Investor 路 Greenville, S.C. 路 Member since 2023 路 17 posts 路 11 votes
3 bed 2 bath with bonus room 2,000sqft in a nice "newer build" neighborhood, does have HOA but the exit strategy would be mid-term rental 30 day minimum which I already have experience in.
Current loan balance: $249K
Arrears: $8.8K
Seller receives: $5K at closing
Wholesaler receives: $5K at closing
Buyer pays closing costs (roughly $2.5K)
House is could use about $10K in repairs to be rent ready and I already have furniture in store to fully furnish from staging my flips. I'd spend probably another $1.5K to fully stock the house as a mid-term rental.
So, $249K balance + $20,000 cash to close and pay everyone, catch up arrears and closing costs. Brings you to about $270K to own the house but 8% cash needed to close and take over mortgage.
Monthly mortgage: $1,842.23/month
Interest rate: 2.75%
Lender: Movement Mortgage
Projected midterm gross revenue $5K/month at $167/night (focus is corporate housing & insurance claims NOT traveling nurses)
Total all in cost to reinstate, pay everyone involved and fix up the house = $30K + $249K balance = $279K
Lender 路 Charleston, SC 路 Member since 2019 路 1k+ posts 路 1k+ votes
1y
Not much margin if things dont work out. If the loan is accelerated or the HOA decides not to allow MTRs and you have to sell, you might take a haircut on the exit since your basis is 93-95% of the ARV. Also, is this a Conventional loan or a govt loan (FHA/VA)?
Last piece, I'm assuming this is a homeowner and not a for-profit owner. If so, you might be taking on a lot of legal risk. SC is actively hunting wholesalers who are skirting the new wholesaling law in order to make an example out of them. In this case, you may be involved a violation of this law by paying a wholesaler. I'd dig into this aspect if I was in your shoes to see where you fall with respect to this. If this homeowner files a complaint after the fact when they go to buy a home later and finds the original mortgage still exists, you could have serious problems.
3 bed 2 bath with bonus room 2,000sqft in a nice "newer build" neighborhood, does have HOA but the exit strategy would be mid-term rental 30 day minimum which I already have experience in.
Current loan balance: $249K
Arrears: $8.8K
Seller receives: $5K at closing
Wholesaler receives: $5K at closing
Buyer pays closing costs (roughly $2.5K)
House is could use about $10K in repairs to be rent ready and I already have furniture in store to fully furnish from staging my flips. I'd spend probably another $1.5K to fully stock the house as a mid-term rental.
So, $249K balance + $20,000 cash to close and pay everyone, catch up arrears and closing costs. Brings you to about $270K to own the house but 8% cash needed to close and take over mortgage.
Monthly mortgage: $1,842.23/month
Interest rate: 2.75%
Lender: Movement Mortgage
Projected midterm gross revenue $5K/month at $167/night (focus is corporate housing & insurance claims NOT traveling nurses)
Total all in cost to reinstate, pay everyone involved and fix up the house = $30K + $249K balance = $279K
House worth $300K - $310K today
What are your thoughts!?
What are the numbers if it is a long term rental? We also recommend pricing it based on worst case scenario as mid term rentals take more work and effort and not always come to fruition, epsecially if not being used as one and no track record
Investor 路 Greenville, S.C. 路 Member since 2023 路 17 posts 路 11 votes
1y
@Chris Seveney Yes, completely aware and that's definitely true. I'll be leaning on my experience I already have with underwriting, buying and executing profitable mid-term rentals. As a long term rental it breaks even. Which in my opinion, is still a great buy if break even is the lowest level of income considering rents will go up and value over time but that 2.75% mortgage will stay the same and get paid down.
Lender 路 Charleston, SC 路 Member since 2019 路 1k+ posts 路 1k+ votes
1y
Not much margin if things dont work out. If the loan is accelerated or the HOA decides not to allow MTRs and you have to sell, you might take a haircut on the exit since your basis is 93-95% of the ARV. Also, is this a Conventional loan or a govt loan (FHA/VA)?
Last piece, I'm assuming this is a homeowner and not a for-profit owner. If so, you might be taking on a lot of legal risk. SC is actively hunting wholesalers who are skirting the new wholesaling law in order to make an example out of them. In this case, you may be involved a violation of this law by paying a wholesaler. I'd dig into this aspect if I was in your shoes to see where you fall with respect to this. If this homeowner files a complaint after the fact when they go to buy a home later and finds the original mortgage still exists, you could have serious problems.
Investor 路 Greenville, S.C. 路 Member since 2023 路 17 posts 路 11 votes
1y
Great points! Thank you for taking the time to share!
I hire experienced Subject-to transaction coordinators from a mastermind I'm currently in.
