Sub-To Deals Explained: How We Protect Seller and Investors | Ep 126

James: Subto is so hot right now. That's my Zoolander impression. And if you think about it you skip the bank, you get a low interest rate, you just take over the mortgage. It sounds so simple. And yet, a lot of investors when they do it, they miss over some critical steps, and they effectively create a handshake agreement instead of it actually being like, yeah-

Jessi: that's

James: good paperwork. But we just closed on a house in Sweet Home where we did a subto, and so I kinda wanna go over the structure and how that all worked today on the Furlo Capital and Real Estate Podcast, where we dive into the intricacies of passive real estate investing. And our mission is to equip people to invest wisely, no matter how they structure the deal.

And wisely in how they structure the deal. There we go. So that we can we can do what? So that we can build wealth while improving housing together, I think. Anyways, I'm James, and this is my wife, Jessi.

Jessi: Still here, and yep, I would have to say a subto confuses me, so this will be good for me.

James: Oh good. I'm curious what do you think it is?

Jessi: I,

James: I-

Jessi: yeah. I think the basic is you just assume the loan somebody else was paying?

James: Yeah

That is very high level. Yes. At a high level, 100%. Yeah. So let me-

Jessi: they- there's not a bunch of caveats. It's just yeah, take it like it is and- ... I don't know. Maybe that's not a piece of it.

James: it. Yeah, no, I... Yeah. Interesting. Interesting. Yeah, I can... I'll give a l- First, let me give you context about the property that we- Okay ... bought, and then we'll back into the

two-

sub-til, sub-to piece and how that

Jessi: Yeah, like what made this property subto?

James: So we found a property. It was off-market and very distressed. It would not qualify for conventional financing- Okay ... because, Distressed, do

Jessi: mean bad roof, leaks?

James: They-

Jessi: Just

James: Plumbers ... they bought it. Wife bought it, lived in it, eventually got married, moved to a new house. She wanted it to be a rental.

And the renters, not only did the tenants not take care of it, they tried to do some DIY

Jessi: Oh, my word. And

James: And it did not go super well. And so- Did

Jessi: owner know about these DIY repairs? So I know

James: so. I think they were even trying to do some of the DIY repairs, I think. Interesting. And it just... It was in a bad shape.

And definitely there was even some things like illegal built additions and- Yeah ... things like that you just can't do. And so we actually found about it from a lender- ... which is not usually a lead source for us, but but we took it. Anyways, we're buying it for $167,000. Okay. And we believe that once it's fixed up in the sweet home area, it'll sell for 305,000.

Okay. And we're going to do all... We're going to make it that fixed up thing- ... over the next six months. Okay. We're gonna fix it up in the next month or two, and then resell it over the next four months. So

Jessi: it's a flip.

months.

James: Yes, 100%. Yes. Okay. It's flip. Yes. Like you're buying

Jessi: you're buying

James: and

Jessi: in this particular subject to

James: to. Correct. Okay. Correct. Cool. And the seller had a 3.25% interest rate mortgage on it- Ooh ... from 2021, so super low rate. And the problem was that their balance on this property was $160,000. And traditionally, if you're a flipper, you're gonna bring in investors, you're gonna pay them 12%, or you're gonna go a hard money lender, still pay 12% plus points, things like that.

And 167,000 doesn't work- Yeah ... with those numbers, and just 'cause you're paying so much in interest that they all wanted to buy it for 150, 140, and they're like we can't. We have a loan. Now what?" And so we were able to come in and say, "All right at three and a quarter percent these numbers actually work for us.

We can do it." And so we came up with seven grand to pay them, which turns out they had some other debt that they had to pay off. And so they walked away with a couple grand. But they were also like, "We're done.

Thank you." Ah, yes. "

Jessi: Finally."

James: And that was the way it helped them. And we did it subject to. Okay? And that's the part where you're like, "Oh, subto, what does that mean?"

And if you're been paying attention to any internet stuff, Pace Morby's the man on this. So here's the deal, right? So traditional way of buying a mortgage or buying a property is a person has, have a property. They may or may not have a mortgage, and you don't care because you say the price is 167,000.

