Joe: Hey. What's going on, guys? Joe McCall, Real Estate Investing Mastery Podcast. It is going to be a good episode. We're going to be talking about houses and multifamily. I've been talking a lot about vacant land and I love vacant land. Still do a lot of those houses and lots. But I've got a special guest on today. His name is David Pupo. And we're going to be talking about sending multiple offers on houses, investment properties or multifamily. And this is something I've done for many, many years. But David has it down to a science and he's got some really cool things that we're going to share with you guys that you can get access to and maybe even use yourself. So when you're talking to a seller, how would you like to go from getting one out of maybe every 20 offers accepted to maybe three or four out of every 30 offers accepted, you can double or triple your deal flow by just giving sellers options, just giving them an option, say, all right, here's a cash prize, here's maybe at least purchase, or here's an owner financing price. So when we can give the seller's options. Yes, what you're going to do more deals. So we're going to be talking about that on today's podcast episode. I got a free book here for you though. First I didn't have it ready, but now I do. It's my new land flipping book. You can get this for free by just going to simple land class dot com, simple land class dot com. And this is a blueprint for how to make 10K in 10 hours. And it's a phrase that I like to use. I'm not making any income claims or guarantees, and that's what it sounds like. It's not because you have to put in the work, but it's very, very doable to make $10,000 a month working just 10 hours a week if you've got the right systems in place, if you're making the right kinds of offers and you can get the whole blueprint for my entire land flipping business right here in simple land flips and my book and you can get it simple in class dot com simple land class dot com that's going to be a link to watch my webinar. It's a class that I have and at the end of the webinar you can actually get a link to download the PDF of the book. Cool. So go check it out right now. Simple land class dot com. Let's bring David and David, are you there to go and turn your video on, would you? 

David: Yeah. How's it going, Joe? 

Joe: Awesome, man. How are you, man? 

David: I'm happy, man. It's wintertime, but it's still only 80 degrees here in Orlando. 

Joe: I don't want to hear that. Just change the subject. He's in Orlando. I'm in Saint Louis. It's 45 degrees here. It's 80 degrees there. I'm wearing long sleeved sweatshirt. He's wearing a t shirt. But whatever, right. Whatever release we have, we still have a good baseball team. We got to. 

David: Yeah. That's true. 

Joe: So, David, thanks for the show. Tell us a little bit about yourself while you're talking real quick. I'm going to close my window, but tell us a little bit about yourself and how did you get started in the real estate business? 

David: Yeah, so I'm I was living in South Florida and I was I was born and raised. And so I grew up with a lot of people in my in my life, my family. My mom did title. My aunt was an agent, my cousins were loan officers. So I grew up around real estate. I went over to UCF over here in Orlando, met my darling and sweetheart of a wife. Now, at that time, only girlfriend. But so we met and we both loved here in Orlando. So we settled over here in Orlando after, took a corporate job right outside. I majored in marketing and finance over at UCF and took a corporate job and really started realizing after about a year or so, I didn't like it too much. I would say that, you know, you get to live and learn. And that was one of those sales positions. I did not too good. I didn't care for the product, didn't care for the clientele. And but I was lucky enough where I started finding out about Bigger Pockets. So Bigger Pockets was I'm sure it's not the first person or the last person that's been on your podcast mentioning that. But yeah, it was a podcast I was listening to on my commute podcast in between appointments podcast, ending of commute podcast. I was in at the gym and then I just started realizing that I was I was always wondering, you know, my family was all around real estate, but I never heard this world, right? So I started going to the local RIAs over here in Orlando and just realized that this was Alice in Wonderland. I just I went into a whole different world where I found out people were just as crazy as I was, if not crazier. And then I started realizing I was becoming crazier. 

Joe: Yeah, well, that's awesome. So how many years ago was that again? 

David: That was in 2016. 

Joe: 2016. So about six years ago. 

David: Yeah. 

Joe: And then what? What happened? 

David: So I started coming up with that, that phase out strategy. Right. Didn't like the W2 job. And what I did there was I just at one time with Sam, who's my wife now, girlfriend. I mean, who was my girlfriend at that time, I told her, hey, we're going and I'm going all in on this. This is the time to do it. You know, coming out of college, you have a lot of crazy amount of liabilities and having children, no house, no mortgage. So save up only about three months of my of what I had in terms of expenses at that time. And I jumped in. I joined a local brokerage here in Orlando that specialize in. The investment world. And man, I was putting out hundreds of bandit signs every month, so it was just cranking out as much as I could on the hustle side. 

Joe: Love it. All right. And you had three months of reserves. 

David: Mm hmm. 

Joe: How'd that work out? Did you do a deal? 

David: I did. Yeah. Yeah. So the first one was, honestly, it was too easy because the rest of them were really hard after that. 

Joe: Yeah? What kind of deal was it? 

David: Yeah. So there is, there's an area right near all the local attractions in Orlando, and I put out a whole bunch of bandit signs out there because it was an area that a lot of renovations were going on. And somebody on my brokerage had a property under contract and my job was to be the guy to find the buyers for them. Right. So I went out there super early, would wait for my line to my calls to come in, and I would go do another round of bandit signs. So I was it was two waves of stuff like that and some money came by the property. I was right near it. He goes, okay, I'll buy it. And it was that simple. But at that time we were at a brokerage, so I was splitting up almost all the amount. Right. So I had to make sure once I got that first check, I realized really quickly, Holy crap, this works. But now I got to go make sure I'm selling a whole bunch of that, right? There is no salary. So it was really cool to get that first check. But then it came also with the reality of like, Oh crap, I need to go make sure I get more now. 

