Strategies for Rapid Success📈

Houston Becquet is a real estate powerhouse, who specializes in creative financing like DTA, no equity sub-to, and seller financing wholesaling, Houston now focuses on joint ventures and dispositions for seller finance wholesale deals, aiming to fast-track others to their real estate dreams. 

Transcript

Mike: 0:00

All right, everyone, welcome to the Real Estate Game Changers show. I'm your host, Mike McKay, based in the Jacksonville, Florida market. And each and every week we do this show with people who are changing the game of real estate all over the country. For anyone in the Jacksonville area, whether you are in real estate already. Or you have some sales experience. We are hiring acquisitions reps. You don't have to have real estate experience, but we are looking for some with sales experience. So reach out to us if that's something that you're interested in. You can send me a DM on Instagram. And this week on the show, we have Houston Becay. Houston, welcome to the show. Absolutely. So for the people who don't know you can you tell us a little bit about how you got started in the real estate business and how that's led you to where you are today?

Houston: 0:44

Yeah. Yeah. I'd love to jump in. So I actually got started traditionally I became a agent in 2014 in Corpus Christi, Texas. And I went through the two week course and I did my, I, I actually failed my test the first time. So I failed, passed it the second time. Went to work for Keller Williams and I was quickly, I quickly realized that just because you. Pass the test and you get your license. Doesn't mean that you're an expert in real estate. I went with the, the leasing route and just to get around people that were doing, like high producers. I would just say, Hey, I'll just take. All your leasing appointments because nobody in Texas wanted to do a lease here in Scottsdale. You get a little bit more, but you would get 250 or 350 bucks for a successful lease. And as an agent in Texas, so it, it was never going to pan out, but I did learn a whole bunch and I worked for one of the top producers and corpus and really learned how to underwrite really well. And. So I spent a whole summer. Literally not leaving the office once every single time I got a listing appointment, my broker would take it for me and he would just be like, okay, underwrite this. And so I was really like resentful at the time, but I'm so thankful now because it's paid off tenfold. Coming back from that experience, I realized that I loved real estate, but not necessarily on the front side or the retail side. So I. Purchase my first wholesaling course and investing course. It was a Cody's Ferber clever investor course, and it was all about direct mail marketing. And I dumped a whole bunch of money into it. And I, sent out 7, 300 mailers over one weekend and got inundated, didn't have any systems in place. And so totally, fell on my face. I. Did that every single year for the next nine years or so just save up all year. And then instead of going on a nice vacation, I would buy a real estate course and try to get involved in real estate. It just didn't work. Just didn't work. Didn't work. I always. Thought that success was like maybe behind a paywall. Cause I would always get the cheaper version of the course and, they would try to upsell you to the more expensive. And so I always thought that success was behind a paywall or maybe, you just had to be, it was a people, or you had to be rich to get involved. And I just, but I kept trying. I kept trying. I'm a very stubborn person and I do credit that to a lot of my success. Everybody was telling me I was crazy. My family, my friends, my, even the people that sold me the courses were like, yeah, I probably wouldn't do this if I were you. And I was like. That's just what they want to tell you. And I made up every excuse to, to actually keep going versus quitting. And that's like kind of something that's different from a lot of people I talked to. I purchased sub two and that's actually where I started to see results. I purchased sub two in October, 2022, and I went on the absolute cheapest. Payment plan that you could choose. I actually creative financed my entry into sub two. And so that should have been a pretty good first time. I jumped around from team to team. I didn't even go through the full course just cause I. Had already purchased so many courses prior that I pretty much knew everything they were trying to train. And so I just started taking action right away. I jumped into a bunch of different teams and all the teams I jumped into were doing just different kinds of things. They were. doing the typical shiny object syndrome, pinball bounce around from thing to thing. And so we just never really got success until I saw a post from Kevin Cho and he had said, Hey, I'm pulling a nationwide, no equity list. I will underwrite the deals. I, I pulled the list for you. I will close it. I will TC it. I will dispo it. All you have to do is call. And I was like, my brain, I'm like, Oh, just take action. Okay, perfect. And so I called and called and called and called. And to be honest, completely honest, it was a little bit of jealousy. I saw this kid was 22 years old and going to make half a million dollars that year. And, he's. I perceived this was just a, such a me thing, but I perceived him to be, less far ahead in many aspects of life. And was very hardheaded and almost, almost angry. I was jealous that this kid was doing it and I couldn't do it. And so I just got around him as much as I could. And I obsessed. Hey, whatever it is you're doing, I'm going to figure this out. And literally within six days of me being completely obsessed, waking up, going to sleep. All I could think about was how I could get my first deal. I got my first deal under contract and it completely changed my whole life. Everyone says, Hey, that first assignment is proof of concept. I was completely over the assignment by the time it came, I had gone through the rollercoaster of emotions and was like, I was the moment it was accepted. I was like, no way. And then literally two days later, he was like, Hey, I signed this to pace. And I was like what I'm like, no way and like the proof of concept came right then and there It wasn't actually when I got that check it was cool It was actually the biggest check that I ever gotten to that point, but It didn't give me any kind of Fulfillment or deep seated there wasn't like, and I realized right then and there, I am definitely not a money motivated person. Absolutely not. I am a goal and people oriented person, like 100, 000%. So it was awesome. I got my first check. I got my first deal and I got that proof of concept and I just started running with it. I would do about a deal a month for the first four months. And then I met my first partner. Who basically came over to my house, watched me work for a day and was like, I could automate and streamline a lot of what you're doing. And I was like, yeah, okay, whatever. Do it. And I just went about my business for the next three weeks and then he showed, and then he calls me up and he's Hey, can I show you something? And he had developed this program that basically pulled all the leads that I was pulling, sorted them, added new columns and imported it into the CRM. That he had designed as well and I was blown away, frankly, and he was gave me the ability to scale from one deal a month to three to five deals a month with just the two of us and it was a mind, again, another one of those proof of concept things were like, Hey, this can be a business. And after two months of doing that, and we had 67, 000 in assignments in the pipeline. I was like, all right, quit my W2, focus in full time on this. And it was a little too early cause those assignments didn't end up, it was, ended up being like, like 22, 000. That's just the nature of the game, failed forward, fell forward and really realized, like I said, as I'm not a money motivated person. And so I turned around and tried to be the Kevin show to everybody else. Because now he's, he's very successful and doesn't have as much time anymore. I'm that next step up now and I try to provide that for as many people as possible. So currently to bring it up to date now I do what's called creative wholesaling. So I wholesale. On market or like mostly on market, a couple of direct to seller, but wholesale on market creative deals. Meaning I purchased them subject to, I put some favorable terms in there and then I sell them to an end buyer. Those are since March 27th, 2023, my first deal closed. I've now closed on, I think 23 24, this. Coming week creative transactions. So

