Subject to Financing
Investor · Bay Area, CA · Member since 2022 · 22 posts · 19 votes
Subject to Financing
Most Popular Reply
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
3yQuote from @Andres Ruiz:
Hi Mike, thanks for the link and the helpful pitfalls to know. I am looking at creative financing as an alternative way to make my numbers cash flow. Since there are certain sellers that have existing loans with a rate below 4%, I think I can do a mix of cash/take over loans at 4% to allow me to cash flow.
Did you hire an attorney/CPA to build standard forms or is there a provider you can leverage across deals or how did you go about it? A lot of youtube channels and stuff I've read is very high level and it makes it hard for me to be prepared to answer all the seller questions.
@Andres Ruiz:
You are thinking in the right direction but you need a guide to do the first few with you. No two deals are exactly alike. The one I am closing on has an Appraisal of $725,000. I put down $100 (that is not a typo) and I'm buying it for $350,000 to pay off the underlying loan, $177,000 to the seller for a total of $527,000 off market, (not on the MLS) and no real estate agents so no fees.
I was going to take the $350,000 Subject To, with some cash to the Seller and a Seller Carryback on the rest with a purchase price of $640,000. But the Seller is buying a new property and the new lender needed the existing loan paid off in order to complete the loan. Typically, I could have worked around that issue but the Seller's credit was not strong enough.
So, instead of paying the original $640,000 I am paying $527,000. When you pull out your abacus, you can see that is even more of a substantial savings.
This can be done in SoCal, AZ, TX, TN, OH, in fact in every state in the Union.
The problem with the youtubers is that they tell you there are ice cream venders out there, but they don't tell you some ice cream has listeria. Everything is all peachy and rosey, . . . until it isn't.
I've had several attorneys add to my forms over the years. Some you address as "Yes, your honor, I'll fix that" as you stand in front of him in court. That's how I came up with the partial list in the post I gave you. I've had lawsuits, one of which went all the way to the 9th circuit appellate court (which I won). That one went for about 6 years and was kind of expensive. “Ah, but you learn so much”.
I've started other lawsuits to enforce contracts. I've won every case, kind of like Perry Mason, only he got paid for it. But, the point is to avoid lawsuits and unhappy Sellers by not making the numerous errors the youtubers either don't know about yet, (until they get sued) or don't care to warn people about, which is a shame.
If you read & understood all of this, or are if you are very adventuresome, you may not need someone to guide you through learning Subject Tos.
In the off chance you want help, or anybody reading this wants help, DM me and we can discuss and probably save you a lot of time & grief. Subject To is a great way to do investing, I just want you to do it the right way and stay out of trouble.
21 Replies
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes3y
Quote from @Andres Ruiz:
I'm interested in doing subject to financing deals but I'm looking for someone that has done several of these deals that can guide me on what forms are needed, CPA recommendations, etc. I know the general process but I've never done one myself so would like to get general advice on this.
Sure, one question
Using Subject To, to Get "Free" Properties
Why are you wanting to do Subject To deals?
Here's a post I did on Subject To that may help
- Investor · Bay Area, CA · Member since 2022 · 22 posts · 19 votes3y
Hi Mike, thanks for the link and the helpful pitfalls to know. I am looking at creative financing as an alternative way to make my numbers cash flow. Since there are certain sellers that have existing loans with a rate below 4%, I think I can do a mix of cash/take over loans at 4% to allow me to cash flow.
Did you hire an attorney/CPA to build standard forms or is there a provider you can leverage across deals or how did you go about it? A lot of youtube channels and stuff I've read is very high level and it makes it hard for me to be prepared to answer all the seller questions.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
The real key is to use a title company that has done these. They usually have all the forms, and process locked down
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes3y
Quote from @Andres Ruiz:
Hi Mike, thanks for the link and the helpful pitfalls to know. I am looking at creative financing as an alternative way to make my numbers cash flow. Since there are certain sellers that have existing loans with a rate below 4%, I think I can do a mix of cash/take over loans at 4% to allow me to cash flow.
Did you hire an attorney/CPA to build standard forms or is there a provider you can leverage across deals or how did you go about it? A lot of youtube channels and stuff I've read is very high level and it makes it hard for me to be prepared to answer all the seller questions.
@Andres Ruiz:You are thinking in the right direction but you need a guide to do the first few with you. No two deals are exactly alike. The one I am closing on has an Appraisal of $725,000. I put down $100 (that is not a typo) and I'm buying it for $350,000 to pay off the underlying loan, $177,000 to the seller for a total of $527,000 off market, (not on the MLS) and no real estate agents so no fees.