With that is a bunch of seller disclosures clearly outlining the risks and that the loan is not being paid off and will still be attached to the seller, to answer your complaint concern. When subject-to is done correctly, you have the paperwork and signatures to protect you that the seller wasn't "taken advantage of" but agreed to this type of sale as it greatly benefited them from foreclosure.
The HOA allows rentals but in the event they change their mind, we have a creative backup plan for guests to be "owner occupants" temporarily while staying for several months.
If the loan is accelerated, we would deed the property back over to the seller and execute a contract for deed where we still maintain ownership but on paper it satisfies the bank's need for the borrower to be on title.
Also, if I truly had to sell the numbers are break even based on selling it without realtors, using a flat fee service that only charges $300 to be listed on the MLS, in a good neighborhood with high demand for housing here in Greenville and low inventory.
In my mind worst case scenario if I had to sell within 1 year or rent long-term the numbers are all break even but the longer I hold it the better the deal and the upside is much greater than break even risks.
3 bed 2 bath with bonus room 2,000sqft in a nice "newer build" neighborhood, does have HOA but the exit strategy would be mid-term rental 30 day minimum which I already have experience in.
Current loan balance: $249K
Arrears: $8.8K
Seller receives: $5K at closing
Wholesaler receives: $5K at closing
Buyer pays closing costs (roughly $2.5K)
House is could use about $10K in repairs to be rent ready and I already have furniture in store to fully furnish from staging my flips. I'd spend probably another $1.5K to fully stock the house as a mid-term rental.
So, $249K balance + $20,000 cash to close and pay everyone, catch up arrears and closing costs. Brings you to about $270K to own the house but 8% cash needed to close and take over mortgage.
Monthly mortgage: $1,842.23/month
Interest rate: 2.75%
Lender: Movement Mortgage
Projected midterm gross revenue $5K/month at $167/night (focus is corporate housing & insurance claims NOT traveling nurses)
Total all in cost to reinstate, pay everyone involved and fix up the house = $30K + $249K balance = $279K
House worth $300K - $310K today
What are your thoughts!?
. 1. Do you have enough money to pay for title, escrow, closing and property taxes, about $3,500 plus taxes? 2. Do you have enough money to give the seller the equity you've promised them? 3. Do you have enough money in the bank to make 6 months of payments if it's vacant? 4. Do you have the resources to refinance out of the SubTo if the Due on Sale is called? 5. Can you afford to repair the roof if it leaks or replace the HVAC if it breaks and do you have enough reserves to cover a broken pipe in an emergency?
You have to be able to answer those questions with a "yes" for the question you have to be the correct ones to ask.
Buying with no money down costs money. "consequence await those who ignore the law or ignore gravity". ';-)
1. Yes, that's what the private money partner's capital will be used for and have bought/closed many transactions with OPM.
2. Same answer as #1
3. Yes, having multiple streams of income and high income businesses helps for emergency debt service, which is very rare for the kinds of properties I buy but my income streams and businesses can very comfortably afford $1,800-$2K/month. My wholesaling real estate business alone generates around $10K/month with just me and a friend using our phone + computer texting with overall monthly expenses between $500-$700 on good niche lists. Mostly vacant land.
4. I would not refinance in this case, I would deed property back to seller and perform a contract for deed. I am also in a high level subject-to mentorship that teaches this in detail.
5. Yes, roof leaks aren't expensive when caught early and this isn't an old roof by any means. HVAC units can be financed easily through many HVAC companies and have done that 3 times already in my career and let the cash flow (essentially the tenant) pay off the HVAC. Broken pipes fall under home insurance if it's really an emergency, but have never had any of my properties do that as I only buy newer more well built homes. Of course it can happen but again, caught early, mitigate damage and move forward.
Investor 路 Greenville, S.C. 路 Member since 2023 路 17 posts 路 11 votes
1y
@Ken M. Trust me I am totally aware. Although, hopefully my answers to your questions can reassure you this isn't my first rodeo and I also have a great community in this subject as well 馃憤
1. Yes, that's what the private money partner's capital will be used for and have bought/closed many transactions with OPM.
2. Same answer as #1
3. Yes, having multiple streams of income and high income businesses helps for emergency debt service, which is very rare for the kinds of properties I buy but my income streams and businesses can very comfortably afford $1,800-$2K/month. My wholesaling real estate business alone generates around $10K/month with just me and a friend using our phone + computer texting with overall monthly expenses between $500-$700 on good niche lists. Mostly vacant land.
4. I would not refinance in this case, I would deed property back to seller and perform a contract for deed. I am also in a high level subject-to mentorship that teaches this in detail.
5. Yes, roof leaks aren't expensive when caught early and this isn't an old roof by any means. HVAC units can be financed easily through many HVAC companies and have done that 3 times already in my career and let the cash flow (essentially the tenant) pay off the HVAC. Broken pipes fall under home insurance if it's really an emergency, but have never had any of my properties do that as I only buy newer more well built homes. Of course it can happen but again, caught early, mitigate damage and move forward.