Mike: 8:19

So that's an interesting thing to dive in on, right? So you only focus on these creative deals. So how do you target, whether that's sellers or I guess agents who would be good prospects for creative deals, or is there a criteria that you're looking for? Or

Houston: 8:36

this is a very good question. I want to unpack that into two different answers. The first answer being no, you don't need to target anything specific when it comes to agents and going direct to agent, which is a whole. Marketing channel, essentially what you're doing is you're cold calling agents about their listings. And then what we're really doing, what I'm like training my callers to do, to focus on is to build that relationship and not worry so much about the actual deal in hand. But to lead with value and show them what we're doing so that they can then apply that to any other listings they have, because something unique with agents versus going direct to seller is the fact that agents, their whole job is to find properties. So there's the potential to do repeat and multiple repeat business with the same agent. I have a, an agent who about we're closing on the 29th, but I think we actually just pushed it back to the. On a property in Killeen, Texas this is the second property that she's brought us. And we actually have a third one that she's like going through her listings and she's Hey, I think that this one might work too. So it's awesome because I don't have to target anything specific when I'm talking to agents, you know I'm just building the relationship and explaining what it is that I'm looking for and then they go to work for me That's my favorite part about agents. Then the second part. Oh, I apologize So the second part about that question is Yes, I do actually target low equity opportunities and I do that through just a system or a software called PropStream. It's one of many real estate softwares. I like PropStream because it shows estimated mortgage balance and it's usually pretty close to, it's pretty close to accurate. And what I can do then is I can search for a maximum amount of equity or years owned. There's a couple of ways to target, but mostly an estimated amount of equity. then I export those leads. And so that the leads that I'm calling shouldn't have any more than 20 percent equity. And the reason why I'm targeting those leads in specific in particular is because the average closing cost on a home nationwide is around 8%. So that means that these sellers are going to walk away with at very most 12 percent of the entire purchase price of the home. And so they are a good opportunity to target for somebody who's looking to get into a low interest rate. At a good entry cost.

Mike: 11:05

And then, what does that conversation with the agents sound like where you're letting them know what you do?

Houston: 11:11

Again I'm going to do two parts on this. The first one where I'm not actually specifically targeting any specific kind of lead. The conversation is just a service level, I call it a discovery call or an introduction call. And basically what we're doing is we're just, we're introducing ourselves, we're leading with value. Like I said we're saying, Hey, we're buying in the area, we'd love to be a resource to you. Do you come across any kind of distress listings? I. Oftentimes go into those kinds of conversations, specifically trying to target, those low equity or owner finance deals. And so what that looks like is basically I'm disqualifying every other method of purchasing. I'm calling and I'm saying, Oh shoot, rates are so high nowadays. I don't think I can make this work on a traditional purchase. Oh, man, your seller has a whole bunch of, a whole bunch of debt, there's not very much equity. Ah, they're not going to make very much money on a sale. Shoot. How else can I buy this home? And, I'm letting them fall into the, the perfect spot for a sub two pitch. pretty much what I'm

Mike: 12:18

And so when you pull that prop stream list, you're pulling it of properties that are currently on the market with low equity. So you've reached out to the agents. Got it. Okay.

