Question for MichaelC?

[man 0]

Hey everyone. I haven't posted anything on here for quite a while. I'll be there on Thursday evening for the teleconference, so hopefully I'll get to meet some of you. My question today was for Michael. I've been reading up quite a bit on different methods of investing (I have some capital, so I'm not focusing only on l/p). Michael, have you heard of 'Subject To' purchasing? It seems to have some more benefits, and it seems easier to get the buyer qualified for a loan of their own after your term is up? Also the title is transfered to your name. Just wanted to get your thoughts on this. Thanks!

[mamasanta25 0]

I have also been thinking of reading up on subject to deals. Michael, you should create a manual explaining that, I would like to buy one somewhere when I have money, because I have talked to people who buy homes subject to ,and then l/p them, and it works rather well. I just don't know how. By the way, that lady is still b/sing. Today she told me she could only come up with 1000.00 to get into the condo. Forget her.

[MichaelC 160]

I'll be there on Thursday evening for the teleconference, so hopefully I'll get to meet some of you.

Hello, man. First things first..........if you want to participate in Thursday's teleconference I am asking you and anyone else to contact me directly so I can have an idea of the numbers to expect. I will also need to contact everyone who is interested with the phone in instructions. So, if anyone is planning on participating but hasn't yet contacted me, please do so at your earliest convenience. Some additional information can be found in the Cash Flow Cafe Forum.

Michael, have you heard of 'Subject To' purchasing? It seems to have some more benefits, and it seems easier to get the buyer qualified for a loan of their own after your term is up? Also the title is transfered to your name. Just wanted to get your thoughts on this. Thanks!

OK, on to the subject at hand. While I personally do not use it as an investment method, I see no reason why others shouldn't do so, or at least research if further. My reasons for preferring lease purchasing over Subject To include my knowing L/P thoroughly and knowing how to use it successfully. It is a technique that fits my preferences and personality and I'm a big believer in the saying, "If it ain't broke, don't fix it."

One concern I do have with Subject To is I have found it to be noticeably more difficult to have a homeowner sign over the title to their property to me, while at the same time remaining on the mortgage and remaining as the principal party responsible for the payments in the event I don't live up to my obligations. I have found many homeowners resistant to this idea while being much more open to a lease purchase. Think about it. You're asking the homeowner to turn over their property to you, but at the same time accept responsibility in the event you default on the loan. A tough sell, to say the least.

On the other hand, should you be successful at doing just that, the advantages are, as you noted man, you take title to the property.

 

Michael, you should create a manual explaining that, I would like to buy one somewhere when I have money, because I have talked to people who buy homes subject to ,and then l/p them, and it works rather well.

Samantha, thanks for the vote of confidence, but there are many out there who know a heck of a lot more on the topic of Subject To investing. I'll leave the writing to those who are better qualified. And, yes, taking a property subject to and then turning around and setting it up as a lease purchase is an excellent plan.

By the way, that lady is still b/sing. Today she told me she could only come up with 1000.00 to get into the condo. Forget her.

Indeed, forget her! She wasn't worth your time from the get go, obviously. A good study as to why it is imperative to qualify prospects thoroughly and early in the process. Had she told you she has one thousand dollars to put down in her first phone call to you, it also would have been your last with her.

What happened with the other prospect who you showed the property to?

[mamasanta25 0]

Hello,

What happened with the other interested party is that he had to drive to Michigan this weekend to pick up his wife, and he will tell her about the condo. He says he is interested, but she has to see it first. So, hopefully this week I will show it to them, and close a deal. The guy said he tried to fax me his app. I JUST got a fax machine Friday. I hope it is hooked up correctly. We have it hooked up to the back of my computer tower, and it rings when my phone rings, but I never received his fax. If anything, I will get his app when I see him next time. Michael, one more thing, what is a polite way to tell the lady that she can't get into the place? Should I just say "3000 firm for a down, take it or leave it."

[MichaelC 160]

what is a polite way to tell the lady that she can't get into the place? Should I just say "3000 firm for a down, take it or leave it."

I would say something like, "Barbara, as much as I would like to let you have it for the thousand down that you are offering, unfortunately, I can't. We have already rejected an applicant who had offered $2,000. We'd like to make this deal work for you if you're serious. Can you somehow see your way to more down? Keep in mind this is a great opportunity with excellent terms."

That's what I would say, (and have said many hundreds of times ).

[mamasanta25 0]

great advice, Michael. I will use it.

[option8 0]

How timely this topic would appear today...

My partner and I have jsut been hashing out how to do a subject to deal with an out of state owner. We know next to nothing about the subject and I fell asleep last night with RE investment books.

 

One concern I do have with Subject To is I have found it to be noticeably more difficult to have a homeowner sign over the title to their property to me, while at the same time remaining on the mortgage and remaining as the principal party responsible for the payments in the event I don't live up to my obligations. I have found many homeowners resistant to this idea while being much more open to a lease purchase. Think about it. You're asking the homeowner to turn over their property to you, but at the same time accept responsibility in the event you default on the loan. A tough sell, to say the least.

