I sat down with Pace Morby to discuss how beginner real estate investors can stand out when using creative finance and subject to, and exactly what steps you should take to gain experience as a new investor without taking on massive risk. Even if you’ve invested in real estate before, you’ll be surprised with what you learn!
Resources
Get Pace Morby’s book - 📖 “Wealth Without Cash”, here: https://amzn.to/3Jx9PSv
Join Pace’s free Facebook group here: https://www.facebook.com/groups/creativefinancewithpacemorby
Give Pace a follow on YouTube - Pace Morby’s YouTube ✌️
Follow Pace on Instagram - https://instagram.com/pacemorby/
Filmed & edited by Ben Walls - https://www.instagram.com/benwallsfilms/ 😎
DISCLAIMER: This description contains affiliate links, which means that if you click on one of the product links, I’ll receive a small commission.
Transcript
Persa
So I had this awesome opportunity to talk to Pace Morby today. He wrote “Wealth Without Cash”, but you guys probably have heard of him before, if you’re already watching this channel. He gifted us this amazing studio to do this in and his time, so I hope you appreciate the effort that he put into it and the knowledge he’s going to drop in this video for you guys.
Persa
Well, thank you, Pace, for giving me the opportunity to chat with you.
Pace Morby
Guys, Persa Invests like I can’t I can’t believe that I’m on Persa Invests, this is amazing.
Persa
Yes. Whopping 22 subscribers - we’ve got this.
Pace Morby
Oh, you’ll get more. Guys, give her a give her give her subscribe. What I found in my subscribers is that like 80% of people watch your content won’t subscribe. Yeah. Don’t be one of those 80% people, like guys be in the 20%, subscribed to the channel.
Persa
Well, I appreciate it. So about two years ago I first heard you on the Bigger Pockets podcast and literally I had been listening to Bigger Pockets for about seven years and I don’t think I ever heard an episode prior to that where somebody discussed seller financing and subject to and what you were doing. And the thing that caught my attention was the story about the bunnies and honestly, I heard the story at the beginning and I was like, What does this have to do with real estate?
Persa
And I didn’t realize at the beginning that telling a story is so important and having a connection to a seller. For a long time, I thought real estate was just about the real estate. And you really teach that it’s about people. How did you go from being a contractor that worked on the properties to realizing that it’s about people?
Pace Morby
I think everything comes down to stories for sure, and when I was a contractor, I would I would have to break things down to rebuild them up. And I’m proud to say that I’m breaking down people’s beliefs in It’s about the numbers and it’s about the house and rebuilding the framework in their mind that it’s actually about the person that lives in that house, not the actual house itself.
Pace Morby
I didn’t know that until I had a woman named Bethany Willis like shake me up and say – best piece of advice ever got in real estate was “it’s not about the house”. It’s not about the house. I’m like, Wait, what? Real estate is nothing but about the house. And when I started breaking down that understanding and having connections with the sellers and understanding their stories, I mean, think about construction.
Pace Morby
You demo, you build, you build, you build, you have problems along the way, and then it’s all the way complete. Nobody wants to see just the end result of it. So when I’m explaining things to a seller, I’m communicating with the seller - I do the same thing. I have a story and an arc, and I go, okay, so here’s where you’re at now.
Pace Morby
Here’s what’s going on and here’s what we’re going to bring in to the table and dat dat dat dat. And then ultimately it’s going to look like this. And I saw the result of my natural desire to do the construction process in a seller appointment of breaking down what’s going on, understanding how to build trust and build all these things to ultimately get to a final result.
Pace Morby
And I was like, Oh my gosh, this is just like construction, except I can make a lot more money.
Persa
Wow, that’s awesome. You mentioned Bethany and you actually mentioned her in your book Wealth Without Cash, Shoutout Bethany Willis. She kind of helped you see the way and it almost seems like she also helped you understand some of these techniques, these tactics of seller financing and subject to. Do you think that if you hadn’t met her and if you had pursued real estate, that you’d be doing cash offers?
Persa
Yeah.
Pace Morby
I would. I wouldn’t be where I’m at today. I would probably still be a contractor if it wasn’t for Bethany Willis. Bethany Willis actually didn’t teach me anything about creative finance. Oh, it was in chapter two of the book. I talk about a lady named Eileen Brown, and Eileen Brown is an escrow officer with 51 years of experience that has seen every type of transaction you can imagine the types of people that brings that bring those transactions in, the demographics of the sellers and all the things.
Pace Morby
And she’s interacted for 51 years and she specializes in creative finance. So when I got really lucky meeting Bethany, Bethany basically yelled at me, right, there’s a lot of us, some of you guys watching this right now that you guys are comfortable in your life, you’re comfortable in your relationships, you think it’s all just going to work out.
