December 18, 2019

JF1932: How To Find & Close 120 Units With Seller Financing with Joe McCabe

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We’ll cover a lot more than just finding deals and getting the owner to agree to seller financing. Joe has been around many facets of real estate, from buying/selling real estate, mortgage brokering, insurance, and his own investments. We’ll dig in on the 120 units from seller financing about half way through the conversation. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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“Just getting out there and taking action is so crucial” – Joseph C McCabe

Joseph C McCabe Real Estate Background:

  • Real estate broker in PA, NJ, and DE; Owner of REMAX Experts, Home Front Mortgage, Keystone State Abstract, LLC and Allstate Insurance Company
  • US Army veteran
  • HOME Front Mortgage is a nationally growing and expanding mortgage broker opening 9 interstate location adding millions in volume
  • Based in Philadelphia, PA
  • Say hi to him at

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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Joe McCabe. How are you doing, Joe?

Joseph McCabe: Hey! Good, Joe. How are you?

Joe Fairless: I am doing well, and looking forward to our conversation. A little bit more about Joe – he is a real estate broker in Pennsylvania, New Jersey and Delaware. He’s the owner of REMAX Experts, Home Front Mortgage, Keystone State Abstract, LLC and Allstate Insurance Company. He’s a U.S. Army vet and HOME Front Mortgages, a nationally growing and expanding mortgage broker, opening nine interstate locations, adding millions in volume. Based in Philadelphia, Pennsylvania. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Joseph McCabe: Sure. You hit on most of it. I’m pretty much invested in real estate in almost every way, except for buying paper. We also have currently about 120 units in our portfolio, we’re adding another 300 by January; they’re already under contract. So we’ve got  a significant real estate portfolio, and then right now we have 71 realtors out of our Philadelphia REMAX office, and nationwide we’re opening a little over 13 offices, most of them are already in licensing. We’re basically creating joint ventures with other real estate brokers on the mortgage company to provide them with some ancillary income.

So yeah, that’s the big piece of it. I kind of got started in real estate as a salesperson with Keller Williams, and I realized quickly on, and mainly in the army that I don’t think I’m good at working for other people… So I decided–

Joe Fairless: The army will make that come to the surface very quickly, I think.

Joseph McCabe: They made that come clear. And luckily, I got a good job real quick; I became a military police investigator, so we kind of got to work on our own. I was in a smaller unit, and there weren’t as many egos, so… It was less frustrating for me. I just got out of the military in January, so I’m all done with them.

When I started with Keller Williams about 5-6 years ago, I saw the scalability in real estate, so I started my title company… I did all the normal things that a broker does. I started the title company, I started the insurance company… Almost fell for recruiting to the downline thing, but then I realized I should just own my own brokerage. So my next step was to buy a REMAX, open up my own franchise, and then the doors really opened for me and I realized there were so many things that I was still missing out on.

That’s when we created our own mortgage company, and eventually Allstate Insurance, title and everything else. Then I started buying property. I think that maybe that’s probably the most important thing I could tell your listeners about today – everything that we’ve purchased on the real estate side was seller-financed at one point. And we very quickly refinanced out of that seller finance debt… But I’ve just been really, really good at finding those deals and making that attractive to the sellers, and kind of building a level of trust there. And partly that’s because my exit strategy is performed by the mortgage company that I own, so that’s attractive to them, of course. Now we have a track record of almost 400 units where this has been done or is in the process of being done… So that’s always been cool.

Joe Fairless: Will you elaborate a little bit on what you mentioned earlier, where you said you started the title company, you started the insurance company, and you almost started recruiting for the downline thing, but instead you opened up your own brokerage?

Joseph McCabe: Oh yeah, recruiting to your downline in Keller Williams is one of the models… The EXP model to that is maybe a little more attractive…

Joe Fairless: Will you just elaborate? What does that mean, “recruiting for the downline”?

Joseph McCabe: Oh, sorry. What Keller Williams does is if you recruit someone to Keller Williams and they join, you can make residual income based on that agent’s income for the next few years. You’ll get a percentage of all the deals they close, of the company dollar. I think EXP does something similar to that as well. But I realized – I was like “Yeah, I guess I could do this, or I could just start my own company and keep 15%-20%, and then get title, insurance, mortgage and everything else, and build a real team.” But it’s a way to build residual income, and I kind of mimicked a lot of what Keller Williams is doing, in a less watered-down way, because they have so many agents. I offer shares in our Allstate Insurance company, and I offer recruiting incentives. They just get a 1% commission if they recruit someone off the top of all that agent’s deals forever, and they never really have to do anything; just set a meeting with me and I’ll close the deal. So it’s plain and simple.

