How to Get Paid to Buy Real Estate with the Equity Carry Method | Steven Glaude

Steven Glaude (00:00)
What if I told you I would come in and give you a 60 % down payment, get to your full asking price, but I wanna carry your remaining 40 % As a joint venture relationship with me, the buyer, mind you, I own 341 doors, so I’m a moderate player in the industry, but will carry your equity forward at a five, seven, 10-year balloon. Obviously, everything is negotiable.
so it’s usually principal payment only on that 40 % equity being carried forward. So by doing so, you’re looking at a blended interest rate of around 3%, 4%, which is unheard of.

Kristen Knapp (00:45)
Amazing

Welcome back to the Real Estate Pros podcast. I’m Kristen and I’m here with Steven Glaude He is a licensed agent, investor, coach, syndicator. He’s got so much going on and we’re gonna talk about the equity carry method. And I’m excited to have him. Thank you for being here. So what got you into real estate in the beginning? What did you enter through?

Steven Glaude (02:31)
Thank you for having me.

⁓ Sales has always been my thing. So I was in the Marine Corps shortly after high school, kind of brought me out west. So I’m originally from Rhode Island, raised in Massachusetts. So came to California, got out of the service and realized I needed a J-O-B to pay the bills. There was a car dealership right across the street and they were selling Corvettes and Suburbans. And so I walked my happy ass across the street, applied, got myself a job and the rest has been history. So I moved from selling cars to selling tech and from selling tech to selling real estate.

Kristen Knapp (02:50)
Right?

and what drew you into real estate?

Steven Glaude (03:09)
I’m always had a passion about real estate. I initially got my license to help buyers realize their dream about home ownership ⁓ evolved into listing homes from there to fixing and flipping properties started an Airbnb arbitrage business before Airbnb arbitrage was a thing. And then transition yet again into commercial real estate where during the pandemic we bought three hotels converted 334 keys.

Kristen Knapp (03:27)
Mm-hmm.

Steven Glaude (03:37)
into 341 studio apartments in the Jacksonville, Florida market. So that was a $16.9 million purchase. Upon exit, we’re looking at about a $54.5 million exit in about 36 months from today.

Kristen Knapp (03:53)
amazing

and kind of how did that feel to get into the market when did you realize that this could actually be a career?

Steven Glaude (04:00)
Um, it’s always been a passion of mine. I’ve always loved real estate. I always looked at apartment buildings as a kid and wonder what it be like to be that landlord owning that building. Um, so I looking at conventional commercial real estate when I made that transition from Airbnb arbitrage to commercial realizing the big play was the equity play. Uh, and then, you know, discovered that blue ocean opportunity of converting and being a converter. So adaptive reuse is one of my passions.

also convert Kmart into interior self storage facilities. We’re actually working on a Kmart in North Augusta, South Carolina, which is going to be converted into a self storage facility. ⁓ Yeah. so adaptive review reuse has been my passion and being creative and having that creative mindset, realizing the potential upside in either a building and or an opportunity ⁓ can present opportunities that would not necessarily come to light when you first.

Kristen Knapp (04:41)
That’s awesome.

Steven Glaude (04:58)
first initially look at them.

Kristen Knapp (05:00)
Yeah, what have been some other creative conversions that you’ve done that you’re proud of?

Steven Glaude (05:06)
While we’re doing a ground up conversion here in El Dorado Hills, it’s one of the largest self-storage developments on Latrobe Row. We’re looking at about 1,200 units. It’s going to be about an $80 million ground up self-storage development that I spearheaded as being a syndicator. So I think in any business, acquisitions is kind of the cornerstone for any business is to acquire especially cash flowing assets.

And that’s where I came into the realization of putting together a program and I call it the equity carry method of being able to approach sellers who’ve been on the market for a while. They really want to retain their equity because more than likely it’s their retirement. And so for them to accept an offer at 60, 70 cents on the dollar is just going to wipe out their retirement.

So a lot of sellers are holding strong, hoping for a market shift, which just hasn’t happened. And so I’ve come up with a option C. So conventionally, we’re looking at either option A, a cash offer, and then offer B would be coming in with a seller financing offer. If they own the property free and clear, let me come in with a 10 % down payment. You carry 90 % at a low interest rate.

