Well said…
John- It’s been a long time since we have chatted I hope you are doing well.
I am thinking of changing the traditional subto strategy slightly and would like your input as to if you think it makes sense.
I am in Colorado and the low end market is really starting to pick up in the last 30 days. I currently have 6 properties so financing is becoming a little challenging so am looking for other strategies to pick up more before I miss the boat 
I want to use subject to to acquire as many properties as I can over the next three to five years (maybe longer) and then sell them when I am ready to cash out and the market has fully recovered. No lease options or land contracts required.
Does that make sense? Besides having the seller quit claim the deed to me, what else will be required to complete the transaction and sell the property on the back end?
My thinking is that since I am looking for more of a long term strategy I will avoid the risk of foreclosure and worse case scenario I will only have to do a traditional eviction.
The other part of my plan is that if the properties do not make sense to acquire for myself as rentals, I will recommend that they move forward with a short sale. I will most likely do the short sale myself. (I am a licensed realtor as well as a mortgage broker). Do I have issues or conflicts being that I am licensed?
Thanks for any info
seanmathes,
Thank you for asking everything is going well and I wish the same for you.
Do not use a “Quit Claim” deed for the transfer of a property to you, as that only transfers the individual’s interest in the property. Ask anyone who owns part of the Brooklyn Bridge via a Quit Claim Deed.
You want to use a “Warranty Deed” or other state specific deed. This way you are assured that the holder of title has the legal right to transfer all ownership of the property to you.
My strategy has never been to Buy & Hold using the Subject To method, as I feel it is not the appropriate method for Buy & Hold. This is my personal opinion as I want the property sold to my buyer in about 2 years. Set up properly there is still a nice chunk of change when the deal is completed.
Many Realtors are using the Short Sale method currently in helping their clients, you see it becoming common place in todays market, so join in on this one.
You are wearing two hats, one being a Realtor and the other being an investor. Once you make your required disclosures to the client about being an agent, then you switch hats to the creative side and make your proposal as an investor. Make sure your client understands the difference. I have not heard of any licensed agent having a problem when they have switched hats.
John $Cash$ Locke
box2good,
Unless you or the lady who owns the property is willing to pay the legal expense to have her appointed Trustee of the property, then I see no reason just to lease the property for two years.
The whole idea of using the Lease/Option method is to make a profit when the Buyer exercises their option, plus any percentage of the monthly lease payment in your pocket above the actual payment and the option money down.
Just using a straight lease, would not be of benefit to you that I can see. I would walk away unless you are willing to get all your ducks in a row by having the proper legal procedures followed to insure you can deliver a clean title to the property, when the time comes to do so.
John $Cash$ Locke
John another couple questions for you if you don’t mind. A couple people I know have done quite a few sub to’s in my area. There are a few concerns they brought up I am hoping you can address.
First of all- if the NED has already been filed, he said that due to the foreclosure protection act you are not allowed to file any type of deed.
My response to him was, can’t you then file an intent to cure? At that time there will no longer be a foreclosure and then record the deed. Am I correct on this?
I am guessing that you will say first of all get to them prior to the NED being filed. I am with you on that as I don’t want to catch up a bunch of late payments either. Can you explain a little more about how you market to people that aren’t that deep in the process yet?
Another guy I spoke with that follows the Richard Roop method said with his postcard he was getting about a 1% response rate and he considered that good. Has this been your experience? He also said he had a company that would go door to door with flyers for about 11 cents a piece which is much cheaper than mail and he said his response rates were better.
Thanks
seanmathes,
Since I have not read your State Statutes regarding foreclosures, I would be hard pressed to answer you question. Many states are setting guidelines on the percentile of the purchase price you must leave the home owner with.
I receive around 2%-3% response rate, however I am dealing with those most likely to need what I have to offer when I send out my post cards. What is very important is your closing ratio on those that do call, albeit 1% or 10% rate of return if you cannot seal the deal, then your wasting paper and keeping the post office carriers working, but that is about all you are doing.
A high gloss, use quality paper postcard will be the first impression of your company to the home owner, so make the card look like you are a professional that they would have no problem dealing with.
Everyone has their own style of marketing, personally I like to keep my message to the house owner personal and confidential, this is why if you notice I do not go into the reasons a house owner is likely to sell on my post cards, I know why they want to sell and surely the house owner knows. As far as door hangers, I guess if you are looking to buy the home owners door knob and offered enough that would work.
Normally even when I am speaking with them on the phone they tell me things I really do not want to hear, some will understand what I am saying and some won’t.
As far as marketing to home owners, those who have the most TOYS win a post card from me.
John $Cash$ Locke
John,
In case I missed it earlier you said that before you ever get to the sellers house that you already know the mortgage balance, interest rate etc.
How do you find that out? Is it with the SiteXdata? Does it cost?
thanx, herbster
herbster,
Yes, all this information is in SiteXData and it does have a subscription cost.
However, what this allows me to do is target the specific audience I want to mail to demographically.
Let’s say for example, that I want to mail to all properties with a 6% interest rate, plus other demographics I am looking for in a property. I can build my list specifically to these demographics.
When I receive the phone call and address, then I can pull up the information on that particular property, which gives me the info I need to see if the property is worth looking at.
