Posted on: October 06, 2020
WI 530 | Legacy Wealth

 

While there are various reasons why people get into wholesaling and real estate, most people have one reason in common—they want to build legacy wealth. Simply put, legacy wealth is wealth that is passed down from one generation to the next. If that is what you want to achieve as well, you’d surely love this episode!

Pace Morby is an industry legend and his passion for entrepreneurship knows no bounds. At 23, Pace owned and operated a thriving gas and oil company that employed 200 people and generated a whopping $15 million in annual sales. Some of his business specialties include fundraising, small business development, and business consultations.

When he built his real estate company, Pace used many winning strategies and you’ll learn all about them today. Not only that, you will also learn how to build legacy wealth, what it would take to build legacy wealth, and the techniques and strategies you can use to make it happen.

If you want to build legacy wealth the easiest and most effective way possible, this episode is for you!

5 Ways To Build Legacy Wealth In Your Wholesaling Business

Episode Transcription

I am here with Pace Morby, Mr. Subject-To. Pace, you own over 100 properties.

Between my partners and me, we own a little over 100 properties.

Why?

It’s the only thing to spend money on. One thing I’ve learned is you can only do 1 of 2 things with your money. What are those? You can either invest your money or spend it. I see wholesalers for years and years in the game still chasing deals. The one thing they’re not doing is building their legacy. We’re going to be talking about the five reasons to own real estate so that you can build your legacy.

We hear and understand these, but we’re going to break it down a little bit differently here because you’re getting the perspective of somebody that is out there every single day building his portfolio and the reasons why he builds these pillars into his wealth-building machine. He’s going to break it down, so this is a real treat.

Number one is cashflow. It’s obvious. It allows guys like Brent Daniels to go take five days off at his TTP cabin. It allows me to take two months off and travel the West side of the country with my family. It’s called passive income, otherwise, cashflow. What is cashflow? Cashflow is the difference between what I pay the bank on my mortgage or on my loan and what I collect in rent from my properties.

Rents could be a plethora of things. It could be my Airbnb income if I own a group home or all the income I receive off that. Traditionally, most people are renting their properties out, receiving income from their tenants after paying all their expenses and putting a little bit of money to the side for repairs and vacancy. You’re going to have a difference and that difference is called cashflow. Some people call it mailbox money. It’s money that keeps coming every month.

When you jump into real estate, you’re protecting your original investment.

This is the thing. Building up the amount of cashflow, the amount of passive income to cover your monthly expenses or to add to your lifestyle is what the wealthy do. That is how you build a fortune.

An easy way to start is you say, “What is my monthly nut? What is the amount of money I need to make every single month bare minimum?” When I started, I looked at it and said, “How do I get to $5,000 a month in cashflow? I can go buy sushi or new tires for my car, whatever I want to do with that money. How do I get that money in my pocket?”

I figured out that the average house with a loan on it and tenants in it, the difference between those two nets is about $425 per month in cashflow. How many houses do I need to go out and own to get rid of all my needs for a job or any financial stress, whatsoever? It was ten houses for me. I said, “How do I get to ten houses?” When I got to ten houses, I go, “That was way easier than I thought.” Why? It’s because as a wholesaler, I’m the lucky guy that gets to see all the best properties coming through the pipeline.

When you are sourcing your own opportunities, when you’re out there finding deals, that’s all wholesaling is. Wholesaling is finding deals. You get to determine what the exit strategy is for them. What you’re saying is to keep some for yourself, build up your portfolio.

One of your students, Katie and Jack, you know them well. They’re an amazing couple. I’ve done multiple deals with some of his students here in town. They’re crushing it. They’ll make a $10,000, $15,000, $25,000 or $30,000 assignment fee, but they’re starting to get that passive income because they figured out, “I’m going to cherry-pick the very best ones.” They’re starting to accumulate cashflow on top of picking. They make a determination, “Which ones do I want to assign? Which ones do I want to keep?” Every house, you’re going to get $400 to $600 a month in cashflow in your pocket.

How do people keep these properties? If somebody’s building up, they’ve done a couple of deals here and there and they don’t have enough money to be able to buy these properties cash, how do you own these properties? If you can’t maybe get a loan or buy them cash and you find these great deals, what do you do?

