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Joel Di Piazza
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Joel Di Piazza's profile image
Joel Di Piazza
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"Subject to" Mythological or Legendary strategy???

Joel Di Piazza
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Posted Aug 31 2023, 05:51

Hello all, 

I know in my own research that subject to is legit strategy. I have seen the pros and cons of it throughout my own research. I have found that there is always missing pieces to the puzzle and not everything is explained. And found out that to get those missing pieces you need to pay someone to provide those missing pieces weather it is a mentor or an attorney.

I have seen a few posts on the forum regarding this "Subject to" financing as well those who teach it. Everyone does a great job explaining what subject to is and how it works. And those who mentor the strategy and how great that is.  What I found most interesting is that those who spoke of the mentors only spoke that the money they paid was well worth it and even would have paid more. But when people who were curious or even skeptical, asked about deals they had done or money they had made on Subject to or from that mentorship. No responses were given just how great the mentorship was. RED FLAG in my mind.

I have been told that this strategy is legal, but it requires almost the perfect storm to work. And a lot is to be weighed on the sellers and buyers mind (legal issues). Now this isn't a bad thing but not great for beginners, I think. For an investing giant that can employ numerous mentees to do all the calling and researching for them it is a great thing. especially when your mentees are paying you to work for you. 

So, as I have been given input and advice by my BP connections (Thank You). I thought it would be a good idea to get a take from those who read this post what you think. Is this a tried and trusted strategy? Or is this just a way for the big-time investors to double dip, making money not only on the acquired real estate but having mentee's pay them to do all the dirty work for them?

***These are my thoughts, not yours.*** (Barrowed from DH)

What do you think?

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Mike Hern
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Mike Hern
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Mike Hern
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Replied Aug 31 2023, 09:34
Quote from @Joel Di Piazza:

Hello all, 

I

I have been told that this strategy is legal, but it requires almost the perfect storm to work. And a lot is to be weighed on the sellers and buyers mind (legal issues). Now this isn't a bad thing but not great for beginners, I think. For an investing giant that can employ numerous mentees to do all the calling and researching for them it is a great thing. especially when your mentees are paying you to work for you. 

Or is this just a way for the big-time investors to double dip, making money not only on the acquired real estate but having mentee's pay them to do all the dirty work for them?

***These are my thoughts, not yours.*** (Barrowed from DH)

What do you think?

I've bought using only Subject To for over 25 years. It's real, but yes, you do need to know what you are doing.
Plenty of people teach it recklessly, either because they don't actually understand what's involved or because it's much simpler to get people to pay for training, if you DON'T fully disclose the downside.

You are perceptive that for most "trainers" it's simply a "double dip". The trainer will use the trainee to simply bird dog for them and then take the deal themselves. Very unfortunate for the trainee. That shouldn't be a business model. 

When I train people on Subject To, we actually go over court cases and what got people sued and how to stay out of court. We go over Asset protection, tax write-offs, exit strategies, systems, procedures, contracts & deeds, title, escrow, how to approach people and so on. All very necessary, to be legal and to succeed. I think that's kinda important.

Subject To is a powerful tool, when it benefits each party and is done legally and thoughtfully. I cringe when I see posts of people simply asking for a copy of the contract to do a Subject To. They are asking for bullets to a rifle they just found and are skipping the firearms safety training. A lot of Subject To training is no better.

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ModeratorReplied Aug 31 2023, 09:54

@Jeff Stephens is the master of seller financing

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Replied Aug 31 2023, 10:01

As Mike mentioned we have the same experience my dad was doing sub too and wraps in the late 70s and 80s so thats were I learned the ins and outs.

One needs to define the end goal .. in our case it was not to build a rental portfolio it was to gain equity that could be sold in 1 to 2 years for a nice profit.

the main thing is its much tougher to do than it sounds.. the concepts are simple enough.

and there is a huge difference in buying sub too and flipping and paying off the mortgage in a year or two than thinking your going to hold title with someone else mortgage for 10 or 20 years. 

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Mike Hern
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Replied Aug 31 2023, 13:03
Quote from @Mike Hern:
Quote from @Joel Di Piazza:

Hello all, 

I have been told that this strategy is legal, but it requires almost the perfect storm to work. 

What do you think?

I've bought using only Subject To for over 25 years. It's real, but yes, you do need to know what you are doing.
Plenty of people teach it recklessly, either because they don't actually understand what's involved or because it's much simpler to get people to pay for training, if you DON'T fully disclose the downside.

You are perceptive that for most "trainers" it's simply a "double dip". The trainer will use the trainee to simply bird dog for them and then take the deal themselves. Very unfortunate for the trainee. That shouldn't be a business model. 

When I train people on Subject To, we actually go over court cases and what got people sued and how to stay out of court. We go over Asset protection, tax write-offs, exit strategies, systems, procedures, contracts & deeds, title, escrow, how to approach people and so on. All very necessary, to be legal and to succeed. I think that's kinda important.

Subject To is a powerful tool, when it benefits each party and is done legally and thoughtfully. I cringe when I see posts of people simply asking for a copy of the contract to do a Subject To. They are asking for bullets to a rifle they just found and are skipping the firearms safety training. A lot of Subject To training is no better.

When I work with students to teach then creative finance like Subject To, there is actually an interview phase first.

Any “course” that accepts everybody, is playing games with the student and the student is likely wasting their money. There is a high failure rate in those "courses."

The student has to understand that they are dealing with other people's lives and credit. That means responsibility.

The student can't be broke. This is not a "no money needed" technique. 

Hiding the transfer of ownership in a Trust "to avoid the due on sale clause" is very foolish.

If they take over someone's financing, they have to pay that mortgage every month, even if there is no rent coming in. So, the student has to have their regular life in order, financially, first.

And to qualify, they need to be able to devote some time to the process, have a work ethic and be in it for the long haul. Otherwise, what’s the point?

I actually help them find the property, so they learn the process "hand's on" and they keep the property. Learning the processes isn't delegated to a "group forum", or "team member". Rather than focusing on being "part of a community, the point is to buy properties, not gossip. You can join a REIA for $20 a month, to be "part of a community" if that's what you want.

Any properties bought are going to be theirs and they need to be taught how to manage creative financing, as well as acquire by creative financing.

Make sure anybody you learn from has the same criteria, so you have a successful experience and don’t get sued and actually buy properties. ;-)

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Caleb Christopher
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Replied Oct 19 2023, 08:50

I started a company to put up some guardrails on these types of deals. I did my first one on my own for lack of good guidance/resources, and it was a nightmare. We got it done, but I resolved from that point that someone needed to be a lighthouse to keep other ships from crashing on the rocks!

I now run 50+ subto, wrap, and seller finance deals per month for buyers/sellers/agents and we're constantly correcting errors and misunderstandings. 

My thoughts: Yeah it's exciting and great to expand your horizons with creative finance, but you also need an experienced guide, whether that's a JV partner or paid consultant. Title companies and closing attorneys can not be trusted to understand the full implications, as their focus is to close the file... After COE, it's your problem, not theirs.