Joe: Okay, so you're doing traditional realtor stuff then? Kind of. 

David: Yeah, that one was more we were just still having around here for it was still common to have short sales and foreclosures still pretty heavy on the market. So that was still the bread and butter, but it was starting to get phased out. 

Joe: Right. Okay. So then what did you start doing after that? 

David: So then after that, I started doing I started working with some of the developers and some of the higher end areas here in Orlando. And I was helping them find land for them to build these nice big old 1.4, $1.5 million houses on, and then I'd be the listing agent on the back end. So then I went a little bit more on the local realtor route. Okay, that one was a pretty crazy one, but the sales cycle took forever. 

Joe: Yeah. And then what?

David: So from there, I was able to start my own investment company. So I did DMP. It was originally DMP. I found a partner and we made Florida house buyers nice. And so from there, I mean, we've been able to start scaling up the operation. We started only with Orlando, then central Florida, then all of you know, it's called the I-4 Corridor, which goes down to Tampa all the way up to Daytona. And then it was statewide and then it was then we trickled into more states from there. 

Joe: Okay, cool. Good. So how did you get into the creative financing side of things? You know, making subject to or owner financing offers. 

David: I started getting into that once I own my own, once I own my own investment company, we weren't obviously doing too much of that on the acquisition side, but I started finding out about being able to take over subject to properties. That was my first introduction into more of the creative financing world. So being able to take over some payments like that, especially when it came to when like I said, we were still kind of talking about foreclosures and short sales at that time. So then that's when that started rearing its head. I didn't do much with it at all until I started trying to buy properties and I was like, Well, this one makes a lot of sense for me to buy. I bought at that time, starting off the wholesaling company on my own. I didn't have a whole bunch of cash. So, hey, would you be open to anything a little bit more creative? And so. So the rock star getting the momentum. 

Joe: All right. Very cool. So give us some examples, then, of what do you mean by when I say creative financing, what do I mean by that? You know what I mean? Like you make a cash offer, you have a guy come in with either their own cash or their own financing in place on a B2C side when you're selling it. But you also now you're talking about buying it with from the seller with creative financing, right. So what does creative financing mean to you? 

David: So yeah, real creative financing is it really is that at the end of day, I want to be able to have that seller become the bank of that property and then I only have to pay them on a monthly amount. I don't have to go targeting qualified through a mortgage company as anybody who's 1099 or owns their own company knows, it is a circus to do that. I've had to do it twice and I've hated both times immensely. So being able to have somebody that's open minded enough to really just be okay and they trust you, that's the biggest thing with really owner financing more than anything I realize is that person has to trust you because they're still looped in on the deal, right? So we're paying them on a monthly basis to be able to make sure that we're holding up our end of the bargain. So that was really one of the more stronger things is making sure that now they are the bank I'm paying them, I'm taking over the property, I'm doing all the renovations I'm putting in the tenants, but now they're not getting the calls about a leaky toilet. Anything going wrong with electrical? Any windows being busted out. That is now my responsibility. 

Joe: Yeah. Okay. All right, good. So what kind of deals are you doing today? What kind of opportunities are you chasing? Houses, commercial, multifamily. 

David: Yeah, we are primarily focusing on multifamily or we do single family residential as well. I am now being able to get that now where I will be targeting commercial action very soon. So we have been able to see that the triple offer approach is very open to investors, as you as you mentioned in your intro. Right. I am now having conversations where the seller is going. I like this option as opposed to saying, no, this doesn't work for me. And that is a completely different ballpark to be in. 

Joe: Yeah. Okay. Very good. So let's keep it to residential. Let's not talk about commercial, but like when you're now making a seller an offer, you make a cash offer. Orlando's very competitive. The entire state of Florida is very competitive. Do you feel like making multiple option offers to sellers gives you an advantage over everybody else and why? 

David: I do because no matter what, it's still about building relationships. And if somebody isn't crazy motivated, like let's theoretically say somebody that needs to go sell their house before it forecloses on, obviously they need to act with crazy urgency. But people that might be trying to sell their property in 60 to 90 days, they're not working with the same type of motivation. They're looking for people that they feel like know them, trust them, and understand what they're kind of going through. So the triple offer allows that situation. It can fit for one of the situation you spoke to me about this one can fit that other situation. And this one is you mentioned this price that you wanted. Here is the price I can get you even maybe more than that. 

Joe: Okay, cool. And how do you structure your owner financing offer? Well, first of all, what are the three different offers you give the seller typically? 

