Is a subject-to deal possible for a newbie?

Question

Hi all, Iâ€™m a newbie and I really want to get started in real estate investing this year. I have put my investing plans on the back burner for several years and now I have the time to do it, I just donâ€™t have the W-2 and a steady income that I had years ago. I have read dozens of investing books and studied multiple approaches to investing but Iâ€™m having a hard time settling on a strategy. I have some savings to dedicate to this but a conventional loan is pretty much out of the question â€“ Iâ€™m self employed and just starting out with that.

My current business plan is to connect up with motivated sellers and buy property subject-to, (primarily because of my lending situation) and then I envision completing some minor repairs and then rent or lease the property out, for a positive cash flow. There are a whole bunch of small steps to this plan that Iâ€™ll need to figure out as I go but Iâ€™m wondering what other experienced investorsâ€™ think of this approach for newbie. Am I realistic to think that I can figure out the steps involved? Is a Subject â€“to loan assumption really possible?

Thanks for your thoughtsâ€¦.
John

Sharad M. · Answer

Hi John-

I am not a newbie investor, so take what I say with a grain of salt.

I think the first and foremost thing would be spend some time reading on this forum and talking to other investors and learning more about different strategies. As you learn more about each strategy, you will start feeling more comfortable with one than the other. Not that any one is particularly better than the other, it's what YOU feel most comfortable with.

Always keep a portion of your savings for rainy days, because when it rains, it pours.

Read more on this forum about the 2% and the 50% rule to see if the property you are getting yourself into is really a cash flowing property. I would say that just because you can have a property with little or no money down doesn't mean it a great investing opportunity. The numbers don't lie.

Absolutely. I was clueless about few months ago, I read a lot of books. I speak with as many people as I can, learn from their experiences, good or bad. Don't rush into an investment opportunity because someone tells you this is THE opportunity. There will always be opportunities out there for you when you are ready. I would spend some time figuring out a strategy that fits my long term goal, and then make a plan of action.

Good luck with your investing career.

Brian P. · Answer

John

You seem to be focused on buying and the financing angle.

At this stage you should be focusing on how to control property and recognizing a deal.

Phase one learn about straight options. Then learn about purchase agreements that are basically options if you write them up properly.

Anytime you have a great deal believe me the money will come.

Brian Haskins · Answer

If your new and you donâ€™t want the risk and need cash flow I would consider wholesaling because if you are hoping to make a living on rental properties at first good luck. I suggest all investors wholesale at least the first few deals to get some cash reserves built up.

Brian Haskins

John Harvey · Answer

Thanks everyone for replying to my questions! I have given considerable thought to all of your comments. 
Brian P, I really appreciate your recommendation - to learn more about purchase agreements/options - I guess with my current financial situation I'm really focused on trying to get the ball rolling without conventional financing and I lose sight of other possibilities.

At this point, I plan to learn more about purchase options, specifically, sandwich leases, wholesaling and gaining control of property subject to. In concept, I'm feeling more comfortable with each of them, but once you have an interested seller - how do you come up with the written agreement? Is this something that you have an attorney put together, or are there standard forms available for each of the options?

Thanks-
John

Adrian G. · Answer

All I can say is  study-research-study-research....have money on the side.

Brian H. · Answer

I agree with Max. Spend time here and talk with other investors. That is THE best thing you can do for yourself.

For your question... It is possible, but there is risk (like everything in REI). One of the biggest concerns would be the bank calling for the mortgage to paid in full. Given your financial situation you might have a hard time paying the mortgage in full.

****Disclaimer**** I do not have experience doing subject-2s. I'm basing this on the research I have done.

Is a subject-to deal possible for a newbie?

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