Houston: 12:27

Correct. I was very broke when I first started wholesaling as many people are. So I looked for free or very cheap opportunities to market. You can build an amazing, consistent, predictable wholesale company through marketing, but it's pretty expensive. And so for people that are brand new getting started and maybe don't have a bunch of money. Wanting to get involved and produce an active income. I strongly recommend going the direct to agent route because it's free. It they're listed on market. You don't have to skip trace anything. There's obviously a level of motivation. You've got the pictures there. You don't need to send somebody out. Usually there's. an inspection report or it's listed on market. So it's probably going to qualify for FHA or government backed loan. So there's a, it's an easy in for people that. Don't have a whole bunch of money to do marketing.

Mike: 13:22

you're having that conversation with the agents, right? You're like, do you have any distressed listings? What are you specifically telling them to look out for? Think of me when what are you saying? Think of me when this.

Houston: 13:33

And I feel like it's funny because every single answer is a two part answer and I don't mean to be like that, but if you're looking at if you want to pitch cash because we've actually transitioned into pitching cash as well we have our, we have like our. I think our second cash deal is all it's just Hey, when creative doesn't work I can fish cash. When I'm looking for cash opportunities and I'm asking for distressed things, I'm usually saying Hey, do you have anything that, you know, Hey, maybe, could use some updating do you have anything that, might have some trouble selling on market? That's usually how I phrase it. I don't ever say distressed listings, unless they specifically say distressed, and then I'll just copy their verbiage. But usually I try to avoid things like those trigger words like, distressed, or motivated, or sub to. Those are like some real trigger words for whatever reason when it comes to agents. And so I just, I Describe that without saying it the next the next thing there, when I'm actually looking for creative leads the way I describe it is I'm usually like, Hey, I, it's through a third party story. I'm like, Hey, we just purchased this home, just a couple of weeks ago where, we, it had a really good interest rate, so we just kept that rate in place and we cashed out the seller's equity. If you have any, listings that for whatever reason the seller is going to have to come to the closing table with cash, please let me know. I'd love to be able to put some money in their pocket and take care of you as well.

Mike: 14:56

Yeah, I like that phrasing. Keep the rate in place and cash out the seller's equity. It's an interesting way to.

Houston: 15:02

cause they can make whatever assumption they want at that point. They're like, Oh, okay. He's going to do an assumption. Oh, he's going to do a blah, blah, blah. Oh, he's going to do this. I don't really care what assumption they make as long as, it doesn't come across as I'm some scammy sales commission breath. Person who's just looking for a discount.

Mike: 15:18

Yeah. Huh. Interesting. So let's say that they do bring you a deal, right? They're an agent. I know that we don't do any really agent direct stuff and we have an agent bring us something occasionally, but it's not our focus. Sometimes the challenge can be like, you're communicating through a third party to someone else, right? So how do you navigate that, that conversation so that, they relay that information in a way like, it's always hard to have someone else sell on your behalf, right? Sell your plan to the seller, especially when it's not just a straightforward like cash offer, for example. So how do you go about dealing with that?

Houston: 15:56

This is tough. It's a little delicate balance for sure. You don't want to insult the agent by, telling them that they don't know what they're talking about. So I like to do a number of things. The first thing I like to do is I like to have the agent actually explained to me. You know what it is I'm offering. So after my pitch, I'll actually ask the agent, I'm like, Hey Mike, I just, agent Mike, I just wanted to just clarify real quick before, Hey, before we get off the phone, while I still got you it sounds Hey, I went through that really quickly. Would you mind just explaining to me real quick or I just a practice pitch, you know how you would explain this to the seller and then half the time they're like, uh, Oh and you're just like yeah. Yeah. No, no problem. No problem. Hey, let's go over it one more time this is how you know, this is and I just keep it super basic super generic super vague because what i'm doing is i'm just trying not to scare away the seller. It's a telephone game you're going to tell the agent something, the agent's going to butcher it a little bit into the seller. And oftentimes it's going to kill the deal. What I really like to do, and I do this every single time. Try to get the seller on the phone. Push a three way or a four way conversation or a Zoom. I always offer to do a Zoom. Most people don't like to do Zooms, but that's why I offer it. So that, I'm like, Hey, I'd love to introduce myself, show you that I'm a real person. And, I can even walk you through some of the some of the deals we've done in the past. I'd love to be able to get in front of your seller. Hey, put you on a pedestal, Mr. Mike, the agent. Really, I think it's amazing that you're even, even considering offers like this, most sellers I, or most agents I talk to are just more concerned with their own pocket and they don't really care, about a good solution for a seller. You're out here actually educating yourself and that's amazing. And I usually you try to bolster their ego bolster.'cause agents are driven off ego as. All humans are but specifically agents are driven on ego. Absolutely. So I bolster them up Oh my gosh, mr. Mr. McKay, it's amazing. You know that you're that you know Thank you so much for putting me in front of your seller and then what it is i'm doing is i'm going directly to the seller and i'm asking them the questions Hey, do you think this works for you? That way there's no chance of the telephone game happening And then also too like I said, i'm like i'm trying to lead with value. I'm trying to be a resource to these agents And so when I come in and and I say, Hey, even if I'm not going to be your best buyer, I'd love to be able to walk you through the way we purchase homes and maybe this will come up in the future. And it takes the pressure off that individual transaction and I can just have a conversation and if it's a good fit, heck yeah, I'll send over a contract. If it's not, then that's totally fine. I'm working, I'm more worried about the relationship than I am the deal in hand.