David: Yeah, absolutely. So the first one is a cash offer. So that one, as I mentioned, I own a wholesaling company. So, you know, at the end of the day, all three offers are going to work for us. So the cash offer is our wholesaling offer, right? That's going to be one between 50 to 60% of what we believe the retail value is of that property. The second one is called the steering wheel offer, and that one is the first seller financing one. We're probably introducing interest into it. So it's more on an amortization schedule. We do fluctuate with the monthly payment, obviously, depending on how much the down payment is, but the down payment isn't going to be as appetizing as what the third offer usually will be. And what I should say to the second offer is going to be strategically closer to the cash offer. Then it will be the third offer because we want to show that steering wheel, right? So we want to steer to the third offer, which is then a principle only offer. And that offer is going to be them being able to of course, they have to own it free and clear or very close to it. That's obviously, you know, you got to make sure you're qualifying them that way. But we are making sure that with the principal only where you either at their price or sometimes if it has a cash flow bonus to it, we can even go above it. Right. And so we make that one really, really appetizing for them. If somebody is just saying, I want 300, I want 300, I want three, and I go to them, well, I can give you 315 if you're willing to do 100% of the owner financing. So I don't mean that it opens up their eyes. 

Joe: Yeah, very good. Are you targeting at the beginning when you're doing your marketing, are you targeting free and clear properties then? 

David: No, I don't only do that of course, with owning a wholesaling company, we have like 500,000 leads in our database. So, you know, we're always recycling through a lot of those, right? So just like any kind of sales funnel, we try just seeing what the people are open to with my lead managers and acquisition managers and then say if be with, we know that that cash offer really isn't going to be too appetizing for them. We have that kind of script language in there. Well, hey, are you open up to any other situations? And then hopefully by then, if they're saying yes, then they get that transferred over to me. And then I'm getting more information about, Hey, is our mortgage what's that monthly payment look like? A really big thing that people forget about here in Florida, a lot of people have solar panels and that one is also a bit of an obstacle. Those are lines that are attached to the property, sometimes like 30, $40,000. So you got to also be able to account for those kind of wholesale things are not on that property, but we've done it before. It's it's nothing too crazy. It's just more of an annoyance to deal with actually. But yeah, so we make sure that that is going to be really qualified through that end of it. And then based off of their conversations that we're having, we go, Okay, well, we can be able to propose three different solutions for you, right? And so body language is very important with that. We know that when we do offer that first one, it's. The anchor offer. Right. So we want to bring back their down their expectations. So when we bring them back up to that offer, that third offer, and that's at their asking price or maybe even a little bit higher now they're like, wow, okay, I'm actually able get what I want. It's a little like I said, we're having a conversation where they get to choose as opposed to just go, Well, now I don't think that works for me. 

Joe: Okay, good. So let's, let's, let's go through in a simple example and then actually look at a real deal that you've done recently. And you have a document here. You'll share your screen in a second. I think we're making a lot more sense to people. Yeah. So let's use a simple $300,000 house. Can you run through the three different options you might offer on a $300,000 house? 

David: Yeah, so not a problem. So actually, the case study's actually at that price point. So this isn't going to be pretty. 

Joe: You want to just let's just jump in the case, study them. Go ahead and share your screen and then pull it up. You might need to zoom in a little bit. 

David: We'll see what I can do here. 

Joe: And this was a multifamily, is that right? 

David: Yeah. This is a multifamily that we were able to do. Is that and that's when the third offer is always really incentivizing for the people. We are able to be able to really come up with something really juicy for them. Let me pull that off really quickly. 

Joe: All right, cool. Here we go. Zoom in on one page if we can, so you can see it better. 

David: A little more. Or you could. 

Joe: Keep on going all the way. 

David: So, yeah, this was a property that we were doing back in October. No, September. I'm sorry. This was back October. Yeah, it is October. October. What I did here is I was able to show you guys how we were able to generate this. So our primary marketing method is still cold calling. It's still something that is very easy for us to be able to replicate and reproduce consistent results with. So obviously I also put in here that we also target multifamily equity list here in the state of Florida. Right. So I put a little tidbit there for you guys. I found more success in multifamily because these are people that already understand passive income. So the mindset is already there, right? If you wanted to think about what your avatar is, these people are already open to it. Nice. Right. So I also put a little tidbit there for you guys. Always understand in the real estate world, money's in the follow up, right? So this first in our database in May and it took us, you know, roughly five months to get it under contract. Right. So from May over to October. Right. 

Joe: Hey, Brooke. Yeah, quick. I forgot to mention this, by the way, guys, I'm going to have, David has given us two free gifts here. This case study. It's a word document. If you're listening to the audio podcast right now and you want to see this YouTube channel, but you can also I'm going to give you a link where you can download if you go to Joe McCall dot com slash David, Joe McCall dot com slash David and you can download this case study. Can we also have another two or three page document of frequently asked questions? Because a lot of the sellers are going to have questions like, well, what about this? What about that? And those are two resources you're going to want to be able to refer to later on. So again, Joe McCall dot com slash David to check this out. So go back to what you were doing. 

David: They're not a problem. So I'll give a bit of a backstory for this for you. It's over in Leesburg, Florida. So just for case of the audio people, so this was run by a family and the father had had passed away a few years back. And the problem was that the father did a lot of the day to day stuff with the property. Right. And so when he passed away, the son really didn't do much at all with this property. And unfortunately, one end up happening is one of the units, one of the tenants had a grease fire and it burnt up one of the units pretty badly in the kitchen to that point where the city went in and condemned it. Right. So then from there, he did mention that upfront. And it's very obviously it's very evident to see that you could see some of those smoke the smoke signals on the outside of the exterior. Right. So out there, you're being able to also see that there was also a couple of other code enforcement violations with the property roof, a super old soffit torn up and obviously, as we just mentioned, to condemn Junior. Right. So at this time, this son is just letting this thing fall apart. He has to break in units, obviously, the one that's condemned and then the other ones are paying them and they kind of want and he didn't even care. And I saw very quickly what the potential was on this. So he was only getting when they paid essentially about a thousand bucks a month. Right. But I knew that you could get this up to 4400 pretty easily is actually if you obviously do the renovations right for these four units, because it was right near city hall, it was right near one of the hospitals and it's actually right near one of the local boating lakes that a lot of people pull up their boats to.  