You go off and go, "Cool. I will either, A, pay cash, or I'll go talk to a bank and they will give me a loan for some portion of it. I'll bring the rest of it and buy it like normal." As far as the seller's concerned, they just get a pile of cash. Yep. Which then either they pay off their mortgage or they just go, "Yay, we get the money."

Whatever. Yeah. That's the-

Jessi: That's the traditional way to buy and sell properties,

James: Yep. We all bring our own financing to the

the table. Yeah. And so but the deal is the financing is not the same as owning it, right? So you get title to a property.

Jessi: Okay. Yes.

James: then you have a mortgage, which is

a,

Jessi: a lien- A lien, yeah

James: the property,

Jessi: So if you don't make your payment, then they get to own the property.

James: Correct.

Yeah, exactly. Yep. And again, most of the time those two things are attached. Yeah. And this is where it gets, interesting. Lot of lenders say, "If you sell the property, the entire loan will be due if you ever sell it to us."

So the property is, yeah, it's called a due on sale clause- ... kind of a thing. And so that's why a lot of people are like, "Oh, if I sell it, I gotta pay back my mortgage."

It is true, but banks are also in "As long as you're paying, I don't care."

And that is where you can buy a property subject to the existing mortgage.

And again, these things can be disconnected. You can have the title be in your name, while the mortgage stays in the original person's name. Why would

Jessi: Why would someone...

That seems very risky for them to do. Ah,

James: Ah, yes. Why tell me more. Why do you think that?

Jessi: because- Your ... they're no longer in charge of making the payments, and they can't guarantee that you're gonna make the payments.

James: You gotta trust that I'm, "Oh I'll do it. Don't worry." Yeah. Totally. Yeah.

Jessi: So-

James: what happens if I don't pay? Then

Jessi: Then they get in trouble.

James: And is there anything I can do...

Is there anything you could do about it as a seller? Do you have any recourse for that?

Jessi: I guess if you sign a contract that says you have recourse, you could,

James: says you have recourse, you probably do.

we're

So we're gonna talk about that. There

Jessi: be something in there

James: You have-

Jessi: I would want a reasonable, you know-

James: yeah ... Oh, it gets worse than that.

or reasonable. Let's say, cool, you sold that property to me. And now you're like, "I wanna go buy another house."

Jessi: What's a,

James: what's

a lender gonna see? Your mortgage.

Jessi: Your mortgage.

James: Oh, you already have a mortgage.

Jessi: They're gonna be like, "No."

James: And so that's going to count against your debt to income ratio number as well.

Yeah. Yeah. Yeah. You're, you're-

Jessi: You're, you're- Yeah. Why would you do that as a seller? Yeah. Why would

James: that? It doesn't

Jessi: It doesn't make any

James: question.

question.

And a lot of times what'll happen is, but you're like, you can't make the mortgage payment or- Oh ... the property, or you can't sell it con- conventionally and all you're getting are a bunch of cash offers, right?

In this case, like- Oh, because- ... people are coming in with cash offers. She's "I can't take anything less

Jessi: asking price. But people can't qualify for the traditional loan because of

James: The house itself ... the repair. Yeah. Correct. Interesting.

Jessi: Interesting.

James: And anyone who's willing to pay cash isn't willing

Jessi: To deal with

James: up to that price.

They just can't go that high. Sure.

Jessi: 'Cause they have to spend a bunch of money to fix

James: it ... you're like, "Great, now what?" Yeah. Yeah, exactly. Okay. So that's why you might do it.

do it.

Jessi: Huh.

James: Or you get someone where they say, "Hey, if I have to go through a traditional lender, it's like a 60 to 45-day,

maybe

Jessi: even-

James: it's a 30 to 45-day, maybe even 60-day close."

Yeah. And we go, "How does 10 days

Jessi: 10 days sound? Super fast.

