I am new to investing and motivated to be successful. I wanted some opinions on whether sub to is a good way to start when you dont have that much money? thanks
Bargain 76
"Then, when you are working with a motivated seller, you can TRY subject - to, but if the seller is not interested in keeping the mortgage in their name... for wharever reason... you can still put the property under contract if you are familiar with alternative methods. "
So would you please explain how to put this property under contract. What are the 12 ways? I would appreciate your help.
I think you have a possible good opportunity to make some money.. you can ask the owner to an option to buy the property for say $1 or max, $100. he may agree to do that in the situation he is in. Then call his bank or have him call his bank to bring down the loan to 60000. Which the bank is likely to do to avoid a property to fight with . If all this works out you have bought a property with 40-45 thousand in equity, with little down. Then you can rent the other apartment . After that you can decide to either hold it, (as property that you would buy is for 60-64 k with the potential of 900-950 should work out better then 10% cap rate), (If you hold it , fill the other apartment and refinance it at a full price putting 15-20k after expenses in your pocket,) while property still makes soney, or sale it to cash out profit. Good Luck [ Edited by ashwin on Date 05/11/2005 ]
I have not done it myself, but i was going to buy one house like that, only the problem was the guy did not buy the option but he bought the title to the property from the owner, hence he became the owner and the bank would not talk to him because by buying the contract the guy added himself to the ownership rights & responsibility to the bank. But if you buy just the option then you are telling the bank that you are a POTENTIAL buyer and as such rather then foreclosing and then trying to find a buyer which will cost the bank another 10% +, you are offering to be a ready and willing buyer . Hence bank will have interest in talking to you.
So far due on sale clause is concerned you are not buying the property, you are buying the "right to buy which you may or may not exercize" . In short you are buying time to negotiate with bank. if the house is already in foreclosure process and if the date of foreclosure is set, you may not have a lot of time.[ Edited by ashwin on Date 05/12/2005 ]
In my experience in doing Subject To deals this Simplicity Form was written by some marketing folks who were sitting around the brain storm session and decided they would throw in the old have the seller pay you for taking their house theory.
In the real world you are helping someone who is in pain and who is about to give up the American Dream for various reasons and your job is to cure that pain. Most sellers who I have encountered, as I would say most pro investors, figure that they are there to help, not say pay me.
Very good reason for this you are building your reputation every time you meet with a seller, so if the word gets out, yes Kris Investor can help you if you pay him to do it, figure out how many deals you will lose, because the vast majority of sellers are not able to pay next months mortgage payment let alone pay you to take their house.
It seems pretty skinny but you havent told us what you want to do with the property. I assume that you will be renting it out because of the prepayment penalties. What are the rents in your area? How fast are properties in your area appreciating? I think that you can probably find a better deal than this, but there are people with a lot more experience on this board and hopefully they will chime in.
Its an instrument which allows you to charge a greater interest rate and a larger than Subto loan.
Example say you have a 147,000 first at 7 %, sell the home on a wrap at 8.5%. they make you payments based on 8.5 and you make the payment based on 7%. it may be better to sell on a lease option with a 10K non refundable down payment and base your payments on the 8.5% with principle reductions based at the 7% rate.. I like the lease option since I have found that in most cases the optionee doesn’t fulfill their option and I get the property back, keep the deposit and gain the appreciation. And in the mean time collect a nice little monthly revenue
Either way you have someone who becomes emotionally attached to the house, which is in your favor. If you’re in California make sure you give the buyer the Transfer Disclosure Statement either way.
I usually dont suggest that any of their rent is a credit towards the final purchase. If they mention it, then maybe. I think you got the idea though. You are going to be selling it NEXT year, so get next years price, get some down, maybe ask for 7k or 10k instead of 3k, and also make some on a monthly basis.
Remember that you are Lease Optioning to someone who does not have the best of credit to begin with. They are usually not in a bargaining position. If they think that they are, then have them get a new loan and they can cash you out right at the begining. You are in the drivers seat, but you can negotiate somewhat. I have left some of the repairs that might need to be done and let them negotiate with me for a lower down payment. I say, I really need 7k but if you are going to fix this or that, I can take the 2k that I was going to use to fix it and only take 5k from you now and let you fix it. Will they fix it?? probably not, but I got 5k which is really what I wanted to begin with.