Pace Morby
Well, guys, I didn’t I didn’t want to be born so it could all work out. Yeah, I wanted to be born so I could draw it out and make it happen the way I wanted to make it happen. It wasn’t until Bethany Willis, she literally grabbed me by the shoulder like this. I can still feel the burning in my left shoulder today.
Pace Morby
And she’s like, You need to get into real estate. If it wasn’t for her, I would not have met Eileen Brown. And Eileen Brown showed me I could help way more sellers with creative finance, then I could with just cash. And so I started doing a lot more creative finance from the very beginning than I think any investor ever would because of those two women I met in my life.
Persa
That’s incredible. So you did start out with cash deals?
Pace Morby
Yeah, My first deal. My first deal I actually talk about in the book is a $25,000 wholesale fee. I sold the deal to Bethany Willis. I did probably 100 cash deals wholesale in my first year, maybe 100 and some odd change. And I only did like 30, 40 creative finance deals in my first year, but then it’s flip flop my second year as I got a better understanding and went through all the failures and the, you know, challenges and expanding and understanding how to pitch those terms.
Pace Morby
And now it’s 100% of the deals I do, or 99% of the deals I do are creative.
Persa
That’s incredible. So at this point, it makes a lot of sense why the community and people out there are looking for subject to deals or creative finance, because the lending environment is just kind of atrocious for investors. So at that point in time, though, it wasn’t quite as bad, was it?
Pace Morby
People were calling me crazy like, Why are you focusing on that? I’m like, I don’t know. I can solve more problems with this. And I think at the time nobody was doing it. And so in the way an investor feels today where it’s like, oh my gosh, there’s so many so many opportunities. Back then, when nobody was doing it, I felt the same way.
Pace Morby
I was like, Nobody’s in my way. In fact, I’m pulling people’s leads out of the trash and I’m making more money on the trash deals than they are on their cash deals. And I was like, this secret assassin just raking up deals and I became known for it. I’ve never noticed a difference in how many more deals I’m doing based on the market.
Pace Morby
I have noticed more deals I’m doing based on my ability to scale my business, and it was never based on the market. But I do see nowadays my community, the sub two community I feel like is leading the entire industry in purchases because of how common this strategy really is.
Persa
Yeah, and I want to bring up a question about this now because it does seem like your reach has expanded everybody’s mindset around how can I get this done? And you expanded mine. I didn’t know about these strategies at all from seven years of being involved in real estate. At this point, though, if I call up a listing that’s been on the market or if I call for sale by owner and I pose the question about creative finance or or subject to, they’ll tell me that ten other people have already asked them.
Persa
So if somebody is trying to kind of make a break for it in this market with creative finance and ten other people have already asked, do they have a chance or is there something that ten other people did wrong?
Pace Morby
Here’s the reality. No matter what the market is like, no matter what’s going on in the market, there’s always a hundred wholesalers calling and bothering that agent about a cash deal. Yeah. So what are your odds? Would you rather go for the 100 people that are bothering the agent on a cash deal or go to the ten that are offering creative finance?
Pace Morby
It’s not a lot, but if I’m calling an agent, I go, How many other investors you call that are called you? They go, 70, 80. Okay. So ten of them know creative finance and seven of them are off my free YouTube channel. They don’t know what they’re doing. No offense, so sorry, but you’re learning on my YouTube channel, which is disorganized.
Pace Morby
It’s not meant to be structured the way that you need to be structured. It’s like taking, you know, some of my YouTube channel, it’s like taking a college level class and then two days later taking an elementary class, you’re going to be frazzled all over the place. So I’d say seven out of those ten people are probably YouTube educated and YouTube is meant to like be there for a lot.
Pace Morby
We have 1700 videos on YouTube, but I can tell you that it is so much easier to do creative finance now. How do you stand out out of those ten? You want to know the number one way to stand out? How? Call more than once, legitimately. Follow up. Oh, my gosh. Follow up. So look at the numbers. The numbers in my company is 70% of my deals come from 13 follow ups or more.
Pace Morby
And when people hear a no or there’s a little bit of a challenge.
Persa
Oh.
Pace Morby
Sorry, I’m I’m I quit. Other people know about this strategy. Well, other people know about the strategy because that’s what I did. My job was to normalize creative finance and in the real estate space. And I’ve done that. However, it doesn’t mean it’s the dominant force. It just means that it’s a little bit more known, which actually, in my opinion, makes it easier.
Pace Morby
Because imagine if I was the only person calling that agent for creative finance. Yeah. And now I’m convincing that the the agent that it’s even a thing. But when ten people call the agents, like, damn, this is a thing like this is happening. You’ve made my life easier. And all I have to do is a second call, a third call.