But I just realized, in the real estate industry, 1) if you have a real estate company, there’s so many other things that you need to tap into, and there’s so much income that you really don’t have to do if you set it up right.

I have a partner that runs each and every single ancillary company that we have, and we still keep most of the profit… And then not only that, but obviously being a broker there’s a lot of deals on the MLS, and a lot of times you’ll find deals, you’ll get calls for listings, or other agents will put out listings pre-MLS, that kind of gives you an early look at some of these deals that you could access. So what I just realized is that I could have my hand in so many pots, but not really have to do any extra work, and really build — I hate to say “passive income”, because nothing’s really passive, but income where I don’t really have to do as much work, and really that is owning properties, and then having a title company, and everything else. The realtors – they drive me nuts though [unintelligible [00:06:26].26]

Joe Fairless: [laughs] We clearly need to talk about the 120 units, and the seller finance deals. Before we do though, you did pique my curiosity when you said the insurance company you’ve got – all they need to do, someone within your team set up an interview with a prospective new team member, you’ll close the deal, and then they get 1%, right? That’s what you said?

Joseph McCabe: Yeah, exactly. I tell my realtors [unintelligible [00:06:51].22]

Joe Fairless: I get that, but my question is “How do you close that deal?”

Joseph McCabe: As far as recruiting, and stuff like that?

Joe Fairless: Yeah.

Joseph McCabe: We have some pretty attractive value-adds in the company, and obviously one of them is the agent’s ability to buy into the Allstate Insurance company at a very low fee, right off the bat. That’s attractive to them, because a lot of times if you’re a realtor, you kind of have that investor mindset, or at least you should, because you’re about to be self-employed…

Joe Fairless: [laughs]

Joseph McCabe: So hey, you should have it, but sometimes they don’t, and that’s why they don’t work out. But they have that option coming into it, so that’s one of our value-adds. Secondly, we start everybody at 85% commission, and then they’re capped at $15,600. So once they pay the company $15,600, they go to 100% commission. And that’s about half of what everybody else is in our industry. So that makes it an easier sell for me. And when you have all the ancillary services, you can do that.

So they like that, they like that we have in-house mortgage; that’s a huge selling point. The loan officers are right there, they can build relationships with them… I also provide all the realtors with performance-based leads. So the faster, the more responsive they are, the more leads they get. Some of my realtors get 25 to 30 leads a week. Again, now they’re getting leads with essentially no risk. If they don’t work, it was their own fault, and they don’t have to shell out the upfront money or the upfront cost for those leads. So I kind of subsidize their leads, and we don’t take an additional split for that, because they’re still cost-effective for us.

So those are pretty much the two biggest things. The other thing is, again, every realtor wants to be an investor, so I tell them “Hey, if you’re looking to learn how to flip properties, build new construction, purchase large real estate portfolios, just build a small portfolio of ten properties. I can help you do that.” I’ll dedicate my time to do that, I have recorded trainings, I run at least a quarterly training on how to purchase properties, seller-financed, how we’ve done it, how to analyze a deal, what’s a good deal – at least from our perspective what to look at, what to look for… And I always make it clear to them, “You’re gonna hear me say that, and then you’re gonna go talk to a guy who will tell you to only buy trailer parks.” There’s so much different information out there.. But it’s helpful for them, because a lot of people aren’t sharing that information, and a lot of real estate brokers are not as diversified, and a lot of times real estate brokers are not also the owner of the company. In some states they are, but in some cases, especially larger companies, it’s someone that’s paid a salary to kind of manage the brokerage.

Joe Fairless: Got it.

Joseph McCabe: So they get to interact with me, and I think it’s very helpful.

Joe Fairless: So let’s talk about the 120 units, all seller-financed deals… You said you’re good at finding them and making them attractive to sellers. What’s the best way to find them, and what’s the best 2-3 talking points to make it attractive to the sellers?

Joseph McCabe: Sure. What I do always is I try to pitch a quick exit strategy for the seller. So what I’ll do is I’ll usually just go on LoopNet or CREXi. CREXi is probably my favorite website; it’s easy to submit a letter of intent… And I’m kind of doing a mass LOI submission. I’m looking at what’s the cap rate, which is probably bullshit, but what’s the cap rate they have up there, what’s the sales price, and how many units do they have.

I like to buy 26 units, just for laws of averages purposes, and I like to buy at a 9% cap and up. And preferably things that — if it’s a single-family portfolio, obviously not a value-add, because that doesn’t really add to the value… Although I’ve seen a lot of them really trying to advertise that way…

Joe Fairless: [laughs]

Joseph McCabe: I’m like, “It doesn’t help. It’s not a value-add, dude.” Just throwing money. Or maybe you increase the market value. So that’s what I’ll do, I’ll just find properties to meet that low criteria – more than 26 units, higher than the 9% cap rate, and ones that don’t necessarily need renovations.

