Can Someone Explain Sub 2 In A Nutshell

trlowder profile photo

Hello,
I'm returning to the site after a couple of months and becoming more interested in the Sub 2 process. I took a couple of months from the world to rehab a property and finally have a contract one it. Bought for 62K, Spent 21K in fix-up, paid 6% RE commision, contract for 119K. Not bad for first deal, so I'm excited and ready to go.
My Question: Can someone explain the Sub 2 process in a general step-by-step process involving different scenarios, including options of selling the property after taking possession Sub 2. Please discuss the title, deed, insurance, when and where to use land trust, etc.
I've read much of the specific questions, and I feel like I'm running in circles. Can someone please help clear my mind?
Maybe in format....if this happens then you can do this or this........Maybe I should just buy the course?

Comments(30)

  • mattfish1130th June, 2004

    I would first suggest buying "the" course! "The course, of course, is John Locke's Sub to that what I do course! This manual is invaluable, coming with John as a personal mentor 24/7 - you actually get John's Cell Phone Number with the manual…

    Anyway - Sub-To... You actually get the property deeded over to you subject to the existing financing (for a minimal out of pocket amount for the equity)! The mortgage stays in the sellers name and you are resonsible for the mortgage! Once you have the deed and the sellers are out of the house, you can lease option it to a tenant-buyer, sell it yourself, live in it yourself, etc - pretty much whatever you want to do with it... But until the house is refinanced out of the sellers name - you are responsible to pay that mortgage...

    This is obviously a very general overview - Get the course to get the down and dirty! Its worth it!

    Good Luck!
    [addsig]

  • JohnLocke30th June, 2004

    trlowder,

    Glad to meet you.

    This link will be helpful.

    http://www.thecreativeinvestor.com/modules.php?name=News&file=article&articleid=146

    John $Cash$ Locke
    [addsig]

  • trlowder30th June, 2004

    Thanks MK and JL!!
    John,
    Thanks for the link. Who holds the insurance on the property? Who is able to claim the interest on taxes?

  • JohnLocke30th June, 2004

    trlowder,

    The insurance can be handled in different ways depending on how the deal is structured, so there is no one size fits all policy. Some investors maintain a separate policy, others are added on to the policy, etc.

    If you are selling with a Contract for Deed your buyer claims the interest on the property. However, the sellers are out of the picture because they are no longer making the payments.

    Selling with a Contract for Deed, Land Contract is one of the benefits you offer your buyer (claiming the interest) when selling this way.

    John $Cash$ Locke
    [addsig]

  • MadamRealEstate30th June, 2004

    Ok so what happens if the TD has a Due on Sale Cause? What happens if the investor defaults? Seller is off ttile but still on the loan? Sounds to me, if the investor defaults, the seller is screwed. He's not on title and he is being foreclosed on. Sounds like a huge lawsuit just waiting to happen.

  • JohnLocke30th June, 2004

    MadamRealEstate,

    Glad to meet you.

    Sorry, if you were asking me, you will have to ask someone else because I did it the right way over 500+ times and never had any of what you are asking happen.

    John $Cash$ Locke

  • MadamRealEstate30th June, 2004

    Not asking anyone in particular. You've been lucky. This is basically the same thing as an non qualifying assumption only the underlying lien is most probably not assumable. You are putting cash down to the loan and removing the seller from title. If you or anyone else were to default on that seller's loan, then the property goes back to the seller, but in this case that poor seller is not on title any longer and he is the one that gets screwed. He gets foreclosed on and his credit gets ruined. What is the benefit to the seller? Are there people really that stupid in this world?

  • JohnLocke30th June, 2004

    MadamRealEstate,

    Some how I just knew you answer would be you just got lucky it usually is when someone does not understand the process or are pushing some other method of investing they are selling.

    I don't think you came on this board to help anyone, but to cause trouble, posters like you come and go mostly go because somehow your posts start to get deleted or they wind up in the TCI Jail, in your case I don't think you will get "lucky" enough for this not to happen to you.

    Not many ladies I know use the term "screwed" as you did of course then maybe you aren't a lady.

    Just post to help the members here, cut the snide comments, derogatory statements, you are impressing no one but your self.

    John $Cash$ Locke
    [addsig]

  • MicahM30th June, 2004

    John's been lucky? 500 times? You are talking about something that is in your control, no one elses. If the investor defaults, you are the investor, and you didn't plan very well.