Mike: 18:42

Yeah. And then how are you handling if these sellers are selling this home because they're moving to buy another home and they need financing another home, doesn't that cause a problem if you're purchasing this one subject to?

Houston: 18:55

Yeah, good. Absolutely. Absolutely. And this goes back to Sometimes a subject to offer or subject to purchase isn't the best case scenario for the sellers And that's why I lead the conversation with a disqualifying tone and I try to disqualify everything else And then we end up with sub two down to answer your question about purchasing power and their ability to get another home This is a very nuanced topic and I love to answer this one. So by the lending guidelines by the Fannie Mac guidelines, there's literally it says they change this during covid. 12 months of a debt being serviced Actually wipes the debt to their debt from that debt to income. So past 12 months, on all of the homes that we've purchased sub two, we actually there's a servicing company put in place like a loan servicer, just like your loan has. And what it does is it pulls the money from our account, deposits it directly to the lender. So we don't actually pay the seller. Per month, we pay directly to the mortgage company. What they can do is they can actually export all of those payments and show that it's been serviced for a minimum of 12 months and it's wiped from their debt to income. That's on a nationwide level. So absolutely past 12 months, this does not affect their buying ability. However, before 12 months, it absolutely does. And this is something to be very aware of. And there are ways to get around this. It's lender specific. So what we've done in the past is we've had a seller that wanted to buy a home directly. At the same time, we're purchasing their home as most people do. So what we did is we actually went to that lender and we asked the lender, Hey, we're trying to purchase their home. What do you need to see? To prove that we're servicing this debt and the lender actually recommended this to us And so this is actually how we use it most of the time we draft a lease purchase agreement For the amount of the mortgage payment and with the option of purchase at the actual mortgage amount And then we show this to the lender, some lenders are a little bit more strict than others and they require an actual deposit or a couple months of payments. And so what we can do, and what we've done in the past is we've actually put two months of payments into an escrow account. And just essentially said, hey these are the two months. And the lender knew what was going on. We asked them to do this and they told us this is the way to do it. And so we showed a lease purchase agreement that we're going to be, servicing this debt, the lender then approved them for the purchase of their new home, and then the sale of this home was contingent upon them getting into the next home.

Mike: 21:36

Gotcha. It's like a reverse contingency to usual, right? Yeah. That's

Houston: 21:41

Exactly. Exactly. Yeah. Yeah, exactly. It was a reverse contingency. That's funny. That's

Mike: 21:44

It's still a contingency, but it's most people, it's the other way around, right?

Houston: 21:47

exactly. Exactly. Yeah. Yeah. And this is, this goes back into that leading with value thing. I don't want to purchase this home if it's going to impede their ability to get into a new home. I talk myself out of more deals than I talk myself into. Because at the end of the day, I've had some nightmare stories where I want what's best for the seller and what's best for the seller. It's oftentimes not, I shouldn't say oftentimes, it's sometimes not the best investment. So just because a seller wants to sell to you, sub two doesn't mean that it's a deal or that you should buy a sub two.

Mike: 22:22

Who are you using to service your loans?

Houston: 22:24

So I, I don't personally own any homes, so I don't even own the home I live in. So I wholesale everything out of those 24 transactions in the last 11 months. I haven't purchased anything, unfortunately.

Mike: 22:36

So are they, then the end buyer is setting up the servicing company? Is that how that's working or?

Houston: 22:42

So RTCs actually set up the servicing company for the end buyer. That's just part of the service we provide. So it's dependent upon the end buyer's choice. Westar just because that's what Pace uses. And that's what everyone starts with. But then we've seen a whole bunch more

Mike: 23:00

Gotcha. Okay. And then how do you, um, always a concern with a subject to deal of, if you're assigning it, right? You told this person that you're going to pay their mortgage, right? So how do you know that the person you're assigning it to is going to make good on that promise?

Houston: 23:18

You don't and I want to be completely forthright about that. You don't as a wholesaler what i'm doing is i'm actually putting in the instruments To, properly convey title and to set up the third party servicing for that empire. But at the end of the day, it's on them to make the payments. And as as we've seen in sub two, there was a large falling out towards the end of 2023 with a pair of individuals that, took on way, way too many. Opportunities at once and were well over their head and they ended up defaulting on, pretty much all of these loans. It was something like 70 something loans. It was ridiculous. And so in that instance I had a property that I had sold and it was actually the second property I ever wholesale in April or yeah, April, I think April of 2023. And then two months ago, like I think like November ish, I got a call from the seller. Because I'm the person of contact. I'm the person that, they talk to. And so I got a call from the seller saying, Hey, Houston, what's going on? I hope you're well. What the heck's going on with this? It shows that I'm two months behind on my mortgage and I've, my heart sank. Oh my gosh, this is that's the worst thing I've ever wanted to hear. So What we did at that point is I actually looked up who the lender was on that, because most people that purchase subject to actually use like a private money lender for their acquisition cost. And so I looked up that lender. And I called them and I was like, Hey, Carlos, this guy's name's Carlos. Super nice guy. Hey, Carlos. Just want to let you know, I don't, I'm not sure if you're aware. It looks like we're two months behind on, he was,

Mike: 24:53

second position lender.