There are three ways that you can buy property, in my opinion. Number one, which everybody knows about, is going out and getting a loan. You’ve got to have good credit and all this stuff. Everybody knows that route. We don’t need to go into the details of it. Number two is I can get it sold to me on seller finance. Katie and Jack’s first property was bought on seller finance. A seller who got a package of homes, a little over 35 homes, Katie and Jack wholesaled a few and then asked the seller to seller finance one of those properties to them. It means the seller says, “I want $200,000 for the property. I’m willing to give you a loan for $190,000 if you give me $10,000 down.”

WI 530 | Legacy Wealth

Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering your Taxes

What Katie and Jack did is they got a $25,000 assignment off of one of their previous houses, took $10,000, gave it to the seller and they’re making $500 a month in cashflow. That’s way number two. The third way to buy properties is to take over somebody’s existing debt, which would be called subject to. We’ve talked about this a bunch. If you want to know more about that, go to my Creative Financing Facebook group.

What that means is that I bought a property from another one of your students and properties from you, where there’s no equity in the deal, but the seller is willing to hand the keys over to you and say, “Relieve me of the burden of this house.” What is the burden? The burden is their payment. Sellers are not real estate investors like us, so they don’t look at that house as an opportunity to rent it out. They don’t want to do what we want to do.

I’ve bought properties. One of my best deals came from you in 2021. I did a whole breakdown on that house. I bought it for $44,000. I’m into it all in about $50,000, but none of that was out of pocket because I took over existing debt. That house cashflows me $900 a month. I took over a seller’s debt. That’s all it came down to. You can buy properties in three ways. I try and teach people, “Do seller finance or subject-to because you don’t need credit and credentials. A lot of times, you don’t need any money out of pocket.”

Let’s move on to appreciation.

Appreciation is amazing. It’s this magic wand that you don’t even know it’s happening.

This is what I see as the number one wealth builder. You buy a property at a certain price at a certain time and all of a sudden, it’s worth double, triple, quadruple what you bought it for it. That is real wealth. You’re making wealth from the world turning. This is the time.

The best thing is that while you’re cashflowing the property, your tenant is paying down the debt. You’re collecting money. Along the way, the house is gaining value. In Maricopa County, Phoenix, Arizona, where you and I live, the average appreciation rate is 5%. If I bought a house for $100,000 now, next year, it’s going to be $105,000. It compounds. That’s scary to think about. People are sitting there trying to throw money in a 401(k) and do all this stuff in their 9:00 to 5:00. Meanwhile, you and I both own properties that are appreciating like crazy. In fact, in Maricopa County, our real estate appreciated 9% in one month.

A property goes up in value because of appreciation. You protect yourself against any inflation.

I bought a property for $190,000 years ago and sold it for $340,000. I put less than $5,000 into it. I’ve rented it and it cashflowed $400 for years. I’m selling that off and that is a $150,000 difference from owning one property. There’s no mystery as to why people become millionaires in real estate. It’s these five things. It is the cashflow and appreciation when we’re going to get through the rest of it. This right here is so powerful because this is what swells up your net worth. Let’s talk about the depreciation.

Depreciation is my favorite part. There’s a lot of TTP students. In fact, I met some of them right here in the studio and they were talking about how much money they’re making from the things that you’re teaching them. They’re raking in hundreds of thousands of dollars on a yearly basis. What does that mean to them is they’re fearful of how much money they’re going to spend on taxes. Depreciation is in the tax code. It allows you to take a property and take a certain credit away from that property every year. That credit wipes out a certain part of your tax burden.

Let’s go through it. If I buy a house for $100,000, the IRS allows me to depreciate that property over 27.5 years. That means I take $100,000. I divide it by 27.5 years and that is a yearly increment I get to wipe off my taxes. What would that be? That’d be about $2,700 a year I get in depreciation. That means I can make $2,700 in my wholesale business and my buy and hold business gets a $2,700 credit that I wipe out my tax burden over here.

When we’re doing all of our wholesaling, we have a lot of attorneys, business owners and doctors buying these properties cash. The reason why wealthy people buy real estate is because of the depreciation. Talk to a CPA, break it all down and make sure you understand everything. We’re not CPAs.

Let’s talk about that because I know it can be somewhat of a boring topic. Imagine your student that’s making $200,000, $300,000 wholesaling, utilizing TTP. In normal taxation and world, they’re going to spend probably $60,000 to $100,000 in taxes. If they’re cherry-picking the best deals, buying and holding those through their pipeline, they’re going to be able to wipe out that tax burden by utilizing depreciation. My goal, a lot of times, is at the end of the year, my tax accountant says, “Pace, you need to go buy six properties so that we can get your federal income tax down to zero.” You can truly get your tax burden to zero by utilizing tax depreciation.

