A Rookie Question About "subject To"
I have been lurking here for several days and reading a lot of the posts, both present and past and as I have read a question occurs to me.
If someone is willing to deed their property to you "subject to" the existing mortagae doesn't that mean that it is probably mortgaged to the hilt with no equity and therefore there would be no room for profit for the investor? If not, why would they not just sell it themselves, take the equity and bail themselves out of their financial difficulties?
It is expensive to sell a home. Realtor comissions, closing costs, etc, etc.
The people that sell sub2 are typically in some sort of situation where time is of the essence.
If you use a lease-option or land-contract for your exit strategy, you can greatly increase the profits made.
Take this example:
100k property
You buy for $93k (100-minus would be agent comission)
You take over 93k, 30yr fixed mortgage at 6% $557/mo
You sell for $110k with 5k down
You sell at 8% interest $770/mo
You get $5k now
You get $213/mo profit from the spread
You get approx $12k when you sell from the difference in what your buyers owe you and what you owe.
Total profit after lets say 2 years: 22k
You just tripled your equity in 2 years. Congrats!
GOOD LUCK
[ Edited by myfrogger on Date 01/13/2005 ][ Edited by myfrogger on Date 01/13/2005 ]
Some people in financial distress don't want to go through the hassle of prepping their house, listing with a realtor, and having open houses. They want their house out of their hands, and they want it as of yesterday. There are people out there in this typs of trouble and are willing to let you take over the payments for the deed.
Now, of course you will come across sellers that have 100% LTV or close to it - and when you come across these sellers you have to make a judgement decision here. If they are behind on their payments, you can look to do a short sale, dealing with the lender. If there is a lot of equity, you can offer them some cash up front to move out and then pay them their equity over the next 5 or 10 years (seller financing)...
If you are interested in taking sub to the next level higher, purcahse john cash locke's course...
Good Luck!
[addsig]
Well, a Sub-2 that's mortgaged to the hilt is good to sell on a Lease Option, where the leasee makes the payment on it for a year or two, letting it appreciate, paying down the mortgage a bit, THEN sell it, so they've got a bit of equity built up in.