Houston: 24:55

yep. Second position actually technically third. Cause there were solar on this which. Not a lot of people are willing to go third, but he went third and he started he, he freaked out more than I did because it's his money on the line. And so he was able to figure out that, he actually caught it up and took over that. So he was able to, in his lending agreement, I guess he was able to actually take title. And so he lent on this, he was earning a return on his investment. They defaulted and so he was actually able to take title back and now he owns the property on something he lent on and he didn't get his full investment back on the lending side, but now he has a home. So it worked out for him. He's okay with it. And the seller. She's was so sweet through this whole process, but understandably like really frustrated. So the lender actually offered to pay for a credit repair service for the seller, which was really sweet. And we ended up doing that and everything worked out great. But to your point it is ultimately on the end buyer to do that. And so you have to properly vet your buyers. One way to do that is we actually have a mandatory questionnaire and introductory discovery call, essentially just like we do with agents with buyers. And we require them to show us their, proof of funds, but an actual proof of funds. We require them to show us their what properties they've closed on. And to be completely frank, we don't work with people that haven't bought a home before. I love to help people, do their first deal. But on the front side I don't really want to be doing deals with people who haven't done them on the backside because it's all about the trust. And I don't trust somebody who hasn't done deals to give the same level of service that I have provided on the front end. And so that's a big portion of what we do now is properly vet our buyers. As much as we can, I'll tell you in six months if we properly vetted them, so far, we've probably vet them as well as we can. And, um, Put the instruments in place to, make it a pretty bad day if they are not to

Mike: 27:10

What type of instruments are that? Are those?

Houston: 27:13

So if you are in the group sub two Pace provides doc he provides pretty great contracts that, that essentially put protections in place for the seller. How we're supposed to buy these properties subject to is we actually buy them mirroring the existing terms. So as a mirror app. And then you're supposed to include the the actual property in a deed in trust. That's how it's recorded and it's up to the buyer to actually do that. But what that does is it gives the seller a vehicle to actually foreclose on. So they can actually foreclose on this trust. and get their property back should we default.

Mike: 27:52

Say the first part again, you said that you do a wrap. What was that? A wrap?

Houston: 27:56

The, if you look at the contract essentially what it says is we're buying this property mirroring or as a mirror app, mirroring the existing terms on the mortgage. And that's what they call a mirror app or, depending on the era, there's always different, terms for it. Silent assumption, unqualified assumption, mirror apps takeover payments, but it's all the same thing. We're just keeping that existing debt in place and, we're purchasing it mirroring the existing terms.

Mike: 28:25

It's a second mortgage that the seller holds towards the buyer. So the, and it's, so you're wrapping the underlying debt

Houston: 28:32

yes. Yeah. I think I misunderstood you there. Could you repeat that one more different time?

Mike: 28:36

Yeah. So let's say for example, a seller's got some debt on there, 3. 5%, whatever. You're not really taking that debt subject, subject to your kind of the seller is then making a loan to you or if pretending you're the buyer right at three and a half percent so that they so they're essentially wrapping their own mortgage so that they have the ability to foreclose if you default as opposed to just signing over the is that am I understanding it right or okay.

Houston: 29:02

Correct. And that's not how every single buyer actually buys, but that's how it's laid out in the contract to, to follow. And that's, that, that puts the most protections in for the seller that I've seen so far.

Mike: 29:13

What other things are in there? You said something about deed of trust or I don't

Houston: 29:18

Yeah. So if this is more this is for a seller seller finance note. So if there's like a second, if we're essentially like, let's say they owe 300 and the property is worth 500. And so we're going to put it, without a down payment, it's like a 200, 000 second position note. So it's, so it's recorded as a promissory note and then it's secured with a deed of trust. this

Mike: 29:40

like a normal mortgage.

Houston: 29:41

just like a normal mortgage and what that's doing, like I said, is it's given them an opportunity to foreclose on something should we default,

Mike: 29:49

Gotcha. What what other like protections are put in place or do you guys put in place? What

Houston: 29:57

we've transitioned out of the deed in lieu. It's not been enforceable is, or so we've been told a pre signed deed in lieu doesn't hold up in court. What we can do is give them a view, give them a chance to foreclose on something, and then also to make it pretty stringent upon us actually performing. There is You know there's certain things like a quick claim deed. We've done like one or two of those before where essentially it says that if we miss, 30 days or 15 days with a payment, then, this property gets quick claim deeded over to the seller without having to go through a foreclosure process. However, we haven't seen any of those through to the end, meaning a buyer hasn't defaulted and a seller hasn't. Utilize that. So I'm actually not sure if that vehicle is, litigious, if it actually works.

