection with the listeners to even another level.

Pace Morby (00:16:30):

You’re the main character of this show, right? Imagine watching a Hollywood blockbuster movie, but the main character you never find out his name the whole movie. That movie is not going to land well, right? The audience needs to know the main character, and the main character is you bro, and they love that. Character development is so important to a story.

Pace Morby (00:16:49):

And what everybody’s doing right now is they’re listening to a story, right? They’re listening to a story of two dudes who found each other, and uncovering success things and failure things and all that kind of stuff that gives them, again, a light on a path that they can follow as well.

Robert Leonard (00:17:03):

How do you come up with content ideas? That’s what I think I struggle with the most with social media is I just, I don’t know what to post, so I don’t.

Pace Morby (00:17:11):

Okay. For me, I call it the Clint Eastwood method. And Clint Eastwood had a movie, my favorite movie of his called The Good, The Bad And The Ugly. Great movie. And so I post The Good, The Bad And The Ugly. And what I do is I document everything. Most of my social media now that I personally post is on Instagram and then YouTube is …

Pace Morby (00:17:34):

Oh my gosh, we post on everything. There’s not a platform we don’t post on. But I just document. I’m never going out and creating content, unless it’s a story or a specific thing somebody asked me about. For example, my YouTube, which is long form content, usually seven to 15 minutes, I’m answering a question that has repeatedly come up in my Instagram DMs or Facebook group or something along those lines that I know people need an answer to, which is kind of hard.

Pace Morby (00:18:01):

Because if you start researching YouTube, you’ll learn that people that are your favorite YouTube creators, they don’t care what your questions are. What they care are, what are the general populations questions? And they go and find like, what is going on with interest rates today? And the housing market’s crashing. And you’ll never really see me talk about those things, because my audience is very specific to creative finance.

Pace Morby (00:18:23):

And so creative finance, we don’t give a crap what’s going on with interest rates. We don’t care about whether the market is going to crash or not. Not 100% true, but I’m not going out and creating salacious material on YouTube so that I can get a ton of views. I’m creating a very specific video to answer a question that has come up at least five to 10 times in the last six months.

Pace Morby (00:18:44):

My content is genuinely just to serve the tribe that follows me, and it works out really, really well. I’m not the biggest on YouTube. I’ve got 75,000 subscribers. I’ll probably hit 200,000 by the end of the year, which is really good, especially in a creative finance niche. My niche of creative finance, the biggest person in that niche is 50,000 subscribers. And the next biggest subscriber, like biggest creative finance guy is like 3,000 subscribers.

Pace Morby (00:19:11):

I’m dominating my niche at where I’m at, and it’s because I’m very specifically serving my audience without a care in the world of what comes out of it. And I do the same thing on Instagram. I just got back from Texas. I just documented my time going to Texas. Why am I going to Texas? Oh, I’ve got this deal. What’s the deal breakdown? I did a live with the seller at the property. Everything is a documented series of me just doing what I’m doing naturally, so I don’t have to create content or come up with ideas.

Robert Leonard (00:19:40):

Would you say you’re a Gary Vee disciple?

Pace Morby (00:19:43):

Yeah, I love Gary Vee.

Robert Leonard (00:19:43):

When you say document, I don’t create, I just went right to Gary Vee.

Pace Morby (00:19:47):

My favorite thing is be the content. Don’t create the content, be the content. If you’re just doing the things that you’re talking about, people are going to follow you, because they’re going to see you’re actually … I won’t talk about a project usually, unless I’m physically at the project, because it gives people a really good understanding, like, “Whoa! He’s there. He’s in Texas right now. Whoa! He’s in Idaho right now. Whoa! He’s in whatever right now.” I am the content. I don’t create it. I just document, and I, myself, am the content.

Robert Leonard (00:20:13):

How do you get comfortable doing that?

Pace Morby (00:20:15):

First and foremost, go to Disneyland. This is the interesting thing. Okay? Go to Disneyland and just look at every human being. Disneyland is a pretty high caliber of people. Okay? Because they’re people that probably spend $1,000 to $5,000 that day depending on how large their group size is and what food they’re buying or whatever.

Pace Morby (00:20:33):

That’s a lot of money to spend in one day. So it’s a pretty high caliber of people. We’re not talking like go down to the swamp and go count people that don’t have teeth. We’re talking about legitimately go to Disneyland and just count a hundred people. And you go, “Do I care what that person thinks? Do I care what that person thinks? Do I care …” And it’s like, “Dude, no.” And most of these people are weird anyway. Everybody’s weird. Everybody’s weird.

Pace Morby (00:20:55):

Everybody is weird to their own degree. And so I’m like, I look at the general population and I’m like, “Everybody has their own like uniqueness and their own weirdness,” and it’s like, “Why am I trying to hide my own uniqueness and my own weirdness? These people aren’t freaking hiding it,” and you’ll get over it. And then here’s the other thing, who are you afraid of when you post?

Pace Morby (00:21:15):

Think about it. Write it down. My mom, my dad, my coworkers. A lot of people will say coworkers, because they don’t want their coworkers to go, “Well, oh, you think you’re the hotshot real estate investor now. I see you going and doing these things,” and it’s like you’re going to be dealing with that at work. Here’s a simple way to solve that. One, block those people and get them off your Instagram and then you can post whatever you want.

Pace Morby (00:21:38):

Two, if you don’t want to block people, because now you feel rude, then go create a second profile just around real estate and go start building that up only around real estate, like pace the real estate investor, something like that. And just create a second profile. Then post to nobody for a while, and then start commenting on …

Pace Morby (00:21:55):

It’s kind of the Gary Vee thing. What was it? The 90 cent role. He’s like, “Go give people your two cents on every one of their posts 30 times a day, and you’ll start gaining up following very specific to the niche that you want to post about.” I never did that, because I just did, number one, I just blocked people that I didn’t want to see my …

Pace Morby (00:22:11):

If I was embarrassed about my mom, my dad, which I never was, but my parents are always been supportive, but whoever it was in my life, which I do. I have friends from high school that are like, “Oh, you’re going to be real estate industrial, huh? Oh, cool.”

