Sub-to's? I don't get it
I've been reading alot on this website about sub-to's but I don't have a clue as to what they are. Could someone please explain them to me. It sounds as if they are the way to go if you have no money and not so good credit. I would hate to mis out on a good thing because I didn't understand it. Someone please help me out.
Thanks
David <IMG SRC="images/forum/smilies/icon_confused.gif"> [ Edited by DavidV on Date 06/08/2003 ]
Hi David,
Subject-to investing is when the investor buys a house "subject to the existing financing."
That's right, the seller actually deeds the property to the investor who pays the existing mortgage. The investor then lease-options the property to a tenant buyer for a year or two or more depending on the agreement and circumstances.
The investor first makes money on the spread between the small downpayment they have paid the seller, and the larger downpayment they collect from the tenant buyer. The second way they make money is the spread between the lease payment they collect and the and the mortgage payment they make. The third way they make money is the difference between the price they sell the house for and the cost of paying off the mortgage.
wgheisler
Hey DavidV,
I have to disagree with some of the things wgheisler stated...The (buyer) does not Lease Option the house from the investor...this is (Subject To the existing mortgage)...
The investor (owns) the house and is (selling) the house to the (buyer), not tenent buyer. The buyer does not excercise an option to buy at the end of the contract term...the buyer re-finances the loan into their own name from the existing loan by the (original seller).
However, I do agree with the spreads...The investor does get a down payment (over and above) the equity they purchased the house for...then by increasing the interest rate, the investors enjoys a monthly spread.
The back end payoff comes when the (buyer) re-fis, the investor receives the difference between the payoff amt. and re-fied loan amt. (In the beginning of the transaction, the asking price is raised to accomodate this back end payoff.
Hope this helps,
Clif
Clif, If the investor wishes, he can rent the house, rent to own the house, L/O the house, sell on L/C- Contract for Deed, or leave the house empty.... He owns the house. Overall you're both correct.
Good Luck,
Shawn(OH)
Thanks for clearing it up a little for me. How do you find people willing to do those types of deals. What is the usual reason for selling subj-to and is there a way to do it with no money down. I know I'm asking alot of questions and they may not be good ones but I'm trying to get it all straight. Thanks for your help and your patience with me.
To find good subject to deals you need to find motivated sellers. If your interested in this form of investing I recommend you pick up John Locke's subject to book through this web site. It's the best $160 you'll ever spend.
Andy
David - You are on the right track. Start here on this web site and read all the material that you can. Look for posts by John Locke, he has tons of expertise in the "subject to" areana.
Learning is always the first step in any endeavor.
Ask complete questions and you will get good answers from many smart people here.
Have fun. You make your own good luck.