Mike: 30:48

about due on sale clause? How are you guys navigating that?

Houston: 30:53

Yeah, there's, this is a really good question too. And it really just depends on what the actual loan to value is. If you have an 80%. Or less loan to value. The best situation is probably just to refinance it. the most common That we've seen um, because i've actually one I have a partner that we've done other stuff with he has a property that actually did have a due on sale call And so what he's doing there is he's actually deeding the property back to the seller And then he's purchasing on an executory contract So every single state has a different documentation that basically, like I know in Texas, it's a land contract, but it's essentially, it's a document that states that you're purchasing the property, but the title is going to be held at a third party company, like the escrow company until the payments are completed. And so this makes it a little bit more difficult to claim tax benefits from the home. However, you can still claim tax benefits, but you have a higher likelihood of being audited by the IRS. And then as long as you have the proper documentation and systems in place to show that, hey, this, we're servicing the debt, we're operating it, we're, the owners. You can actually legally claim tax benefits from it. It's just, are you willing to go up to bat for that?

Mike: 32:15

Yeah, that sounds similar to a what they call a contract for deed in Florida.

Houston: 32:19

Yep, exactly. Exactly the same. They're all part of a family called the executory contracts.

Mike: 32:24

Okay, gotcha. And like, how much of do the sellers, are they aware that you're assigning these? Like, how up front are you about that?

Houston: 32:31

So I believe in being like pretty transparent. I'm not a hundred percent transparent just to be completely honest. just to be transparent. I I usually phrase it in the sense of, hey, I'm working with a group of, Investors, I'm part of a large group of investors, which I am. And I'm going to be looking at this as a long term rental. And if it doesn't fit for my numbers, if it doesn't pencil out I'm still going to, I'm going to put this in front of these people and, potentially find you a buyer that's going to agree to all the terms that we put in place. So nothing changes for your seller is how I put it. Other times, if it's a little bit, if it's a really strict agent and they're like, Oh, I, we don't want to do any assignments. I, I usually say, Hey, I assigned every single property I have, whether it's going to be to another investor. That I work with, or if it's going to be a different department of ours. And I usually just explain it away as a funding partner. And that our funding partner is the one who is essentially going to be holding title. That's part of their requirements. That's how I get around it now. Now that's for properties that, you know. The first time around, if I look at a property and the agent realizes that this is not a good deal for sub two, one way I can do it is I can pitch what I like to call a transparent wholesale. And I like to tell the agent Hey, look, similar to what I just said Hey, look, this doesn't look like a deal for me, but doesn't mean it's not a deal for somebody else. I work with a whole bunch of people and they all buy for different reasons. Sometimes they focus on, temporary housing solutions and furnished rentals. Sometimes they're doing short term stuff. Sometimes they're buying for sober living. All of their underwriting is going to be different. And maybe just because it's not a deal for me, it doesn't mean it's not a deal for them. If your seller agrees to these terms, Why don't we do this? I'm down to put it under contract and leave a, a shorter a shorter inspection period of maybe, 10 days. And I don't want to waste your time. I don't want to waste your seller's time. But if you think that these terms work for your seller, I'd love to be able to put this in front of the people I work with and see if it's interesting to them. Would you be open to something like that? And so I'm essentially pitching an option contract or a transparent wholesale as I like to call it.

Mike: 34:53

Gotcha. Do you guys use trusts at all when you're doing the subject to deals?

Houston: 34:58

do we use trust in what sense? To hold on to these? Is that what you're asking?

Mike: 35:01

There's some people who use like, land trust to, transfer the title as opposed to just transferring it normal. I don't know if that's something that you guys do.

Houston: 35:09

So haven't gone there so far. I haven't gone there so far.

Mike: 35:12

Gotcha.

Houston: 35:13

We just, we go through a typical either a closing attorney or title company and just transfer it traditionally.

Mike: 35:19

Gotcha. What? Gotcha. What do you think changed for you because, you said you bought your first, wholesaling course, a real estate course 10 years ago, and then it took really 9 or 10 years to get, rolling to get your first deal. And then obviously things took off from there. What do you think was the catalyst that made this different than the previous times?

