Why Do A Sub To Purchase??
Everyone please excuse me for not understanding these sub to deals but I don't get it. this is unheard of where I live and I don't even know if it would be legal in Wisconsin. Aside from that I don't know why buying a property this way would be better or give you any more gain than just buying the property outright. You still have to pay a mortgage.
Also, I don't understand how the title can legally transfer as the mortgage payoff is a requirement of title transfer or "clear title". How can you be the legal owner of the property in the subject to situation?
As I said, excuse me for not understanding. I'd like to know more about why this method seems to be so popular as opposed to simply purchasing the property. I can understand perhaps why a first time investor may do it this way as they may not have a lot of assets or equity for the first few deals. But what about those of you who have many other properties and have "flipped" other properties and made cash. Do you still do Sub to's ? Or do you purchase more conventially using your equity. Please explain to this "newbie". Thanks
Here is a Link that John posted on another topic relating to Sub To
JohnLocke
Super-Star Investor
Joined on: 06/17/2002
Post: 2074
Las Vegas, NV
Posted: 07:58 on 07-13-2003
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Ghini,
Glad to meet you.
Here is a link that will give you some information on Subject To investing.
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=146
Couple of questions....
How much does it cost to get a loan? (points, fees, etc)
How long does it take?
What happens once you get 15 mortgages in your own name?
Why not use other people's credit?
Are you looking for motivated sellers?
Sub. to won't work for all deals, but it's a great tool for the right deal.
I guess buying houses subject to is not the way to go for me personally. It seems easier and better to me to simply buy the house by using some creative financing techniques. I guess I'm just curious about why others like this and I'm also curious about whay a buyer would turn over their deed and yet be completely liable for the mortgage. That would take a heckofa lot a trust!
Sandbahr,
I can certainly understand having reservations as to whether this actually works..I know I did when I first learned about the method.
The problem I had was that I was thinking conventionally. That is, I was never in a position where my house was going to be foreclosed on and I had no hope of stopping it or it from ruining my credit. I have never been in a position where I was barely able to afford my house with two incomes, let alone afford it with only one due to being recently divorced. I had never been transferred out of state and trying to quickly sell a house with low or no equity. Simply put, I was never a motivated seller and thus, had no clue about how a motivated seller thinks.
Now, I am not attempting to convince you that you ought to do Subject To investing. Everyone must pick the methods that best suite their temperament, comfort level, and risk tolerance. What I am trying to convince you of is that until you are in a desperate situation with your house and you are hoping and praying that a miracle will happen that will solve your problem, you will never be able to think like a motivated seller. It is best to simply understand that these situations arise daily and the investor that can solve these problems, help these people, and make a little money doing it is going to enjoy a fair bit of success.
If you want glimpse on how a subject to deal might be structured, you can take a look at this post:
http://www.thecreativeinvestor.com/ViewTopic17482-34.html
In any event, I wish you the best of luck!
RS (So. CA)
[ Edited by Rogue on Date 12/07/2003 ]
Thanks for the link. That discussion thread was useful. I can see how the process works. What if I want to sell it conventionally? Usually the buyers bank (or the title company) pays off the sellers mortgage at the closing. The mortgage wouldn't be in my name however, it would be in the name of the previous seller. Does this cause a problem or doesn't anyone care whose name the mortgage is in?
Buying sub2 just has so many advantages, I can't understand why anyone would NOT want to use this method.
1. Having the mortgage in someone else's name doesn't tie up your borrowing ability.
2. There will reach a point when the banks will say no to you due to the fact you have X amount of mortgages. With sub2, you can buy all you want.
3. It is fast. I can close in a matter of hours if needed.
4. Virtually no closing costs.
I could go on, but you get the picture. I have sold many houses, rehabs, flips, cashed out sub2/LOs, but I still buy this way and love it. It has so many advantages and virtually no more risk than any other method.
It is a good thing.
William Tingle
WilliamGA
In the example used in the above link, I would say it would not be worth trying to sell conventionally. Remember there is no equity in this particular house.
If you look closely, your profit is in the payment spread and backend (created, in large part, by the payment spread). In addition, you have closing costs; probably additional holding costs, possibly commissions, etc. that will eat into your profit.
if you want to sell conventionally, then you will need to get a good discount on the house in order to make it worth your effort (Always figure your profit before you get in and make sure you have a couple of exit strategies in case things do not work out as planned).
If you are seriously interested, you may want to read up on the topic more and perhaps pick up a course.
Hope this helps!