How Do You Approach A Potential "subject To?"
I'm just learning about the "subject to" method of investing. I'm simply wondering how you approach a seller with this idea. What is in it for them if your only taking over an existing loan, and only giving them "uhaul" money. Why would a seller be motivated to work out a deal like this? Really - what's in it for them, and again, how does one approach the seller with this?
Thanks,
-Diemus
Actually the real goal is to get them to approach you. The ideal target is an Anxious / Motivated seller. One that has to leave for whatever real or imagined reason that they have. They are either in trouble and don't know of any any alternatives to their problem, or just want out. Your target is alot harder to find if you are just knocking on doors hoping to find someone that is willing to listen to your proposal. You can run ads, use flyers etc to get them to call you. That way they're partially pre-qualified for your program before you speak with them. Their motivation is that you have a solution to their problem when they thought none existed until they spoke with you. I recommend John $Cash$Locke's Course. It's only about $159, and the best priced education I've found. You might try Derrick Ali's on marketing too. I have heard that they are good as well.
Good Luck,
Jeff[ Edited by jeff12002 on Date 09/29/2003 ]
Diemus314,
Glad to meet you.
Jeff, is correct when the seller calls you through your marketing methods, then they are in your ball park. They basically called you for help, remember the rule it is hard to help someone unless they ask for help.
As far as why would they sell for U-Haul money, they could wait for the Sheriff to show up to evict them or miss their next mortage payment and mess their credit up and the list goes on. Or they could call a Subject To investor for help and receive that help.
Get your creative hat on and your conventional hat off, look around ask yourself what would motivate you if the world started coming down around your head monetary wise.
John $Cash$ Locke
[ Edited by JohnLocke on Date 09/29/2003 ]
Thanks for your repy, John, I see what you mean. The view looks a bit different when looking from the sellers perspective. Actually, yesterday since posting that first post, I managed to find what I think will be a pretty good deal for my Father and I. (We are going into business together). A Duplex, rented already, who's owner has already moved out of state and needs to relocate. The property is inexpensive, and the two rents almost double the mortgage payment. This will be our first investment property and seems like a good place to start. Thanks again for your help......
-Diemus
Thanks for your reply, jeff, I think I will try the course, everyone here reccommends it highly, and from its description, it seems to be covering just the types of things a new investor (like me), needs to know. I understand the importance of having sellers approach you, rather than the opposite, tell me though, how does one word an ad like that? has that worked for you well?
Thanks again,
-Diemus
How does one word an ad like that?
Take a look thru your local papers. You'll see several. Ads like "We/I buy houses," "Sell your house fast," "Cash for Properties," "Save your credit," etc.
I'm sure you get the idea.
Roger
My latest purchase and you can do it too:
In providing computer support for a big organization, I chatted with an employee while working on her computer and learned she had a house for sale. (Not listed or advertised in any way)
She and her husband were 2 months behind in payments, couldn't afford it, etc.
I met with them on Sat. made an generous offer, very generous, an Sub2, and a 6 yr term balloon pm for 7,500. Some of the advantages to them were: good payment history benefits there credit, tax deductible expense, among others.
We closed yesterday, three pieces of paper, an quitclaim deed, and my pm. The owner thanked me, and I saved them and their house from foreclosure besides giving them money out of the deal!! I feel great helping people!! Do you??</p>
My point is this, you need to find people who have little or no other options, it's a risk vs. risk situation, the owners have no more risk doing a sub2 compared to a inevitable foreclosure!
Pre-foreclosures with little or NO equity make great deals. And there IS profit in a home with NO equity that you buy sub2, think about it for a minute, I'll give ya a hint, future appriciation!! (What I call the back-end)
My expenses so far?? $5 Bank notary & $10 Earnest money. (+ $920 for one months payment until I fill the home).
Hope this weekends buy helps motivate a few of ya to go find those hidden easter eggs!!!! There not in the newspapers or publicized kids!! Drive neighborhoods, talk to ppl, talk to everybody, contact past bkruptcy filings (prime for the picking). (as proof of this the owners of the home I purchased over the weekend had previously filed bkruptcy, they said within a few years and still eventually ended back up unable to make there payments and keep there home due to one spouse member being unemployed for sometime).
<p>Go out there and help save these home owners!! They need help and they will welcome your offers with open heart just wanting to the property off there hands, I throw in balloon pm's just to sweeten the deal in my deals.</p>
Chris,[ Edited by cky on Date 09/30/2003 ]
Hi cky, everyone,
A very green, newbie investor here. cky, I found your post very interesting. First, because I have the same regular day job as you, computer support, and could see a similar thing happening to me. And secondly because it made me stop and think, knowing very little about the Subject To investment, I was wondering if you or anyone reading this has ever offered the current seller of a Subject To property the option to let them stay in their home as a tenant after the Subject To sale. This would further help you by not having to find a tenet and help them by being able to stay put and not worry about moving, leaving their home, etc. I suppose the downside would be your rent income would be less than their mortgage payment since they couldn't afford the house in the first place, but if you get a good enough deal that might not be a problem. Anyway, just trying to think outside that box. Thanks for making me think! Any comments that do the same are very much appreciated.
pataz
Hi, this question has come up before. I believe there are two concerns. 1) If the person is having problems paying now, why would they all of a sudden be able to start paying. I could imagine circumstances where this issue might be overcome. 2) If you keep them in the house and sell it back to them, you might run afoul of usury laws. (One person offered the solution of forming an LP with the person).
Rgds, TJ
Pataz,
For numerous reasons, overall it is just too much risk and potentional heartache in buying a home and then renting it to the prior owners.. Keep it clean and simple, buy it, and resell/rent/or l/o it..
This house I bought for a total of 109,5 and I'm happy with the deal.
"convincing" a homeowner to go with your program/terms is easier than you think when they want out..
And as for fields, yeah, I do alot of computer support and networking for businesses, I enjoy it and have been doing it for 9 years.. I don't think I'll quit anytime soon..
P.S. Sadly I'm not green, fairly new to this lil'sub2 trick, but I've owned my fair share of property in addition to working for numerous years for an Appraisal company in OR and a short while with a lender in CA, I learned a great deal!
Get a r.e. related job if ya can, you learn lots and meets many helpful people in the biz.
Chris,
pataz,
I would urge you, in this situation to re-evaluate your investment objectives. You have the opportunity to control a property for very little money down, and in short order collect deposits, and rent up front. This has the potential to be a positive investment with regards to cash flow right off the bat. If you keep the current owner in the home, you are giving up the ability to collect the deposits and the rent up front. If they had the money to do this, they would address the back payments on the mortgage themselves. You have the ability to get them to move willingly, with no mess. If they become your tenants, and you have to evict them, not only will they have to deal with being evicted, in their mind they have never severed the emotional attachment to their home, and it will be much harder for them. My recommendation is either pass on the deal because it's your friend, or do the deal, and find someone new to live in the house.
Good Luck,
Jeff
Thanks everyone for the helpful comments and suggestions! Most everything I've read tell you to follow your instincts and yes, my instinct would be to get the previous owners out of the picture. I’m not in this situation now or have ever been, was merely thinking out loud and trying to be the “creative investor”!
I look forward to learning more!
Oh, and cky, I didn't mean you were green, I was speaking about myself. Thanks again everyone.
Thanks,
pataz
<IMG SRC="images/forum/smilies/icon_smile.gif"> [ Edited by pataz on Date 10/01/2003 ]