Joe: How much in repairs do you think it would need to get it all? All four units rent ready. 

David: At least 125,000 for all four units. So I originally thought it was a hundred and then we walked in and it ended up being more okay. Yeah. So, so then right here based off of that information, finally. Again, this person on the phone is when we go into now the triple offer sequence. Right? So then we made the first offer, which is that cash as his wholesale offer of $200,000 and being able to pay in like a typical wholesale deal. Right. And 30 days cash as is no appraisal contingencies or anything like that. Right. So then we go into the second offer and he didn't want the first offer, by the way. He wanted something that and I'll go through it in a little bit, but he wanted something that gave him some money upfront. But he also it was kind of a lazy landlord, but he still liked the opportunity when they did pay to get income. Right. So the second one, that steering wheel, the steering wheel interest off, right. So then we went in and once again, this is very strategically priced closer to the cash offer than it is the third offer. So the second offer then comes in at $240,000 with a 10% down. We were able at that time to negotiate, if he wanted it, five and a half percent interest based off of the 30 year amortization that comes out to 1450 to him on a monthly basis. And then that was going to make it a ten year bill. So that's 120 payments total. Ten, obviously, for the audience that doesn't know what a balloon is. The balloon is when everything comes due at the end of that time that you negotiate. But if what you can do is you can base the monthly payments off of an amortization schedule that obviously drops down your monthly payment, a drastic amount. Right? So that's super strong to be able to understand really quickly there. So the third offer then is our like this is like the creme de la creme offer, right? It's the principal only payment. So the principal only payment is now, as Joe actually mentioned it even see the example, guys, 300,000. Do you want it originally? 280. So I go up and I go, I will give you 300,000 for this one. I will also do a 25% down payment, but I'm getting 0% interest and I'm making the payments a little lower than the offer, too. But it wasn't too much where it would deter him away from it. Right. So there's also that we also did that one based on the five year balloon as opposed to a ten year balloon. So it made a little appetizing for him because he's going at his money a little bit quicker. 

Joe: Well, let's talk about how you came up with the $300,000. What if the property was fixed up? What do you think you could sell it on the MLS for? 

David: $450. 

Joe: $450. So you said it needed about 120,000 and repair. So you're giving him about the real close to the as is value of the money the as is in terms of like what it's worth in its current condition. And 25% down. Where is that money coming from? Is that coming from your own pocket or are you getting private investors money? 

David: We get private investors. Yep. 

Joe: Are you putting that private investor in second position or first position? 

David: What we were going to do with we were doing with this one is that we were actually going to do the LLC together. So it would be actually our land trust. My apologies. On an LLC, we were going to do a land trust together on that, and so he would be a 50% owner on the property because he was also going to be funding not only the down payment but also all the rehab, because he's actually a really big construction commercial guy in our in our market. So I knew that he had the right team for that kind of renovation. 

Joe: So you're partnering on this particular deal with a private money guy and a contractor? The same guy. 

David: He's the same person. 

Joe: Okay. If you if you didn't have him and you're just using a regular private money lender. How would you structure how would you protect that private investor? 

David: Yeah. So they would want to be having like a mortgage or a promissory note recorded on the property. Of course, it would be a very difficult thing to negotiate for them to be in first position. These people would have to be okay with being in second position because the seller is has the bulk of the mortgage. Right. If they're willing to do the principal, only their mortgage is still after a 25% down payment. That still brings it up to about 225. 

Joe: Yeah. Yeah. So then what I'm thinking of is and I used to do a lot of these deals. So the reason I'm asking is sometimes my the cash flow was really good, but my. There wasn't enough room to get my private money lender in second position and make them feel comfortable with it. Right. Because then their loan to value would be about 90% which worst case they maybe get their money back to May not. Right. So some of the deals I would tell the seller, in order for this to happen, in order for me to make you this offer here, I'm going to have to have my private investor in first position and the seller will be in second position. Have you ever structured a deal like that?

David: I haven't had to put the person in first position or the private lender in the first position. Yet now I haven't had to do that yet. 

Joe: Okay. Because it worked. The seller said on this one particular deal I'm thinking of, the seller said, Yeah, okay, that's great, because they were in a desperate situation. They needed to get out there and fast forward a couple of years that they forget. The pain that they were in and now things are a lot better, etc., etc.. Like, wait a second. This doesn't sound right. I had this private investor who's in first position with only I think at that particular deal is like 20 grand and they're in second position with like 100 grand. Like, wait a second. So they talked to their attorney. I didn't do anything wrong. I used the title company and everything is above board. They all signed all kinds of disclosures. But attorney of the seller said. Mortgage fraud. Mortgage fraud. Red flag. Red flag. Which is ridiculous. None at all. But it just didn't look that good. Right reason I'm bringing this up is when you when you're taking on an owner financing and you're giving the seller a big one, you're giving them a higher price. You're going to need private money for the down payment and for the repairs. So in this particular deal about you're going to need to borrow 75 for the down payment and 120 for repairs. That's almost $200,000, right? Yeah. You're going to need private money for this deal. Mm. That's worse. What did you say again? Was worth fixed up about. 