Pace Morby (00:22:23):

Especially in the blue collar trades, there’s a lot of people like, “Oh, you’re going to be too good for us now, huh? You’re going to be too good for us now.” So I’m like block, block, block, block, block, block. Now I can just live my life in peace and post what I want.

Robert Leonard (00:22:34):

Are you a reader?

Pace Morby (00:22:36):

Yeah, I read a lot. Yeah.

Robert Leonard (00:22:37):

Have you read the Almanack of Naval?

Pace Morby (00:22:40):

No, I haven’t.

Robert Leonard (00:22:41):

In that book, he talks … I mean, I don’t think it’s a very brand new thing, but he takes that strategy or that idea of like, “You’re going to die, and none of this matters anyway,” to a whole nother level. He says, “Not only are you going to die and it’s literally not going to matter to you at all, but go a step further in how many generations are you not even going to be remembered.”

Robert Leonard (00:23:01):

Like what, two generations, three generations? You’re entirely gone. Think about this. Some of the most amazing people that we’ve ever had in the United States, they don’t mean anything really to us anymore. And so like if you take it to that level, it’s like, “Yeah, there’s nothing to be scared of really.” And so I want to kind of spin this for you, because this is actually something I struggle with.

Robert Leonard (00:23:19):

And I host a podcast that goes out to millions of people, so I can talk to people. But when it comes to video, I just kind of have this … I’m not really scared of it, but it’s just kind of a different feel than on audio. And so I have an interesting kind of moment here is, when we’re done recording this, one of the things I do is I help people kind of do RV Rentals. You basically buy an RV, rent it out to people, kind of like a short-term rental thing. And-

Pace Morby (00:23:41):

Yeah, I did that for about a year.

Robert Leonard (00:23:42):

… Cool, cool. So you got to have an idea. I’m about to go out and clean mine. It’s going out for a three week rental tomorrow, and I’m about to go out and clean it, and I think that’s an awesome opportunity to document what I’m doing. Now the question is, what do I even say? That’s where I kind of fall. What would you say?

Pace Morby (00:23:57):

Okay. Everything comes down to, what am I going to teach the audience? What can they walk away with value? Right? What I would do is I would put my phone on time lapse. Do you have an iPhone?

Robert Leonard (00:24:08):

Yeah, I do.

Pace Morby (00:24:09):

Okay. You put your phone on time lapse, and you just set it up on like a little … I have a bunch of them. I have one right here. You put it up on a little tripod kind of like this, one of these things. And you time lapse yourself cleaning it over the course of an hour or whatever. I’ll do two posts. Actually you could do three things. This is really easy.

Pace Morby (00:24:29):

You do a time lapse, and you make it into an Instagram reel, which also turns into a TikTok, which turns into YouTube short as well. Three pieces of content going into three different places all from one time lapse. And the time lapse is cleaning my RV before it goes out for a three week rental. How much money do you think I’ll make over the next three weeks? Make a comment in the comments. And then it’ll get comments and it’ll get whatever.

Pace Morby (00:24:53):

And then you do a part two three weeks later where the RV comes back, and you go, “Hey, part two. Here’s …” And then you’re cleaning it again. You go, “I’m cleaning it up after a three day weekend. I made this much money after this. It cost me this much money to clean it myself with Windex, and this and that, and blah, blah, blah, blah, blah. My net profit is blah. Want to learn more, go over to my YouTube channel.”

Pace Morby (00:25:13):

I then would create a YouTube channel or a YouTube video sitting in my RV before I clean, and I go, “Hey, guys. I’m going to clean my RV today,” all on my iPhone by the way. Everything is done on my iPhone primarily. “Hey, guys. I’m going to clean my RV today. I’m going to tell you what chemicals I use, how long it takes me, things that I really spend my time and energy on, things that bother me about … Like, the renters when they bring it back, they always miss these things,” and dah, dah, dah, dah.

Pace Morby (00:25:38):

And then take that time lapse and put that time lapse in the middle of the YouTube video so that people see you doing the thing. And then at the end, wrap it up and go, “All right, guys. It came back. Here’s the three week. Here’s my rundown on the financials.” That’s a whole YouTube video that people are going to be like, “Dude, this is so great. The guy showed me how he cleans, what chemical he uses, how much it costs him. At the end, he broke it down on a whiteboard.”

Pace Morby (00:25:58):

I have a whiteboard in my garage. You don’t need some fancy studio. Just put it on a whiteboard and go, “All right, guys. This is what I brought in. This is how much my RV payment is, my insurance, my cleaning materials, my this, that and the other. I netted $842 and blah, blah, blah cents. What would that mean for you guys?” And I don’t know, do you sell a course around it?

Robert Leonard (00:26:19):

Yeah, I do. I don’t push it very hard at all. It’s just kind of there for people who want more-

Pace Morby (00:26:23):

Well, that’s where you push it, is you push it to YouTube, right, or you push it through YouTube. I don’t push mine through YouTube, but you would then push yours through YouTube by saying, “I teach a group of people how to do this. If you guys are interested, send me a DM on Instagram,” or whatever it is, right?

Pace Morby (00:26:37):

And then the other place that I would put the content as well is I would take that same time lapse. I do this all the time. This is why I have this here, because I’m on so many podcasts and I’m on so many zooms with my students that I will time lapse myself as mobile notaries come into my office. I will sign right here and I’ll document me sitting here with a mobile notary. And I’ll put it on reels and YouTube and blah, blah, blah, but I also put it my Instagram stories, which is my favorite place to post.

Pace Morby (00:27:04):

Because Instagram stories is only around for 24 hours, so I can screw up and test out the mechanics of Instagram. I can try out music, I can try out little gifts, I can try all sorts of things, knowing that in 24 hours it’s going away and I don’t care. I just post a lot on my stories. I probably post 15 to 20 things a day on my stories, just documenting my day all the way through my day.

