I’ve been a lurker on the forum for a while, and I’m trying to expand my knowledge base from my wholesaling/short sales background. “Subject to” deals would fit perfectly into my niche here in Illinois.
I have read all the articles on “Subject to” on this site, and read a great deal of the forum posts, but there is one scenario that no one seems to cover:
Can I do a Subject 2 deal, then turn around to my Real Estate agent the next day (after recording the deed) and put the house up for sale to an end buyer?
All the articles I have read talk about leasing the house or offering seller financing, but I would just want to unload the house for a profit. It doesn’t seem like this would fall under the “seasoning” problems, because I would still be operating under the Seller’s original loan. And if I am now the owner of the property, I can sell it if I want to as long as the Seller’s loan gets paid in full, right?
If this is a legal scenario, why don’t the REI pros ever mention it as an option?
Any insight from you experienced investors would be greatly appreciated.
What you want to do is legal and the reason the pro’s don’t normally do this is because, if you sell with a contract for deed say payable in 2 years you can add the appreaciation say another 10% or current appreciation rate in your area onto the purchase price, plus increase the monthly payments above the current interest rate, say 2% above, on the loan for a nice monthly passive income. Then get your down payment, which I include in the selling price above the 10% appreciation figure.
Three profit centers.
Monthly Passive Income.
If you have a ton of equity then you might consider selling conventionally, otherwise why leave money on the table on a Subject To deal?
I see your point. I suppose I’m just gun-shy because I have had trouble finding renters quickly, and finding renters (including lease option tenants) who could be relied-upon. After having a few unpleasant and costly investment experiences, I suppose I am instinctually treating all future acquisitions as hot potatoes. If I am lucky enough to find them and control them, I just want to get my cash out of them fast.
Perhaps I need to plan to sell a few and hold a few (if I should be so lucky as to have that many properties at a time) to diversify my holdings.
Thanks again. Your advice makes a lot of sense, as usual.
One thing I noticed in your post was the seasoning issue. Once you get the deed in your name you are the owner and seasoning comes into play. Not all lenders require seasoning so if this is the case your buyer needs to get financing from these lenders.
You also have to get a great deal sub2 to be able to add on commission and closing costs to net a profit.
So, seasoning may apply even if I don’t take out a new loan? I didn’t realize that some lenders feel is has more to do with taking over ownership than with the financing. I must tread carefully there.
I get your point about the profit margin needing to be exceptional to turn over the property right away. I have reflected on deals that I recently turned down that I might have used “Subject To”, and most of these deals would have been profitable enough to do that. Such a shame. Of course, I’ll be following up with those folks once I get the “Subject To” procedure down.
Do you do pre-foreclosures in your area? If yes, what is your strategy, such as how do you find motivated sellers? I focus in the city of Chicago and some adjacent suburbs, so hope we can both learn from each other. Send me an email if you prefer.
I focus mainly on pre-foreclosures in Kane County and in a few parts of Dupage (Glen Ellyn, Carol Stream, Bartlett, etc).
I put out bandit signs between Rt 31 and Randall Road every couple weeks (which get removed very quickly, unfortunately). It seems like everyone else’s bandit signs stay out longer than mine. Maybe I need to make friends at the local Public Works departments. I have magnetics on my car which get a lot of looks, but don’t seem to generate phone calls. I also send a series of targeted mail to the scheduled foreclosure properties in my general area.
So far, the bandit signs (while they are up) bring in tons of calls, while the postcards and letters have not netted a single call since December.
I don’t have much experience in this field, but I have been doing as much research as I can do for free, and I certainly have the hunger for real estate success.
title seasoning will apply here, not loan seasoning
also, in ur reply to $cash$, u state:
“I suppose I’m just gun-shy because I have had trouble finding renters quickly, and finding renters (including lease option tenants) who could be relied-upon. After having a few unpleasant and costly investment experiences, I suppose I am instinctually treating all future acquisitions as hot potatoes. If I am lucky enough to find them and control them, I just want to get my cash out of them fast.”
don’t forget one thing $cash$ said here: down pmnt. u need to get a serious dp, and a large enuff one to be sure the new buyers are into this for the good. the more someone has into a deal, the more apt they are to treat the home as if it were theirs becuz, after all, they are going to own it in 1-2 yrs.
Not familiar with title seasoning, I have a property that I bought with my own financing about 5 weeks ago. I believe I have a buyer and we wanted to close in the next 30 to 45 days is this going to be a problem… I purchased the property for 187,500, after updates I have 197,000 in it, He will buy for 226,500, property is worth about 240,000. Is the buyer going to have trouble finding a mortgage beacuse I dont have title seasoning and Im selling it so fast??. The buyers credit is 720.
if u r going to resell, title seasoning should not be a problem. sometimes it can be an issue on a refi, but some lenders allow it. i thought the OP was going to refi but after re-reading the post i mis-read it to begin with lol sorry for the corn-fusion. :o
I’m new to Sub2 investing in Houston Texas and I’m trying to find a Loan Servicing company( from the reading I have been doing it seems this is the way to go) and A Title Company here in Houston that will do a Wraparound Mortgage when i sell … Made some calls today and the last guy said Wraparound Mortgages are illegal in Texas which is why i won’t find a Title Company to do one! I thank you guys in advance for any help u can give me.