David: 450 

Joe: 450. You're actually, a it's a great mortgage. I mean, you're getting 0% down, right? It's not. Forget that. That's. So you're a little overleveraged at the at the beginning of this, aren't you?  

David: Yeah. But that's yeah. As you're as you're about to go into it, that's the power of it being a principal only because then what it does over 60 payments, it now drops it down significantly. 

Joe: Right. So your first year, let me get my calculator out here. You're paying $150 a month. Principal only payments. 

David: Mm hmm. 

Joe: That's 15 grand a year. You're paying bang down. You're paying down your principal. And over five years, at 75 grand, you've been paying down your principal line, right? 

David: Yeah. 

Joe: And not including the cash flow you're getting because you're going to be getting 4400 gross rents. You're out your taxes. I mean, your payment, your insurance taxes, let's say, are going to be two grand a month, 2500 a month, maybe. That's about 1900 and $2,000 a month in cash flow. But then you have to take vacancies and maintenance, repairs and all of that out. But like your cash flow is really, really good. If you're putting an additional thousand dollars down towards your principal, you're building your equity up that much faster, right? 

David: Yeah. 

Joe: Okay. So but you in this particular deal, you had a private investor who was partnering with you kind of on this deal. 

David: Right. 

Joe: Could you have made this work without that kind of a private investor? 

David: I think it would have been a little bit more of a tough approach. This is somebody that I've known now for a very long time. Once I was going into the RIA back in like 2016, this was always one of my coaching mentors and I was completely fine because at the end of the day, I think people have to also understand at this exact moment I had $0 out of my pocket. Yeah, right. I'm about to split cash flow and then whatever we make on the back end and I've still put $0 into my, into this, into this investment, which is crazy if I'm willing to do that. I mean, you keep on doing that for four or five properties. I mean, you're getting 50% and you're not putting any money down. I mean, your ROI's infinite. 

Joe: Well, let's talk about this for a second then. I've heard some people say that equity doesn't matter. Cash flow is all that matter. Is that true? 

David: I always like to say, why can I have both? 

Joe: Yeah. Yeah. But in this deal, do you have both? Right now? At the beginning. 

David: At the beginning, you don't know. 

Joe: So for how long would it take you approximately to get some equity into this deal? 

David: So as you just mentioned, it's going to be 75,000 over the entire span of that that loan. So that comes out to, I think at the original time, it's about roughly another 25% off of the 300,000 price. Right. So. 

Joe: Well, we're getting a little complicated of detail here. And I don't want to dive. I don't want to dive too deep in the weeds. But you have a calculator that shows you kind of the long term profit of this. Correct. Right now, maybe that's something you can just at least show us later on. 

David: Yeah, yeah, I can I could be able to pull it up. I did pull up. I think I did save that that Excel sheet. 

Joe: Okay. Let me call and look at real quick, because I get the argument that if I'm just playing devil's advocate here, because I get the argument that it as long as it cash flows, that's okay. Because you could be upside down, you can have very little equity. You have no equity. Doesn't matter who cash flows. And when you factor in the tax write offs and the depreciation, and especially when you're not using any of your own money, your cash is good and your ROI is infinite. But I always think worst case, worst, right? Right. Like what if the rehab costs 200,000? 120,000? . 

David: Yeah and of course, I mean, you always have your due diligence period to be able to make those types of adjustments. You know, when we did do this property, we did get an inspection done because we also obviously, as you can imagine, with a condemned, you know, we didn't know how severe it is. Right. So it's very easy to, you know, at least get the results back. Think about what the estimations are and once again, the beauty of being able to have this type of partner. The partner was also somebody that's doing a lot of rehabs. So we knew what we were getting into, which was after doing inspections, everything like that is obviously a lot more powerful, and that's why I was easily willing to do a 50% equity split on the property. He's coming up with the money. He knows how to bring in some of some of his skills and expertise to the table. I'm the only person that I've essentially generated lead and structured the deal. 

Joe: Are you managing the property during the rental time as well then? 

David: Yeah. 

Joe: You're acting as your own property manager. 

David: On this one, he actually phoned the property management company too, so I'm sure that. Yeah, we're still in the middle of being able to do some stuff for it. But yeah, their company is going to be able to do the property management for it as well. 

Joe: And I don't know Orlando as well as you do, but I would think that 120 grand is enough money to fully rehab this property very nicely. Right. 

David: Well, of course it's four units. Right. So you're if it was just one property doing 120K, absolutely. I think would be a high end looking property. Right. But this property was an older property. And then once again, it's it just had that higher landlord, no updates, a condemned unit kind of thing. So that money that money goes away. 

Joe: Yeah. All right. So in this particular deal, if you were not if you're going to use private money, that would be a little trickier because you wouldn't be able to protect that private investor that much in second position.  