The government will reward you for buying real estate.

One of the best books I ever read was Tax-free Wealth by Tom Wheelwright. It’s Robert Kiyosaki’s actual CPA. It goes all about the 2017 tax code and how they put together rules and they give you a game plan of how to not pay taxes by making cashflow and getting appreciation. It’s a cheat code.

WI 530 | Legacy Wealth

Legacy Wealth: Wholesaling doesn’t just mean assigning deals. It also means finding deals and sourcing opportunities. You need to keep some for yourself so that you can build this legacy wealth.

 

What about capital?

Here’s what I worry about. Let’s say that I put $100,000 into a car. What’s going to happen to that $100,000? It’s gone. If I buy a property for $190,000 like you did, years later, I made $350,000. I’ve protected my original investment. It’s 100% secure. Nobody has lost money in real estate unless they jumped out at the wrong time.

When you jump into real estate, you’re protecting your original investment. I don’t know about you, but I get people asking me to invest in their weed farms and all their businesses. I go, “No, I’m all about real estate.” That’s it. What I earned now, I want to protect for forever and that’s capital protection. Let’s talk about the last part of capital protection. In 1950, a hamburger was how much?

It’s $0.10.

I go down to McDonald’s and I’m buying a Big Mac for $5. That’s called inflation. That means the purchasing power of $1 dwindles, which means that if I want to buy the same hamburger twenty years later, the cost is 3, 4, 5 times more. What’s cool is that $100,000 I put into a property goes up in value because of appreciation. I protect myself against any inflation. When the government dumps $7 trillion into the economy by printing money, what’s going to happen to the power of the dollar? Your money and my money sitting in a rental property go up in value while everybody else’s goes down.

One of my mentors said, “Brent, I don’t care if you pay retail for properties. I know that you’re finding all these fine, good houses in good school districts. Buy them cash and forget about them for the next twenty years.” That’s what he’s done. He’s a $20 million, $30 million net worth type of guy. This is incredible. This is the strategy that the wealthy build their fortunes on.

One of my private lenders is an anesthesiologist. He went to school for sixteen years, spent $500,000 in education and had student debt like you wouldn’t believe. He spent sixteen years of his life dedicated to a craft. Here he is in his 60s, doesn’t own any real estate other than his own house. He’s sitting here telling me, “I wish I never went to medical school. I wish I went into real estate because if I had put my time and energy into real estate, my net worth, which is about $5 million, would be closer to $150 million.” It is crazy. He invested in the wrong things.

Wholesale real estate is the number one wealth-building tool if you are cherry-picking your own properties.

Anesthesiologists are amazing and I’m grateful that he’s my lender. However, he sees the writing on the wall. If you have doctors, lawyers, all these people wishing they got into real estate, we are the luckiest human beings. Wholesale real estate is the number one wealth-building tool if you are cherry-picking your own properties.

You got to keep the properties. Legacy wealth is what we’re talking about. We’re talking big numbers here, $20 million, $30 million, $150 million. This is real life. This is real estate. This is what happens when you focus on sourcing the deal first, finding real estate opportunities, being able to find discounted properties, working with distressed property owners and bringing them, converting them into an opportunity to be able to solve their problem. They either sell that property to somebody else or keep that property. Remember, wholesaling doesn’t just mean assigning deals. Wholesaling means finding deals and sourcing opportunities.

You need to keep some for yourself to build this legacy wealth so that you can be the example in your family of the person who buys all these properties and is savvy. Everybody goes to them and asks them questions about business, real estate, rentals and all these things. You get to educate your family on all of these things. All of a sudden, they’re buying a property a year, changing their financial future and getting the depreciation, appreciation, cashflow and all of these things. That is what we’re talking about. Standing at the top of buildings screaming and telling everybody, “You need to buy real estate. You need to keep it and have this. It’s because of this.”

The way I look at legacy wealth is I say, “You’ve gone on three-day vacations where you leave on a Friday, you come home on a Sunday.” We’ve been in that world where on Sunday, I’m sitting here thinking, “I got to get back for Monday. I got my job.” What if you have enough cashflow and your houses are gaining value that you go, “I’ve got plenty of money coming in. I can go home next Wednesday. I don’t need to do this. On top of it, I wholesale real estate. I can work anywhere I want,” which is cool.