James: again, imagine you're just like, this thing has been this emotional weight around you, right? And we're just like, "No, we can, we'll just take care

Jessi: it. Does the bank that holds the mortgage have any sort of a

Document- I'm guessing they have documentation form, whatever, that says "Yeah, we get it. You're now responsible for making the payments"? Or are they just "Nope, it's still this person"?

James: that person.

Jessi: person.

James: Wow. Yeah. No,

worse than that. If they find out that it's sold, they go, "Cool, the entire loan is due now."

now."

Sure.

In theory. They don't really do that, but in theory, they, that's that's what's in the documentation saying, "If you sell it, the entire balance is due."

Huh. That's the whole, it's due

Jessi: due on sale. So banks

aren't

okay with subject to.

James: to? Correct. It is technically against their lending terms. Yeah,

Jessi: yeah. Wow.

So why do you do that?

James: do that?

Jessi: It doesn't seem... It seems like there's lots of risk

James: why would I do it?

Jessi: it? Yeah.

James: Again, if I went out to lenders, I'm paying 12%.

This is three and a quarter. Okay. All right. I would also have a longer sales cycle. I might have to pay points. It's significantly cheaper for me to go

Jessi: What would happen to you, though, if the bank found out that the original owner sold it- and now they're no longer making payments,

and

you were making the payments, and then it comes due?

W- what happens to you?

James: and then it comes due?

What happens to you? Yeah, good question. Yeah. Usually there's some amount of time that you can have to fix it, 'cause the banks want the payments. They don't

Jessi: want- They don't want a default and- So they'll

James: with us, and there's things you can do to try to resolve that problem, or what about that other situation, right?

We're paying... there's things you could do, like we pay the bank directly, or we have to pay that person, and what if that person doesn't make payments? They just pocket the money. Yeah. And they're like, "I don't care if the house gets foreclosed upon." Exactly.

Jessi: Cause we're closed upon Exactly

James: Yeah.

Oh, man. It's a tricky situation, huh?

Jessi: huh? It seems

James: Here's what most people do. And I'll be honest, in our very

subto- ... this is

And in retrospect I'm like, " Oh,

Jessi: Oh, shoot." Oh.

James: you have a purchase and sale contract. You say, "Hey, we're gonna buy it subject to the existing mortgage," which essentially tells the escrow officer, "Don't pay it off."

And then we go, "And we'll just make payments for you." And we get the bank login information, we switch it to our bank account, or we write a check, and we start making payments. Done. That is what is called a naked subto. Naked. Naked, not good, because there's nothing protecting

it.

Jessi: Yeah.

James: It's

Jessi: not- That makes sense ... it's not good. You're exposed.

James: risky for me. Makes

for the seller.

Jessi: It's risky for them.

James: It's

It's risky for everybody. Yeah. But it's also really straightforward and fast, 'cause there's- Sure ... nothing you gotta do with that. Yeah. We do not do that anymore. We have we have put things in place to help it.

That's good. So I wanna go through the six things that we have added, which is now a 30-page document that we have- Oh ... somebody go through- Okay ... that kind of addresses these very concerns that you have. Okay. All right?

Jessi: So fascinating.

James: So here's the big one. We create a wraparound promissory note. It is a new formal note sitting on top of the existing mortgage.

Okay? So essentially what we do

is

we go, "Mortgage is in your name. No big deal. We're creating a whole new mortgage that is going to look and be exactly the same as the existing one, but instead of you being the borrower, you are now the lender and I'm the borrower." So you have a bank who's the lender.

Yeah. You're the borrower. And now I'm the borrower, you're the lender. But it matches all the same stuff. Okay? There are let me make sure I get things in the right order here. So this has a whole bunch of advantages to it, right? Because now there's the recourse piece. I have a mor- I'm, I pay my note, which then, and we'll talk about this in the next step, flows through to that mortgage.

'Cause there's still the risk of what if you- Yeah,

Jessi: Yeah, what

James: I pay you

Jessi: it through? Yeah. But if you set it up, then it has to flow through.

James: which will be the next document that we come to it. Here's what's really cool about this. We call about the debt-to-income ratio, how we're like, "Hey, this throws everything

off."

Jessi: Yeah.