Pace Morby (00:27:26):

And so I would put that time lapse on my stories and say, “Hey, here’s me cleaning my RV. I just made a whole YouTube video about blah, blah, blah.” And I would give people the link, because stories are the only place you can actually give a link away, and they can click on it, go to your YouTube channel. For me, if I could have started over and done social media the right way, I would’ve started with a YouTube channel and then created other things to push to my YouTube channel.

Pace Morby (00:27:49):

Because YouTube, I have a good size YouTube, 75,000 subscribers, but it makes me just from Google ads, people running ads on my channel, I make about $12,000 a month from that. And that pays for two of my video editors. I have two full-time video editors that, that money goes to. Now I have the ability to amplify my team, but then I have all sorts of other ways I make money. I mean, one of the deals I’ll tell you guys about today came from my social media. I make millions of dollars from social media, millions of dollars.

Robert Leonard (00:28:19):

… Now, this is going to be super detailed. But if you’re recording this for a YouTube video on your iPhone, do you do it sideways?

Pace Morby (00:28:25):

Yeah, I do it sideways. I do it sideways on my phone, which is challenging because then when you’re like … We just did this the other day in Texas, because my videographer comes with me now. Again, guys, you create content by yourself on your iPhone for like two, three years. That’s how long it takes. It takes a long time. Be patient and do the work.

Pace Morby (00:28:43):

And then you start making money and then you can hire people and do whatever, and which is what I’ve done. I pay for my videographer to fly with me. He’s a friend of mine, and we hang out. Now I’m not just flying around buying real estate by myself, it’s like I got a buddy, a companion with me. But we go to the property and he’s like, “Do you want me to go landscape or vertical? Landscape or vertical?” Right? Type of thing.

Pace Morby (00:29:01):

And I’m like, “I don’t know. What are we going to use this content for?” Genuinely, I have to stop and think, “What am I going to use this content for?” And there are times where I’ll film something horizontally that I wish I filmed vertically. And it’s like, “Really? Is that my biggest problem today, is whether I’m going to film it horizontal or vertical?” And it works. It always works out. It always works out.

Pace Morby (00:29:20):

And we just get better and better and better and better, and you just improve along the way. In fact, I just got. Back fly to Texas, right? Dallas. Stay in a hotel that night at 1:00 o’clock in the morning, because I’m busy, right? And we filmed our TV show on Friday till 7:00. I get on a flight at 9:00. I land at 1:00 o’clock in the morning in Dallas, get into a hotel after getting a rental car. I’m trudging through the airport and all this stuff.

Pace Morby (00:29:45):

Drive the next morning, three and a half hours to where this apartment building is that I just bought, just for Eric to go, “I forgot the batteries.” This happens. This happens. This stuff happens. And then the seller is so happy to be on camera with me, I’m like, “We need two mics. Why didn’t you bring two mics, bro?”

Pace Morby (00:30:04):

So I’m recording my audio on my iPhone’s voice memos while the seller is on the actual only mic that we have, with a battery that’s only going to last 30 minutes to film all the content that we literally spent three days to get out there for.

Pace Morby (00:30:20):

And guess what guys, it’s still going to work out. Just don’t overthink it. Just get it done. And sometimes it’s just fun. The adventure is more important than the actual journey and the destination. And it was just a great adventure to be like, “Eric screwed up. That was funny. Hahaha. That was great.” And we had a good time.

Robert Leonard (00:30:37):

Last question about social media. I want to get into some of the really creative strategies that you do. One more question about social media. If you were making a YouTube channel … I talk about real estate. Obviously I have the real estate podcast, but I also do the RV. Kind of separate, kind of similar, it’s kind of a spin on real estate, kind of not. If it was you, would you make a real estate channel and a RV channel, or would you do it all on one? Do you separate out the topics or you keep it in one?

Pace Morby (00:31:01):

I’m creating a second channel probably in the next three months. Okay? My second channel is going to be only like financial information about side hustles and things that I’m doing with my son for him to make money, and financial planning, what’s going on in the market, kind of a general basic topic. I’ll never talk about creative finance on there.

Pace Morby (00:31:24):

Unless you’re so niche, your topic is so niche, and you have as much content around it that I do. I could literally, no joke, I could post 20 to 30 YouTube videos a week on my channel on creative finance. For me, it made sense for me to have a very niched down YouTube channel that I have so much content around this one topic, and never really care about it ever getting to 3 million subscribers.

Pace Morby (00:31:49):

Because creative finance is never going to get to 3 million subscribers, right? Even though I’m on A&E, I got a paycheck that has Disney’s name on it. It’s crazy. Even with that brand that’s growing, nobody is coming to learn creative finance from me unless they’re kind of already wanting to get into real estate. For me, you have a unique advantage that I don’t have, which is you don’t have to have your whole channel around RV Rentals. You can have a channel …

Pace Morby (00:32:13):

Go look at Spencer Cornelia. He’s doing a great job. He’s got like half a million subscribers. A recent friend of mine, young kid, and what he does is he talks about all the ways he makes money, or what I like about this, ways that he’s interested in potentially making money. And he’ll interview other people about those topics rather than try and worry about his … Does your podcast go on YouTube?

Robert Leonard (00:32:38):

Yes. Yeah.

Pace Morby (00:32:40):

What I would do is I would-

Robert Leonard (00:32:41):

But that’s separate. But that’s going to be separate. That’s through-

Pace Morby (00:32:43):

… Perfect.

Robert Leonard (00:32:44):

… We have TIP, which I know you’re familiar with. TIP has its own YouTube channel. The podcast goes on its own YouTube channel with TIP, so that’s like our TIP page. But I’m talking about me personally, like the Robert Leonard YouTube page.