I was going to take the $350,000 Subject To, with some cash to the Seller and a Seller Carryback on the rest with a purchase price of $640,000. But the Seller is buying a new property and the new lender needed the existing loan paid off in order to complete the loan. Typically, I could have worked around that issue but the Seller's credit was not strong enough.
So, instead of paying the original $640,000 I am paying $527,000. When you pull out your abacus, you can see that is even more of a substantial savings.
This can be done in SoCal, AZ, TX, TN, OH, in fact in every state in the Union.The problem with the youtubers is that they tell you there are ice cream venders out there, but they don't tell you some ice cream has listeria. Everything is all peachy and rosey, . . . until it isn't.
I've had several attorneys add to my forms over the years. Some you address as "Yes, your honor, I'll fix that" as you stand in front of him in court. That's how I came up with the partial list in the post I gave you. I've had lawsuits, one of which went all the way to the 9th circuit appellate court (which I won). That one went for about 6 years and was kind of expensive. “Ah, but you learn so much”.
I've started other lawsuits to enforce contracts. I've won every case, kind of like Perry Mason, only he got paid for it. But, the point is to avoid lawsuits and unhappy Sellers by not making the numerous errors the youtubers either don't know about yet, (until they get sued) or don't care to warn people about, which is a shame.
If you read & understood all of this, or are if you are very adventuresome, you may not need someone to guide you through learning Subject Tos.
In the off chance you want help, or anybody reading this wants help, DM me and we can discuss and probably save you a lot of time & grief. Subject To is a great way to do investing, I just want you to do it the right way and stay out of trouble.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Account Closed:
This doesn't sound like a "Subject To" deal. You're paying off the mortgage and giving the Seller some cash, so this is a normal sales transaction. Or am I missing something?
The DIY Landlord Book4.7248 Reviews - Investor · Bay Area, CA · Member since 2022 · 22 posts · 19 votes3y
Thanks, all. Are there any sites you use to find owners open to subject to? or even seller financing? I recently found landwatch.com.
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes3y
Quote from @Nathan Gesner:
Quote from @Account Closed:
This doesn't sound like a "Subject To" deal. You're paying off the mortgage and giving the Seller some cash, so this is a normal sales transaction. Or am I missing something?
It started off as a Subject To for $640,000 but morphed into a buy at $527,000. (That is not a typo) It was better to not do the Subject To.
That's why I outlined both the first Purchase & Sale Agreement (Subject To) & the revised Purchase & Sale Agreement (Buy).
The lesson is that Subject To isn't always the best deal.
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes3yI'm not aware of any legitimate websites that have these kinds of deals. It's my guess that if someone had these, they wouldn't put them on the internet, they'd buy them themselves.
Quote from @Andres Ruiz:
Thanks, all. Are there any sites you use to find owners open to subject to? or even seller financing? I recently found landwatch.com.
I buy mine "off market" by direct to seller contact. That seems to work the best. It's not hard to learn or perhaps have someone who is doing these feed you a few. They will charge something if it's a deal worth doing of course. Just depends on how much time you want to put into it. - Accountant · CPA Miami, FL · Member since 2022 · 192 posts · 43 votes3y
@Andres Ruiz, hi. There are over 20 very competent, real estate friendly CPA professionals/firms here in Biggerpockets working with clients remotely. Please reach out to one you feel is a better fit.
- Member since 2022 · 13 posts · 10 votes3y
Quote from @Fulton Abraham Sanchez:
@Andres Ruiz, hi. There are over 20 very competent, real estate friendly CPA professionals/firms here in Biggerpockets working with clients remotely. Please reach out to one you feel is a better fit.
Hi Fulton,
Did you suggest the CPA's to help with Sub To deals, or in general with accounting and tax services?
Thanks!
- Accountant · CPA Miami, FL · Member since 2022 · 192 posts · 43 votes3y
Quote from @Dan Panea:
Quote from @Fulton Abraham Sanchez:
@Andres Ruiz, hi. There are over 20 very competent, real estate friendly CPA professionals/firms here in Biggerpockets working with clients remotely. Please reach out to one you feel is a better fit.
Hi Fulton,
Did you suggest the CPA's to help with Sub To deals, or in general with accounting and tax services?
Thanks!
@Dan Panea, hi. I was suggesting to reach out to a CPA here in Biggerpockets to help with their real estate tax planning. DM me if you have any questions.
- Real Estate Agent · Ava, MO · Member since 2022 · 31 posts · 45 votes3y
Quote from @Andres Ruiz:
Thanks, all. Are there any sites you use to find owners open to subject to? or even seller financing? I recently found landwatch.com.