But that doesn’t get sellers off the fence because the reason why they’re selling in the first place is they probably want a big influx of capital to do something with, whether it’s to travel, pay some bills, retire early, what have you. So that’s where I came up with this equity carry method. It’s ⁓ commonly known as a stack method. It’s been around for a while. It’s not something I’ve made up from scratch. I’ve done some iterations and tweaks to make it a little

more unique and a little more advantageous for the seller to accept. But in essence, what we’re doing is we’re coming in at the seller’s asking price. And by doing so, we’re carrying the equity of that seller forward with a 40, 50, 60 % down payment. Essentially, it’s two escrows, six minutes apart, two transactions on one property, as you will. The first being a cash-like transaction.

CSCR loan at say 70 % loan to cost we then have a private money lender that would lend the remaining 30 % and then literally six minutes later in a separate escrow that sellers equity that they agreed to carry forward with then repay that private money lender off and then any overage goes to the investor buyer at close of escrow so you’re literally getting

paid to buy real estate. It’s freaking amazing.

Kristen Knapp (08:47)
And how does,

I mean, it’s so creative and incredible how break down like the numbers of how that differs from the other options of how to pay for real estate.

Steven Glaude (08:58)
Well, know, as I mentioned, if you wanted to buy something as an investor, you want to have upside. And if you’re paying cash right now, capital is expensive. So you’re going to come in historically and the rule of thumb for most investors, it’s 70 cents on the dollar or 70 % of ARV after repair value minus repairs. And then minus any type of an assignment fee that you’re hoping to obtain. If you were to assign your rights,

for that contract to another buyer. So that pretty much equates to around 60 cents on the dollar. Not a lot of folks get excited about a cash offer at 60 cents on the dollar. But

what if I told you I would come in and give you a 60 % down payment, get to your full asking price, but I wanna carry your remaining 40 %

As a joint venture relationship with me, the buyer, mind you, I own 341 doors, so I’m a moderate player in the industry, but will carry your equity forward at a five, seven, 10-year balloon. Obviously, everything is negotiable.

I try to, in essence, offer them a 0 % interest, so it’s usually principal payment only on that 40 % equity being carried forward.

So by doing so, you’re looking at a blended interest rate of around 3%, 4%, which is unheard of.

And as long as that NOI, Net Operating Income, exceeds the PITI on the first and the PITI on the second, and I’m cash flow positive day one of close of escrow, then who would not want to buy a 12-plex?

in Texas,

you get paid $130,000 at Close of escrow and oh, you’re making 971 bucks a month on actuals. You can now can take that $130,000, pay potentially your bridge loan costs for that private money lender, pay all of your closing costs for that acquisition, pay the assignment fee to a wholesaler who may have brought you that equity carry method deal, and you now have capital.

remaining for reserves and to do those capital improvements in order for you to realize that pro forma rent which were 99 % of the properties that are market in today’s market are being advertised at everything that you see on Crexie and loop net They’re sitting because they’re being advertised with pro forma rents not actuals Right. So who wants to buy a property on pro forma nobody?

but I can pay a pro forma price if you’re open to doing something.

Kristen Knapp (12:33)
That’s amazing. do you have to, how much convincing does it take when you kind of introduce this? Yeah.

Steven Glaude (12:38)
I don’t convince. I

don’t convince. I attract, I don’t chase. And that’s how I operate my life. Whether I’m dating or going after properties, it’s how I operate. It’s like, hey, if you want a piece of this, this is how it’s going to work. This is the benefit. Here are the pros, here are the cons. Just like there’s pros and cons to taking a cash offer at 60 cents on the dollar.

Kristen Knapp (12:44)
Right.

Steven Glaude (13:05)
So with that being said, you know, I present that offer. My offer is good today. It’s good 30 days from now. It’s good six months from now. Right. So when you’re ready to move forward, here’s my number, here’s my contact information. We look forward to doing business with you. And then it’s just onto the next. And my close ratio, Kristen is like through the roof. It is through the roof. It’s probably one in three.

