Sub2 Vs. Lease Options
It seems reading through these forums that these two methods of investing run closely together.
If I am correct, often when you buy a property Sub2 with little or no equity that you need to sell on a lease option in order to make any money? If there is equity, then you just simply get the house ready to sell and sell it at retail. Is this how to work these two methods together?
If I buy John Locke's program, will it explain in detail different options of acquiring the properties, as well as the different options of moving the property fast once it is controlled?
Thank you in advance for any help and suggestions.
No, on different options; yes, on selling fast--very excellent on this.
One option only, Sub-To, which John and others feel strongly gives you the best legal stance.
Lease-Options, however, can soften the approach if Sub-To makes a seller nervous. You can learn both methods and just keep in mind Lease-Option as your back-up.
I prefer going in with three methods. Sub-To (my desire), but I may not mention it first depending on the feel. L/O and Contract for Deed (Promissory Note, Seller-Financing) are my 2nd and 3rd ready methods. Learn the in's and out's of all three to believe in yourself, and know that you offer excellent solutions to sellers. Off and on study, but fairly consistently, between courses and this site, and you'll be thoughtfully prepared in 6 months to a year. This will cover, from the best business card styles to converting Lease Options to Subject To deals when an owner is more comfortable with you...the gamut.
Best of luck, rzproperties!
Alan
rz,
Here's my thoughts...
Although I stopped buying on L/O years ago, essentially as soon as I learned the proper way to present Sub2, I do think they can have their place as an acquisition technique.
In my mind in order for one to be properly protected in a L/O purchase, you have to jump through all the Sub2 hoops anyway, so why not get the deed?
That said, if a property had little or no equity, your local market was uncertain, and/or you were not as knowledgeable as you should be, buying on L/O gives you an automatic out. Finding out down the road you own properties you never should have bought in the first place ain't fun.
It takes time, money, and experience to learn how to buy right regardless of technique. And I'm not just talking numbers here. There are numerous variables that determine "right". It might be worthwhile to always leave yourself a built-in "out" until you're very comfortable with what you're doing.
[addsig]
Tim/Alan....both good posts. I got something of value out of both ideas. Thanks
[addsig]
Thank you for the reply's. It seems that Sub2 has some issues with the DOS clause, but what I am beginning to understand is not a problem if dealt with correctly. The biggest difference that I notice between the two is that the L/O gives you an out if the deal does not work out and the Sub2 does not. It would seem that it is best to have both options in your arsenal when dealing with the seller since many do not want to give up the deed.
You should be aware that Lease/Optiions longer than a couple of years have the same issues with the DOS clause that Sub2 does. The lenders consider these to be "disguised sales".
With regards to L.O giving you an out, and Sub2 not, If you need an out the deal is probably too skinny any way. What happens to you if the seler of the property has some financial problems, and the result os that the title of the property you are selling becomes encumbered by liens from the original seller? I know, the seller gets the property back, and you aren't hurt. What about your buyer? They will stil have to move out of a home that they hopefully love. One that you couldn't deliver clear title to. With Sub2, you get the deed. your exit strategy can be whatever you choose. You can sell conventionally, Land contract/contract for deed, Lease/Option or what-ever.
Jeff, thank you for your response. Sub2 is sounding more like a great way to invest in property. I have had my concerns with the DOS and the seller not wanting to give up the deed.
I plan on purchasing a course to learn the details of this type of investing. Is John Locke's "Subject 2, that's what I do" course the best, or is there another that would be better to get started with?
Mr. Locke's course is an excellent course to learn Sub2 investing, and well worth more than he charges for it.
I would be curious to see if any of you posters that have bought Sub2 have ever had a lender force a DOS on any of your transactions and, if so, how did you handle it? I, personally, have not experienced this problem as of yet.
You very rarely hear about it.
I would bring new financing in to pay the original loan.
I've heard of it happening, but that situation involved an open heloc on the property from the original owner.
Jeff