David: Yeah in this one, you know, I guess at the end of the day, you got to remember, like I was I was talking with this with my partner on this one for quite some time. And then once we started finding out what it needed, that's when I actually was talking to three private lenders. He was one of them. And then once I found out how much renovations I was going to need, that's when I brought this one in, because at the end of the day, I was still willing to be able to split up that amount of equity. But at the end of the day, I'm getting utilize some of his experience. And a couple of other deals we've had to only put in eight to maybe 15,000 more. 

Joe: Yeah. So this would be one of the you could have a fourth offer as well, couldn't you? You could say to the seller, All right, four, offer number three, I'll give you 300,000. But because it needs 120 grand in repairs, the only way I can get my private partner and financial partner to invest with me in this deal is he has to be in first position and you have to be in second position. You tell that to the seller upfront and that's part of your written agreement. You've got all kinds of CIA things signed. You know, that's that would be a good that would be a good opportunity to do that because then that's easy to find private money. If that private investor is going to be first position, their loan to value is maybe 25%. That's really, really good. I agree. But then the fourth option could be all right as well. Mr. Seller, if you insist on being in first position, then I can't give you 300. I can give you maybe 250, something like that. So then you would have more room to protect your private investor. This is important, guys. I want you understand this. If you don't understand what we're talking about, once you start looking into these kinds of deals, when you start raising private money, you have to put your private investors interests in first position. So your private investors, they get paid first. You have to make sure 100% that they get paid their money back if the deal falls apart. I don't care if you're personally responsible or personally if you have, what's it called on a if you're well. Anyway, the phrase I'm thinking about is if you are personally for the loan, whatever, it's a private investor, you've got to make sure even if you if the deal dies and you lose the deal, your private investor still gets paid back 100%. 

David: Yeah. I mean, and at the end of the day, if you're somebody doing this in your local community, that's part of your brand as part of your reputation. Can you I can't even imagine being able to sleep well at night, understanding that I sunk somebody that, you know, just like anybody else here. We're not any kind of multibillion dollar conglomerates. We're talking about what we just mentioned, over $200,000 that can impact anybody in our in especially in this day and age with what we’re about to see what's going on in or in a potential like tidal wave of what 2023 might be. Macroeconomic. Yeah, I mean, I mean, it is so important. That's why I was completely willing to do an equity partnership on as opposed to just a private lender, more times than not. But we do the private lender out for just the smaller amounts of like say down payments or any kind of rehabs for it. 

Joe: Definitely. So private investor always gets paid first. Always gets paid first. Right? So let's look at this deal then. Do you have a calculator that you can share as a profit that you can show? All right, cool. 

David: So at the top right, it kind of shows you a quick little recap of what based off of the results were like corporate cash on cash return, a 1% rule and then an internal rate of return. Right. All right. So here's where we start breaking it down and the debt financing situation, total financing cost. 

Joe: And by the way, this can you tell us where you got this spreadsheet from? Where other people can get it, maybe. 

David: Yeah, this one is just I think it was just called rental analysis. And so they have a basic one, an advanced one for the advanced one because it was just better for the multi family ones. 

Joe: Who's. Who's they? 

David: The company. 

Joe: Yeah. Where did you get the spreadsheet from? 

David: My partner got it. I'll have to. I'll put that in the show notes. Maybe it does it have it on here somewhere. Let's see. I'll put it in the show notes on or I'll give you that information after. I don't know what the company is off the top of my head. 

Joe: All right. So, guys again Joe McCall dot com slash David, Joe McCall dot com slash David, we'll show you how to get this spreadsheet here. All right, cool. So, walk us through this. 

David: Yeah. So as we mentioned, we went through the purchase price. We are also being able to go through right here what we believe the rehab estimation was going to be the 125 right. So we have a property type here on the left side. It was, like I said, four units. We also believed with the properties, these are large these are all large one bedrooms that we could probably split out of frame out and put another bedroom within it. So there could have been even more value. There could be even more value add with being able to do that. So that's why we have it has eight bedrooms, four baths. When we walked in, these were all huge, one bedroom, one bath. And then some of them, the one of the tenants that was on paying one and he wanted kind of like subleased it. He was making more money than probably the seller was. Yeah, yeah. Okay. So we're scrolling down, we're going into some of the here ago. So the rental income stuff and the property insurance taxes and whatnot. So it was at this area, it's a lower income area. So the property taxes are only about $3,000 a month a year for the property. Right. We put in an assumption on the low end of being able to be at 1000 per property. So that shows that it's a 12,000 annual per unit. Okay. So that shows it being able to bring in roughly 48,000 a year. 

Joe: Okay. 

David: So from there, though, like I said, we went through the property taxes, property insurance, and I'm sure that this would have actually gone up a little bit higher. We got kind of lucky that we did this right before the hurricanes came through. Everybody I know that's trying to get insurance now is not too happy that we did go through. And we do assume a 10% vacancy rate does an annual rate increase, and that's pretty low at 2%. I think you can easily you can easily make it really 5 to 10. But we were trying to be a little bit more conservative with the numbers. 

Joe: Are you saving anything as setting aside for Capex feature repairs and maintenance? 

David: So this is this is what we were running into with that, Joe, is that we were going to put in everything pretty much now. So we didn't in the first year. 

Joe: Okay. And you're not putting in anything for property management either in here, right? 

David: No, because he owned the property management group. 

Joe: Okay. 