Quote:
On 2005-05-13 13:15, rickpozos wrote:
I usually dont suggest that any of their rent is a credit towards the final purchase. If they mention it, then maybe. I think you got the idea though. You are going to be selling it NEXT year, so get next years price, get some down, maybe ask for 7k or 10k instead of 3k, and also make some on a monthly basis.
Remember that you are Lease Optioning to someone who does not have the best of credit to begin with. They are usually not in a bargaining position. If they think that they are, then have them get a new loan and they can cash you out right at the begining. You are in the drivers seat, but you can negotiate somewhat. I have left some of the repairs that might need to be done and let them negotiate with me for a lower down payment. I say, I really need 7k but if you are going to fix this or that, I can take the 2k that I was going to use to fix it and only take 5k from you now and let you fix it. Will they fix it?? probably not, but I got 5k which is really what I wanted to begin with.
rickpozos,
Thanks for your response, it sounds great, I will follow your advise, can you explain me post processing, like I heard that we have to record the deed after the deal is done.
Also advise on what other paperwork needs to be done?
Thanks much.
Money is needed in situtations like one we just purchased to bring the payments up and also to do any needed repairs to make it marketable as this one needed carpet through out.
SO the money I am putting into the deals is in most cases to take care of cosmetics and any back payments and such as needed.
Now my question of my origional post still stands
Is the monthly payment less than the market will bear for a lease to own? If so, could you get the deed and sell on a lease option, with the option being more than what it owed on it?
REIkid-What does negotiate second position mean? Also, would they be willing to sell some of thier future payments off to a note buyer?[ Edited by iamhappy on Date 05/16/2005 ]
This is easy. Here is one way to do this deal
1. Take out a HARD money loan, most lenders will loan 65% of value have the seller carry the balance in second position.
if the seller doesn’t want to be in second position cross collateralize with another property to make them feel more comfortable
vacant property insurance is a pain to deal with especially here in california... We went to a Coarse of Contruction policy which covers all of our homes... And its a lot cheaper..
Bargain 76
"Then, when you are working with a motivated seller, you can TRY subject - to, but if the seller is not interested in keeping the mortgage in their name... for wharever reason... you can still put the property under contract if you are familiar with alternative methods. "
So would you please explain how to put this property under contract. What are the 12 ways? I would appreciate your help.
slick,
I called it first
I think you have a possible good opportunity to make some money.. you can ask the owner to an option to buy the property for say $1 or max, $100. he may agree to do that in the situation he is in. Then call his bank or have him call his bank to bring down the loan to 60000. Which the bank is likely to do to avoid a property to fight with . If all this works out you have bought a property with 40-45 thousand in equity, with little down. Then you can rent the other apartment . After that you can decide to either hold it, (as property that you would buy is for 60-64 k with the potential of 900-950 should work out better then 10% cap rate), (If you hold it , fill the other apartment and refinance it at a full price putting 15-20k after expenses in your pocket,) while property still makes soney, or sale it to cash out profit. Good Luck [ Edited by ashwin on Date 05/11/2005 ]
I have not done it myself, but i was going to buy one house like that, only the problem was the guy did not buy the option but he bought the title to the property from the owner, hence he became the owner and the bank would not talk to him because by buying the contract the guy added himself to the ownership rights & responsibility to the bank. But if you buy just the option then you are telling the bank that you are a POTENTIAL buyer and as such rather then foreclosing and then trying to find a buyer which will cost the bank another 10% +, you are offering to be a ready and willing buyer . Hence bank will have interest in talking to you.
So far due on sale clause is concerned you are not buying the property, you are buying the "right to buy which you may or may not exercize" . In short you are buying time to negotiate with bank. if the house is already in foreclosure process and if the date of foreclosure is set, you may not have a lot of time.[ Edited by ashwin on Date 05/12/2005 ]
ZNICK,
Glad to meet you.
Just so I understand are you talking about the seller you are receiving the property from should pay these costs?
John $Cash$ Locke
[addsig]
ZNICK,
In my experience in doing Subject To deals this Simplicity Form was written by some marketing folks who were sitting around the brain storm session and decided they would throw in the old have the seller pay you for taking their house theory.
In the real world you are helping someone who is in pain and who is about to give up the American Dream for various reasons and your job is to cure that pain. Most sellers who I have encountered, as I would say most pro investors, figure that they are there to help, not say pay me.
