Subject To Investor Questions
Hi BP!
After listening to podcast 70 and learning about "subject to" strategies I was provoked to hop on the forums to see if anyone on BP is doing this in WA state? I am interested in this strategy and have been reading everything I can find on the site, but still have questions:
1. Are WA state investors doing subject to deals getting DOS clauses called by the lenders? Do you see this increasing as interest rates rise? Is your experience similar to @Grant Kemp where only a very small fraction of the DOS clauses are being called? I know it's always a risk, just curious what is going on locally, presently.
2. For the investors that are doing this, are any of you doing wrap mortgages like Mr. Grant, thus making you the middle-man, or are you primarily fix/flipping, renting or wholesaling? If you are wrapping, at that point, being the middle-man, if the lender issues a DOS, are you responsible for the payment or is it still with the original seller who is still carrying the original mortgage?
3. After I complete a subject to with a seller, do you recommend doing a owner-finance with a QUALIFIED buyer or sticking to fix/flip, rental or wholesale?
4. Do you recommend taking over the deed as soon as you can (once you find a owner-occupied buyer, or renters if using the property for buy-hold)? Or do you wait for awhile? And once I find a buyer (if I decide to go this route) do I then sign the deed to them and I am just the creditor from then on out?
5. Let's say I find a distressed seller who owes 100k on a home worth 100k, but he would rather do a subject to deal so he can get out fast and avoid selling costs. I come in and do the subject to deal where I would take the deed under a 60 day option that would allow me to find a buyer looking for owner financing (if I can't find an exit I walk away). Because the buyer cannot qualify for traditional financing and needs to go the owner finance route, I decide that I am going to sell the house to them for 110k and add 2% interest on top of the monthly payment (I have read a lot about how sales prices can be higher for owner-finance deals, but have also read the contrary). I will also ask for let's say 10k in down payment so they buyer stays put. Now this is where things get confusing for me. Do I count the 10k down payment toward the extra 10k I am selling the property for and after that they just pay off the original loan plus my added 2% in interest? Or do I just extend the loan longer than what is actually due to the original lender and once they complete the original loan the payments to me are 100% in my pocket until the extra 10k is paid down? Mr. Kemp very briefly mentioned this scenario on the padcast and I wish he would have had more time to elaborate. In this same scenario, let's say there's 20 years left on the loan. Do I have to wait the entire 20 years plus however long it takes after that to make the extra 10k on the property? Or do I just create a deal from the beginning that would account for the higher sales price and I am slowly paid the extra 10k over time?
6. Taking the above scenario again, do I keep the deed in my name until my buyer pays off the loan? I assume no because we will close on the deal, but if so, how do taxes come into play? Does the "one" making the payments get the interest write-off come April? How about expenses (repairs, maintenance, cap-ex, ect.)... who pays those? I assume the buyer would pay those, but if they default and the house is still in my name or I take it back via foreclosure, I would be stuck with everything to pay for.
7. Can someone walk me through the process once I have found a buyer to wrap the mortgage with? It seems like all the forums don't get this far or only briefly touch on it.
8. Can anyone recommend an attorney in WA state who specializes in this type of creative financing?
9. Best books or detailed article/videos to learn about this (preferably after Dodd Frank was put into practice)?
Apologies for the long post. Just want to get this strait. I am sure I am a ways off here on many accounts.
Thanks so much!
Chris