Hi Andres, I am a realtor in So MO and have started the brutal journey of cold calling. I don't know what it is, but I would rather chainsaw poison oak in booty shorts, but hey what doesn't kill you makes you stronger. I bought $500 in leads from a company called The Share Group. I tried calling other companies, but had a hard time communicating due to language barriers. I like The Share Group because they are a small US company and they constantly check up and are willing to update leads you didn't get to in a timely manner. I focused on absentee owners and distressed owners. Both of these classifications work great for potential creative financing deals. I have been only looking for listings as a real estate agent, but now I am going to start looking for creative financing deals as well. It ain't easy, but I have some really good leads, I also connected with another investor via cold calling, who is open to a future joint venture.
- Investor · Bay Area, CA · Member since 2022 · 22 posts · 19 votes3y
Quote from @Katherine Wiltse:
Quote from @Andres Ruiz:
Thanks, all. Are there any sites you use to find owners open to subject to? or even seller financing? I recently found landwatch.com.
Hi Andres, I am a realtor in So MO and have started the brutal journey of cold calling. I don't know what it is, but I would rather chainsaw poison oak in booty shorts, but hey what doesn't kill you makes you stronger. I bought $500 in leads from a company called The Share Group. I tried calling other companies, but had a hard time communicating due to language barriers. I like The Share Group because they are a small US company and they constantly check up and are willing to update leads you didn't get to in a timely manner. I focused on absentee owners and distressed owners. Both of these classifications work great for potential creative financing deals. I have been only looking for listings as a real estate agent, but now I am going to start looking for creative financing deals as well. It ain't easy, but I have some really good leads, I also connected with another investor via cold calling, who is open to a future joint venture.
Thanks, Katherine. That's helpful to know. Good luck on the leads. How is your market in MO doing?
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesWell 2 years ago it was BRRR this year its sub too.. I have personally done hundreds of these over the decades my dad started doing them in the late 70s when rate started to climb. then we sold them on wraps ALL inclusive Deed of Trust which is a CA specific document.
you will find it very difficult to land sub toos unless your working with distressed owners Generally speaking.. So this is why this strategy is coming up so much one because of why you want to do it taking over low interest loans and when markets start to have issues and owners have financial issues.
the KEY is finding sub too ANY EQUITY a lot of folks doing sub too will over pay just to land the mortgage to me thats not a good bizz model every deal we did could be flipped day one for a nice profit. other wise we passed. ITS very hard to do this stuff .. sophisticated sellers or any seller that talks to an attorney is going to have a hard time giving you title to their property but they remain on the loan.. thats your biggest hurdle. - Real Estate Agent · Ava, MO · Member since 2022 · 31 posts · 45 votes3y
Quote from @Andres Ruiz:
Quote from @Katherine Wiltse:
Quote from @Andres Ruiz:
Thanks, all. Are there any sites you use to find owners open to subject to? or even seller financing? I recently found landwatch.com.
Hi Andres, I am a realtor in So MO and have started the brutal journey of cold calling. I don't know what it is, but I would rather chainsaw poison oak in booty shorts, but hey what doesn't kill you makes you stronger. I bought $500 in leads from a company called The Share Group. I tried calling other companies, but had a hard time communicating due to language barriers. I like The Share Group because they are a small US company and they constantly check up and are willing to update leads you didn't get to in a timely manner. I focused on absentee owners and distressed owners. Both of these classifications work great for potential creative financing deals. I have been only looking for listings as a real estate agent, but now I am going to start looking for creative financing deals as well. It ain't easy, but I have some really good leads, I also connected with another investor via cold calling, who is open to a future joint venture.
Thanks, Katherine. That's helpful to know. Good luck on the leads. How is your market in MO doing?
Our small rural market is still strong. We have a price reduction in some areas, especially higher end properties, but overall it is holding. I attribute this to a consistent flow of out of state buyers (we are a red state and are a haven for political refugees ;) and we always have low inventory. I think low inventory is obviously due to a small population, but also much of the land is legacy ranches that are passed on to younger generations. So Mo is the new Florida! Lol. Sorta.
- Real Estate Agent · Ava, MO · Member since 2022 · 31 posts · 45 votes3y
Quote from @Jay Hinrichs:
Well 2 years ago it was BRRR this year its sub too.. I have personally done hundreds of these over the decades my dad started doing them in the late 70s when rate started to climb. then we sold them on wraps ALL inclusive Deed of Trust which is a CA specific document.
you will find it very difficult to land sub toos unless your working with distressed owners Generally speaking.. So this is why this strategy is coming up so much one because of why you want to do it taking over low interest loans and when markets start to have issues and owners have financial issues.
the KEY is finding sub too ANY EQUITY a lot of folks doing sub too will over pay just to land the mortgage to me thats not a good bizz model every deal we did could be flipped day one for a nice profit. other wise we passed. ITS very hard to do this stuff .. sophisticated sellers or any seller that talks to an attorney is going to have a hard time giving you title to their property but they remain on the loan.. thats your biggest hurdle.I appreciate your words of wisdom. I didn't understand how you would sell the sub-to using a wrap. I do understand the deed of trust...I think. It seems like what your saying is you would kinda wholesale the sub-to and transfer the loan as a wrap and the deed of trust is included to continue to protect the lender? If you have time would you explain that a little deeper? I am super thankful for all the golden nuggets!!