Pace Morby (00:32:55):

Yes, bro. 100% you need a personal brand YouTube, 100%. And I would make it so authentic to what you’re doing and what you want to be doing. And then it comes across. Spencer Cornelia, he’s like, “Hey, guys. I just found a guy local in Vegas that buys used cars and flips them, and he makes like $2,000 on every single car. And he was looking for investors, so I’m giving him $10,000 for him to use my money and we’re going to split the profits.”

Pace Morby (00:33:22):

And he’s just documenting a new thing he’s trying out, and he’s like, “It may fail. It may not fail.” And then the next video is about something completely different, but it’s still in the realm of making money. Right? I think for you, if you have a lot of content around RV Rentals, I would make a very specific channel to that. But if you don’t have enough content, right, maybe you’re just kind of starting your … This is maybe now towards your audience listening.

Pace Morby (00:33:46):

If you don’t have a lot of content and you’re just starting out about RV Rentals, I would go a little bit more broad and talk about RV Rentals 30% of the time, some other things 30% of the time, and then maybe take some Q&A in your YouTube comments and turn those into 30% of your YouTube videos. And I would kind of make it a little bit more broad. Because you’ll get way more subscribers way faster going broad than you will doing what I did, which took me two years to get to 75,000.

Robert Leonard (00:34:14):

I think the RVs would be just like your niche. Because it’s going to be super niche and it’s never going to get to 3 million subscribers. There’s not that many people that are interested in RV Rentals. But I think you could get to 75, 100K. I think there’s that many people, but it’s going to say small.

Pace Morby (00:34:26):

Oh, bro. I mean, do you follow Keep Your Daydream on YouTube?

Robert Leonard (00:34:29):

No, I don’t watch a lot of YouTube.

Pace Morby (00:34:32):

I watch a lot of YouTube. It’s probably the number one thing I consume, because I love watching what other people are doing in their own branding and marketing. I would go follow Keep Your Daydream. They’re an RV family that travel around the country. And they don’t talk about RV Rentals.

Robert Leonard (00:34:46):

Are they on TikTok? I think I might have seen them on TikTok.

Pace Morby (00:34:49):

Oh, they’re everywhere. They do such a great job. They have a massive following of other people who are interested in RVs and RV Rentals. And so what’s funny about all these people that are like RV families, they already know RVs really well. And they’re all like, “How do we make money in the RV world? How do we make …” I’m looking at their comments all the time, I’m like, “Why aren’t you guys going on like …” What is it? It’s not RV trader. What’s the websites that people use?

Robert Leonard (00:35:14):

RV Trader is where you can buy them. RVshare and Outdoorsy are-

Pace Morby (00:35:18):

There you go.

Robert Leonard (00:35:18):

… the Airbnb version of RVs.

Pace Morby (00:35:21):

I used RVshare for about a year with my … I have an Airstream. And we traveled around the country with it for about a year, and then I got so busy with the TV show we were like, “Hey, while we’re filming the TV show, let’s rent it out.”

Pace Morby (00:35:31):

And I rented it out for a year, and it was really, really good. I was like, “Wow, this is making me a thousand dollars net after my payment on the Airstream. This is great. What the freak? This is great. I want to buy 10 of these.” Right?

Pace Morby (00:35:42):

And I just got too busy and it wasn’t my sole focus, but it’s a wonderful business for anybody that’s trying to get into it. But for you, you should go look at what these other people are doing in terms of their content, and you should be making comments on their YouTube videos to drive people over to your YouTube channel all around specifically like, “Hey, guys. I teach people how to make money on RV Rentals.”

Pace Morby (00:36:01):

You guys already understand the RV world, and how to buy RVs, and how to manage them and clean them and stuff like that. You guys should be buying three or four of these bad boys and renting them out.

Robert Leonard (00:36:10):

That’s almost the exact realization I had probably a month or so ago was like, I was almost tailoring the RV content to people that listen to the podcast only and saying like, “Oh, you should go buy a new RV to do this.”

Robert Leonard (00:36:21):

But then I realized, I think the opportunity is all the people that already own RVs, that it just sits in their yard 90% of the time, because they want to use it two weekends a year and then they can drive it out the rest of the time. And a lot of people that I race motocross with, everybody has an RV for the most part that goes to these big national races that I go to.

Pace Morby (00:36:39):

Because they go camp out there for like four or five days, right?

Robert Leonard (00:36:41):

Exactly. And motocross is a very expensive sport, so a lot of people are trying to find ways to make it cheaper. And I’m like, “Well, you’re not using the RV all the time. Rent it out when you’re not using it.” And so I think I need to really focus on that. I think there’s a big audience there.

Pace Morby (00:36:53):

There’s a big audience there. I think that you’re underselling yourself. I think that you could probably get a YouTube channel around RV Rentals probably to half a million people. No doubt.

Robert Leonard (00:37:04):

Yeah. I just need to get my-

Pace Morby (00:37:05):

Some wider audience.

Robert Leonard (00:37:05):

… stuff together. I have no excuse. I know we’re talking about iPhones here, but I have a very expensive camera that I use. I don’t have it set up right now because I’m traveling tomorrow. But nonetheless, I have a very expensive camera that we use. I have really nice equipment all for the podcast. I already have it. I just need to use it.

Pace Morby (00:37:21):

Yeah. I mean, what I would tell people that are listening to this that want to create their own content as they should. If you’re not using social media in 2022, 2023, it’s irresponsible. It’s absolutely irresponsible for you as a business owner or just somebody who … If you’re trying to get anything in the world, social media can provide all of it.

Pace Morby (00:37:39):

What I would say is there’s this thing called gas. Okay? And it’s gear acquisition syndrome is what it’s called, gas. I got gas. And what I see is people that want to get into content, they’ll go out and buy all the nicest stuff, but they don’t end up using it. And then they think like, “Oh, well, I just need the next thing,” or, “I need another lens,” or, “I need another this or I need another that.” I have everything you can imagine.

