Mastamike6 1 Report post Posted July 8, 2011 I was wondering if anyone had purchased a home subject to the existing financing in place? I was recently contacted by a seller who was responding to my email marketing about a lease purchase and stated that she did not want to stay on the deed and lease it out. However she said that she would consider a mortgage take over and sign the deed over where I could then sell it on a lease purchase to a tenant buyer. I have read many books and articles on this technique and understand the risks involved, however I wanted to hear if anyone had purchased a property themselves this way and how it worked out. Any input would be appreciated. Thanks! Share this post Link to post Share on other sites
MichaelC 160 Report post Posted July 9, 2011 Mike, I'm not a Sub-To guy myself, but I know a number of investors who are and, for the most part, done correctly and with the proper agreements and disclosures, it's a creative way to purchase real estate. I'm pretty sure fellow member Jonathan Rexford utilizes this strategy. Maybe he'll be along with some input, or you can shoot him an email or PM. Share this post Link to post Share on other sites
Jonathan RexfordFL 8 Report post Posted July 9, 2011 I was wondering if anyone had purchased a home subject to the existing financing in place? I was recently contacted by a seller who was responding to my email marketing about a lease purchase and stated that she did not want to stay on the deed and lease it out. However she said that she would consider a mortgage take over and sign the deed over where I could then sell it on a lease purchase to a tenant buyer. I have read many books and articles on this technique and understand the risks involved, however I wanted to hear if anyone had purchased a property themselves this way and how it worked out. Any input would be appreciated. Thanks! I have bought many homes Subject to...as a matter of fact that was my main form of investing. I am a lot more cautious these days as an obligation of debt. It would have to be a super deal and I would need to evaluate my own cashflow needs vs risk. But, I can tell you that it is a viable business model. There are many pit falls as I am sure you have read about. Not sure what you wanted answered. But I have bought subject to and sold them many ways: Lease OptionRehab RentRehab SellRehab (work for equity)Subject to to RetailSubject to and list to sellSubject to Agreement for deed. The set up is key. Some investors like trusts, some will just do LLC's. It really is a preference and you need to speak to your own attorney about which is better. Share this post Link to post Share on other sites
David Alexander 1 Report post Posted December 7, 2011 Yep... That's how I got started... buy them sub2 and rent them out (L/O) or contract fordeed.... Turns out its more fun just selling them on wraps and owning the paper... more profitable too... Nowadays I do them sub3 to remove the sub2liability... Share this post Link to post Share on other sites
Jonathan RexfordFL 8 Report post Posted December 7, 2011 David, With property management, I would do a wrap. But with a 11 months to get a house back under judicial foreclosure kinda makes a regular wrap hard to swallow. This is why I am moving things to a trust and then wrap the interest of the trust. It has not been tested (or at least I do not think so) but I think it would be easier to get it back according to my attorney. Of course people in my area rarely have the down stroke of 10-15% to make me comfortable. Share this post Link to post Share on other sites
lhenley 8 Report post Posted December 7, 2011 David, Ok, I'm game. I think it's been discussed before, but what's a "Subject 3"? Lynn (FL) Share this post Link to post Share on other sites
David Alexander 1 Report post Posted December 8, 2011 David, With property management, I would do a wrap. But with a 11 months to get a house back under judicial foreclosure kinda makes a regular wrap hard to swallow. This is why I am moving things to a trust and then wrap the interest of the trust. It has not been tested (or at least I do not think so) but I think it would be easier to get it back according to my attorney. Of course people in my area rarely have the down stroke of 10-15% to make me comfortable. Jonathan.... Florida is one of the fastest states for foreclosure...It actually only takes about 90 days or so if I rememberright... Contrary to what most will tell you.. You get the "BIG" down payments by owner financing..people these days understand the difference betweenL/O's and contract for deeds and actually owning.... Too many investors have been made to look bad by notdoing the right thing with L/O's and Contract for deeds... Right now.. we are getting 10 - 20% and more and our housesare selling in two weeks or less.. its freakin crazy... Owner financing rocks now that lender aren't financing.. perfect storm! As far as trusts go.... You know my story about that...One visit from the feds... and I quit using trusts.. No... you wouldn't be able to get it back any easier...If the trust is selling on a wrap... and deed is transferred... If the trust is holding title and you are contracting forthe beneficial interest... then it would be the same as..a contract for deed... yes, I know it should be... treated as personal property...but, not likely... My problem with that... is.. it don't what talk and soundlike a duck.... Clean and simple... No trusts... just owner financingwhere is clear cut... And with sub3 as you know... the liability is reducedto... Nil.... Hope to see ya around brother... and hope all is wellin Florida... cheers, David Share this post Link to post Share on other sites