. Your comment: "4. I would not refinance in this case, I would deed property back to seller and perform a contract for deed. I am also in a high level subject-to mentorship that teaches this in detail." Sorry, that is very bad information. You should ask your mentor the specific properties he did that to and see what happened. Specific addresses and specific occurrences.
Last year one such mentor got 10 Due on Sale notices, tried that solution several times (the most popular mentor on youtube and instagram) but ended up having to find financing for 10 properties, very quickly. His word in his video. I checked, I have the addresses.
Can you do that? No? Didn't think so. He is full of half truths.
Deeding back can be an unlawful action, cause damage to the seller's credit, you can try to deed it back however the seller just sold it, why would he want the property back? If you deed it back, it is now his and you can't do a thing about it. The seller left town And you can't find him, now what do you do.
Deeding it back is a "Due on Sale action" You get the loan called, (once a "due on sale is called" there is no requirement on the lender to call off the foreclosure" you lose property insurance, incur transfer fees from the county, truly mess up someone's IRS reporting. Have you actually read a Due on Sale clause? I would suggest you do so. In the clause it says that "the intent to transfer ownership using "contract for deed'" violates the Due on Sale. It's pretty inclusive.
Your mentor is very wrong and the legal entanglement falls on the person doing the SubTo, not the trainer. The authorities don't "give a pass" to a poorly trained investor on this one. Too many people get hurt.
You mentor says it is for "entertainment" purposes only.
Word of wise advice to the newbie, ask an attorney in your area. But then, your mentor didn't tell you what questions to ask, now did he. Hmmm. That's a problem.
You can get your money back (and stay out of trouble) by contacting the Attorney General in your state. They are interested in you being repaid your money and not getting visited by them for other reasons.
Well, after all that, you will do what you will do. I do wish you well though.
Investor 路 Greenville, S.C. 路 Member since 2023 路 17 posts 路 11 votes
1y
A lot of assumptions here and think at this point we are moving away from a constructive conversation. No time for text battles, but I am more than happy to chat. Again, this is not my first Subto purchase 馃槑馃檹
A lot of assumptions here and think at this point we are moving away from a constructive conversation. No time for text battles, but I am more than happy to chat 706-814-2821. Again, this is not my first Subto purchase 馃槑馃檹
No problem, as I've said, I wish you well anyway.
You are obviously smarter than me, the guy who litigated this at the US Appellate level.
Lurkers, I know you are reading this, ask an attorney what to avoid when doing Subject To. That's all I ask. Oh and read the lawsuit here (hint: they didn't avoid . . .) what their mentor didn't know
3 bed 2 bath with bonus room 2,000sqft in a nice "newer build" neighborhood, does have HOA but the exit strategy would be mid-term rental 30 day minimum which I already have experience in.
Current loan balance: $249K
Arrears: $8.8K
Seller receives: $5K at closing
Wholesaler receives: $5K at closing
Buyer pays closing costs (roughly $2.5K)
House is could use about $10K in repairs to be rent ready and I already have furniture in store to fully furnish from staging my flips. I'd spend probably another $1.5K to fully stock the house as a mid-term rental.
So, $249K balance + $20,000 cash to close and pay everyone, catch up arrears and closing costs. Brings you to about $270K to own the house but 8% cash needed to close and take over mortgage.
Monthly mortgage: $1,842.23/month
Interest rate: 2.75%
Lender: Movement Mortgage
Projected midterm gross revenue $5K/month at $167/night (focus is corporate housing & insurance claims NOT traveling nurses)
Total all in cost to reinstate, pay everyone involved and fix up the house = $30K + $249K balance = $279K
House worth $300K - $310K today
What are your thoughts!?
Why not purchase it via assuming the mortgage?
There has been a whole lot of approvals happening with that nowadays. Keeps it simple.
3 bed 2 bath with bonus room 2,000sqft in a nice "newer build" neighborhood, does have HOA but the exit strategy would be mid-term rental 30 day minimum which I already have experience in.
Current loan balance: $249K
Arrears: $8.8K
Seller receives: $5K at closing
Wholesaler receives: $5K at closing
Buyer pays closing costs (roughly $2.5K)
House is could use about $10K in repairs to be rent ready and I already have furniture in store to fully furnish from staging my flips. I'd spend probably another $1.5K to fully stock the house as a mid-term rental.
So, $249K balance + $20,000 cash to close and pay everyone, catch up arrears and closing costs. Brings you to about $270K to own the house but 8% cash needed to close and take over mortgage.