Pace Morby (00:38:02):

I’ll tell you, I got five Blackmagic 6Ks, which that’s probably $40,000 in cameras. I’ve got a Sony FX6, which is a $9,000 camera by itself. I’ve got all the best of the best stuff. The best lighting, the best everything. And the number one tool I use that gets the best views and the most views is my freaking iPhone. Because people can tell it’s not overproduced, and they’re like, “Oh, this is great. This is just a dude giving me information, like clean, cut and dry.”

Pace Morby (00:38:31):

We end up using my iPhone way more frequently because people actually watch the content on my iPhone. Anybody out there, go get one of these JOBYs, the brand that I use for these things. I use them when I’m walking around. I use them for time lapses. So really all you need is your phone and I would say a decent tripod that you enjoy holding.

Pace Morby (00:38:51):

And Amazon typically is the one that sells … I have 10 of those. They’re around my house. In fact, I use them so much that I got sick of going up and down my stairs in my house and finding where they are, so I just bought 10 of them. And they’re like in every location that I film, I’ve got another one sitting there waiting for me to just pop my phone in it.

Robert Leonard (00:39:08):

I really have no excuse. I just need to get on it.

Pace Morby (00:39:11):

Even me, bro. I don’t have excuses. I should be doing more content, to be honest.

Robert Leonard (00:39:16):

I think everybody should really. I want to get into some of the real estate specific stuff. You’re very well known for a lot of creative finance, but specifically Subto. And to be completely honest, I do not know much about this strategy. I told you before, it’s kind of rare that I have a new guest on that talks about something that I haven’t really heard of much about in the real estate world, so I really am here learning with the audience about this topic. Give us a full rundown on what it is, how it works, why it’s a great strategy and how you got into it.

Pace Morby (00:39:46):

Let’s tie this into RV Rentals. Okay? Because your audience is kind of already understands what that is. Let’s say I want to go out and I just want to start renting out an RV. Right? Well, I’m brand new. I don’t have credit. I don’t have an RV. I don’t have any money. Right? Okay, well that’s your excuse. And this happens in real estate all the time. I don’t have money.

Pace Morby (00:40:05):

I was the same guy. I was sitting there fixing and flipping for everybody for years before I realized there’s so many different ways to get into this. And so today, if I have no credit, I can’t go buy and get an RV on credit. I can’t go get a loan for one. I have no money. I can’t buy one with cash.

Pace Morby (00:40:21):

Well, couldn’t I just drive through the streets and find somebody has their RV parked in their lawn, and knock on the door and go, “Hey, I see you have an RV parked in the lawn. Would you mind if I go out and rent this out and I’ll split the profits for you? I’ll make sure it’s insured, it’s cleaned, it’s taken care of.”

Pace Morby (00:40:36):

And yeah, you’re going to get some people that say no, but you’re going to get a lot of people that go, “Wait, yeah, I’ve been wanting to do that, thought about it, but I don’t have the time. Great.” And you go around town, let’s say you spend a month doing that. You think it’s reasonable to say that you could probably find five to 10 people in a month of driving around town that would let you rent out their RV? Probably, right?

Pace Morby (00:40:57):

I’m doing this with trailers with my son. Okay? I do a trailer rental business. I have like a dumped trailer that I bought. I paid $12,000 for it because I use it for my own business. But the problem with it is that we rent it out and it makes like $3,000 a month, which is really great. What we did is I told my son, I go, “All right, you’re 14 years old, so it’s time for you to start manning up a little bit. Let’s go and we’re going to drive around town, and we’re going to find people that have trailers in their yard.”

Pace Morby (00:41:24):

You’ve seen them. You drive around your town. You guys will start noticing this now that you’ve heard me say this. And there’s so many people that have trailers sitting on their side yard that never get used. And what I did is I just started knocking doors with my son, and I told the ladies, the first two ladies we got, “Hey, this is my son. He’s 14. Not trying to sell you anything, but we own a trailer rental business. We see you have a trailer right here. We would love to partner with you on renting that trailer out and split the profit with you for the first six months.”

Pace Morby (00:41:51):

And they go, “Wow, really? That’s cool. I really like that.” The trailers are not there anymore. I hauled them. The both ladies said yes. I hauled them to my parking lot, which we have access to at one of my buildings. And now we have five rentals. One of them I own, the other four I don’t. This is called trailer rental arbitrage. I’m not the owner of those trailers. I’m just borrowing them from people and then renting them out. You can do the same thing with RVs, right?

Pace Morby (00:42:20):

Well, I don’t like this model necessarily because guess what? I don’t own the RV. I don’t own the trailer. And so what I started doing with my son is I started going, “Let’s go to these people, and let’s ask them if they’ll let us take over their trailer and pay them off monthly.” Right? Give us a monthly payment. So essentially seller financing their trailer to us.

Pace Morby (00:42:43):

We have one lady that this week we’re signing a contract with. She has a trailer, she bought it for 7,000. She was going to go sell it on Craigslist for 3,000. And I told her, “Well, what if I give you $5,000? But I give it to you with payments. Would you be okay with that? You’ll make $2,000 more money.” She’s like, “Yeah. How much money can you pay me per month?” I go a, “100 bucks.” “That’s not enough.” And I go, “How about 250 bucks?” She goes, “Okay, I’ll do that.”

Pace Morby (00:43:09):

We’re going to start paying her 250 bucks a month on a trailer that will bring me in $3,000 a month in income, and I am the owner of that trailer and she has become my bank. Does that make sense? I’m not splitting profits with her anymore. I’m just making payments to her. And so she becomes the bank. We create what is called a promissory note, or I promise to pay you, therefore I’m writing it on a note that we both have a copy of.

Pace Morby (00:43:34):

It’s called a promissory note. Here’s our agreement. If I failed to pay you, you take the trailer back and you keep all the money I gave you along the way. And so that is buying a trailer on creative finance. I could do the same thing with an RV. I could go to somebody and go, “Hey.” Now, here’s the difference between seller finance and subject to. Seller finance means that the lady has the trailer paid off free and clear.