Houston: 35:39

I truly believe it was the company I surrounded myself with. I just shunned all of my current friends at the moment who were, great people. I'm still friends with them. We're, been friends since high school. I've been friends with them forever, but they weren't. Success minded. Hey, they were, one of them was and working on an oil field and making, 150, 000 a year, I had another friend who's a, masters and has some other kind of degree as a, as an architect. And then I have one friend, so I've had, I have successful friends, but they're successful in different fields. And then they don't carry that to their personal life. They don't carry that in conversation, they're big, like past minded people where they're like, they're always bringing up the past. They're never thinking about the future. They're not willing or wanting to grow. So I got around growth, success minded people. And that's what sub two did for me. That was a big changer, but physically, like actually getting around these people was the biggest game changer I've ever seen. Actually physically getting around these people in the same room literally touching these people and I was like, oh, these are real people They're really doing it and this is actually what it takes. It's one thing to learn about it on a course It's one thing to hear people be successful that you've never met or don't know But if you're talking to these people, you're taught, you physically, I'm like, I was shaking this guy's shoulder. Hey, how can I do what you're doing? And just physically getting in the room with these people and having that, fall back, having that trust fall kind of scenario is what really pushed me over the, pushed me over the edge into the realm of, Hey, this is possible. Then what actually got me to success was obsession, absolute obsession. Just day in day in, day out, thinking about getting my first deal, thinking about how to improve my conversations. I didn't listen to YouTube or podcast or music. I watched seller calls just again and again and again and again. And then I would make a seller call and then I would listen to a couple and then I would make one and then I would listen to a couple and I'd make one. And I got obsessed. And like I mentioned earlier, it was a little bit of jealousy that drove that, but that was the catalyst. That was the catalyst for me.

Mike: 37:49

Yeah. What advice do you have for people who are thinking about getting into the creative side of real estate? Yeah.

Houston: 38:04

it. In any part of real estate, just get involved. It does not matter. There's soul. There's. There's so many ways to be successful in real estate, especially when you jump into something like sub two, you realize that there is so many ways. I know this guy, follow this guy on, on, on Instagram. All he does is flip land. He finds lots of dirt and flips them for thousands of dollars. And it's amazing to me. I'm like, there's literally no liability. There's like very little overhead. He's a one man show and he's killing it. Or you can go into multifamily and multifamily has high, high passive, high, income or passive income, returns and you can get involved in that. They all work. They're all amazing. Just pick one Avenue and pick one person that you resonate with and just get around them. Follow them, buy them lunch, buy them dinner, buy whatever you need to get in their presence, get in their frickin presence and just copy what it is they're doing. And then once you start building that momentum, the first steps are the hardest. Once you start building that momentum, you can take that any which way you want, but give one person, one marketing channel, one lead source, the time of day for six months. And everyone says three months. No. It took me nine years to get a first deal. You can do six months. You can do six months.

Mike: 39:24

Yeah. I think that's a great piece of advice. Focusing on one thing people ask me a lot when I came down to Jacksonville, cause I did a bunch of, Like deals my first year or 20, whatever, something, and they're like, what'd you do? And I'm like, all I did was get a VA to text. And whenever someone said, I'm remotely interested, I called them. That was

Houston: 39:40

go. There you go. There you go. And you didn't try to do a nine other things at the same time. Just

Mike: 39:46

was it. Yeah. But it is hard to keep that focus, right? Because there is, especially if you're entrepreneurial, there's a lot of things driving you in different directions.

Houston: 39:54

Oh, trust me. I just had a conversation with somebody this morning who's doing development and he's doing amazing things. And I was like, what? I want to do that. I want to do that. But then I like came back and I was like nope. What got me to this point is not jumping around Just doing more and better of the same and then eventually when I'm at a point where I'm not Involved in my own company and I've replaced myself then I can focus on something else But until then nope, not ready. Not ready.

Mike: 40:22

Yeah. Yeah. What like roadblocks have you encountered when doing creative deals that might be helpful to people who maybe they've haven't done any, or maybe they've done a handful, you've obviously done, 20 something in the last year. What are some things that you, lessons you learned that other people could take away? Yeah.

Houston: 40:40

Over those payments and cashing out their equity. Do you think that makes sense here? I'm always letting them be the expert and so I'd recommend not coming off as the expert coming off genuinely curious and leading with value, leading with compassion because that's the hardest part to fake. Is that part right there? So if you genuinely come in and you're not worried about that deal, you're worried about having a nice conversation with that agent, you're going to come off so much more authentic. I would recommend starting there and then, seeing how the conversation goes. I didn't know the answers to half the things that they asked me, but that was fine. Guess what? I have a partner who does know. So I was like, Oh, okay. That's a really good question. Actually, I'm gonna, I'm gonna find that answer for you and I'll be right back. And then guess what? You go to somebody like me now who has done all the, a lot of these and I'll give you the answer to that. And then you come back and you're like, Hey, I talked to my partner, Hey, it's actually, I'm really glad that was the biggest concern because we've actually overcome that a whole bunch of times. And. In this scenario, that's actually how we overcame it. Hey if that wasn't an issue at all, and we were able to do all this stuff, Hey, would you want to hop on the phone with my partner and go over what that looked like? Push it off to somebody else, push it off to somebody else. You don't need to be the expert. You're just coming in with compassion and curiosity. And push it off to somebody else. I still don't know things. And if somebody asked me something, I don't know. Guess what? I don't act like I know all I will push you to the right person because that's what I've realized is this business is not about knowing everything. It's about knowing the people that know everything or knowing the people that know what it is you're looking for. Cause nobody knows everything.

Mike: 42:21

for sure. We're getting close to the end here and there's always two questions I like to ask at the end. The 1st is what is the craziest or most uncomfortable situation that you have ever experienced in a real estate deal?

