I recently started doing sub2 deals and I am finding out that most homeowners do not want to hand the title over to me. I have been thinking about different exit strategies for a NO GO on a sub2 deal and I wanted to get everyone’s opinion on this idea I have.
If the homeowner balks at my sub2 strategy, I would then suggest he/she sell to me via wrap and/or owner financing. Then I would assign/wholesale the property to a retail buyer. Reason why I would not do a conventional wholesale assignment is because I would like to assign to a non qualifying buyer for an easier sale. Does this idea sound doable?
I wouldn’t have nor use your back up strategy. The key word you used to begin your statement was the word “IF”. Remove the doubt words. If you have a back up strategy then when it gets a little ugly you’re going to use it rather then fight for what you want.
Besides if you have give a presentation to the seller which instills confidence in you and how you buy houses then they rarely object.
Lastly when someone does object; remind yourself that Sub2 is how you buy houses.
I wrote a course on this and have to say its the easiest method for creating wealth and buying houses without using cash or credit.
Good advice, Michael!! I’ve been buying ‘subject to’ for years successfully. The key ingredient in this success is the buyer’s perception that YOU will solve their problem. You need to understand that the problem is they cannot sell their home and they need to move for one of many reasons. You must be confident in providing a solution and be very ‘matter of fact’ that this is how you solve people’s problems. Make no excuses. If you are confident and convey that you can, and will, solve their problem…someone will say YES!
When you are sincere and confident, people will take your offer. I talk with the sellers and review with them (in a painful fashion) all the problems they have in selling this house, showing them I understand their problems. Then I say to them, I can take you out of this problem, but if you want me to assume this bad position, you will need to pay me. So I have them pay me a fee to take over their home ‘subject to’ and they are relieved that there is an end in sight. Then I start marketing the home with owner financing and get another down payment.
You can make money when you buy and when you sell!
I believe you guys are missing the point of his thread. He’s not asking why he can’t close deals, but rather if “Plan B” that he’s mentioning will work.
I have to say that standing on the corner with a sign that reads STARVING VET WILL WORK FOR FOOD will work… I just dont think its a business practice one should do… As a Mentor I find it difficult to blow smoke up someones, well you know, just to make them feel good…
When doing a sub2 deal you should not allow a seller to remain on title as a wrap… I hate seconds or thirds… I am always assuming that when someone asks a question that they want a truthful answer… Maybe I am wrong…
Nice to meet you too Michael! I still think you’re missing the point though. I really don’t think he’s trying to do a sub2 while keeping the seller on title. After all it wouldn’t be a sub2 deal. He states that if a sub2 does not work out with the seller, then is his second plan going to work.
It is so nice to see some of you out there offering to interpret English to English for us older, more experienced investors…you know us ancient guys like Michael and me who have done over 600 transactions combined! Thank you.
I’ll give my opinion on the back up plan…too complicated! If a seller does not have the confidence in you to do a ‘subject to’ deal, most likely he will not have the confidence for your back up plan, a more complicated transaction combining owner finaning, wrap mortgages, and assignments…this is definitely a sign of being uninformed if you believe a seller would do this over a ‘subject to’ transaction.
My back up suggestion is to simpy get his bottom line and actually cough up some cash (yes, why not invest a bit of money, after all this is an investment business) for an option on the property. Then, you have your investment with a deadline, and find another investor with means to buy the house at a profit to you. If you do not have the ba…courage to do this, then move on to your next prospective house.
Yes, your plan can work but how are they different? If I were the seller I would ask what is the difference?
In both cases your asking the seller to give up title and yet keep the liability for the loans. And in the second case he has no control over choosing who will be making the payments on his old home, where in the first case he picked you.
Suggest you look into land trust arrangements. I don’t endorse anyone but my brother and I used such a trust before Bill Gatten could spell real estate. It was very useful in what we called “skinny investing”, and often removes the sellers objection because he is still part of the deal.
You totally can do that. I would sugest if you are into the SUB-2 Area is doing some pre-foreclosure work with the Obama plan right now I know you can drop the payments to nothing! I just did 4 last week where we got them down to 4.25% on a 30 year and 1 on a 40 year. The 40 year was even Thru BOA there really easy to get these done with. See all this time I thought that BOA was Bank of America! Come to find out its Bank ObAma! Don’t like where the Country is heading yet might as well profit in the down turn. Until they figure out how to get out of this mess… WHERES MY CHANGE???
Wow, an answer to the question asked! To some previous responders, notice the original question was about a back up plan and not about one’s confidence in closing sub2s.
As if they closed every sub2 deal they encountered and did not have a plan b… :rolleyes
You can certainly do that.
Start of with the Sub 2 because it’s easier to do, but then use wraps etc to back it up just in case they balk at it. that’s fine.
Just make sure they are motivated enough. You may be dealing wtih a seller that is not motivated enough and if the deal is skinny, you may think twice about doing the deal at all.
Secondly, if you are flipping these things out on the retail end to non qualifying buyers make sure you disclose everything to your seller. If you’re stepping out of the deal that’s fine, but make sure the seller knows that.
If you’re staying in on a wrap, just make sure you’re ok with babysitting this deal until the buyers refi out.