Ok, I Got 10K To Start My Sub2 Investing....
Now, on your first deal, would you say it's best to only look and work with little to no equity mortgage loans? I mean, I don't know what options I have with sellers with quite a bite of equity. I don't want to "buy" using this method, a home with x amount of equity if I have to use most of my $ to do it. Not yet anyways. Let me ask this....How can I politely get around dealing with homes with large equity, while screening on the phone? I want to sound professional, but what can I say..."I can't help you with as much equity as you have?" I'd much rather purchase a home for $1k and work up from there. Is it possible to prescreen this way or must you always visit the house to figure this one out....and the county clerks office. Any comments or do I have this backwords? I know you want to get as close to a negative figure as possible, but I can't show $50k in negatives on a $150k house with a $100k loan. Assuming the house is in good condition. What do you think? Sorry if this is a little confusing.
There appears to be a good book on the subject of "subject to" in the sites store. I would also read articles in the archive.
I think the best use of 10k might be to first get better informed with a couple of hundred of it.
That said, who are the subject to sellers? and why are they wanting out of their homes in this way? If I was buying a house subject to and only discounted $1000 I would consider that to be high risk-low return.
I would have to know that I could rent or lease for enough to give me positive cash flow.
There are several god articles in the archive.
justmjc,
In answer to your first question, the answer would be no that wouldn't be your best situation. While little/no equity deals can be done, you should become more experienced before tackling them.
By getting some equity in a home, you'll create a cushion for you (just in case). Getting equity isn't that hard really.
1st, your seller needs to be motivated. Sellers wanting all their equity aren't motivated. Now, using your figures of a home price at $150K w/ a $100K loan. Need to do a little selling here. Sold thru a realtor, the seller would have to deduct 6% for commission, 3% closing, 3% for buyer negotiating (could be more in your area). There's 12% or$18K. Are there any repairs to be done (be picky if needed) $2K would be new carpet (usually needed after a few years). We're up to $20K. Then there's holding costs. It could take up to 6 months for an agent to sell (or more depending on area market. This price in my area would be a year). Monthly payment X 6 months(we'll use $700) = $4200.
You're up to $25K in equity reduction with just what they would have to pay using a realtor. You can get it even lower if you want to push it a little by asking the seller something like what would be a fair price for such a quick sell. You'll usually get another $5k or so from this (if they're motivated/anxious to sell).
So you only owe them $20K now. Would they be willing to take a note for all/most/some of it? Need it all now - would they be willing to refinance the property at an 80% LTV ($150x80=$120) and then sell you the home.
This is just one example. If you haven't yet, I'd suggest buying John Locke's book on Subject to investing. It will give you all of the answers that you're looking for.
Just a note here. High equity deals, while not rare, will not come along frequently. Most of the people contacting you will be people who already know that selling thru a realtor will be bad for them, usually because of not enough equity to pay the fees.
Roger