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Katherine Wiltse:
Quote from @Jay Hinrichs:
Well 2 years ago it was BRRR this year its sub too.. I have personally done hundreds of these over the decades my dad started doing them in the late 70s when rate started to climb. then we sold them on wraps ALL inclusive Deed of Trust which is a CA specific document.
you will find it very difficult to land sub toos unless your working with distressed owners Generally speaking.. So this is why this strategy is coming up so much one because of why you want to do it taking over low interest loans and when markets start to have issues and owners have financial issues.
the KEY is finding sub too ANY EQUITY a lot of folks doing sub too will over pay just to land the mortgage to me thats not a good bizz model every deal we did could be flipped day one for a nice profit. other wise we passed. ITS very hard to do this stuff .. sophisticated sellers or any seller that talks to an attorney is going to have a hard time giving you title to their property but they remain on the loan.. thats your biggest hurdle.I appreciate your words of wisdom. I didn't understand how you would sell the sub-to using a wrap. I do understand the deed of trust...I think. It seems like what your saying is you would kinda wholesale the sub-to and transfer the loan as a wrap and the deed of trust is included to continue to protect the lender? If you have time would you explain that a little deeper? I am super thankful for all the golden nuggets!!
google " all inclusive deed of Trust" its a California specific Deed of Trust.. .not sure how many states have adopted these but they came out in the late 70s early 80s in CA. read the document it will explain all. - 3yVarinder KumarPro MemberReal Estate Broker · LA & ORANGE COUNTY CA -Multi Family · Member since 2016 · 374 posts · 132 votes
like a cosigner lol
- Member since 2019 · 7 posts · 0 votes2yHey Jay, that makes sense if you plan on flipping but you can go higher on price if you are going to hold it for some time as a long, mid, or short term rental. As long as your strategy makes more than what you are paying, right? Also wanted to ask how does one go about taking over the loan payments. If the loan is still in the sellers name, does the buy just pay the seller and the seller pays the mortgage company? what if the seller stops making payments? Thanks in advance.
Quote from @Jay Hinrichs:
Well 2 years ago it was BRRR this year its sub too.. I have personally done hundreds of these over the decades my dad started doing them in the late 70s when rate started to climb. then we sold them on wraps ALL inclusive Deed of Trust which is a CA specific document.
you will find it very difficult to land sub toos unless your working with distressed owners Generally speaking.. So this is why this strategy is coming up so much one because of why you want to do it taking over low interest loans and when markets start to have issues and owners have financial issues.
the KEY is finding sub too ANY EQUITY a lot of folks doing sub too will over pay just to land the mortgage to me thats not a good bizz model every deal we did could be flipped day one for a nice profit. other wise we passed. ITS very hard to do this stuff .. sophisticated sellers or any seller that talks to an attorney is going to have a hard time giving you title to their property but they remain on the loan.. thats your biggest hurdle. - 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Dmitry Feldberg:
Hey Jay, that makes sense if you plan on flipping but you can go higher on price if you are going to hold it for some time as a long, mid, or short term rental. As long as your strategy makes more than what you are paying, right? Also wanted to ask how does one go about taking over the loan payments. If the loan is still in the sellers name, does the buy just pay the seller and the seller pays the mortgage company? what if the seller stops making payments? Thanks in advance.Quote from @Jay Hinrichs:
Well 2 years ago it was BRRR this year its sub too.. I have personally done hundreds of these over the decades my dad started doing them in the late 70s when rate started to climb. then we sold them on wraps ALL inclusive Deed of Trust which is a CA specific document.
you will find it very difficult to land sub toos unless your working with distressed owners Generally speaking.. So this is why this strategy is coming up so much one because of why you want to do it taking over low interest loans and when markets start to have issues and owners have financial issues.
the KEY is finding sub too ANY EQUITY a lot of folks doing sub too will over pay just to land the mortgage to me thats not a good bizz model every deal we did could be flipped day one for a nice profit. other wise we passed. ITS very hard to do this stuff .. sophisticated sellers or any seller that talks to an attorney is going to have a hard time giving you title to their property but they remain on the loan.. thats your biggest hurdle.
on a wrap you pay the seller and the seller makes his / her mortgage payments .. and if the seller stops paying the mortgage ( which can happen and then just pockets your payments) you have the right to cure under the provisions of the AITD.
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