Kristen Knapp (13:23)
I love that. Yeah.

Wow.

Wow.

Steven Glaude (13:34)
end up going,

okay, let’s move forward. Yeah. So I just look good. I was gonna say, just launched my school SK double O L about 10 days ago. Got 57 signups. I haven’t released it yet to the public, but we go through deals Mondays, Wednesdays and Fridays at 4pm Pacific. So my next class is coming up in 32 minutes and we will role play, look at projects, you know, discuss how to

Kristen Knapp (13:37)
Yeah, you… no, keep going.

Steven Glaude (14:03)
cover opportunities, how to, I have a customized equity carry method underwriting calculator that’ll allow you to see how to structure the deal and whether it’s a deal that you want to pursue or not, right? As buyers, we carry all the leverage, not the sellers, right? I can’t buy every apartment building in the country as much as I would like to, but I can only buy the ones that are open to this equity carry method.

and that are going to be cashflow positive day one at close of escrow.

Kristen Knapp (14:37)
and you’re doing a lot of deals.

Steven Glaude (14:39)
Doin’ a lot of deals.

Kristen Knapp (14:41)
Talk about how many you’re doing per week, per month.

Steven Glaude (14:43)
Right now I just launched this about three weeks ago and I’m averaging about three deals a week and that’s just that’s just myself

Kristen Knapp (14:49)
That’s amazing. That’s great.

Yeah. Well, I mean, it’s really cool that you’re, I mean, the real estate market always like impresses me because there’s always so many creative ways to leverage what you’re trying to do. And this is just another example of that. So I mean, it’s exactly what you said. If people are open to being creative, there’s so much opportunity.

Steven Glaude (15:11)
And it goes for both buyers and sellers. If you’re open to doing something creative, there’s a way we can get this deal done. Come 100 % legal.

Everything’s on paper. Everything is disclosed. There’s no smoke and mirrors. We’re creating an LLC and or trust. The seller basically has a junior position in that LLC as a beneficiary. ⁓ If the buyer fails to make two consecutive payments, buyer is pushed out of that trust.

Kristen Knapp (15:59)
Mm-hmm.

Steven Glaude (16:19)
then the property goes right back to the seller. So there’s no need to foreclose, no foreclosure necessary. So, and obviously we’re going to vet the properties and do our due diligence, including inspections, make sure the property is, you know, as they say it is, and make sure that the rent roll and T12 line up to what we’re underwriting. But if we’re cash flowing, you know, at close of escrow, then, you know, how would we fail?

Kristen Knapp (16:24)
Mm-hmm.

Yeah. Are there any downsides to this, to the equity carry method? Man.

Steven Glaude (16:48)
⁓ zero,

zero. It’s all upside. It’s upside for the buyer and it’s an upside for the seller. Seller gets their price. Buyer gets to buy a piece of real estate with 110 % financing, realizing 10 % cash, a close of escrow. Now the bot, yeah. So the buyer needs, it’s not just any Joe Schmo buyer off the street. They need to qualify for a DSCR loan. They need to have a six.

Kristen Knapp (17:04)
⁓ Yeah, so I…

Steven Glaude (17:15)
a 40 credit score and not a huge credit score. They need to have some real estate experience. But you know, that’s, know, a fair amount of investors out there looking to build their portfolio, whether it’s adding a duplex or a fourplex. ⁓ Obviously, if you’re looking at larger property, say 12 doors or more, you’re to have to flip that into a commercial loan. Those commercial loans take a little longer to close. There’s a little more hurdles for the investor buyer to qualify for that particular loan.

But ⁓ no, it’s upside for both if you’re open, willing and able to doing something creative. Now, if you have no equity, right? If you have very little equity, maybe you bought the property a year ago or two years ago and you have very little equity, we can then do a mortgage takeover, which is basically a sub two purchase via a trust acquisition. And then we take over your position and your loan, any remaining equity, we can then.

Kristen Knapp (17:49)
Mm-hmm.