James: So after about a year after this note matures, which is a thing that has to happen, which is about a year long.

Jessi: year long- Like a wine

James: They go to do your debt-to-income ratio number, right? And they go, "Oh, look, you already have a mortgage. Oh, look, you have revenue from another note coming in," and they offset each other.

Jessi: Oh. You're

James: paying

Jessi: month. So it doesn't count against

James: Not anymore." But it takes about a year for it to mature.

Jessi: 'Cause you have to have the

James: So if you're talking to the seller and they're like, "Hey, are you gonna wanna buy another house in the next year?" They're like, "Yes." You go, "Okay, let's talk about other options." If they say no, you go, "Awesome.

I got one for you." Interesting.

Jessi: Interesting.

James: Yeah, it's it's like rental income- Yeah ... but even better than that.

Jessi: than that.

James: Yeah. So it offsets. Okay. Yeah. So that's the first thing that we

Jessi: And then while you're, so they no long- they no longer own the house. They're just getting these payments-

...

and then they filter

James: So the second thing that we add is we ca- we added a licensed third party servicer, and all payments f- flow through them. So we don't pay you, we don't pay the seller directly. We pay this third party servicer- ... who then pays the m- the original mortgage- Yeah ... and then quote whatever's left over they would send back to the original seller.

In this case, it's nothing, so there's nothing to send back. But we essentially, we took them out of the, we took the seller out of the loop. We don't depend on them anymore. It just goes and it's all taken care of for us. So that's another piece. Now we're protected because there's no chance, and you're happy 'cause we're not getting in, we're not having to worry about logging into your account- and do all that stuff and get access- Yep ... though oftentimes we do want that information. But in this case, like nope, it's just gonna go straight for us, no problem.

Jessi: problem. Got

James: it. Easy. Listen to us. And it's what was the math? It's 25 bucks a month to do that. Pretty reasonable. And and if we happen to miss a payment, that servicer will notify the seller within a couple business days.

So it's just no surprises. All so the other thing is deed of trust, right? So this, so you have, we have the note- Yeah ... that we've created, but then you have the deed of trust, right? And that is the recorded piece of paper that says, "Hey, we owe

Jessi: this thing ... "

James: we own

And so we also do that.

So this second, this wraparound mortgage that we've created now has a deed of trust connected to it. So there's now two deeds of trust on this property: the original mortgage, and now the new one. Okay.

Jessi: Okay.

James: Okay? And this one's technically in a second position-

'Cause the main

Jessi: the bank-

this

James: the main one. The main

Jessi: the main one.

James: Okay?

Jessi: Yep.

James: All right? Yep. So we just gotta have that. And so again, that's just making sure that there's some sort of legal recourse for it. Within that deed of trust, we create a cure window of essentially hey, if we cause a problem, here's how long we get to, to fix it.

Yeah. We do 60 days. It could be as long or as short as you're able to negotiate. Now, here's something we do that massively protects the seller- ... okay, to help them feel more confident. It's 'cause in theory, all right, let's say we stop making payments. What would you have to do? To

Jessi: do? You're

James: now the lender.

You gotta go through a f- foreclosure process.

Jessi: Oh.

James: Right?

Jessi: On my own property?

James: Yeah.

Jessi: That seems- Because you're the lender ... it's not mine

James: it's not yours, but you're the lender on it. Okay.

Jessi: it. Okay.

James: Oh, and by the way, you still gotta make payments to the, to your existing bank. Otherwise, they're gonna start the foreclosure process.

Jessi: right?

Huh.

James: So- So

Jessi: like a, wait, a double for- foreclosure?

James: yeah, I don't... And it's not a weird way to say it. It's like whoever, one of them, whoever files first gets the precedent and goes from there. Huh. So you would really be incentivized to file first. Yeah. Yeah.

Jessi: Huh.

James: Yeah. So- It's, it

Jessi: it still seems messy to me, but I

James: And your credit gets trashed in a long way.