    What if I rob a bank? What if I shoot someone? It's not like someone else is going to make you default on the loan.

  • johnbriscoe30th June, 2004

    Madam Seems to have a good mind for coming up with potential pitfalls, which means she has propably done many deals herself. If I was the seller the big risk is the investor defaulting. What do the standard contracts provide for this circumstance. Does the seller take the property back? It also would seem smart for the Seller to regularly check that the payments are being made.

  • maggyldy30th June, 2004

    John, you seem to be more than just a little sensitive. She's not attacking you. However, you are attacking her. She makes some very good points, given limited information. Madam, there are ways the seller can protect himself. John, why can't you just educate the woman, instead of getting all huffy. That's why you are supposed to be here. You can put 2-3 months of mortgage payments into an escrow with a Loan Servicing Company, which also sends reports to the seller to verify timely payments and other info. How do I know this? I read one of John's articles. John, I think that you owe this woman an appology. She really said nothing wrong, other than to come to some very natural conclusions, given a limited amount of experience and knowledge. Why are we here anyway????

  • JohnLocke30th June, 2004

    maggyldy,

    Glad to meet you.

    I found after reading many posts that if someone doesn't understand something they ask a question here is what they don't do.

    They don't post the seller gets "screwed" or people must be "stupid" to sell that way.

    This poster could have asked questions if they did not understand rather than make blanket statements about a method they know nothing about.

    It is called showing a little class in posting, I can think of one of the top posters who has helped many people with his posting for the past 2 years recently leaving this board because of trouble makers and posters having no clue what they were talking about, so I just advised this person to stick to helping people.

    If you feel that her type of posting is condusive to helping someone and is beneficial then that is your opinion and you are certainly entitled to your opinion.

    In my opinon she is trouble waiting to happen if she does not change her attitude and it did in another post she answered someone other than this one.

    John $Cash$ Locke

  • JohnLocke30th June, 2004

    johnbriscoe,

    Glad to meet you.

    I noticed in another post you were saying this person was right on, so I wonder do you know this person, do you know how many deals deals she has done?

    From her post if she was asking questions like she did told me that she had no idea what doing creative real estate investing is all about.

    Normally a new person to this board comes on and if they are professional in an area of investing they establish their credibility by helping members here on TCI. They don't start out by huffing and puffing in an area they know nothing about, if you relate this to doing many deals, then you should re think your position on this matter.

    John $Cash$ Locke

  • JohnLocke30th June, 2004

    maggyldy,

    I just went and looked at some of your posts and I saw some sincere questions being asked, they were intellegent rather than obtrusive.

    This is the difference from someone looking for help and someone looking to be shall we say less than sincere in their motivation.

    John $Cash$ Locke

  • JohnLocke1st July, 2004

    I picked this up from another post and wish I would have said it:

    "Go to the Madams profile and read all of the posts made to date. It appears that the madam is single-handedly trying to squash all of the creative thinking on this site. Appears to be one of those old Real Estate Brokers that thinks there two ways to do everything, her way and the wrong way.

    It doesn't appear from any of the comments that I've read that there has been any creativity in any real estate transaction she has been involved in years.

    This is of course my opinion only.
    Madam, I'm glad that I have a choice of who I take advice from. Instead of telling those of us that are doing it that it can't be done, why not open up your mind to some new ideas?

    You of course have the right to the internet just as I do. If you insist on continuing with the negative comments, might I suggest you visit John T Reed's site? I believe that you'll feel more at home there.

    If I have offended anyone else, that was not my intention. Moderators, if this is out of line, please delete this post. I'll understand.

    Creative Investing Forever,
    Jeff"

    It only took me one post to figure out what was going on, so before anyone jumps in with was a poster being sincere in what they were asking, read between the lines.

    Now who is due the apology?

    John $Cash$ Locke

  • maggyldy1st July, 2004

    Tou-Che!!!

  • JohnLocke1st July, 2004

    maggyldy,

    C'est un apprentissage, mais vous apprendrez.

    John $Cash$ Locke

  • maggyldy2nd July, 2004

    L'érudition est ma carrière.

  • JohnLocke2nd July, 2004

    maggyldy,

    Good for you, we should never stop learning.