Steven Glaude (18:12)
structure a seller carry on that remaining equity, it’s just there’s not a lot of sellers that are in that position, especially if you’re looking at multifamily in the Midwest. So in the Midwest, rents are high in proportion to the purchase price of said property. So that’s where you can really get some decent cash flow, some great appreciation.

Rents have been stagnant now and will continue to run stagnant until I think 2027. So I think this is a good time as investors to pick up real estate creatively. only, you know, imagine where you’re going to be in two years when interest rates come tumbling down. What happens when interest rates come tumbling down? Buyers now have more leverage to buy more real estate.

And so now it’s going to flip into a buyer’s market. So where things have not been very competitive for buyers will become very competitive. Prices will soar, so will rents. So this equity carry method has, I think, longevity or a lifespan of maybe 18 to 24 months. So you have a very small window to leverage this tactic.

Kristen Knapp (19:33)
Wow. And you were talking about ⁓ blended interest rates in relation to this. Can you talk about that?

Steven Glaude (19:41)
Sure, yeah, so in essence what you’re doing is you’ve got two escrows, one transaction, you have the seller’s equity that’s being carried forward. So hypothetically, let’s say you come in with a 50 % down payment, seller is carrying their 50 % equity forward. Let’s say you negotiate with that seller a 10-year balloon on that seller’s equity at a 0 % interest rate. So in most cases, I’ll negotiate with the seller like, hey,

If I were to get to your asking price, I want to carry your equity forward, but I’m not paying you interest. This is not a loan. This is a way for me to preserve your equity, move it forward in installments. So think of this as like an installment sale on your equity at a 0 % interest rate. Mind you, in first position or that primary loan is going to be a debt service coverage ratio loan, probably at seven and half.

8%, right? So if you blend the seller’s equity carry in that JV relationship at zero, and then you have a DSCR loan at eight, now you’re looking at a blended interest rate of 4%, which you can’t find anywhere. That allows you to do 100, 105, 110 % financing on these assets.

Kristen Knapp (20:57)
Bye.

Yeah, so I mean, this is, you’re very optimistic about the market right now then. You think it’s a great time to buy. Yeah.

Steven Glaude (21:13)
It’s the best time to buy.

Yeah, yeah, it’s the best time to buy. Doesn’t get any better. Doesn’t get any better.

Kristen Knapp (21:17)
I love hearing that. Yeah, I love hearing that

because there’s a lot of like fear mongering out there. So it’s nice to hear some positivity about the market.

Steven Glaude (21:25)
Yeah, you want to go when people are like, you know, moving in a certain direction, you want to move in the opposite direction. Yeah, you don’t follow the masses. So when there’s fear margarine, there’s a reason for that, because those who are attuned to the market and understand cycles and where things are going to be in the next 24 to 36 months, those are the folks that are buckling down and looking for these opportunities and locking up these apartment buildings. Yeah, they’re paying a higher interest rate, but they’re able to negotiate.

Kristen Knapp (21:31)
Mm-hmm.

Steven Glaude (21:55)
You know on doing very creative structures like they wouldn’t be able to do in the past right because if you had Seven eight buyers competing for one twelve unit apartment building. What’s the likelihood of the seller wanting to do something creative? Zero right they’re gonna like I want my price and oh by the way my price just went up versus oh You’ve been on the market for 273 days

Kristen Knapp (22:11)
Mm-hmm. All right. Yeah.

rain.

Steven Glaude (22:25)
And the reason why you’ve been on the market for 273 days is if you sat down with the seller and the listing agent for just 30 seconds, you opened up a basic underwriting template and you ran through, okay, if I were to buy your apartment building, call it a million bucks, did $300,000 down, and this is my cash flow, I’m looking at the cash on cash return of one, two, 3%.

Where would you want to put your $300,000, Kristen? Would you want to put it into an apartment building making 2 % cash on cash return and having to deal with toilets, termites, and tenants? Or would you take that $300,000, dump it into the stock market, make 8%, 9 %? And so if you sat down with the seller and the listing broker for like 30 seconds and ran through that underwriting scenario, like, okay,

Kristen Knapp (23:03)
Night.

