SUBJECT TO SELLERS AND BUYER? when do they meet?
i am new and still studying ,FOR 2 WEEKS NOW, this "subject to" way of profits in real estate. Do i have this correct? I get the seller to give me the real estate fees(he was going to pay) for me to buy his house under the "subject to" clause-advertise the property-transfer the seller's title into a title trust with me as the trustee of the trust-sell the house to the buyer on a lease option for 2-3 years-collect $3-5,000 from hime, with no credit or job check-let him pay the note plus $100-200 profit per month to me thru a title company, who will send the money to me and the mortage company-in 2-3 years we go to have the title transferred from the trust to the buyer name? The buyer and seller never meet? IT IS FINALLY OVER-RIGHT
RALPH,
If you're interested in the Subject to method, have you purchased John Locke's Subject to Training Manual yet? It provides a concise, straight-forward approach to the subject, and while it does leave some questions unanswered (all courses will), Mr. Locke provides 24/7 email support and a private website to get any questions answered that you may have.
You've got it pretty close, I believe. You show the seller that he doesn't have as much equity as he believes by showing him the 6% for a RE agent, 3% closing, 3% for price negotations, payments X 6-12 months holding costs, X amount for repairs, etc. Bill Young has a couple of articles here at TCI showing some of these. You can do an article search.
The land trust, IMHO, is the investor's choice. Some experts say do it, others think it's not necessary.
The CA$H NOW team chooses to sell the property on a Contract for Deed/Land Contract. Lease/Option could be another method of selling, too. Yes, the Manual states NO QUALIFYING for the buyer, so no credit/job check. I would personally verify employment and the ability to pay. Most lenders have a maximum of 50% debt to income. I wouldn't go over that amount either.
You can make money on the buyers monthly payment ONLY if the monthly mortgage payment (yours/sellers) is low enough to allow an increase. Too high a payment and most buyers wouldn't/couldn't buy.
Have all your payments (ingoing/outgoing, insurance, etc.) handled thru a Loan Servicing Company, which will collect the buyer's payment, make the mortgage payment, and deposit any difference in your account. They will also perform any end of year paperwork required for tax purposes. Using a 3rd party provides a safety net for both buyer and seller. They don't have to rely on the investor to make the mortgage payment. Some title companies perform this service as well.
In 2 years or so, your buyer would be required to refinance the property into their name. At that time would be the final closing where the end buyer would get the property deeded to them.
I think that you're on the right track, but don't rush into REI before you've fully grasp the concepts. 2 weeks is not a long time. I must have closed 50-75 deals in my first year of investing. Made close to a million dollars. Of course, it was all pretend. Made up deals that I created to walk myself thru to LEARN what objections might come up, how to deal with them, and decide WHICH deals that I wanted to make. I used my wife as a test subject for my sales approach until she was tired of it (doubting spouses are great. if you can convince them to buy, or sell, using creative techniques, you convince almost anyone )
Point is, by the time I talked to anyone about actually buying a property, whether it be a seller, lawyer, RE agent, etc. I was pretty confident in my knowledge.
Good luck and happy investing,
Roger
Roger,
Your hired.
Quote
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I must have closed 50-75 deals in my first year of investing. Made close to a million dollars. Of course, it was all pretend.
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Guess who did more than that and it wasn't pretend.
John $Cash$ Locke
Actually John, it took that long and that many paper deals to prove to my better half that this stuff would work. But like I said, if you can convince a doubting spouse, a motivated seller is a piece of cake.
The point I was trying to make is that as a new investor, you need to be sure of what you are getting into. I'm sure that before you started on your 500+ of deals that you had some sort of plan BEFORE you made the decision to become a REI.
I felt a little safer doing paper deals first, than going out a trying trial & error with $100K properties. It also taught me what works best for me. What I should focus on in buying and selling.
I didn't want to do a 100 deals a year, but I did make a goal to make at least $30K this year in REI. Well, half the year is almost over, and with the closing of a deal at the end of June, I'll have made appx $35K (all tax free). Now, I guess I'll either have to reset my goal or just go golfing <IMG SRC="images/forum/smilies/icon_smile.gif">
Roger[ Edited by rajwarrior on Date 05/31/2003 ]
Roger,
I thought you did an outstanding job of explaining how things are done using the creative way of investing.
Actually I got into real estate investing on a fluke. I never read a rei course or book, attended an rei seminar or knew who Carleton Sheets was.
I never have used a Realtor to purchase or sell any property I ever owned. We had just returned to Las Vegas from Florida after selling my radio stations there and needed a house.
I ran an ad that read 'Family Needs House' 4bd 3ba etc. Well I must have had a 100 phone calls from sellers.
The house that my wife and I liked and ended up getting was done with the Subject To method, however I did not even know what that meant when I bought the house. The seller said, "here take my house please, I need out now".
I had an attorney help me with the paperwork gave the seller some 'U-Haul' money and he moved out. I thought this is pretty neat, no stacks of loan paperwork, which is what I was accustomed to doing, I am using his financing, this must be a one time deal.
The phone kept ringing with people wanting to gid rid of their house. Then the bells went off and the lights went on. "I found a need all I have to do is fill it. " Simple as that.
For me it was like having a potatoe chip bag in front of me, I just never was able to eat just one potatoe chip, try it. The same thing happened with houses I just could not stop buying and selling them.
Now, I will admit, I was and am well versed in sales and marketing, so this came into play. Just a matter of staying in control of the situation, making your presentation and closing the deal.
No big deal, with the proper training anyone can do it, remember creative not conventinal thinking get past that, the rest is easy.
John $Cash$ Locke
WOW-I GOT MR JOHN LOCKE HIMSELF TO RESPOND-THANKS:
I will buy your book-is this the best for me before i go out there-I WOULD LIKE TO KNOW where are the faults in my theory listed above-i still will buy the $150 book (listed under your products) to get more ideas-please email theory answer to me hear or to rconcentine@yahoo.com-THANKS