Hello everyone,
I was curious to know what a sub2 is. I keep hearing it and people saying that its a good place to start. Any help would be great.
Thanks!
Sub2 essentially means that the owner deeds the property to you while the mortgage stays in their name.
Frankly I think it’s a TERRIBLE place to “start”. Unless you have great credit and plenty of cash reserves, I think it would be ill-advised to do sub2’s, because if the loan is called due YOU have a moral (and possibly legal) obligation to purchase the property outright. If you don’t have the means to do so then things can get messy.
Thanks Doug,
How does an investor make money doing this? I guess I just don’t know to much about it so it doesn’t make sense to me. Anymore info would be great.
Thanks!
You make money the same way you would if you bought the house and got a mortgage yourself. You either buy below market value, fix it up, and resell or refinance and rent it out. Or you resell it on terms (like a lease/option or contract for deed).
The purpose of buying sub2 or any other “take over the existing financing” technique, is to reduce your cash and credit investment at the outset of the deal.