Is 'Sub-To' For The Newbie Investor??
Hi...
My question is this: Can a newbie investor use Sub-To investing as a good way to begin their investment career? I am considering buying John Locke's "Subject To - Thats what I Do" training Manual and cd because of all the great things I have heard about it. I have really been concentrating on wholesaling/flippping as my main tech., but I am interested in expanding my horizons a bit. I know nothing of Sub-To investing and I am hoping this course will show me how to invest , sub-to.
Does anyone here have advice as to what I should do?
Thanx again!!
Chris G 
I was in your shoes about 6 months ago, tomorrow I close on my first house. John's course is what got me there.[ Edited by nebulousd on Date 02/23/2004 ]
Congrats nebulousd, how did it turn out?
Ryan J. Schnabel
sharpREI_PA,
Sub_to seems like a great way to go. Just don't leave the owner hanging. Make his payments. In other words, have your exit strategy in place before offering your services. Have enough reserve to cover several months payments if need be.
I know an investor that took a house Sub_to a month ago. The owners had already fallen behind on their payments so he is having to pay $1400/month for the next 6 months to get them caught back up to the normal $1200/mo payment. I don't think he has any intention of paying it. It's not his name on the loan, right? Granted, he is working as fast as he can to get the house ready to market (everyday after work) but it's still a slow process.
Poor owner. I would consider jumping in to help (it is a nice house in a nice neighborhood) but there isn't much equity in the deal at all.
I think a rule of thumb for me will be: Only take a low equity deal if I have a strong, swift exit strategy in place.
What do you guys think?
JohnCl
JohnCl,
Glad to meet you.
When you ask what we think, I think you did not tell us enough about the deal to make an itelligent decision.
Just saying the buyers are not making the payments on time means nothing and the investor is making them tells me that he must not have used the proper selling techniques or knows how to get the people out of the house in less than 6 months.
John $Cash$ Locke
John,
Thanks for the quick response!
They are out of the house. The house is vacant and the investor is using elbow grease every night to make it presentable. Nothing major (knock on wood). He has to replace a ceiling in the basement where the owners had let some water drip for some time from the kitchen sink above. Besides that, just carpet cleaning, new vinyl in a bathroom, patch holes in walls and paint, inside and out.
The investor has not made any payments, and I don’t think he has any intentions of making them. He is under the impression that the house will be worth 154k after fix-up. I ran some comps (drive-bys) and I don’t see it fetching more than 139-142k. He "assumed" two loans, a first at $123,650 and a 2nd at $10,400.
I assume he is hoping to fix it up and get out of the property before the banks call the loan due.
I should change "he is having to pay $1400/month for the next 6 months" to "he is supposed to pay $1400/month for the next 6 months".
Sorry for the confusion.
JohnCl
[ Edited by JohnCl on Date 02/20/2004 ]
JohnCl:
All I can say is, I'm glad this investor's in your neck of the woods--it's situations like this that get me dirty looks by RE agents and give Sub2 critics more grist for the mill (although I can live with dirty looks and fewer competitors!).
As JL said, it doesn't sound like this investor did his homework. Stiffing the seller tells me he wasn't thinking about his repututaion in future deals...what goes around, etc.
andy
Back to the orignal question - I would definately learn new techniques and tools to add to your REI toolbelt. Sub2 is a great method and I've heard many good things about John's course. I have not heard any negatives, so maybe that would tell you something. I'm a big advocate of continual learning and it seems like learning Sub2 would be a great addition to any investors toolbelt if they were not already aware of using this method. I hope that's helpful to you.
Ryan J. Schnabel