Houston: 42:33

There's a, there's. Unfortunately, with creative stuff, there's a lot of uncomfortable situations. I'm not a confrontational person. And so the most uncomfortable stuff for me is post. Post contract before closing. And so that kind of in between communication between the buyer and the seller and me just trying to be like the mediator is pretty uncomfortable for me. Recently I just had a transaction where we agreed to an entry and then title came back and it turns out that, the statement I was looking at showed that we were 3, 000 in arrears. It turns out it was 13, 000 in arrears. And then it wasn't a 10, 000 escrow balance. It was a negative 10, 000 escrow balance. And so I had to go to the seller who's going through a nasty divorce, who's paying the mortgage out of her 401k. And I had to tell her, Hey. I can't afford to pay you as much as I wanted to pay you. And then I had to go to the buyer and say, Hey, Mr. Buyer, there's all this stuff coming and she doesn't have enough money to pay all this. And I don't have enough and there's not enough room on my side. Like I'll wiggle a little bit, but let's figure this out. And so I had to negotiate the seller down, five or 6, 000, the buyer up five or 6, 000 and try to salvage my assignment fee. And those kinds of situations are really, they're really tough for me because it's like outside of like my comfort zone, but. But. But everything, everything is negotiable. And if I didn't try to do this, then I just, I would have made 0 or negative dollars. I ended up having these tough conversations and ended up making, it was like a 7, 000 assignment on that. So not nothing crazy, but Hey, I still made money. And the seller one, they walked away happy. The buyer ended up walking away happy. Even though it was a really tough conversation, a really uncomfortable conversation for me. It worked out really well.

Mike: 44:29

Factors are you looking at to know that you have a good sub two deal, the

Houston: 44:34

good question.

Mike: 44:35

can assign. Yeah.

Houston: 44:36

So everyone buys for different reasons. The most common thing I hear is a cash on cash return. And so people are looking for typically a 10 percent cash on cash return for cash flowing rental properties. And then they're looking for a less than 10 percent entry. What I

Mike: 44:51

of purchase

Houston: 44:54

ends up being pretty much the mortgage balance. Let's say it's a 300, 000 mortgage. Someone's gonna want to make 300 a month. And a 30, 000 entry. That's a typical subject to purchase. That's what a good deal looks like.

Mike: 45:09

Gotcha. So they want to make one, it sounds like the 1 percent rule. And then they would, then 10 percent on the, and that includes includes Oh, I guess it's the entry fee includes your assignment fee and then whatever the seller is getting. Is that kind of how it's, I'm not as familiar with subject to stuff

Houston: 45:24

Yep. Yep. Yep. So the entry fee on a subject to purchase is broken down as cash to seller,

Mike: 45:31

Okay. Gotcha.

Houston: 45:31

cash to agent if there's an agent assignment, any arrears there may be, as well as closing costs.

Mike: 45:38

Got it. Okay. So if

Houston: 45:39

And those five items have to equal less than 10 percent and it has to either break even or make at least 10 percent cash on cash return as far as the cash flow side of things. Most of the deals I look at are not good sub two deals. of the deals I, most of the deals I see posted in sub two are not good sub two deals.

Mike: 45:58

Yeah, fair enough. And the final question I always ask is if you go back in time, give yourself one piece of advice when you were looking for that first deal, knowing what you know now, what would you tell yourself?

Houston: 46:09

Just do it. Do it. No, I, really what it would be, it would just be, Hey swallow your pride and get around people that are doing it. I wish I would have, instead of. Actually I shouldn't say that because everything that I did put me in the position to succeed now. However, if I was going to redo it, if I was going to tell somebody else, and this is what I tell everybody every day, get around people that are doing deals, like just get around them. Like just I, I don't I don't know very many people that are doing deals that, that don't want people around them. Like everybody that I know that is doing deals want action takers around them because guess what it is. That's a lead source. It's good for me too, because Hey, you're bringing me problems. I have the potential to make money on that problem. I don't want you to come to me and be like, Oh, where do I start? What's wholesale mean? Look it up on Google go on YouTube get the basic information. It's all out there. It's all free when you're ready to take action Come bug me. I'll get you a list pulled Well, or I'll instruct you how to pull a list take action and bring me problems bring people problems get around people that are doing deals that's the number one thing I would tell people.

Mike: 47:16

Gotcha. If people want to reach out to you after the show or, maybe they want to JV a deal with you, how could they go about doing that? Cool.

Houston: 47:28

House the number four Houston. That's a really good way to reach me. I'm always on there. My my, my name is Houston Beay. You can search that. My phone number, if you guys wanna reach out reach out through Instagram and I'll give you my phone number. I'm an open book. Like I said, I do a zoom four days a week where I do a live office hours. We comp deals, we overwrite, underwrite make offers live. So I'm happy to do that. I would say Instagram is probably the best way to reach out to me,

Mike: 47:53

Awesome, man. This was great. Thanks for being on the show.

Houston: 47:55

dude. Thanks for having me, Mike. I had a blast.