David: So we got to be able to keep that in-house, too. So that worked out a term like once again, it's knowing who your network is with those private lenders. And if you're if you're not thinking about bringing them in as equity partners, they're going to bring more to the table than just simply money. And that's what I was looking for. I was looking for a partner on the deal, not just a private lender. 

Joe: Okay. 

David: So then yeah, then it goes through and just does a great breakdown. I'm being able to understand what our, you know, our net operating income in cash flow is going to look like first year monthly. And then it just does a great KPI break down our key performance indicators telling us out of roughly about that, like I said, that 8% cap rate or 85% cash on cash. And then just about where the 1% rule is after all is said and done with being able to do the renovations and everything like that, it's just at about a 1% rule because we like I said, we made it conservative. We were at a total for 25, just shown a let's be conservative and just do 1000 on each property. 

Joe: So the cash on cash return, how are you basing that? Is that the cash that was put into the property in terms of down payment and repairs? Yeah. Okay. Cash out in three years. What does that mean? 

David: Yeah, that was if we wanted to be able to just get out of it on three years now that's it. 

Joe: Okay. And the 1% rule is for people who don't know, that just means if the House is $100,000, it should rent gross rent for about $1,000. That's the kind of 1% if it's a $200,000 house, it should rent for $2,000 a month. 

David: Yessir. And so that was pretty much what we went through with it. 

Joe: All right, cool. So your cap rate, your target is 10%. 

David: Mm. 

Joe: And internal rate of return unlevered profits. Okay. So what is, what are some of the numbers that you really look at to see if this is a good deal or not? 

David: So what I always like to be able to see at the end of the day is when I am being able to create, I'll say like a private lender loan and also being able to create the seller financing loan. How much more are we looking for on that cash flow place? As you can imagine. Now, the whole equity versus cash flow play, I like to be able to see how much can we get close to that 10% cap rate and also a 1% rule are even higher if we can, of course, target it with this property, the cash on cash ends up being pretty good because at the end of the day, we're not really having to assume the whole bunch. 

Joe: All right. So you're also you're not paying any principal and interest rate, aren't you, though? Because right now it's blank there on the left, you are paying some principal to the seller. Right. So you're not making any payments to your private investor, right? 

David: I'm sorry? 

Joe: Are you making any monthly payments to your private investor? 

David: Yeah. Yeah. So we would be able to split anything on the net profit. I, I'm sorry I didn't put that in there on that one. 

Joe: All right. So your principal and interest to the owner is 1750 a month, right? 

David: Yeah. 

Joe: So your net cash flow is about how much a month? 

David: So we haven't been able to get this all this all this one down yet. So the 4400 say that again. 

Joe: You're right there on your sheet there on the left, your cash flow per year is 2825. But you still need to put in there write the principal payments to the seller, which are about 1750 a month. Right. 

David: But one more thing, mortgage payment right there is 1389. That's what I put in there for it to that. I don't think I broke it. I broke it down as well. 

Joe: Right. So but if you're unless I'm looking at it wrong and I apologize if I'm throwing some mud into the water, but after you, you it's important to know what your net cash flow is every day. Every month. Right. Right. And what is your minimum net cash flow requirements? So when you look into a deal like this, what are some of the minimum numbers that you're looking for? 

David: For me personally, I would like to be able to be at about 300 to $400 per door. 

Joe: 3 to $400 per door, cool. 

David: Yeah, that's why I like to be at for it. But at the end of the day, I also I'm willing to exchange it if I'm not really bringing any money to the table. 

Joe: Yeah. So I'm sorry just to break, because I'm still confused about this. Your cash flow, your one is that number, right? The 2826. Well that's year one. I thought that was monthly the way that. Yeah. What's your monthly cash flow. 

David: So I don't know why he's breaking it down. I think it's good it's doing as a net operating income, but the monthly cash flow is going to be $4,000 on the like I said, on the conservative side right here. 

Joe: That's your gross income coming rent. Right. All right. Well, maybe something's not coming over. 

David: I don't think what I did is I probably it everything. Just because we haven't been able to solve, we haven't inputted everything final. Right. 

Joe: Okay. So you're have a private investor who's lending the money, who's managing the rehab. He's also going to be managing the property. What is your role going to be in this deal? Is it just you found the deal and you. 

David: Yeah, yeah. What I'm going to be able to do with that is, is yeah, it's, it's I'm not really having to really do a whole bunch with it. That's, that's why I was willing to be able to give so much of the equity away and be able to do that. He was also coming into it knowing that he wanted to be able to have tax write offs for this year. So this was also a very big play for in the house and tax write offs. 

Joe: Do you guys have to negotiate? Who gets the tax write offs? Does he get 100% of them? Do you how do you split that? 

David: You know, I haven't I haven't gone into that. Are you I'm sure I'll I'll have to talk to him about that pretty soon. 

Joe: All right. Cool. So do you have a do you have another calculator or spreadsheet you use when you're making your offers to the seller that will show the in terms of how to make the offers, does that make sense or is that just go ahead and kind of work it out? 

David: I usually try coming up with in my head and then I start working it out on the Excel sheets based off of the conversations that I'm having with them. 

Joe: Okay. All right. Let's talk about some of the frequently asked questions over the objections of sellers going to bring you when they say, you know what, I don't want to seller finance, why don't you just give me my money now or five years is too long? Can you do less? You know, can you talk about that? 