    John $Cash$ Locke
    [addsig]

  • rajwarrior2nd July, 2004

    Hey! Hey! Hey! What's this French talking stuff going on?

    Don't you know that you're in America now.

    So speak Spanish!

    Roger

  • trlowder2nd July, 2004

    no hablo espenol.....pequeno.
    You all are impressive. Can you help me out here.
    What happens to or how are the following items handled when taking possession of a property Sub 2:
    Title insurance, home owners insurance, who claims mortgage interest on taxes.
    If I buy sub 2 and then owner finance to another buyer and they don't make payments....do I have to go through the foreclosure process? How do you CYA?

  • InActive_Account2nd July, 2004

    Just to post my 2 cents worth.

    I think everyone is making good points here. If you join a board, you need to be positive, not negative. That's is part of what I like about this site over cre's site. I've gone over there a few times, and each time you have someone who thinks they know it all, or who thinks this CRE is just a bunch of bs and as soon as they see something they don't understand they let loose with the cannons.

    But I can also see madam's point. The contract must also protect the seller (not that in many cases as has been pointed out before, they have a lot to protect). Now, madam could have asked how you could protect the seller without getting all riled, but to be honest, I've had the same questions about sub 2. That is what drew me to this post initially is to learn all that I can about how to protect the seller contractually, not just ask them to 'trust' that I will make the payments.

    Part of me thinks though, that REI has a bad 'name' in the public eye. I didn't have any reason to believe RE investors were crooked before considering REI, but that is what I thought none the less. So, I wonder how many REA out there here about a RE deal that isn't traditional and instantly their defenses go up, thinking about all of the possible things that could go wrong because you didn't do it 'their' way.? I think we as RE investors (or newbies in my case), have an important opportunity at times like this to help dispell the notions in REA's minds that creative real estate is a bunch of people taking advantage of down and out property owners.

    Just my own opion.

    Robert

  • JohnLocke2nd July, 2004

    Robert,

    The normal response from anyone who wears the conventional hat versus the creative hat, posts like Madame, all the explainations I could give her would never be good enough.

    So let me tell this little true story that happended a few years back, a lady called me with a house in Henderson, Nevada she told me she needed to sell immediately. I did my due diligence and found what she owed on the property is what the property was worth.

    Normally I would have passed on this deal because it was zero, zip, nada (sorry Raj couldn't help the nada one) equity deal in not so great of an area.

    Something in her voice got to me, so I made the appointment and went to meet her. She was a single mom with three small children, one of the daughters was bald, which told me probably from cancer treatments. She then explained she needed money to get her daughter to a free cancer clinic in Colorado.

    Now here is house that I would never advise anyone one to purchase creatively, only I felt it did not matter I knew I could sell it, just from many past experiences.

    I asked what it would take to get her set up in Colorado, she told me and I purchased the house, now if anyone feels I took advantage of her maybe I did because I did make money on the house.

    If you want to follow the NOD' s to the end for folks being foreclosed on then show up the day the Sheriff is there and a family is being evicted, as they are sitting on the curb with what is left of everything they own in the world, what if a creative investor would have stepped in gave the family some "u-haul money and let them go on with their life?

    I really don't deal in pre-foreclosures, as I target market for folks before they get to that point, what I do is cure the pain the house sellers have. I have many testimonial letters from average folks thanking me for helping them, sellers to this day call me and tell me how they are doing.

    The post above yours asking those questions, I could set here and go through them one by one with the right answers, however unless a person knows all and I mean all the items it takes to do a creative real estate investing deal and that there are different situations, it would not be fair in my opinon to give someone a small part of what it takes to become successful in our great industry. There was an old saying we used in the casino industry "I don't care how you did it in California, this is the way it is done in Nevada."

    State stautes differ from state to state, specific paperwork is involved in doing a deal which also varies, so it is not a one size fits all.

    Just as a quick follow up Madame is in Jail for a while, apparently she did not get her dancing shoes on quick enough to dance with me.

    Is her way the way to answer someone in the majority of of her answers, "either someone is getting "screwd" or is "stupid" for someone who is looking or help?