So what I’m doing is I’m  getting them to 100% seller-finance them. So I’ll buy them, I’ll roughly run through some numbers, look at some market values, and figure out “If I purchase this portfolio, what would leave me with 25% equity in the property?” And then I’m gonna write an offer based on that number. So if it was a million dollars, I’d write the offer for $750,000, and I would stay firm on that price, but then I would add a bunch of additional contingencies in there.

So I’d say “I’m gonna do full inspections, mortgage contingency, I need 90 days for the initial close”, and then maybe I’ll say “I need you to hold the seller finance note for five years.” Now, of course I’m not going to do that, but they’re always gonna counter me on price, and normally I counter them back and say “Look, the price is the price, and here’s why. Here’s the value, and here’s what I’m trying to do, and I’m doing this to protect your seller.” Because I wanna be able to get the seller out of this as quickly as I can and get him his money. And the best  way to do that is to buy at a 25% discount, which is — any other investor who pays cash is gonna want a 35%-40% discount. So it’s usually in their best interest anyway.

Once I do that, usually the agent calls me, tells me I’m nuts for writing a 100% seller finance deal…

Joe Fairless: [laughs]

Joseph McCabe: …that’s usually the next step. And then I explain “Hey look, how many properties do you own?” “Well, I don’t know [unintelligible [00:11:48].21]” “Well, we have 400 that we’re doing this way. And it works, and it’s attractive to a lot of sellers. So just be open-minded and pitch it.” It’s just another way to close the deal. And all we do then is we have this seller finance loan, maybe we hold it for 90 days, and we refinance out of it, because we already know where the market values are gonna come in. So we know it’s gonna appraise for a million, we can get 75% loan-to-value, and then we pay off the seller, and everyone goes on their own ways.

The coolest thing about our structure is we’re obviously collecting a real estate commission, we’re getting paid on the mortgage side and we’re getting paid on the title side. So we’re recouping most of our costs.

Joe Fairless: I think you said that you don’t need renovations, it’s a 9% cap and at least 26 units, right? You said those three things? Why not just get financing out of the gate?

Joseph McCabe: I always tell them right upfront, I don’t wanna put down 25%-30%. I don’t wanna go through that, I don’t wanna go through the extra scrutiny… A purchased deal has a lot more scrutiny than a  performing  refinance. One thing about refinancing a property is even if it’s seller financed, if you can show performance on the note, you’re good to go. Plus, it gives us a few extra months to get a better understanding of the books, stabilize some things… Because a lot of times, if someone agrees to this type of structure, they’re usually not sophisticated sellers. They’re probably a guy that built a really nice portfolio, and they cash-flow really good, but he’s probably self-managing, he’s taking a lot of cash… The books just aren’t on the up and up that a banks wants to see. So it gives us time to go in there and stabilize those things, maybe make some renovations to increase the market value if we have to, get some tenants out that we need to get rid of…

And that’s why we like to buy in rent states, because there are chances where when they’re self-managing, they know these people, they feel bad for them, they start cutting deals, and the next thing you know it’s six months later and he still hasn’t paid his rent, “But he’s gonna.” They keep telling he’s gonna pay, he’s gonna pay… So we have to go in and get a professional management company, and that transition can just take time, from self-managed to professional, or even from a professional that sucks to a professional that’s really good. That can take even more time. That’s happened to us a few times.

Joe Fairless: Thanks for walking through that process and how you position it to them, and also the back-and-forth that inevitably will happen with their agent that’s representing them. I asked also how to find them, and you said two things – CREXi and also LoopNet. Are those the two primary sources you’ve used to close deals?

Joseph McCabe: Yeah, that’s it. Actually, the only website I’ve ever closed a deal off of was actually CREXi. Sometimes there’s off market opportunities, but to be honest, sometimes those get so convoluted… Especially in Philadelphia – I’ll find a property and I’ll look it up, and it’s on the MLS for a million, but by the time the six wholesales who are selling it got done with it, the final price is like 1.6, and I’m not gonna deal with them. I’m gonna go straight to the broker… But then I find out the broker is also a wholesaler, so I get frustrated with those types of deals, and  a lot of times those are the smaller deals. But 36 units and up, or 26 units and up – you’re usually dealing with a large commercial firm, who won’t deal with wholesalers. You just get a more direct approach.