Yeah. So what we did was we created a pre-authorized deed in lieu, okay? So essentially we signed the deed conveying the property back to the seller, and it's held by escrow, a third party, and they have instructions that if we stop making payments and we don't get it all fixed within the 60 days, they then file that, property goes right back to you.

to you.

Jessi: Oh, okay. Skip

James: the

Jessi: foreclosure process. That's, that seems reasonable.

James: Right?

Jessi: I mean- ... because it's like, if you're not making payments, like there should be some recourse for me, the lender now, who's like-

James: like- and the normal recourse is yeah, you got to file with the- Yeah ... get lawyers involved and file with the court.

And this is an easy way of saying you

Jessi: don't have to do that.

James: up, we'll just give it back to you." Yep. "And here's a legal way of us doing that." Yeah. Yep. Makes it super clean and easy.

Jessi: I, yeah. I would sign that more than just, "Oh yeah, you don't make my payments.

It's all good."

James: yeah,

Jessi: yeah. Yeah.

James: The other one is we have a insurance authorization and a limited power of attorney. Because now we are doing a bunch of insurance stuff- ... and ideally taking you out of the loop. But the insurance, guess whose name the insurance is in? The

Jessi: The sell- me, so The seller's

James: name.

Jessi: Yeah.

James: And then we become an additionally insured, but we also want to be able to, make changes, do whatever.

Yeah. And so we have you sign a limited power of attorney- Yeah ... to let us do that. That was actually a problem we ran into on our first one. We didn't do that.

Jessi: So you couldn't-

James: ran into an insurance thing- Yeah ... and it was like, "Hey, we want to send you a..." It was like a refund check because we paid for a full month, and then we

Jessi: closed.

James: And "Where do we send the money?" And we were like, "Send it to us." And he's "You're not authorized." Oh. We're like, "Oh, shoot."

Jessi: We're

James: Especially if you're gonna hold onto it for a long time, maybe you wanna change insurance co- coverage. You have to have a way to do that without having to call the seller- Yeah

and have them sign everything. So we just, ahead of time, we go, "Hey, give us permission to do all of this."

Jessi: That makes sense.

James: Again, we're just trying to save you, keep you out of the loop. And then the final thing that we have everybody sign is essentially the due on sale acknowledgement. A piece of paper that says, "Hey, if the lender finds out and cares about this, they could call a due on sale, FYI."

And so if that happens, we've created like a 60-day cooperative window to either let us refinance or find some sort of alternative thing to get it done. And again, most of the time you never think about this and hopefully you never need to use it, but it's just one of those like, "Hey, we want to be covered," like you knew what you were getting into as a seller.

You recognized yeah. I still got this. This is still a thing.

thing.

Jessi: So let me make sure I understand this. Yeah. You,

give me an analogy with real numbers. I guess that's what I'm, like, floating around with. Like, why would... I guess you said the bank is not really okay with this. So if they did find out that you were do- that you had this- Yeah ... subject to thing in place, and were like no," they totally would have the right to be like, "Just, we want the money.

We want you to pay the mortgage in full."

James: Yep.

Jessi: Okay.

James: But it's usually there's a time period in there. It's not instantly. Okay. They give you time to, to fix it.

Jessi: find the funds and-

James: Yeah. Which one option is like, "Okay, we're just gonna deed it back to you, the seller, and so it's back in your name. We're all good, and now we'll do like a lease option or something like that," or whatever. There's

Jessi: You just structure it differently.

James: Yeah. There's things you can do. Or depending on where we're at if we've done a bunch of repairs and we're planning to hold onto it forever, you just go, "All right.

We'll just re- refinance it."

Jessi: re- refinance it"- ... "and

James: Call it good that way. Yeah. Or we sell it and let someone else bring their own financing- Yeah ... and call it good. There is the potential here. Now, here's where things can get not so crazy. You ready for this one?

Jessi: this one?

James: So

there is the potential for us to say, "Hey, we've got this property.

We've got this really good interest rate," and if someone's able to bring a big enough down payment, we can go, "Hey, we'll now wrap around the wraparound-" Oh, my word ... "so you can pay that as well." Oh. And that sort of thing is you can start to domino effect these

Jessi: that seems very messy.