    Just my opinion,

    Jhn $Cash$ Locke
    [addsig]

  • trlowder2nd July, 2004

    John,
    __________________________________________________
    You wrote:
    The post above yours asking those questions, I could set here and go through them one by one with the right answers, however unless a person knows all and I mean all the items it takes to do a creative real estate investing deal and that there are different situations, it would not be fair in my opinon to give someone a small part of what it takes to become successful in our great industry.
    State stautes differ from state to state, specific paperwork is involved in doing a deal which also varies, so it is not a one size fits all.
    _________________________________________
    Does your course/manual describe all these situations? Is it a one size fits all course? I'm not asking for free advice, or maybe I am. But I thought this is what this site was all about.....helping each other. I can't get anyone to answer these questions. I even had a post out there that no one responded to, so I was trying to get this answered in this post that turned into the MADAM tug-a-war. Is there anyone out there that can answer these questions based on different scenarios? Or are you the only one, but want spill the beans without me buying your course? Surely there is someone out there that can give me a general answer to these simple questions.
    John email me at **Please See My Profile** and we chat through email, if that works better.

  • JohnLocke2nd July, 2004

    trlowder,

    I have answered many posts to help someone, I have spoken on the phone with people who did not have my course and helped them with various problems, I have met with people looked at a deal they were working on and given my advice to them, again someone who never purchased anything from me.

    This information is not guessed at, qualified professionals, which my student’s contact and pay for these services, then the professional gives them this information or it is shared among fellow Cash Now team members by helping one another.

    You wanted a nut shell answer only your nut shell is worded thusly:

    “Can someone explain the Sub 2 process in a general step-by-step process involving different scenarios, including options of selling the property after taking possession Sub 2. Please discuss the title, deed, insurance, when and where to use land trust, etc.
    I've read much of the specific questions, and I feel like I'm running in circles. Can someone please help clear my mind?
    Maybe in format....if this happens then you can do this or this........Maybe I should just buy the course?”

    Off the top of my head I can think of 10 different Deeds that might apply or 30 different Purchase Agreements or 50 different Power of Attorneys maybe 25 different trusts, 15 or so different insurance letters, how is the interest claimed in about 3 or 4 different scenarios, 5 or 6 ways to have a seller leave who does not make the payments, and does the seller sign off documents for termite inspection, house inspection, etc.,

    This is probably going to come as a big shock to you; however I have turned down orders or told someone not to order anything from me and meant every word of it. Even if they tried to order I cancelled the order.

    Congratulations you just made the do not order from me list. Now you don’t have to think about ordering my course and this should set your mind at ease and when you get these answers to your questions, I certainly hope you remember that you will be wondering if you got the correct answers.

    Yes, this board is about helping people by answering questions, if you look at your nut shell question you might have been out of line and then upset when no one answered.

    John $Cash$ Locke

  • tbelknap3rd July, 2004

    Quote:
    On 2004-06-30 10:21, trlowder wrote:
    Hello,
    I'm returning to the site after a couple of months and becoming more interested in the Sub 2 process. I took a couple of months from the world to rehab a property and finally have a contract one it. Bought for 62K, Spent 21K in fix-up, paid 6% RE commision, contract for 119K. Not bad for first deal, so I'm excited and ready to go.
    My Question: Can someone explain the Sub 2 process in a general step-by-step process involving different scenarios, including options of selling the property after taking possession Sub 2. Please discuss the title, deed, insurance, when and where to use land trust, etc.
    I've read much of the specific questions, and I feel like I'm running in circles. Can someone please help clear my mind?
    Maybe in format....if this happens then you can do this or this........Maybe I should just buy the course?



    trlowder, seems like you are being a little cheap if you ask me.

    You boost about making some money then ask for information most of us had either learn the hard way or paid money for to learn.

    Your question was very broad.

    "How do I do Sub to". Please break it down step by step. Let me know all what if's.

    Palease.

    There is a little to this technique so posting it in one post is not feasible.

    Take some of you money and reinvest it into your business. Buy a course.

    Now this is a place of learning. If you have a specific question (instead of a broad question) then ask away.

    Otherwise quit being cheap and reinvest some of your money into education.

    Tom

  • molotov3rd July, 2004

    What if a meteor hits the earth and wipes out all the dinosaurs? Yeah, well I guess "stuf" happens.

    I have to agree with John here, someone calling herself (himself??) MadamRealEstate might have a little more to contribute than doomsday scenarios.