 

Michael, I can go you one better. We have the title holder in one state, the mortgage holder in another state and a property here in a third state that was in good shape 6 months ago but rented out to a tenant who has since trashed it. We determined the repairs are cosmetic...carpet, paint and a little bathroom resurfacing.

 

We were originally discussing taking this on a LO until we saw what the tenants had done to the property on Thursday. Over this weekend we have played the ultimate reluctant buyers (...we'd really like to help you solve your situation, but...now this doesn't meet our profitablilty hurdles...the repairs on the property really make this a tough LO as the money we would have given as an option consideration is now needed to do repairs... this is not our usual approach... there is some risk involved to us... [my sister is great at coming up with this stuff!] She actually came to a verbal agreement with the mortgage holder today and we are now scrambling to come up with a comprehensive list of documents that need to be overnighted to each party in the deal - mortgage holder and title holder.

 

The numbers look like this:

 

Mortgage: 83,700

Mo pmt: 764.00 (includes PITI)

Asking Price: 109,900

Our offer: 93,000 somewhere down the road

Rent: $900/mo

 

We will either flip it, fix it up with a couple grand and LO or retail it.

I wasn't looking for a subject to but this dropped in our lap and it is better to take it using this avenue since we have the repairs

 

Can anyone recommend any good books or other materials on the subject?

Our local REIA has quite a lending library and I'll be going to the meeting on Weds and would like to know what titles to look for.

 

option8

[man 0]

Can anyone recommend any good books or other materials on the subject?

Yes, actually I can reccomend a great book. I just spent the day studying the heck out of it, and it teaches you practically everything you need to know about subject to's. The author reminds me a lot of MichaelC, as he gives you full support. He gave me his email address, and even his cell phone number should I ever need help, or get stuck when I'm dealing with a potential seller.

 

The manual will cost you around $160, but let me be the person to tell you, it's worth every penny. I don't think I could have made a better purchase than Michael's LO manual, and this subject to manual.

 

I don't want to advertise anyone's work here, so I have PM'd you the link to the website for this Subject To book. Let me know if you have any questions, or better yet, let the author know and he or his assistant will be happy to help you.

 

-man

[-Tony- 0]

man,

 

are you talking about the $Cash$ man? if so good investment. MC you would like him. he promotes his book "sub 2 with out the fluff"

 

 

She actually came to a verbal agreement with the mortgage holder today and we are now scrambling to come up with a comprehensive list of documents that need to be overnighted to each party in the deal - mortgage holder and title holder.

 

The numbers look like this:

 

Mortgage: 83,700

Mo pmt: 764.00 (includes PITI)

Asking Price: 109,900

Our offer: 93,000 somewhere down the road

Rent: $900/mo

 

option8,

 

why did you talk to the mortgage Co (when setting up a subject to deals that is a big no no)?

 

With "Sub to" investing you pay the owner his equity up front when they move out.

 

With the figures above you would have to pay him 6.3k, then take care of the repairs (your looking at over 10k invested in the property). For the risk you are taking, there isn't much in on the deal.

 

What if there is a termite problem or structural problems did you have any inspections done? is the title clean?

 

As for the rent, you don't pay rent you pay the mortgage and that is it no more.

 

I don't mean to put a rain on your parade but there is a lot more there. With "sub to" the is more of a risk so there should be more of a payoff.

[NickC 0]

Option8,

 

In dealing with sub2's, I agree with Tony. If you haven't studied up on the technique, I'd proceed with caution.

 

As Tony asked, why are you dealing with the lender? Are you protecting yourself from the DOS clause, if you proceed?

 

Why not offer to just take over their payments? If current, offer purchase price of balance ($83700). If they need some equity out, just get them to take back a note.

 

Of course, you would need to do your due diligence as well.

 

In dealing with sub2's, some investors use this tool, with a l/o as a back-up; in case the seller has a big problem with signing over the deed. If you find a seller motivated enough, a sub2 deal may be workable in providing this service to them. They may want to be just done with the property.

 

Just my thoughts.

Thanks.

Nick

[option8 0]

I obviously blew this explanation of this deal. (I'm getting bogged down in the -ees, --ors and ---ers)

 

We are taking over the property from a couple subject to the existing mortgage which is in the name of a relative on behalf of the couple . So we were dealing are dealing with 2 different parties in 2 different states each with different motivations.

 

I diidn't talk to the mortgage company, but with the relative whose name appears on the note and whose credit this whole deal affects.

 

We will do everything to prevent triggering the DOS clause (another insurance policy, put property in a land trust, etc)

 

We did learn another item that will help make sellers a little more comfortable about sub2s. Offering to use a loan service company to collect and disperse funds is a valuable option.

 

We are not paying the equity upfront, but when we sell the house somewhere down the road. It could be 6 month or 2 years.

 

Believe it or not, while marking another property we currently, I got a call from a gentleman who just may want to take this house (before we even ink the deal)

 

Not too bad for a couple of hour work....

 

(Please forgive my muddled brain cells)