James: yeah.

It's possible. And then

Jessi: I guess if it's documented well.

James: And that's where and depending on how it's structured, like their payment would, again, you go to that third-party servicer. They pay whatever they need to the mortgage, and then if there's any left over, pay to us, which that would be the idea.

the idea.

Jessi: But- So- ... there's

James: craziness there

Jessi: when you're looking at the deals and you're trying to figure out okay, what type of financing am I doing, what would cause you to choose a subject to over just "We're just gonna raise the funds and buy this outright"?

James: prep- because of how we do deals, my preference is always to do a sub to.

like-

Jessi: Because it locks in the interest rate?

James: Yeah.

It's just less money we have to raise, makes it simpler. As long as the interest rate's less than 12%, which it like always is. Yeah. Yeah, I'd rather do this. There's sometimes if it's a small balance, like eh, whatever.

Yeah. Like it's just easier to do the other. If you're going to raise hard money from another lender, they always wanna be in a first position, so you can't do it. Then you have to go to private investors. So like in this case, we raised $100,000 in order to do the rehab. So we have four deeds of trust.

We have the original mortgage- ... our wraparound, and now our two investors

Are in order of

Jessi: of- okay

James: Our investors are okay with it. If you did a hard money lender, they're not okay with that. They'd be like, wah-wah. We're not gonna be in third

Jessi: position." And so the plan is to do the fixes, actually sell it, pay off your investors, pay off the sell- pay off the- owner, the previous owner-

James: Well-

Jessi: The seller-

James: So it's, we pay off the investors- The position ... we pay off the wrap, and the funds fr- the proceeds from the wrap- The wrap goes ... then go to the original mortgager. And the seller actually- Seller ... doesn't get anything-

Jessi: Yeah, so the seller just, their name is on it- ... but they're really not part of this deal anymore. Correct.

James: that's really

Jessi: weird.

Oh, that's really weird. Yeah. Super weird. So h- like, where w- I guess they could rent. That would be, I, in my brain, I was like, "Don't they have to find somewhere to live and buy a new place?"

And I'm like no, they could rent somewhere."

James: Yeah. That's usually what

Jessi: That's usually what they do-

James: there's some

Jessi: safety- In the in-between ...

James: issue.

Or in this case like she got married, they had their own, another house. Sure. And they were trying to have it be a rental and it just didn't work. Yeah. Yeah. Huh. All

Jessi: All

right.

right.

James: So again, why this is good for the seller, it protects them.

Or if they couldn't sell it conventionally- Yeah ... this is an option. The loan, it's gonna get paid by a professional servicer, which is nice. Everything's recorded. it's all figured out. They're actually better protected than most conventional seller finance deals because they, they have that d- the deed in lieu

Jessi: lieu-

James: piece to it.

And again, the wraparound offsets their existing mortgage, so they can qualify for a new one, which is nice.

Jessi: is nice.

James: How, what this also protects our investors, okay? I know, right? You're like, "What are you talking about?" So if the seller fails to pass payments through, which isn't a situation in this case, we can bypass them and go with the lender directly, and it's all documented correctly.

she, the, she, in this case, our seller's a lady she can't touch our title, and she can't assign her interest. She can't refi or anything. It's all documented. You can't mess with it. Which, otherwise it would be if nothing's written down. Yeah. Exactly. We kept that three and a quarter rate and which is nice.

And so that gap 'cause today it'd be, like, in the 7, 8% range. That gap, it made the deal possible, otherwise we couldn't do it. And and yeah. And th- so the, those are the big ones that are good for it. So again, like anyone, honestly subto deals and the option, the opportunities are out there.

they really are. But you've just gotta make sure that you do the proper documentation, right? In our case, we've got these six formal documents.

They're all... and it's an escrow person who did all the stuff. So it's all properly notarized. It's all properly recorded. We're just doing it all in the correct way.

