Pace Morby is a nationally recognized real estate investor and educator, specializing in creative financing strategies, particularly subject-to financing. With a background as a contractor, Pace transitioned into real estate, leveraging his skills and creativity to build a portfolio of thousands of units. He’s renowned for his ability to communicate complex concepts in a relatable way, his dedication to helping others, and his innovative methods such as the “Morby Method” and “dating contracts.” He is also the creator of the SubTo Community, a vibrant group of investors learning and applying creative financing strategies together. Pace’s passion lies in not just closing deals but also empowering others to succeed in real estate investing.
A Conversation with Pace Morby
Suzanne Luther, loan manager of FasterFunds Lending, Sam Primm, leader of FasterFreedom, and several members of Buyers Club recently had the privilege of speaking with Pace Morby. During this insightful conversation, they delved into creative ways to buy houses as a real estate investor. The discussion highlighted innovative strategies, real-world examples, and the transformative power of subject-to financing.
What Is Subject-To Financing?
Subject-to financing is a creative real estate strategy where a buyer takes ownership of a property “subject to” the existing mortgage, meaning the original loan remains in the seller’s name while the buyer makes the payments. This approach can help both sellers in distress and buyers seeking alternative financing solutions. Pace Morby has revolutionized this method by integrating it with unique strategies and tools, making it a cornerstone of modern creative financing.
Finding Deals Using DealMachine
Pace Morby emphasizes the importance of leveraging technology like DealMachine to streamline lead generation. This software helps investors identify motivated sellers by building targeted lists based on key criteria. Here’s how Pace pulls his lists:
· Filter by Days on Market: He targets properties that have been listed for 30 days or more, indicating potential seller motivation.
· High Equity for Seller Financing: Properties with substantial equity are ideal for seller-financed deals.
· Low Equity for Subject-To: Homes with little equity are perfect for taking over payments via subject-to financing.
· Pre-Foreclosures and Distressed Properties: These leads often yield the best opportunities for creative solutions.
Using DealMachine, Pace created a list of 480 homes in Phoenix, Arizona, that met his criteria. This strategic approach allows investors to focus their efforts on high-potential properties, increasing their chances of success.
Case Studies: Real-Life Applications of Subject-To Financing
Devante and Joy’s Story
Pace worked with Devante, a real estate agent, and his client Joy, a homeowner in foreclosure. Joy owed $206,000 on her mortgage but had a property worth $450,000. She was 13 months behind on payments, her car had been repossessed, and she was facing immense personal challenges.
Instead of offering a lowball cash deal, Pace provided a comprehensive solution:
· $20,000 for Arrears: Caught up Joy’s overdue payments to stop the foreclosure.
· $6,000 Escrow for Future Payments: Ensured her mortgage remained current for four months.
· $7,000 for a Car and Insurance: Allowed Joy to attend job interviews and regain her independence.
· $7,000 Living Expenses: Helped Joy cover her basic needs during her recovery period.
In total, Pace invested $40,000 to stabilize Joy’s situation. When the property sold for $430,000, Joy retained most of her equity, while Pace earned an $18,000 profit. This win-win outcome preserved Joy’s dignity, improved Devante’s reputation, and solidified Pace’s position as a problem-solving investor.
Tim’s Balloon Payment Dilemma
Another case involved Tim, a roofing company owner who purchased a property with seller financing but failed to refinance before the balloon payment came due. Facing foreclosure from the original seller, Tim was at risk of losing a home now worth $650,000.
Pace offered a creative solution:
· Purchased the property for $350,000 using a DSCR (Debt Service Coverage Ratio) loan.
· Charged Tim a $20,000 success fee and required him to prepay six months of lease payments.
· Allowed Tim to buy back the property within six months for $450,000, with monthly penalties for delays.
This structure secured Pace’s investment while giving Tim time to resolve his financial challenges. If Tim defaulted, Pace retained the property with significant equity, ensuring profitability.
The Benefits of Subject-To Deals
For Sellers:
· Avoid foreclosure and its long-term credit impact.
· Potential to receive cash for moving or rebuilding.
· Relief from monthly mortgage payments.
For Buyers/Investors:
· Acquire properties with little to no money down.
· Avoid traditional bank financing hurdles.
· Build long-term wealth through cash flow and appreciation.
How to Get Started
1. Education: Learn the nuances of subject-to deals through resources like Pace Morby’s YouTube channel, engage with local St. Louis subject-to experts such as Jeff Coffman with Sub 2 Empire, or attend meetups like Buyers Club to expand your knowledge.
2. Networking: Connect with real estate agents and wholesalers to find leads.
3. Action: Start small by focusing on one lead source, such as pre-foreclosures, and gradually expand.
Closing Thoughts
Subject-to financing is more than a transaction; it’s a strategy to create meaningful impact for sellers, buyers, and communities. By adopting Pace Morby’s proven strategies and leveraging tools like DealMachine, as well as connecting with seasoned experts like Jeff Coffman of Sub 2 Empire, investors can unlock opportunities that transform lives and build lasting wealth.
FasterFunds Lending is here to support your journey with flexible financing options and expert guidance to help you achieve success in creative real estate investing. Visit us to learn more about how we can help you scale your real estate business.
