SUB 2.. Has anyone got burned?

General Real Estate Investing
1

Hello folks,

First timer here…
I wanted to talk a little about subject 2 deals. I have never done one, and my business partner does’nt want anything to do with them! I spend good money on marketing and hate to see so many leads go down the toobs because our company does not deal with sub 2. Sometimes I feel like I’m missing the boat on these deals…

My partner’s concerns are:

  1. The Risk of the loan being called due by the lender

  2. The Risk of doing a deal with the homeowner, and then the homeowner coming back at a later date and tying to sue us for what ever reason they can think of.

I do think that these are valid concerns, but I wanted to talk to others that have been successful using this type of strategy.

Again, I am trying to maximize the number of deals I can close from the calls I get from my marketing. I really would like to use Sub 2 as a strategy, but I would like to see if this strategy is valid or not.

Thanks in advanced.

2

Go to the REI Club and find a Sub2 Investor. Offer to birddog your sub2 deals to them for an agreed upon price.

3

Get another partner.

4

The homeowner only reason to come back on you if they take it off of the market and you walk away because you could not get a SUB2 done. Give the homeowner $500 and be honest in the SUB2 agreement that you are the real deal. The $500 will show the homeowner you are serious and not someone trying to pull a fast one.

5

Thanks for the advice fellas,

I like the idea of bird dogging these deals out to other sub2 investors while Im getting a firmer grasp of this strategy.

Java… I’ve read every single one of your posts. I’m very impressed with your knowledge.

I think Ive learned a thing or two from all of your insightful help. Thanks

From what I understand, the banks rarely call the loans due as long as you are ontop of your game, sending timely payments and such.

6

You dont need a partner to do sub to deals

7

hitman, those are valid concerns. Leverage someone in your local market for their knowledge and experience… assign them a few of these to show you the process.

Just dont make promises you cant keep. Disclose everything and roll with it. 80% of what we worry about never happens.

8

Food for thought.

Assume for a minute that you have a subject to deal and it is running fine. Then assume the lender decides to call the loan. Just how bad would it be?

If the deal was a good deal, could you sell the property and pay off the debt?
If you were clear with the seller when you set up the deal, they knew it was a risk.
It might be completely possible that the seller takes back the deal (a sale for what ever you agree) so the loan is no longer in default. That might cure the default so the lender would have to stop their action. This is dependent on the loan agreement and the rights the lender has to continue once there was a default.

My point is people really need to think about the worst case and what could be done if something happens. In many cases nothing will happen. In the few that do ‘go bad’ the cure is not unreasonable.