John $Cash$ Locke
John- maybe I’m not smart enough but what do you mean by the most toys ? Or is that your secret sauce?
Also, your previous example you said search by mortgages with a 6% rate. This makes sense for taking over the note but isn’t it more likely that the people with a low fixed rate mortgage aren’t going to be the ones in trouble?
seanmathes,
To answer your question, it all depends on how many new Toys they purchase after they buy the property and a good percentage of these people get in trouble quickly, because when they purchase a property, they also purchase new Toys.
A buyer usually purchases new furniture to go along with the new house, added payment, then when you see the new wide screen Sony television in the front room, no need for a presentation just show them where to sign. I am also fond of seeing Two new Ski-Doo’s in the driveway.
I look for 5%-8% fixed rate mortgages, this way I can build in a Pack Payment for passive monthly income.
John $Cash$ Locke
Gotcha, I thought you were talking about a search method of what they have purchased “toys” to find sellers. But this is more of an indicator once you get to the presentation right?
Aside from a fixed rate mortgage, do you try to search by certain geographic areas?
seanmathes,
Remember when I said I could drive a street and tell you who is most likely to be in trouble?
A student of mine asked me to close a deal for him in a fairly new subdivision, the new owner put $10K down with an interest rate of 6.2%. Basically all I had to do was have them sign some paperwork.
It was later in the evening and the sun had already gone down, when I pulled up to the entrance to the subdivision the first thing I noticed was the street lights were not on. Brought out the flash light and started checking street signs until I found the street the property was located on, however the street numbers on the houses were not lit up.
Thinking about what I learned from previous deals about who needs to sell, I did a little experiment rather than check street addresses I checked driveways for Toys. As I was driving I notice this new “Bubba Truck” and SUV in the driveway of a house, I thought this must be it. Got out of the car walked up to the front of the house and shined my flashlight on the front entry way and low and behold the house numbers matched the house I was looking for.
The kicker is after I knocked and went in, there on this brand new monster Sony wide screen TV was the Monday night football game and an owner watching who bought to many new toys to go along with the house.
Not particularly interested in any certain geographic area.
John $Cash$ Locke
HI John,
Thanks for your reply to my SitexData question, I’ll have to check them out further because they tell you the price right up front.
Anyway I think you wrote a book on this post so lets add another chapter.
Have you ever done a Sub2 on a mobile Home in a park with or without the land?
thanx again Herbster
Mobile Homes…A few years back I was running my $Cash Now$ - We Buy Houses – Call $Cash$ Now!!! newspaper ad 7 days a week. Just thought I would slip this in: Back then I was doing it more for name recognition than trying to purchase houses. There were only about 3 of us serious investors running daily.
Then the Guru Circus would come to town and when they left there would be 20 we buy houses ads the first week, the second week it would be down to 5, then the third week it would be myself and the other 2 investors until the next Circus came to town. However, I would receive calls from Mobile Home owners and I always politely said I was not interested.
Then I received a call one day off my newspaper ad from a Lady that owned a Mobile Home and she started telling me about her 7 year old daughter who needed to go to Denver for treatment at a clinic there and would I please help her. Her presentation got to me and I said, “I will drop by.”
She had a newer Mobile in very good condition and I thought what the heck, let’s find out if you can make money with Mobiles. So I took over the payments and even gave her more money that I was giving people for their houses.
Now I found out about Park Managers, believe me they are trained at the Supreme Being school of park management. If you want to talk about a tough crew to do business with these folks take the cake, in my opinion. So I knew I would have to Juice them if I wanted to sell in their parks.
I started visiting the Park Managers of the park I purchased the mobile in, told them what had expired with the lady I purchased from and I would like to have permission from them to sell the mobile as they must approve everyone prior to purchasing in their park. A few dinners for two tickets, etc. and we were friends, of course the perks continued. Found out the majority of Park Managers love those perks and you can buy and sell mobiles in their park all day long.
Here are some pluses with working with Mobiles, the owners know that a mobile starts depreciating from the day it is purchased, so you do not have to go through that as you do in today’s market or even back then with house owners who think their house is worth more than they purchased it for. Never gave the Mobile Home Owner more than $10 Bucks for their equity, except the Lady going to Denver and don’t ask.
I found you can only make around $8K to $12K a month with mobiles with a lot of work compared to buying houses. Mobile Home buyers are in a league of their own, that is what they want and that is all they want, you could offer them the same down payment and monthly payment for a house and they will still go for the Mobile Home. About all you make is on the Down Payment, however you can receive $3K to $5K down on them.
How I handled it was, I had a Bird Dog who worked with me and he was a hard worker and did his best at all times. So I trained him to do mobiles and wished him my best. He does very well and still does just messing with mobiles.
Anyway Herbster, does this help about investing with Mobile Homes.
John $Cash$ Locke
John
Have you written any books? if not which ones would you recommend for subject 2’s
Thanks John,
I’m visiting a very upscale MHP on a popular 2000 Acre lake this weekend, and I needed to hear this.Thanks, herbster
Upscale and mobile home park, you don’t hear those two combined very often :biggrin
kdhastedt,
Thanks so much for the link.
You’re welcome…
Keith