Why SubTo Works - Actual Safe SubTo Numbers - Real Deal - Not "No Money Down"

[Ken M.]

Subject To is definitely NOT a “No Money Down” technique”, Here’s why . . .

The obvious question is: "How Do I Keep Finding These Smokin' Deals"

It costs money to locate a willing seller. One of the largest wholesalers in Phoenix says it takes them $2,220 to get a wholesale that closes. It’s about the same for securing a Subject To. Think about the time and money you put into marketing. I do it for a lot less than that, but I’ve streamlined the process. Yet, $2,220 is the normal.

Here is an example of a Subject To I did, in foreclosure, bringing their loan current, taking over their loan and giving them “cash out”, they had a previous loan mod as a 2nd loan. Think of it this way, if they aren’t paying their mortgage, chances are they don’t have money to move, which creates a problem. So, give them money to move.

Bought for $157,100.38 ***

***

ARV

$245,000.00

5 bed 3 bath – Phoenix AZ

These are the numbers from the HUD statement

Bought for $157,100.38 ***	*	ARV	$245,000.00
Existing Loan Amt Payoff $118,145.37	*	Subject To	$118,145.37
****
Closing Costs From HUD
Title			$1,045.00
Escrow			$1,400.00
County Taxes			$538.38
Recording Fee			$120.00
Cash to seller			$10,000.00
Misc other charges			$525.00
Total Amount Due $			$13,628.38

***
Arrears To Bring Account Due
	Total Number of Missed Payments:		11
	Total Payment Amount		$10,095.47
	Unpaid Late Charges		$146.84
	Additional Amounts:
	Foreclosure Fee/Cost		$354.19
	Unpaid Advance Bal		$1,101.75
	Total Amount Due $		$11,698.25

***
	FHA Loan Mod 2nd			$11,582.44
***
	My Out of Pocket			$36,909.07
***
	Total Cost Basis of Purchase			$155,054.44
	ARV (After Repair Value)			$245,000.00
	Repairs Post Purchase			$ 5,000.00 +/-
	Unrealized Profit			$84,945.56
***
	Equity (ARV minus Subject To payoff)		$126,854.63
***

I strongly recommend having 3 months reserves as follows:

	Monthly Mortgage		$917.77
	(Taxes included)
	Electric Monthly		$362.21
	Water & Sewer Monthly		$102.80
	HOA – None		$0

Reserves

3 months mortgage payments @ $917.77 per month = $2,753.31

3 months Electric payments @ $362.21 per month = $1,086.63

3 months Water payments @ $102.80 per month = $ 308.40

Minimum Reserves Total $4,148.34

Then I turned around and sold it to someone in CA on a Lease Option for $265,000 getting $20,000 down on a nonrefundable Option fee, and rent of $1,900 a month.

***
	My Out of Pocket			$36,909.07
	Option Fee To Me			$20,000.00
	My Adjusted Out of Pocket			$16,909.07
*** ***	My Cash Flow	*		$ 982.00 monthly

*

*

So, I didn't need bank financing, I sold it for $20,000 more than street value, I get tax write offs, I got $20,000 back immediately as an Option fee, I cash flow at $982.00 a month and if they exercise their Option, I’ll get $146,854.63 (minus the $20,000 Option fee) equals $126,854.63 cash along with any pay down during their Option period. If they don’t exercise their Option, I’ll do another Lease Option. I could do a fix & flip, STR, rental just about anything you do with a house.

That’s why you need money to do Subject To, the right way, wisely & legally.

If you would like a copy of the spreadsheet so you can calculate your potential profit when you do Subject Tos, and how much money you should be working with, send me a DM with your email address (don’t post it here, that’s crazy to do ;-) ) and I’ll send you the spread sheet. Works in CA, TX, GA, FL, AZ doesn't matter location.