Advice for the youngster ?

Question

Hello guys and gal !

My name is Loc Nguyen I barely turned 20  :D

I little about me i am interested in real estate but as of right now I am going to school and working i have decided to start investing maybe at the age of 22 or 21 , right now I am taking advantage of living rent free and saving up money for future investing. In the mean time i also been reading money management books, Real estate audio and books from Robert Kiyosaki and Dolf roos also playing a lot of monopoly and cash flow 101  8).

Is there any advice you would recommend to better prepare me ?

and one more question i know there are a lot of inspection a person need to do when they are looking at a property, what are the inspection do you do when you are looking at a property ?

thx again guys!

Sam O'Reilly · Answer

I understand what you're saying and the process but you're not addressing my concerns about the legality of the transaction. You stated previously "there are no "due on sale" police that are going to come in the dead of night and arrest you." So basically your justification is that because there may not be a high risk of getting caught, that makes it okay? And WHO exactly would get an additional insurance policy on the house? How would this work? You also did not address if you would let the lender know what is about to transpire in regards to it's contracted loan holder or if you would even let the loan holder know that it would possibly breach the contract with the lender at all. You know your quote under your name says "Investing with honor, for a mutually fair profit". There is no honor in what you're advocating if you're promoting the works of such authors. If the seller gets caught doing this he could have to pay the remaining balance of the loan in as little as 30 days. Where is the honor in putting that person in that position without his or her consent or full understanding of the terms of which he is agreeing to and what is at risk? If the seller is not able to pay the rest of his/her loan within the allotted amount of time the lender gives them, they could then be subject to a lawsuit. Do you honestly think that would be an honorable thing to do? Why would the lender in the first case make sure to implement a clause in the contract that relates specifically to this type of activity if it wasn't that big of a deal? You are only making speculations and they are very dangerous when dealing in real estate investments. Give me some facts to support your claims of this aspect of business to be legitimate. You know, it's a shame when a newb coming into the business sees your site and seeks good, solid advice for investing and you refer them to this dishonest way of doing business. And continue to argue on why it's a good avenue to take. Most people don't know to ask if something like this is legit or not because they only see the large amount of smoke being blown up their asses by Conti and the likes and even people like you. People who are reading this please be aware of the advice you are getting from so called gurus and do your own research. There is no quick way to get rich in any aspect in life and certainly not in real estate. In order to legitimately get control of a property w/ no money down, you have to have perfect credit and make an incredible salary already. Research for yourselves and don't get caught up in the hype of this "you're helping people" crap. All that fluff is to drag you into buying more books, seminars ect. Ask yourself this question: If these people that promote this are making so much money in their real estate deals then why are they trying to get rich selling books and seminars at an extravagant price?

Account Closed · Answer

1. Only very motivated sellers should consider selling Sub-to. No one in his right mind would sell this way unless he had no other alternative. It allows him to get out from under his payments - easier than getting his loan foreclosed.
2. All of what you said may be true, but in reality do you know of any lenders who in this present market would foreclose on a loan if the payment is being made?
3. No one should buy a sub-to deal unless they fully expect to make all payments related to the loan. Yes, if he didn't the original loan holder is still on the hook. Not good!
4. Yes the insurance part of this is a dilemma. I prefer getting an additional policy on the house as a cost of doing business.

Sam O'Reilly · Answer

So you're pretty much saying that it's not something that is actively perused. Would you suggest advising the lender of the possible transaction before it takes place as to abide by the terms of the agreement between the loan holder and the lender? And would you also suggest to advise the loan holder that what he is about to commit to is going to breach his contract with the lender and be forced to pay the full loan to the lender no earlier than 30 days and could potentially be sued by the lender if he cannot commit to the payment?  Do you think that the lenders would be ok with allowing a person to take over the payments without knowing that they may or may not fit the requirements for an actual loan from the lender? I don’t think that would be a smart business decision on the lenders behalf to allow that to happen because they don’t know if the new tenant will have substantial funds to pay the mortgage. If they don’t happen to have the funds after being in the house, does the mortgage payment automatically fall on the seller? And what law would you not be breaking?  In your professional opinion, do you find anything wrong morally or legally with the practices Conti is teaching? What are your thoughts on this statement: " getting the previous owner to keep the insurance on the property in his name to conceal the change in ownership is arguably conspiracy (two or more persons), mail fraud (something related to the insurance will go through the mail either from you or to you), concealment of a material fact, and false statement (to the insurance company about who is the current owner). If you do two such deals within a ten-year period, you have arguably violated the racketeering law." –John Reed

Account Closed · Answer

Sam,

You are correct that there is a due on sale clause in most if not all mortgages. However, there are no "due on sale" police that are going to come in the dead of night and arrest you. This is not a law that you would be breaking, just one of the terms of your agreement. I would not necessarily advise buying a house "subject to" on a long term basis, although many have, but just for a few years while you sell the house to another party. The reality is that most mortgage companies do not care as long as they are receiving their monthly payment on time every month. If you also buy at a good discount, you should be in a position to sell the house quickly or refinance if they did somehow exercise the due on sale. Good luck, Mike

Loc Nguyen · Answer

Going to a REIA meet tomorrow im excited  :groovy:

Loc Nguyen · Answer

I am going to start off with small properties and renting them out to establish a steady cash flow so i can get the hang of things, learn from mistakes that I know i am going to make and just really build from there.

thanks guys for replying so quickly. What books do y'all recommend for REI noobs ?

Michael Shadow · Answer

Hello locnguyen and welcome to BiggerPockets.

I would recommend hanging around here in the forums and reading up on what other people are doing.  The thing you get here that you don't get in the books is "Real Life".  Many times the books gloss over expenses and don't tell you the true cost of owning real estate.

What kind of REI are you planning on doing? Filpping, wholesaling, renting, etc...

-Michael

Account Closed · Answer

I would suggest reading the posts in Bigger Pockets under the heading "Real Estate Gurus, Courses aznd Book Reviews".

I myself liked best the Wendy Patton Book, Buying real estate using Lease Purchase and Subject to. And Buying real estate without cash or credit by Peter Conti. Others have said Gary Keller's Millionaire RE Investor is good, but I have not read that yet. Good luck, Mike

Jason Hanson · Answer

Loc,

Congrats for starting so young. I would begin to network at all of your local real estate investor associations. I would get as much knowledge as I can from the successful investors in the groups. I would also take them out to lunch and soak up everything.