Pace Morby (00:43:57):

She has no debt on it. And she’s the sole owner with no debt. She can create whatever number she wants to sell it to me for and say, “Yeah, I’ll sell it to you for $5,000. Because on Craigslist, I’ll get three. That means I get benefited by selling it to you for a higher dollar amount, and I get to see you guys win as well. This is a win-win. I get more money. You get more money. This is amazing.”

Pace Morby (00:44:18):

That’s seller financing, right? The seller is financing me. They’re giving me a loan essentially as the bank. The seller acts as if they are the bank. Now, with subject to, typically you’re not going to find too many people have trailers that have loans on them, but you’re going to run into a lot of RV owners that have big loans on these RVs. Okay, we’ve done this before too.

Pace Morby (00:44:38):

When I first bought my Airstream, the first trailer I ever bought, the first RV that I ever bought, I just went on Craigslist and I found people that had Airstreams, and I would call them and I go, “Can I buy this on terms?” And they go, “I don’t even know what the hell terms are. What are you talking about? Terms. But the price is on the Craigslist app.” I go, “No, no, no. Do you owe a debt on this? Do you have a loan on this?”

Pace Morby (00:45:01):

And they go, “Yeah, I owe 37,500. I’m looking for 50,000.” I go, “Great. If I give you a small down payment, maybe a thousand or $2,000, will you let me take over your loan of the 37,500 and just make the payments to your bank for you, and then I’ll make another payment to you for the equity?” Right?

Pace Morby (00:45:20):

They had like $15,000 in equity. The first Airstream I ever bought was bought on subject to. Subject to means somebody has a debt with a bank that they owe the bank $37,500, and I just start making the payment on the debt. I don’t have to qualify for it. I don’t have to show credit. I don’t have to go to my job history, my W2, I don’t have to show my bank records, tax returns, nothing.

Pace Morby (00:45:43):

I can just literally take over that Airstream, an agreement between the seller and myself and says, “I’m the new owner,” and I just make a payment to the debt. That’s the difference between subject to and seller finance. Seller finance means the thing is paid it off free and clear. Subject to means they owe a debt on it that I’m just going to take over.

Pace Morby (00:45:59):

My personal house was bought subject to, my last personal house was bought subject to, the last 700 rentals I have in my portfolio are bought subject to or seller finance. And I even have a Kia, one of my cars in my garage was bought subject to. I had a guy who was on Craigslist, my videographer named Eric. He says, “Pace, I know you talk a lot about subject to, but could you subject to a car?” I go, “Yeah, let’s do it today.”

Pace Morby (00:46:24):

And so I go on Craigslist and I start hammering through. It took me about 40 phone calls. Okay? I started hammering through the Craigslist ads. And I get to a Kia and it’s like, “No, no, no. No, no, no, no. Maybe, maybe, maybe. Ah, interesting, but I’ve already got 15 people coming to look at the car today, so probably not.”

Pace Morby (00:46:43):

I get all the way down to this guy who has had a Kia on Craigslist for like 60 days and he hasn’t sold it, which in this market, you haven’t sold a car, what is going on? Cars are hard to come by right now. There’s a car shortage. Cars are going for over what they should be going for. I call him up and I go, “Hey, I’m looking to take over payments on somebody’s car. I saw your Kia has been in here for 60 days.”

Pace Morby (00:47:03):

He goes, “You would take over my payments.” I go, “Yeah.” He goes, “Oh my gosh, that’d be great.” I go, “Do you need any money for it?” And he goes, “No, I bought this thing on a dealership. I basically owe &26,000 on it. It’s worth $26,000. I put it on Craigslist for 30, nobody wants to pay 30. They want to pay 24 or 22. And if they pay me 24 or 22, I can’t pay off my loan that is worth 26.”

Pace Morby (00:47:29):

And I go, “Well, what’s going on?” He goes, “I’m sick. I’m taking a year off of work, like a hiatus. I can’t drive right now, and it’s a $600 monthly payment, sorry, $500 monthly payment. Insurance is $100, so it’s $600.” And I go, “I’ll take that over.” He goes, “You would take this.” I go, “Yeah.” We write an agreement. I make the payment to his ally bank for $500 and I have my own insurance on it now.

Pace Morby (00:47:51):

What am I doing with that Kia? I gave it to my son. He has it on Turo. It brings in $1,500 a month. I took over a Kia subject to the underlying debt. There’s a debt, $26,000. I just make that payment, and I go turn that into a $1,500 a month rental.

Pace Morby (00:48:08):

I can do that on anything. RVs, I can do it on trailers, I can do it on cars. And I’m well known for doing it on houses, and mobile home parks, and in multifamily, apartment complexes and all that kind of stuff. It can be done with anything. Anything, anything, anything can be bought subject to.

Robert Leonard (00:48:25):

I have so many questions, but the first thing is, when it comes to real estate, the first thing that popped into my mind was what about the due-on-sale clause? And I know you have a YouTube video. I know you’ve covered this, but explain it for my audience. What happens with the due-on-sale clause when you do a subject to with a real estate deal?

Pace Morby (00:48:40):

Let’s talk about the due-on-sale clause. The due-on-sale clause is you become the owner. Okay? Yesterday I was speaking on stage and somebody goes, “I don’t understand this. How can you become the owner of something if the original owner still owes a debt to the bank? Doesn’t the bank own that thing?” I’m like, “Oh, okay. Well, let’s talk about this.” Robert, have you ever used a credit card to buy groceries before?

Robert Leonard (00:49:04):

This morning.

Pace Morby (00:49:06):

Okay. You bought groceries this morning with a credit card. Who owns those groceries, you or the credit card company?

Robert Leonard (00:49:12):

Me.

