sub2

General Real Estate Investing
1

What is sub2

Please explain…

Thank you

2

Hi kpatsamatla.

Sub2 is short hand for “subject to”, meaning subject to the existing mortgage. In other words, buying a property without getting a new loan.

Wilson

3

so sub2 is only referring to when existing financing is assumable? I’ve been reading a lot of these posts trying to figure out the basics and am just confusing myself.

Thanks for the help.

4

Most existing loans are not assumable according to the mortgages. Most of the Sub 2 courses tell you what the risks are of taking property sub 2 and how to prevent having the mortgage company call the note due. My suggestion would be to have a backup plan in case the due on sale clause is envoked.

Wilson

5

Based on this definition and I have seen it a lot so I take it to be true, but my question is what is the difference in this definition and sub2 meaning ‘subject to’ - home inspection or subject 2 funding? That’s what gets me confused a little… Although I do understand what is taking place under both definitions.

My other question relating to sub2’s is how do you find people who will actually TRUST you enough to do it?

Any info would be greatly appreciated

6

SD,

Glad to meet meet you.

Here is a link that will give you a better understanding of Subject To investing.

http://www.reiclub.com/articles/sub2-beginner-investing

As far as how do you get people to trust you, just make them sell you on the idea that taking over their property subto will cure their pain and make it a win/win for everyone.

John $Cash$ Locke

7

Thanks Cash… nice website… I presently cant afford your course, but maybe sometime soon… :slight_smile:

I reviewed that site you referenced and i have a couple of questions:

  1. In regards to the LSC, are they available everywhere?
  2. What are their costs?
  3. Is there a site to research one?
  4. In regards to Trust Accounts, what types are available? Is one better than the other?
  5. Are they available at most banks? i.e.: Wells Fargo…
  6. In regards to financing, how can the new owner raise the interest rates as mentioned in the example you used in the Sub2 explanation?

I hope I didn’t ask too much, but I have to get an understanding… I look forward to hearing from you and thanks in advance… :wink:

8

Sd,

  1. LSC’s are not available everywhere, however you can do a search on the net and find some that will suit your needs.

  2. Usually anywhere from $25 - $50 dollars to set your account up and $5 -$7 per check they write to you or the lender.

  3. http://www.usloanservicing.com/ this company is one many of my students use.

  4. You can set up a trust account at the LSC, so if your buyer is late on a payment then the LSC will make the payment so it is not late. I recommend at a minumum two months worth of loan payments left in the trust account.

  5. Banks do not handle traditional loan servicing to my knowledge at least the way we do it in Subject To investing.

  6. If I take over a property with an interest rate of let’s say 6%, remember I am now the owner of the property so the existing financing stays in place. I sell the property after doing research, such as how much the property will appreciate over a perod of time, which I add to the back end of the deal when my buyer is required to re-finance.

Now since I am the owner I can sell the property for my price and add 2% to the current interest rate to give me a nice monthly passive income. I just set up a mortgage note between myself and my buyer for the selling price and interest I choose.

John $Cash$ Locke

9

Alrighty then Cash,

I’ll have to wait until experience gives me a better understanding of that last answer… :o Now based on what you said sub2 meant, you’re quitclaimed on to the original deed and are now paying the existing mortgage… avoiding the need of getting a brand new loan with a possible higher interest rate… :wink: Correct so far? Now if you sell the property, how can you set the conditions of the interest rates of the buyer? If the buyer isn’t buying it sub2 keeping the existing rates in place then wouldn’t the rates be based on the deal the buyer got from his/her lender? That’s where you got me… ??? But it’s still fun following the concept and learning… ;D

Great lessons…

10

Now if you sell the property, how can you set the conditions of the interest rates of the buyer? If the buyer isn’t buying it sub2 keeping the existing rates in place then wouldn’t the rates be based on the deal the buyer got from his/her lender? That’s where you got me… But it’s still fun following the concept and learning…

When the property is deeded to you, you are now the owner of the property. What Cash is saying is now you can legally sell the property to someone else and offer owner financing since you own the property. So you create a spread on the interest rate when you sell the prop to your new buyer. Does that make sense?

Think of it like this. You walk in to Bank of America and they say, “sure, we’ll finance you at 4 %” and then you go to Wells Fargo and they say, “Sure we’ll finance it at 6%” Different banks offer different products.

When you do an owner finance the buyer walked into the Bank of SD Newbie and your rate is 6%. He/She accepts and starts sending you payments and then you turn around and make your payment to the bank at 4% until the buyer pays you out by refinancing or just continuing to pay you for 30 or 15 years. Whatever terms you set up.

Long story short, you become the bank!!! Very powerful and really motivating!!! Good luck and I hope this helped!

Smart Investing,
Mark