Above and beyond that, it’s not only spending more time with your family, quality time. You’re probably one of the people that have pushed me to spend more time with my family watching you do what you do. Above and beyond spending the time, it’s also giving your children and your children’s children the ability to make better decisions with their life. What do I mean by that? Have you ever thought about an opportunity in your life that you say, “I can’t do that because I can’t afford it? I need to be at my 9:00 to 5:00 job.”

My kids will never have to worry about that. Number one, my kids will work. Number two, when they find their passion, I will say, “Let’s go follow that passion. I have the wherewithal and the financial fortitude. I have the money in the bank to make anything happen for you if you put in the effort.” When I was a kid, I had to go do things at the grocery store to get my allowance. That’s not legacy wealth. I’m very appreciative of my father, but I want my children and my children’s children to be able to make decisions that will impact them in a big way that doesn’t have to do with being tied to their bank account. The only way to do that is through all of this.

That’s the most important things, that legacy wealth, freedom of schedule and financial freedom. That’s what this is all about. Going out there, being proactive and having quality conversations with distressed property owners as often as you can is the start, but I want to show you what the future looks like and the potential of this. I want to get you inspired through Pace’s story of owning over 100 properties. It’s incredible. You’ve done this for years. It started with you in the office, joining TTP, getting things going. You’ve been in real estate. You’ve been doing it. It’s not like you were right out of it. You have changed everything so fast because you decided to be proactive, start sourcing your own deals and getting loud about it.

WI 530 | Legacy Wealth

Legacy Wealth: Buy five houses. Let them sit, and you’ll have $3 million in your retirement account. Real estate will build your portfolio for you.

 

You said something that I loved. Wholesaling is not all about just assigning deals. It’s about buying houses at wholesale prices. Here we are buying houses at wholesale prices. We keep them. We’re changing not just our future but our children’s and children’s children’s future. It is crazy what this will do for you. Most people go to a 9:00 to 5:00 job and say, “How do I put $1 million into my retirement account by the time I’m 65?” I’m sitting here thinking, “Buy five houses. Let them sit and you’ll have $3 million in your retirement account.” It will do it for you. Real estate will build your portfolio for you.

You got to start. Keep that fire and that pilot light inside you that says, “I can do this. I can put this together.” Years ago, he was at bankruptcy.

I had somebody file bankruptcy on me that owed me $1 million in cash. I sold my rental properties I had at the time to make sure my business was good and I told myself, “I’m going to stop investing my money in anything but real estate. I’m not going to buy watches or all these things that don’t appreciate in value.” I jumped full-time into real estate, long-term buy and hold. I could quit, but it is way too fun.

That goes back to making sure that you keep the money that you make. I want you to keep 70% to 80% of every check that you get and that should be your rule so that you don’t get too crazy with your expenses, whether they be personal or business. About 1,700 people have become millionaires now. Find somewhere on the calendar that’s going to be your day that you’re one of those 1,700.

You follow the plan, look at this and start sourcing opportunities. You’re proactive. You take this seriously. You don’t listen to the naysayers and the people trying to bring you down or telling you, “This is one of those things that you’re into again,” whatever that is. If you put all that to the side and stay in this world, squad up with people doing this, be around people who are more wealthy, doing more than you, different from the people that may be holding you back, then you can do this. You’re going to mark somewhere on that calendar and it’s going to be your day that you have a net worth of over $1 million. That’s what we want.

Thank you. I appreciate you.

Thank you. You are the best. I love you. Until next time. See you.

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About Brent Daniels

Brent Daniels is a multi-million dollar wholesaler in Phoenix, Arizona… and the creator of “Talk To People” — a simple, low cost, and incredibly effective telephone marketing program…

Also known as “TTP”… it helps wholesalers do more, bigger, and more profitable deals by replacing traditional paid advertising (postcards, yellow letters, bandit signs, and PPC) with being proactive and taking action every single day!

Brent has personally coached over 1,000 wholesalers enrolled in his “Cold Calling Mastery” training, and helped 10,000’s of others who listen to him host the Wholesaling Inc. podcast, watch his YouTube channel, and attend his live events…

A natural leader, Brent combines his passion for helping others with his high energy, “don’t-wait-around-for-business” attitude to help you CRUSH your wholesaling goals as quickly and easily as possible!

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