Pace Morby (00:49:13):

Right? Everybody pay attention to this. You have a debt to your credit card company that you owe them money now, right? You’ll pay them at the end of the month or whatever. You have a debt. Okay? On your credit card statement, just like people have a debt on their house, a debt on their RV, a debt on whatever.

Pace Morby (00:49:30):

Just because there’s a debt owed on the property doesn’t mean you’re not the owner. It just means you’re not the owner free and clear. You own it. On public record it shows you’re the owner. You can refinance it. You can sell it. You can paint it pink. You can do whatever you want with that thing because you are the owner of that thing. Now, how do I verify that I’m the owner of those groceries?

Pace Morby (00:49:52):

Well, physically I have them in my hand, so that’s like I own them, but also there’s something called the receipt. Okay? The receipt verifies ownership. And in real estate or RVs or cars or whatever, that’s the title. Okay? Whoever has the title, right, or the right to the title, that’s the owner. They’re holding the title. In a vehicle, an RV, a trailer, the bank will hold the title even though the title has your name.

Pace Morby (00:50:18):

The title has your name from day one, but the bank is physically holding it until you pay it off or you sell it, or whatever, and they send it to you. Okay? In housing, it’s not like that. Housing, I get the deed is what we call it. We don’t call it a title. We call it a deed in housing. That’s the receipt of ownership. I can trade my deed. In fact, I’ve got one of them sitting right here, sitting next to me.

Pace Morby (00:50:42):

One page document that says, “I own this property.” And in real estate, you don’t wait to receive the title until the house is paid off. You have it on day one. In vehicles it’s called … I don’t want to get too much in the weeds, but it’s called an agreement for sale. It is subject to in seller finance, but the bank holds the title that has your name on it. A lot of people don’t know this.

Pace Morby (00:51:02):

The bank is holding the title that has your name on it. You are the owner until you pay it off. And then they mail it to you once it’s paid off. Okay? But in housing, it’s not like that. You can have a debt with Wells Fargo, Bank of America, Chase, whoever, and you can still be the owner, and people have to understand that. Okay?

Pace Morby (00:51:20):

For example, this house, okay? I bought this house for $3 million dollars. And there’s a loan on this house with Zions Bank. Okay? It’s a bank prevalent in Idaho, Utah, whatever. Zions Bank gave the previous owner, not me, gave the previous owner a loan for this $3 million dollars. Okay? I came to the owner and I go, “Let me take over your payments.” And the owner goes, “You can do that?” I go, “Yeah, you can do that.”

Pace Morby (00:51:47):

I took over the payments on a $3 million house, moved my family in, and the deed was transferred into my name. What happens is if Zions Bank finds out that I transferred that deed into my name, there’s something called the due-on-sale clause. And due-on-sale means literally what it says. The debt, the $3 million, is due upon the sale of the property.

Pace Morby (00:52:09):

And guess what? Just because the debt hasn’t been paid off doesn’t mean I haven’t sold the property. Jerry, the former owner, transfers the deed to my name and that is a verified sale. The difference is we just never paid off the $3 million in doing it.

Pace Morby (00:52:24):

The bank doesn’t have an obligation to do this, but they have a right. And the right that they have is they have the right to say, “Hey, Pace. We see you’re the new owner of this property, but our $3 million never got paid off. We would like to have that money paid off. You have six months or else we’re going to foreclose on you.”

Pace Morby (00:52:41):

That’s the due-on-sale clause, is the due-on-sale clause gives the bank the right to call the debt due when the property is sold. They call it due-on-sale clause. Okay? For anybody who didn’t know what that meant. There’s multiple ways to avoid this. There is due-on-sale clause insurance that’s available for people if you want to go out and get insurance. I don’t buy that insurance.

Pace Morby (00:53:01):

Two, understanding that only this is going to happen once out of maybe a thousand subject tos that you’ll ever do. It’s happened to me five times. And the third thing is when it does happen to you, which it has happened to me five times, there are ways to mitigate and get rid of it. And we could go into that. It’s like an hour long conversation, but it is nothing to worry about.

Pace Morby (00:53:21):

I’ve never, in all my years of doing this, I’ve never seen somebody lose a house or anything to due-on-sale. There’s very easy things you can do. This is going to be tough for people who don’t understand real estate. Usually the due-on-sale clause comes up when people actually understand what the due-on-sale clause. If I have to explain what the due-on-sale clause, it means you shouldn’t even worry about it.

Pace Morby (00:53:38):

But people that are in real estate, they typically know what due-on-sale clause means. I’m going to go through this, and it’s going to mind boggle a bunch of people and you’re not going to understand half of what I’m saying. So forgive me for what I’m saying. Okay? I’ve had the due-on-sale clause called on me. We had a house, it was on Lost Dutchman Way, which is the name of the street that the house was on.

Pace Morby (00:53:57):

The seller was in foreclosure. Okay? This happens all the time in subject to, where I find a lot of these subject to deals are sellers who are in foreclosure. They lost their job. They lost their second income. Maybe somebody in their household passed away, maybe they got sick, whatever. Literally thousands of different stories of why sellers do this is because in subject to, it’s all about pain.

Pace Morby (00:54:18):

And in seller finance, it’s all about gain. Okay? Remember that, because people will always, “Ask why would a seller do this?” Well, subject to, it’s typically pain. And if I tied it into RV Rentals, it would be the pain of watching my RV sitting out there in the side yard with $1,000 payment, and I haven’t done anything with it, I have pain. I just want to get rid of that thing. Okay?

Pace Morby (00:54:39):

There’s pain there. I go knock on that door and I go, “Can I take over your payment on your RV and I’ll give you maybe $100 a month until I pay the thing off or whatever?” There’s a high likelihood that, that person, the longer that RV has been sitting in their side yard is going to say yes to you, because there’s more pain. The more pain, the higher likelihood you’re going to get this.