Steven Glaude (23:20)
I’m going to buy your property, I’m going to get a DSCR loan at 70 % loan to cost, which means I’m having to come up with around a 30 % down payment. Call that $300,000 to make 100, 200, 300 bucks a month because that high interest rate is wiping out your cash flow. Why would any investor buy any of these buildings? And that’s why they’re sitting for 100, 200, 300 days.

versus with the equity carry method, I don’t have to put any money out of pocket. Like, in fact, you’re gonna pay me to buy your building.

Kristen Knapp (23:56)
Mm.

I mean, I love it. Yeah.

Steven Glaude (24:03)
So

my cash on cash returns are infinite.

Kristen Knapp (24:08)
Wow, I mean, I think this is helping so many people. This is such a unique way to look at it.

Steven Glaude (24:09)
Right?

It really is. It’s a unique structure. I like to enter the conversation with the seller like, hey, Mr. Seller, I can get you a cash offer and my cash offer is going to be X. And they’re like, well, that’s kind of light. I’m like, well, that’s where most of your cash offers are probably landing. Yes, no, or maybe. They’re going to be like, yeah, pretty much. I go, well, here is offer Y. I’m going to have to come in and.

you know, 80 cents of the dollar in order for me to make a DSCR alone, even remotely pencil, because I’m going to have to come in with 20, 25, 30 % down and then interest rates are around 8%. This is what my cash on cash returns are looking like. But you know, ⁓ XY, while I have options Z, would you be open to me coming in at full price? And if I gave you a large down payment, would that interest you any?

And they’re like, write it up.

Kristen Knapp (25:11)
Yeah. Yeah.

Steven Glaude (25:13)
Right?

Just write it up. And that’s what I do. Send over the offer and then rinse and repeat.

Kristen Knapp (25:20)
Amazing. So talk about how people can work with you, where they can find you, what kind of people you’re working with, or what kind of people you’re looking for in your school.

Steven Glaude (25:27)
I’m looking for those individuals who have a desire to be in real estate, whether to build out your own portfolio, have their own assets that you can realize and grow with ⁓ real estate agents, brokers who are looking to provide an additional tool for their sellers and or buyers. ⁓ What’s unique about my school is we will actually go through A through Z on this program. So I’ll show you where to hunt, where to fish.

how to underwrite, how to structure your letter of intent. You can even leverage my credibility package, my proof of funds. You can even say you work with me as an assistant with LPT Commercial Real Estate. So you’re literally walking in the door with a full credibility package, presenting options A, B or C. Obviously C becomes highlighted because we can get to the seller’s asking price. I do have a school that I just launched about 10 days ago.

kept the price relatively low just as a, foundational members only. Right now it’s at 97 bucks a month. So even if you got one deal, your ROI on one deal is probably 30 fold. If not higher, that price will go up to probably 297 here next week. And then I’ll probably increase it yet again, cause I’m just one person.

but I’ll handle all the backend on dispositions. have a large pool of investor buyers that want to basically acquire these properties through creative means. And it works for pretty much any type of assets, single family, multifamily, mobile home parks, you name it. And you know, anything that has the cashflow or the net operating income that’s going to allow you to cashflow after paying these two liens, it works for.

Kristen Knapp (27:17)
Amazing, and where can people find you?

Steven Glaude (27:19)
Well, I can put my link up on the ⁓ screen here and share that with everyone, my school link, and I can also share my link tree. You can find me on my various different socials, Instagram, Facebook, YouTube. I’m a family man. My daughter just started college at UC Berkeley. I’m delightfully divorced dad and living here in Northern California. So feel free to reach out, join my school before prices go up. I’ll share my link with Kristen so she can…

add that to whatever page that you guys are listening on and would love to have you connect. My classes run Mondays, Wednesdays, and Fridays at 4 p.m. and we usually are on for about two or three hours talking about deals, deal structure, and how to underwrite deals.

Kristen Knapp (28:06)
Amazing, well I really encourage everyone to check it out. Steven has so much to teach everybody and I learned a lot on this episode, so thank you so much for being here.

Steven Glaude (28:15)
My pleasure, thank you for having me.