Very good reason for this you are building your reputation every time you meet with a seller, so if the word gets out, yes Kris Investor can help you if you pay him to do it, figure out how many deals you will lose, because the vast majority of sellers are not able to pay next months mortgage payment let alone pay you to take their house.
John $Cash$ Locke
[addsig]
It seems pretty skinny but you havent told us what you want to do with the property. I assume that you will be renting it out because of the prepayment penalties. What are the rents in your area? How fast are properties in your area appreciating? I think that you can probably find a better deal than this, but there are people with a lot more experience on this board and hopefully they will chime in.
Instead of renting why not do a lease option or sale the home on a wrap
Its an instrument which allows you to charge a greater interest rate and a larger than Subto loan.
Example say you have a 147,000 first at 7 %, sell the home on a wrap at 8.5%. they make you payments based on 8.5 and you make the payment based on 7%. it may be better to sell on a lease option with a 10K non refundable down payment and base your payments on the 8.5% with principle reductions based at the 7% rate.. I like the lease option since I have found that in most cases the optionee doesn’t fulfill their option and I get the property back, keep the deposit and gain the appreciation. And in the mean time collect a nice little monthly revenue
Either way you have someone who becomes emotionally attached to the house, which is in your favor. If you’re in California make sure you give the buyer the Transfer Disclosure Statement either way.
I usually dont suggest that any of their rent is a credit towards the final purchase. If they mention it, then maybe. I think you got the idea though. You are going to be selling it NEXT year, so get next years price, get some down, maybe ask for 7k or 10k instead of 3k, and also make some on a monthly basis.
Remember that you are Lease Optioning to someone who does not have the best of credit to begin with. They are usually not in a bargaining position. If they think that they are, then have them get a new loan and they can cash you out right at the begining. You are in the drivers seat, but you can negotiate somewhat. I have left some of the repairs that might need to be done and let them negotiate with me for a lower down payment. I say, I really need 7k but if you are going to fix this or that, I can take the 2k that I was going to use to fix it and only take 5k from you now and let you fix it. Will they fix it?? probably not, but I got 5k which is really what I wanted to begin with.
Quote:
On 2005-05-13 13:15, rickpozos wrote:
I usually dont suggest that any of their rent is a credit towards the final purchase. If they mention it, then maybe. I think you got the idea though. You are going to be selling it NEXT year, so get next years price, get some down, maybe ask for 7k or 10k instead of 3k, and also make some on a monthly basis.
Remember that you are Lease Optioning to someone who does not have the best of credit to begin with. They are usually not in a bargaining position. If they think that they are, then have them get a new loan and they can cash you out right at the begining. You are in the drivers seat, but you can negotiate somewhat. I have left some of the repairs that might need to be done and let them negotiate with me for a lower down payment. I say, I really need 7k but if you are going to fix this or that, I can take the 2k that I was going to use to fix it and only take 5k from you now and let you fix it. Will they fix it?? probably not, but I got 5k which is really what I wanted to begin with.
rickpozos,
Thanks for your response, it sounds great, I will follow your advise, can you explain me post processing, like I heard that we have to record the deed after the deal is done.
Also advise on what other paperwork needs to be done?
Thanks much.
MarkB,
Right back atcha, why would anyone need money to do Subject To deals if they are already doing them?
John $Cash$ Locke
[addsig]
Hi John,
Money is needed in situtations like one we just purchased to bring the payments up and also to do any needed repairs to make it marketable as this one needed carpet through out.
SO the money I am putting into the deals is in most cases to take care of cosmetics and any back payments and such as needed.
Now my question of my origional post still stands
MarkB
Is the monthly payment less than the market will bear for a lease to own? If so, could you get the deed and sell on a lease option, with the option being more than what it owed on it?
If you really want it take out personal loan. Or negociate second position??
REIkid-What does negotiate second position mean? Also, would they be willing to sell some of thier future payments off to a note buyer?[ Edited by iamhappy on Date 05/16/2005 ]
This is easy. Here is one way to do this deal
1. Take out a HARD money loan, most lenders will loan 65% of value have the seller carry the balance in second position.
if the seller doesn’t want to be in second position cross collateralize with another property to make them feel more comfortable
vacant property insurance is a pain to deal with especially here in california... We went to a Coarse of Contruction policy which covers all of our homes... And its a lot cheaper..
This may help you:
http://www.thecreativeinvestor.com/residential/modules.php?name=Articles&file=article&articleid=472