A lot of times these commercial brokers have seen crazy structures like this, and a lot of times they’re really not blown away, especially in the single-family world. Because with single-family all of these properties were acquired in some creative fashion. A lot of times these sellers will be like “Oh, it’s really cool. I haven’t seen this in forever. That’s actually how I bought most of my properties.” So it’s always cool to hear that.

Joe Fairless: Yup. Taking a step back – based on your experience, what’s your best real estate investing advice ever?

Joseph McCabe: My best advice – and I just ran a training in the office for this – is just get out there and do something. Everyone’s always wondering “How do I jump into real estate? What do I have to do to get started? Where do I start? Let me research this, let me talk to this, let me go to this course…” and it’s like “How many courses are you gonna go to before you finally do it? I started the real estate company, the title company, the mortgage company, Allstate, and I bought my first 73 units in one shot, without ever having done that before, without any mentors. I’m not saying that’s the right way to do it, I took a lot of freakin’ hits, but I did it, and there’s thousands of people out there still thinking about doing it.

So I think just getting out there and taking that action is so crucial… And if someone gives you information like this and tells you that it’s possible, just go out there and try it. There’s nothing that can go wrong.

I have a friend right now who is a contractor in Iraq, and I was speaking to him today, because he’s buying a property in Philadelphia, and he’s like “Yeah, I’ve got a portfolio… I heard your podcast on Brad Lea’s show, Dropping Bombs, so I went and got a portfolio under contract in Iowa.” And I was like “See, that’s perfect.” That’s someone who listened… They’re like “Okay, wait… I don’t know everything, but I can figure this out.” And he called me and he said “Hey, the lender is asking for this. What do I do?” And I guided him through that process. So yeah, you’re not gonna know everything, but there’s people out there that’ll ask, and if someone were to DM me… I don’t even know my Instagram; I think it’s @josephcmccabe… I’ll respond if they have a question. Usually, I’ll even give them a call. I’m always willing to help people like that. There’s plenty of money to go around.

Joe Fairless: I agree. We live in a world of abundance.

Joseph McCabe: Yeah.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Joseph McCabe: Yeah.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:17:07].28] to [00:17:49].20]

Joe Fairless: What’s a deal or business transaction that you’ve lost the most amount of money on?

Joseph McCabe: Actually, my first two – and this is why I have a minimum unit rule. I will never buy less than 16 units; that’s my actual minimum. I bought two duplexes on my first deal, when I first got into real estate… And you lose one tenant and then the next thing you know all four are leaving, too. You can’t make that payment on your own when you’re just starting out selling real estate and everything else.

My first two duplexes that I bought in not the best area in Philadelphia – luckily, I was able to sell them and make some money, but that only helped me recoup the monthly payments that I had to shell out.

Joe Fairless: When the dust settled, what was the result of the dollars out.

Joseph McCabe: Oh, I probably still lost 2k-3k on that… And that’s where I said “You know what – worst-case scenario, even if you are buying in a bad area, at least have more units and increase your chances of not having that problem.”

Joe Fairless: Best ever way you like to give back to the community?

Joseph McCabe: Right now we do a lot of stuff for Police, Fire and Military, since I’m a veteran… I partner on most of these real estate deals as a Philadelphia cop, and my whole family is cops… So any way that we can give back to the Police, Fire and Military community, we do that all the time. Sponsoring events in Philadelphia… And then also – I like to give back to other realtors and other people. I think that sometimes we forget that Police and Fire – they all stick together, and so does the Military… And sometimes in real estate everyone focuses on this competition that really doesn’t exist, and… I like to help everybody out; I’ll pick up the phone for anybody and guide you through your real estate career and see how i can help. I love to shoot back for other people in the industry and help them out.

Joe Fairless: And how can the Best Ever listeners learn more about what you’re doing and get in touch with you?

Joseph McCabe: They can reach out to me on Instagram, @josephcmccabe, or they can shoot me an email at, or go to one of our websites; you’ll see stuff on there. I also have a podcast, and I’ve been on a lot of other podcasts; on Brad Lea’s podcast, Dropping Bombs, that we talked about… All the mortgage stuff, and then on Pat Hiban’s podcast, where specifically we talked a little bit more about how we bought these properties. So my information is out there in multiple places, and I’d be happy to share it.

Joe Fairless: Well, Joe, thanks for being on the show, talking about the 120-unit portfolio, the seller financing, how you’re finding them and then also how you’re positioning that to the seller, and the seller’s representative (the real estate agent) as well as how you’ve grown the business, and the different ancillary income streams that you have. Also, thank you for your service, sir; I really appreciate that.

I really enjoyed our conversation. I hope you have a best ever day, and we’ll talk to you again soon.

Joseph McCabe: Yeah, thanks  Joe. I appreciate it.

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