Jonathan RexfordFL 8 Report post Posted December 8, 2011 David, With property management, I would do a wrap. But with a 11 months to get a house back under judicial foreclosure kinda makes a regular wrap hard to swallow. This is why I am moving things to a trust and then wrap the interest of the trust. It has not been tested (or at least I do not think so) but I think it would be easier to get it back according to my attorney. Of course people in my area rarely have the down stroke of 10-15% to make me comfortable. Jonathan.... Florida is one of the fastest states for foreclosure...It actually only takes about 90 days or so if I rememberright... Contrary to what most will tell you.. You get the "BIG" down payments by owner financing..people these days understand the difference betweenL/O's and contract for deeds and actually owning.... Too many investors have been made to look bad by notdoing the right thing with L/O's and Contract for deeds... Right now.. we are getting 10 - 20% and more and our housesare selling in two weeks or less.. its freakin crazy... Owner financing rocks now that lender aren't financing.. perfect storm! As far as trusts go.... You know my story about that...One visit from the feds... and I quit using trusts.. No... you wouldn't be able to get it back any easier...If the trust is selling on a wrap... and deed is transferred... If the trust is holding title and you are contracting forthe beneficial interest... then it would be the same as..a contract for deed... yes, I know it should be... treated as personal property...but, not likely... My problem with that... is.. it don't what talk and soundlike a duck.... Clean and simple... No trusts... just owner financingwhere is clear cut... And with sub3 as you know... the liability is reducedto... Nil.... Hope to see ya around brother... and hope all is wellin Florida... cheers, David Well I would love 90 days in this environment. Our court docket is so backed up, and with mandatory mediation it takes a min 11 months...been there done that. I lie trusts and always will. I do agree with you with owner financing has larger down payments. But speed is the games with debt service. The personal property is now that I am talking about concerning the UCC1 filing. I know Mark Warda preaches it. Like I said. I have not tested it. We can have a nice discussion on what works and what doesn't. I love the Sub 3 model. States like Texas, Ga I would be doing them all day long. But here in my area. I think a L/O is and always be my comfort level. Things are good on my side of the pond. JR Share this post Link to post Share on other sites
David Alexander 1 Report post Posted December 8, 2011 Lynn... Sub3... is a thing of my own concoction.. Well by me and with help of a few other really really smart.. investor friends.. It was the answer to the question... ? How do you do a real estate deal... by it sub2..without incurring the sub2 liability... And extract all profit.. without incurring liability.. So, it took me a year and half to solve thatconundrum... and a couple more to turn everythingI do into a system... But, the basics... You find a seller....You find a buyer... You slam the two together...and extract the profit... with no worries about the "safe act"no worries about loan seasoning... I create notes... and am in the note business... The business model is mainly about creating the notes... but, structuring them in a way thatthey will cash you out for monster profits.. in 1 - 3years... Then take the cash and reinvest into free and clearassets... other businesses.. and stocks etc.. if youdare.. Share this post Link to post Share on other sites
David Alexander 1 Report post Posted December 8, 2011 Jonathan... You know those throwaway deals...that you don't want... I'll gladly partner with you.... And I'll deal with the details of the notemanagement, foreclosure etc.. (if it came to that) Just let me know.... By the way.. check the other forum... mastermindcoming up early next year... Always good to have smart people to hangaround with... Share this post Link to post Share on other sites
lhenley 8 Report post Posted December 9, 2011 David, Correct me if I'm wrong, but it sounds alot like either a wholesale deal or "option property and sell on a wrap". Lynn (FL) Share this post Link to post Share on other sites
Kent - FL 0 Report post Posted December 9, 2011 David, for us less informed, would you mind giving an example? I'm trying to figure out you creating a note and extracting the profit. Thanks! - Kent Share this post Link to post Share on other sites
David Alexander 1 Report post Posted December 12, 2011 Buy house for 80k... (underlying loan) - payments $800/month Sell a house 110k... Owner financed... Get 10k down... Create a 100k wraparound... with payments of $1,000/month You make 10k upfront (minus any expenses)You make 20k plus (equity is growing every month)You make 200/month cash flow spread Get the people to refinance in a year or two...(can't do that on a lease option in the current climate) Then after 2 years... you make... 10k from the down, $4800 from the cashflow..and likely around.... 24k on the backend... So, almost 40k on a two year deal... Not a bad lick... you can do this deal sub2 or sub3... Share this post Link to post Share on other sites
Kent - FL 0 Report post Posted December 13, 2011 Okay, now I'm following you... thanks for clarifying with the example! Share this post Link to post Share on other sites