Pace Morby
I have to be memorable. You ever hear the story about Grant Cardone and how he got his wife to marry him? No. Took him three years of follow up. She didn’t want to have anything to do. Didn’t want I didn’t want. I didn’t want to. He’s like, I know that’s the deal. I want to close. Took him three years and a lot of other people can they resonate with that is that they took two months, two years a year.
Pace Morby
Your wife didn’t notice you when you first approached her or an employee you tried to hire did not want to come work for you, so you had to work on yourself, you had to stand out, follow up. So for me, the way to dominate is make the second call.
Persa
All right, Perfect. So if somebody reads “Wealth Without Cash” and listens to your YouTube videos, listens to the podcast you’ve been on, do they stand a chance at figuring this out?
Pace Morby
No.
Persa
No.
Pace Morby
You don’t stand a chance unless you are in my free Facebook group. Why? Because a book, a YouTube video should inspire you to take action. But a connection to another human being is going to keep you consistent. And so what you need, is you need – I have a free Facebook group. There’s 100,000 members now. It is completely free.
Pace Morby
And you see all these people doing deals actively. You get to actually click on somebody makes a post and that poses. Here’s the deal. Here’s a deal that you actually can now go underwrite and look at that deal and screw things up and experiment and actually apply what you’ve learned in my book or in my YouTube channel and now you stand a chance.
Pace Morby
But if you’re sitting here, I read a book and I watch YouTube video, you have zero chance, 0.00 chance to be successful. You need another human being to practice with. And as human beings, we need connection. Certainly, no matter what A.I. does, no matter what technology does, human beings will always need to be connected with each other because ironically, you know what the number one Google thing in the world is right now?
Pace Morby
How to install A.I. on my computer. Which is ironic because it’s like, wow, technology has reached this ultimate level, but a human being still has to Google and get an answer from another human being how to even use the technology. And so human beings are always going to be that way. They’re never going to be able to implement things on their own.
Pace Morby
Very small percentage of people, the the crazy lunatics, less than 1% of the population will be successful by themselves. But as human beings, we are a herd animal. We are a pack animal. We are successful as a herd.
Persa
Definitely. And if somebody hasn’t done a deal before, they’re getting into this. They go to the Facebook group, they find someone who’s got a deal. What’s the number one thing they should look to in kind of partnering up with somebody else?
Pace Morby
This is an interesting question. I would challenge your audience to do this and they won’t do it. But think about how powerful this is. Go to your phone and swipe through everybody that’s in your phone, all your contacts, and put a negative emoji like literally the subtraction sign next to their name. If they’re are either neutral or negative in your financial journey of life, then put a positive emoji next to their name,
Pace Morby
if they are positive in your financial journey of life and out of thousands of people. Hundreds of people, dozens of people, whatever you have in your phone, I would venture to say that less than 5% of all your contacts in your phone, maybe even less than 1% of the contacts in your phone have a positive impact on your financial journey of your life.
Pace Morby
What does that tell you?
Persa
You need more friends.
Pace Morby
You need more specific friends that are actually making money, which is why I put a free Facebook group together so that people can actually collaborate, at least in that free Facebook group, the filter is - we are like minded, we want more. Okay? And then it’s your job to kind of go through and go look at these thousand people that are in my in my contact list.
Pace Morby
Now you’re thinking you probably thought like, damn, I wonder how many positive people are in my group, in my in my phone. Have you thought about that.
Persa
Oh, since you’ve said it. Yeah. Oh, absolutely.
Pace Morby
It’s scary. And then what you do is you go, right now I’m going to put ten of those people together as my favorites. These are the people that are I’m collaborating with. I’m relying on I follow on YouTube or we push each other. Right. Whatever they give you. If you are my friend in Arizona and you’re doing YouTube, I’m going to push you so hard to do more YouTube.
Pace Morby
I’m going to be at the top of your list on your favorites. Yeah, okay. But let’s say that I get lazy and complacent and I’m not doing YouTube any more. Ah, that’s too hard. You probably should replace me. For sure. Are you a leader? Me? Yeah. Yes. Okay. So if you’re a leader, that means people rely on you.
Pace Morby
Yeah. So if you hang out with people that are not leaders, then the people that are relying on you to make good decisions. You’ve just made a bad decisions for them on their behalf. Okay, Think about my 700 employees. Yeah. Every time I spend time with you or anybody else. So think about this. I made a decision right now to spend my time with you.
Pace Morby
Yeah, that’s a positive decision in my mind for my 700 people that are relying on me. So, guys, if the amount of people you have relying on you is two people right now, it doesn’t matter. One person, ten people, whatever you got to do, you got to find the people to spend time with that are going to bring something positive back to the people that rely on you.
Pace Morby
So for me, it’s always about who, It’s never about how. Who am I going to hang out with? Who am I going to learn from, Who’s going to you know, I’m going to learn from through osmosis and they’re going to teach me through osmosis and vice versa. Hey, guys, here’s the thing. Have you been watching this YouTube video the whole time?