David: Yeah. So when it comes to being able to go through some of the frequently asked questions like that, it's always give and take, right? If you want this price here to my terms and if they are willing to be able to do that, then I'm going to make their all levers right. At the end of the day, if you're if you're trying to shoring up this, then I'm having to either drop down price, I might have to drop down what I'm doing on a down payment. So I use all the other terms as part of the negotiation. 

Joe: Okay. Do you have a document you can share with us? 

David: Sure. I do have to be leaving in about 5 minutes. Have to give you that heads up. 

Joe: Okay. I do too. 

David: I forget with how fast these kinda go. Like you just lose track of time. 

Joe: Why don't why don't you just show us real quick that frequently asked questions and we'll make it sure everybody gets it, Joe McCall dot com slash David and it's a Google it's a doc word document that kind of answers some common questions to common objections that sellers have. And I want to make sure you guys have this because it's really valuable. Seller is going to say, Well, I want interest or I want price or I want all of it. And so how do you kind of work through? At work through that. So, you know, like here it is. Is it legal? Can I buy another house? What about the do on sale clause? Are you going when are you going to refi me my mortgage? Is a mortgage still in my name? So these are some of these questions are subject to questions, right? 

David: Right, right. Because like I said, I started off with being able to do that, of being able to I like being able to structure, especially if they already have say like a mortgage on it. And then maybe it's just a really small mortgage. Like I said, the principal only one sometimes it will do is that is that will structure also that we maybe either pay out the smaller amount of mortgage or there's just a little bit left on. 

Joe: Yeah. So what if you stop making payments? That's a great question to ask. Right. I want interest. Why aren't you paying me interest? Well, I know a guy, too, by the way, who makes a lot of owner financing offers and he goes ahead and gives them one or 2% because it's just easier pill to swallow than 0%. And it's really not that much money. But and he gets to write it off. But yeah. 

David: I have, I have thought about doing like a one or 2% offers. But what I want to typically do is I would say, as you kind of know, I'm willing to go a little bit above the asking price and kind of build it in on that. 

Joe: Yeah, good. Right. So what else do you have here? Educating the seller? 

David: Yeah, yeah, of course. So, you know, educating the seller, I mean, once again, we got to make sure that these people aren't people I need to sell within 30 days. Right. We got to make sure that we are grooming a lead, making sure that we're building trust without this entire process. So what do you want to do? What are you hoping to accomplish? Where do you want to be? So these are all obviously the questions that you have to be able to understand as you're starting to gear up how you make three offers. Right. This is so critical in being able to make sure that they understand that you are getting all this money upfront because sometimes people get I don't I don't understand how you can make three offers and then somehow think that you're still getting all the money upfront and then be able to understand that no, the offer three you are holding now a mortgage, but we are willing to pay you upfront and give you a down payment. And so sometimes is just you just got to work through some small things that you do. Don't think you need to repeat too often, but you end up having to. 

Joe: Yeah. Okay, good. What else do you have on this paper here? 

David: Yeah. So being able to transition into other options, we buy it in two different ways. I always like to be able to make sure that in a subject to situations you kind of know, I have it really big open in front of my lead manager acquisitions managers, right? Make sure you understand that you are not being able to assume the loan. We are simply taking over the payments. Loan stays in your name. I get the deed. So that's always I that one because I found I was listening to some of my recordings on some of the lead managers and they would be like, Yeah, I would assume the loan. And I'm like, no. 

Joe: Yeah, yeah. All right. So this document has just a lot of good notes. Any scripts on how to explain the hybrid? 

David: Yeah, the hybrid is, really quickly. So a hybrid comes into place when they are still we are still being able to keep what the mortgage looks like in place. And then we are also based off of the amount of remaining equity, also paying them a monthly payment on that. Yeah. So that's what the hybrid approach is, right. So sometimes that one is also it's not necessarily that part of a conversation you have, but you want to make sure they understand that there is two payments being done, one towards your mortgage and one now toward you as that second loan. 

Joe: Yeah. All right, David, thank you so much. This whole document here. We got to go. Appreciate you going long here. I'm sorry for starting late. If you guys want more information on this that what we're talking about the case study that we just looked at in terms of the notes there where David can get a calculator, where you can get a calculator like David as we're going to put that in the show notes also that frequently asked questions objection handling script is at Joe McCall dot com slash David and you can get that for free in there. David how can people get a hold of you if they want to reach you? 

David: Yeah, as you can probably imagine, David Pupo is not too common of a name, so you can find me pretty easily on social media, Facebook, Instagram, TikTok. Also there is David Pupo dot com and in there we're building out triple offer dot com right now as well. So we're going to be making that website come out pretty soon. 

Joe: Very good. David Pupo, P U P O. And man, I sure appreciate you being on the show, David. Thank you so much for sharing the stuff and thanks for asking our answering all my tough questions. 

David: Yeah man, I appreciate it. This opportunity to be able to just have somebody as experience with you, Joe, is always just such a pleasure, man. You've obviously done hundreds, if not thousands of these types of transactions. So it also is great to be able to see any kind of blind spots that I might have too. And like, hey, I was like, You're right. I didn't put that in there. I didn't even notice. 

Joe: Yeah, well, good. Appreciate you. Thank you, everybody, for listening to the podcast. Have a good one. See you later. Thanks, David. Bye bye, everybody.