Creative Sub2
I was reading the David Finkel & Peter Conti book and I did like some of the Ideas in doing a Purchase Option. The part I dont like is that the orginal owner keeps his name on the Title and can ruin you in the end by getting 2nd and 3rd mortgages. I am thinking that Sub2 is still the way to go. But what do you think about making a creative sub2 that is contigent upon you getting a tenant/buyer. In addition if they want a Down payment you could make that contigent on getting a tenant buyer. Finally If they also want any of their equity back you could give that in an installment 6 years down the road or contigent on you reselling the home. Just trying to think of a creative way to do a $0 down low risk Sub2. Do you think it would work?
"But what do you think about making a creative sub2 that is contigent upon you getting a tenant/buyer. In addition if they want a Down payment you could make that contigent on getting a tenant buyer. Finally If they also want any of their equity back you could give that in an installment 6 years down the road or contigent on you reselling the home."
Don't take this personal....but don't do sub to if your going to be doing it like this. You make the rest of us look bad. If you don't know what you’re going to do with the property...don't buy it, or attempt to buy it. "Know how you’re going to get out of the back door before you walk through the front."
All your contingence clauses make you look like you don't know what you’re doing? If that is the case, find someone to teach you.
When i said "Tenant/Buyer" I meant Someone that is going to rent to own. So I know what I would do with the property after I got it. Im just throwing out ideas to get some feedback. I would not do this type of Sub2 without investigating it and getting others opinions first.
You can eliminate all your contingencies if you find a Tennant/Buyer BEFORE you take a property sub2. Often times there is a month or longer before the you actually have the property vacant, so shop around and SELL BEFORE YOU BUY!
It will be much easier to get the Sub2 if the sellers know you already have someone that wants to live there and buy the place.
Ask the seller to make the first two or three payments after they move out. This gives you time to clean the place up and find a quality tenant buyer. If they were trying to sell through a RE agent, the agent wouldn't be making payments for them. You gave them a quick sale.
You will never get if you don't ASK. Many sellers will take their equity two years or so down the road. In the meantime you could pay them a couple of hundred a month toward their equity (which actually comes from your tenant buyer payment) or offer to make their car payment each month or something.
Everything depends on how motivated the seller is.
I read somewhere that contengencies where sometimes called "weasel clauses." No, maybe that was a realtor friend of mine that said that, I don't remember - I just know that by conducting your due dillengence and having your exit strategies in place, you elliminate most of the "what-ifs" before placing your offer. This keeps your reputation as a straight shooter in tact as the person who stands by what they say and is prepared to win or lose on their decision to purchase.
heyshid,
Here's some thoughts which may or may not help...
1. There's no requirement in a L/O that the seller stay on title.
2. L/O give you a built in "out" if you missed something in your analysis.
3. Sure, you can do Sub2 contingent on finding an occupant. Granted, it's more difficult unless you're in a hot buyer's market, then anything goes.
4. Offers can contain whatever you want - just needs to make sense for your situation and you need to be able to present it in a way that makes sense to the seller (honestly, of course).
5. The only way to do a zero down low risk Sub2 is with tons of equity and cash reserves available. Of course, Locke will jump in here and likely disagree, 8-) , but that's okay - we've agreed to disagree.
6. Another thing to consider, which I never see addressed anywhere in courses or the forums, is to ensure your seller has some form of recourse written into the contract. It's not critical when you're just getting going, but once you have a decent portfolio, it's essential. The chances of legal actions from sellers is (in my mind) much higher than DOS concerns. I've never had serious issues with either, but it's comforting to know that simple clause makes my contract "appear" fair.
my cents...