Pace Morby
And you like, Dang, that was good. Make a comment down below. Give her some support. She’s putting a lot of time and energy together, traveling, spending money on camera equipment. Do you know how much the average YouTube channel spends to go produce? You know how much money we’ve spent on our YouTube channel? Oh.
Persa
Taking a look at this set up, it’s got to be over 20 grand, probably 100.
Pace Morby
I spent 100 grand a month on my YouTube channel. I have a payroll. I have I have salaries. We have an office. We take it very seriously. So for me, the average YouTube video costs about $3,000 to make one video.
Persa
That’s incredible.
Pace Morby
It’s crazy is what it is. And so make sure that you support her and love on her and give her some some support by subscribing, liking, sharing with somebody else and making a comment down below. It’s the least you can do for her spending four or 5 hours uncomfortably asking me to come and spend time on her YouTube channel.
Pace Morby
It’s uncomfortable. Ask anybody. Kudos to you.
Persa
Thank you. Appreciate it. Of course. People in in your position, I don’t think necessarily I’ve heard you say this, but I’ve definitely heard people say you have to take massive action. And I think that for somebody who’s in a beginners mindset, they think massive action is just like.
Pace Morby
Watching more.
Persa
Watching more or like going out there and like trying to take down a deal that maybe isn’t the best one for them. Like in your opinion, what is massive action for a beginner?
Pace Morby
Think about it. You know, Boy Scouts are in like what they have to earn to become an Eagle Scout.
Persa
I don’t know that.
Pace Morby
Merit badges. Okay, so think about if success or financial success requires 100 merit badges like I do a thing, I become so proficient and efficient at it that I get a reward of a badge that says I’m good at this thing. In real estate, the way I look at that is, I go, well, what are those merit badges in being a Boy Scout?
Pace Morby
It’s like how to start a fire. You get a merit badge for that. You’re fire starter. Financial education. There is a merit badge for financial education. Archery. You know, building a birdhouse, those types of things. You get a merit badge. It’s like really nice embroidered merit badge. You’ve seen them before. Yeah. So think about it from a real estate standpoint, do you know how to comp? Like if I threw any house at you and I said, Hey, Persa, what would an investor have to pay for this?
Pace Morby
Not you. Yeah, but an investor. Could you comfortably comp that house and tell me what the offer should be? You don’t have to buy a deal, spend any money to do any of that. Here’s what I would be doing, in order to do that, I’d say, all right, for the next 90 days, all I want to do is earn the merit badge that says I can comp a property that somebody sends to me and tell them the maximum allowable offer an investor should offer on that property.
Pace Morby
That’s a pretty specific and amazing skill set that you should never lose You’ll never lose it. And it’s pretty simple to learn. Yeah. So what I would do is I would go on MLS, if you’re an agent, I would go on Propstream, Zillow, whatever, and I would look at a very specific zip code and I would focus on that zip code for 90 days.
Pace Morby
And I would see every house that trades, every houses, every house that that trades means sells - every time it goes on the market. How long it stays on the market, who’s buying it, who’s the lender on the deal? Who was the agent on the deal? If you just focus on one zip code for 90 days, you would become the most dominant figure in that zip code by understanding all of the players, what they’re doing, how they’re exchanging, and you’ll go, Wow, this guy has bought three houses in the same zip code in the last month.
Pace Morby
That guy is a fix and flipper - I should probably know. So nowhere in here did you spend any money, but you become so dominant understanding one zip code and you’re empowered and you have confidence that then go and move on to the next thing, which is now start submitting offers. What most people don’t do is they start submitting offers and they’ve never even understood one zip code and how it exchanges in their marketplace.
Pace Morby
So when I say take market massive action, I say go out and create those merit badges. What are those merit badges look like? Raising capital, sending out offers, Hearing no’s. Have you heard a thousand no’s before? Yeah, right. So that’s a merit badge. If you haven’t heard a thousand no’s before, then you haven’t become the master of rejection.
Pace Morby
So I would say massive action doesn’t require any financial anything. But most people, I would say, even in any room I step into, are real estate investors. I go, If I gave you any address in any city, could you comfortably give me a maximum allowable offer? And they go, Yes, it doesn’t sound like you’ve earned the mayor badge.
Pace Morby
So I would go earn that merit badge. It’s free and it’s the most powerful skill that you can acquire in your real estate journey.
Persa
Well, that is super actionable. Thank you so much, Pace, for your time and for giving this audience so much advice.
Pace Morby
Persa, you’re dope. Guys, if you haven’t subscribed yet, I’m going to come find you. I’m going to give you a knuckle sandwich and that’s going to be it. We’ll see you in the next video.
Persa
Thank you.