    The answer to the hypothetical "screwing" that may befall the seller is that the investor is really only screwing him/herself if they allow the mortgage to go into default and bring on a foreclosure. When selling on a contract for deed (typical after a subto purchase), the investor can hope to recoup a few thousand more in a down payment from their buyer than their out of pocket monies were to the seller. If the investor has bought well, they may see a couple of hundred a month in pack over and above the committment they have made to cover the monthly payments on the original note. The real payoff is when the new buyer refinances, and pays off the underlying mortgage AND the investors equity. If the investor was careless or dumb enough to have not made these payments, they are slitting their own throat and will not be investing for very long.

    People that jump out of airplanes 500 times and live to jump another day are not "lucky" - they know what they are doing, and repeat it successfully time and time again. John Locke and his Sub 2 method works, time and time again.

    Molotov

  • trlowder3rd July, 2004

    John,
    Let me first say I'm sorry. I reread my post to you, and I guess it came across as sarcastic or negative. Sorry for that, not my intentions at all. I guess I am being cheap by not buying the course, and I guess my initial thoughts on sub 2 were so minimal that I didn't think about all the what ifs. My question was way to broad. Please accept my apology.
    I'm very impressed by your knowledge and success. It just rubs me the wrong way how you came out the shoots blasting me. I can understand the MADAM posts, but not sure why you've come at me that way. I'm an active investor and I've come across deals that I could not close because I did not have the knowledge. That is why I came back to this site.
    John, I'm not going to beg you for your course, but I am asking you to accept my apology and at least consider that I am sincere in learning and contributing to this web site. I would like the opportunity to buy your course, but I was only trying to learn more about the process to see if it would help me in dealiing with some of the deals I've been unable to close. Creative investing is broad, as you know, and I only wanted to see if this was the route I wanted to proceed. Can I please be put back on your list of potential buyers. Sometimes stupidity on a subject can rub someone the wrong way, who has spent time and money investing in the knowledge of. Call me stupid on this one.
    Sincerely

  • InActive_Account3rd July, 2004

    Here we go again John,
    Someones advice is different than yours and you just call them stupid. Now thats what I call constructive help. We know that you have knowledge in real estate but there is always more than one way of doing things. BTW, this is actually a compliment to you. Its funny that in most cases you are never around until someone mentions your books or articles, then you reply like you never saw it. I like that, really.

    $$$

    These are quotes from your posts:

    Here is where you are showing your racist attitude:

    “And another lake where their is nothing but white trash in 1950's trailors.”

    This is where someone tried to help you and your response:

    “Again if I sound ungrateful, I do not mean to be, but some of post here are not even constructive ideas.”

    These replies disrespect the elderly:

    “I know most you guys and gals are married but I see this all the time, male and female. Spouses will kill you in the business world. Marriage should be for 50+ people.”

    “I wonder if he can change the image of Dairy Queen without upsetting the retired people who meet there in the morning for coffee.”

    This one you are promoting terrorism in America:

    “go to college
    learn to make a nuclear bomb
    somehow find some discount plutonium
    make bomb
    threaten a wealthy country
    make at least a billion”

    This one says what your opinions are based on:

    “But since I have never bought property before I was wondering how hard would it be to buy a apartment complex at age 23, with no previous RE experience, and a part-time job.”

    $$$
    [ Edited by JohnLocke on Date 07/03/2004 ]

  • JohnLocke3rd July, 2004

    trlowder.

    There is no apology required I am sure you did what you believed was a direction to go in pursuing your investing career.

    I should have replied as such:

    Let's say you are driving alone for the first time in your car and you get a flat. Problem is you have never changed a flat tire before.

    You could call someone you know for advice, they tell you pull the car off the road slowly to a safe area out of the traffic area. Go to the trunk and get the spare tire out, you ask where is the spare I don't see one, on this particular model it is under the mat in the trunk.

    Now you find the spare, your next direction is find the jack, the jack isn't under the mat, it is hidden in the wheel well of the trunk, hold on we are almost to the point of finding the jack, be careful jacking up the car so it doesn't roll or fall on you, I think you can see where this is leading.

    As for myself I "pay a yearly fee to AAA", when I get a flat I call them, they send someone who changes my tire. I could watch the person who changes the tire to learn how to change the tire, but I would rather be on my way to my next appointment without being covered in sweat or road dirt.

    Sometime we all just have to pay for what we get out of life, that is if we want the finer things that life offers.

    John $Cash$ Locke
    [addsig]

Add Comment

Login To Comment