Pace Morby (00:54:58):

This seller on Lost Dutchman Way, he’s in foreclosure. He owes $20,000 in late payments. He’s behind. He’s going to lose his house to the bank. Okay? So we get ahold of him through cold calling. There’s a list of foreclosures. People that are like, “How do I get into real estate?”

Pace Morby (00:55:13):

Guys, pull a foreclosure list, there’s literally thousands of people that are in foreclosure right now in your town that need you to call them and say, “How can I help you out? Can I take over your payments? Can I catch you up? Can I help you find another house to live in?”

Pace Morby (00:55:26):

That’s all we do, is just help people with their bad situations. It’s all we do in real estate. We call this guy and we go, “Hey, we notice you’re behind on your payments. What’s your plan with the house? Anything we can do to help you?” The seller says, “I just need to get out of this town. This town is so toxic for me. I just need to go back to Colorado.” We go, “Okay. Well, can we take over your payments?” And he goes, “Yeah, take over my payments, but I’m $20,000 behind.”

Pace Morby (00:55:48):

I go, “Okay, great. Well, we’ll catch up the $20,000.” We bring in a private money lender, we whatever. We catch up his $20,000, we give him $1,500 and we take over the house. We paint the house, we turn it into a rental, and that thing’s been renting for us for like five years. It’s been great. Made hundreds of thousands of dollars of the growth of that property. That property has killed it.

Pace Morby (00:56:06):

And so here’s what happens. When we catch up the payments. Okay? This is where due-on-sale clause typically gets called. Somebody is in foreclosure, which means now the bank has got them in a very specific like Crimson red, “Oh my gosh, these sellers are the bad actors,” type of category and pile in their computer system.

Pace Morby (00:56:26):

When you reinstate their loan, they have to transfer that file from foreclosure to reinstated and in good standing. Okay? We buy this house. We close escrow. One day after, we reinstate the loan. We catch the $20,000 up, we reinstate the loan. The very next day after we close on it, which means the deed, remember the receipt transfers into my name, the owner of the bank, it’s a very small bank, Johnson Bank, the owner of the bank has a physical stack of manila folders on his desk.

Pace Morby (00:56:58):

And he says, “All right, well, let’s go through the folders and see who’s reinstated and who hasn’t reinstated.” And he sees our file on Lost Dutchman Way. And he goes, “Okay. Well, looks like they’ve caught up their payments.” So he takes, it, opens up the manila folder, goes to the computer and is physically typing things in, goes to transfer from getting foreclosed on to reinstated and in good standing.

Pace Morby (00:57:19):

And in that process, guess what he notices? He notices that I’m the new owner. That’s where the due-on-sale clause comes from, right? What does he do? He goes, “Oh, looks like somebody just bought this subject to.” So he types up the letter, sends it out to us. We receive the letter a week later and the letter says, “You have six months to pay off this debt or else we’re going to foreclose on you and take the house back.”

Pace Morby (00:57:40):

I call the bank, personally myself, which is pretty unlikely. It’s just Johnson Bank is so small that the actual owner of the bank was the one physically doing the work. How unlikely is that? Jamie Dimon at Chase Bank is not looking at their files, right? I get on the phone with him. His name is Brian. I get on the phone with Brian. I go, “Hey, Brian, I caught up the $20,000 late payments.” He goes, “No, I saw that. I saw that. I appreciate that. I see that you bought the house subject to.”

Pace Morby (00:58:06):

Everybody knows that subject to is in real estate, especially in the banks. And he goes, “I know you bought a subject to, but our bank policy is to always call the due-on-sale clause.” And I’m like, “Brian, dude, I caught up $20,000 of payments and you guys didn’t have to foreclose on this house.” He’s like, “No, I appreciate that. That’s great.” And I go, “I want to keep the house. I don’t want to go sell it or refinance you out or anything like that. I just want to keep it.”

Pace Morby (00:58:27):

And he goes, “Okay, I have a suggestion for you. What I would do is just give the deed …” This is where it gets hairy. This is where people are going to have a hard time understanding this. Transfer the deed back to the owner. This costs $17 at the county recorder’s office. Transfer the deed back to the previous owner and then repurchase the house on a lease option where your option to buy it is the outstanding mortgage balance.

Pace Morby (00:58:53):

I was like, “Oh my gosh, that’s so genius.” Because think about this, in a lease option, there’s two documents. Okay? There’s a lease, which means I’m renting the property from the owner. There’s a lease. And then there’s an option document, this is why we call it a lease option. If anybody’s ever listened to a lease option, there’s two documents, lease and an option. The option contract states that I have the option to buy this at a determined price, at a determined point in the future.

Pace Morby (00:59:19):

What we do is the determined price is whatever the mortgage balance is on the day that I decide to sell it or buy it myself. Does that make sense? As I make payments on the lease, the mortgage payment, the mortgage balance goes down, and down, and down, and down. Essentially I’ve still bought that property subject to, it’s just that the deed is not in my name, which then gets rid of the due-on-sale clause.

Pace Morby (00:59:44):

On that property, we have a lease option. It’s an automatic renewal for the next 27 years, because that’s how many years are still on the mortgage. And whenever I decide to sell it, whenever I decide to refinance it, whenever I decide to do anything with that property, all I have to do is execute my option at whatever that day’s mortgage balance is.

Pace Morby (01:00:04):

In 10 years, it’s going to be $100,000 less. In 15 years, it’s going to be 1$50,000 less. Essentially my strike price or my option price goes down, and down, and down the more lease payments I made. I still bought that creatively, I just avoided the due-on-sale clause by doing it that way. Now, most people will ask, “Well, why don’t you just buy every property on a lease option with that same … Why wouldn’t you just do every house that way?”

Robert Leonard (01:00:29):

All right guys, that’s all I had for this week’s episode and part one of this two part series with Pace Morby. Be sure to tune in next week for part two and the continuation of this episode.

Outro (01:00:40):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday we teach you about Bitcoin, and every Saturday we study billionaires and the financial markets. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consultant a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.