And yeah, you just gotta make sure you build it right 'cause again, in

Jessi: Yeah, 'cause it, it has the potential- ... can get complicated ... yeah, it has the potential to get very messy- Yeah ... and very confusing, so

So

Yeah

James: Yeah. I could see

Jessi: I could see why you would want each piece of it spelled out-

James: You know

our case, we're doing a flip.

We gotta survive six months. It's not a big deal. But in some cases, you're like, "No, I actually wanna hold onto this thing for the remaining life of this loan." That's what's really important 'cause, 10 years from now, you wanna be like, " Oh, no, we actually have this documented. We're talked about.

You can't just go off and do this stuff." Especially, man, if you didn't have that wrap and it's 10 years later, they're in a different financial spot. They wanna get a mortgage. And dude, what the heck?

Jessi: Yeah. That would be-

James: Oh,

gonna be miffed Yeah ... so you don't wanna do

Jessi: that.

James: which again, if you're doing a flip, that's less important- Yeah ... 'cause the chances of that coming up aren't high, but wanna make sure that you're doing it right. 'Cause who knows? Maybe we do wanna hold onto this as a rental. I don't think so, but-

There

is that option.

Jessi: suppose if you get down the road and you can't find a seller, you could hold it as a rental

James: Which is part of what we talked about with our plan. Yeah. If the economy does something crazy, yeah, we may have to turn, hold onto it for a rental for a bit. Okay. So be it. So we're just fully protected in that process, making sure everything is on the up and up. So there you go. That's, So that's the subto.

That's some of the behind the scenes of the subto. I don't usually worry our investors too much about all that stuff. That's one of the perks of being a passive investor. You just go, "Yeah, James has got this. It's all good." But that's the high level how we structure this thing to make it all work.

Jessi: Okay.

James: So you feel better?

Jessi: Yeah ... now that you're- I learned a lot about sub twos

James: that you're, now that you've

Jessi: about the subto? I'm, we watched a pace Morgie, Morgan. Morbi. Morbi, that's what it is.

James: what it is.

Jessi: Morbi . We, like Orbeez, but with a B, with an M.

Sure. Morbi. We watched one of those videos, and I was just kinda

So-

James: He goes over it pretty fast.

Jessi: Yeah. Oh, he's super fast. And he uses numbers, but he's just "Yeah, don't worry about that. We're just gonna put this here, and we're gonna move that over there, and this person's gonna say that," and I'm s- just "Okay.

I think I got it, but that's weird." That's a little it i- it is a little strange- ... when you're thinking about it because it's like, it seems like the seller is put in a very not good position.

James: Yeah.

Jessi: And so-

James: Which I think a lot of them are, honestly- ... without all the proper documentation. Yeah.

Jessi: Yeah. Yeah, without all the doc- Yeah ... if they're not really thinking through like- They haven't asked those questions ... "Hey, I need things," yeah. So

James: all 'cause all I'm telling them is, "Hey, I'm gonna take over payments for

Jessi: Yeah, don't worry about it ... so you don't have to worry about it anymore."

There's a huge- Like, that's it for them ... level of trust there that's eh, how do I want that guaranteed

James: I go, "And don't worry, I'll put protections in place so that if anything bad happens, you get the property back,"

Jessi: Sure, which I totally get. Yeah. Sellers can be in all sorts of different positions for having to sell and, or not being able to make their payments, and so- Yeah

I get why they would do that, but it's nice to know okay, you're not just taking advantage of people and putting them in precarious situations. Yeah. You're actually thinking through, like, how does this structure- ... work for you and work for us, and- Yeah ... yeah. That makes sense.

James: Yeah. Got

Jessi: Interesting.

James: You

got it. Yeah, I guess that's... I don't have a final question for this one other than yeah that's how they work, and it is, I think you nailed it there.

And so if you are interested in investing with us and, 'cause we do subto deals, you can check us out at furlo.com and you can see some of our previous deals and how they all worked as well, and and let us know if you wanna invest with us 'cause it could be pretty fun. Yeah, and we're trying as hard as we can to do it right even though sometimes we're still learning along the way.

But yeah, it's awesome. So with that, thanks for listening. Have a great day.