Monthly mortgage: $1,842.23/month
Interest rate: 2.75%
Lender: Movement Mortgage
Projected midterm gross revenue $5K/month at $167/night (focus is corporate housing & insurance claims NOT traveling nurses)
Total all in cost to reinstate, pay everyone involved and fix up the house = $30K + $249K balance = $279K
House worth $300K - $310K today
What are your thoughts!?
Why not purchase it via assuming the mortgage?
There has been a whole lot of approvals happening with that nowadays. Keeps it simple.
. He can't prove income or reserves. He has not money. The bank wouldn't approve him. At least that's what he's telegraphing.
Because his is in (his words) "I am also in a high level subject-to mentorship that teaches this in detail." and spent all of his money joining the mentorship.
Investor 路 Greenville, S.C. 路 Member since 2023 路 17 posts 路 11 votes
1y
@James Hamling Hey James, thanks for posting but you may not agree with me here and that's okay, but as an investor we are always weighing out options. What's the easiest, most simplist and cheapest but most effective way to execute a transaction. It sounds "simpler" why not just assume the mortgage, but if you've explored that route, it requires much more paperwork, cost and quite frankly time that a seller doesn't have when it a foreclosure situation. The seller I'm buying this Subto from and honestly, all of my Subto purchases, have been in a tight time crunch and highly motivated position to work with someone with a creative mind who can execute a transaction quickly and the most simply. The "challenges" and concerns you hear about Subto do not weight out the benefits of Subto when done correctly in my opinion. Happy to chat more about it over the phone and give examples but love the question for sure!
@James Hamling Hey James, thanks for posting but you may not agree with me here and that's okay, but as an investor we are always weighing out options. What's the easiest, most simplist and cheapest but most effective way to execute a transaction. It sounds "simpler" why not just assume the mortgage, but if you've explored that route, it requires much more paperwork, cost and quite frankly time that a seller doesn't have when it a foreclosure situation. The seller I'm buying this Subto from and honestly, all of my Subto purchases, have been in a tight time crunch and highly motivated position to work with someone with a creative mind who can execute a transaction quickly and the most simply. The "challenges" and concerns you hear about Subto do not weight out the benefits of Subto when done correctly in my opinion. Happy to chat more about it over the phone and give examples but love the question for sure!
Myles, I understand if you hold a tinge of automatic defensiveness but my question in discussing was legitimately exactly that, just a question in discussing, not a hidden slight of any kind.
And you may be surprised to find myself as a more senior person within that exact SubTo community you keep referencing, FYI.
My question stands, as as of yet has not been legitimately answered; why not try a mortgage assumption first?
The time is a non-issue. That statement of yours on such only makes me question your motives here and your actual experience in foreclosures.
I have dealt with a plethora of foreclosure situations, over many many years. And in virtually every instance I was very easily and readily able to get the foreclosing entity to put a hold/freeze on everything.
It's a simple phone call, discussing situation and that I have the property under contract. From there I have found every bank I have ever worked with, big, small, microscopic, very receptive to working together to bring a positive end.
Because despite the tin-foil-hat-club's thoughts on it, finance entities don't want to take the property back, it's a giant pain in there azz.
SubTo is NOT some fit-all magic wand.
SubTo has some very legitimate MAJOR pitfalls, and risks.
SubTo is far more complex and complicated than a purchase with mortgage assumption, by a multiplication factor.
SubTo has it's place, there is a place for it, and that place is FAR from being the 1st go-to transaction tool.
I notice you employ the use of the strategic "in my opinion". So I will clarify, my "opinions" above are formed & supported by the facts of multitudes of transactions, not feelings.
If I come off a bit annoyed it's because I am.
The now clear and obvious click-bait of this post, not being written as any legitimate question but as a quazi promotion of self or SubTo is annoying.
The assumption of general superiority and talking down to persons is annoying.
3 bed 2 bath with bonus room 2,000sqft in a nice "newer build" neighborhood, does have HOA but the exit strategy would be mid-term rental 30 day minimum which I already have experience in.
Current loan balance: $249K
Arrears: $8.8K
Seller receives: $5K at closing
Wholesaler receives: $5K at closing
Buyer pays closing costs (roughly $2.5K)
House is could use about $10K in repairs to be rent ready and I already have furniture in store to fully furnish from staging my flips. I'd spend probably another $1.5K to fully stock the house as a mid-term rental.
So, $249K balance + $20,000 cash to close and pay everyone, catch up arrears and closing costs. Brings you to about $270K to own the house but 8% cash needed to close and take over mortgage.
Monthly mortgage: $1,842.23/month
Interest rate: 2.75%
Lender: Movement Mortgage
Projected midterm gross revenue $5K/month at $167/night (focus is corporate housing & insurance claims NOT traveling nurses)
Total all in cost to reinstate, pay everyone involved and fix up the house = $30K + $249K balance = $279K
House worth $300K - $310K today
What are your thoughts!?
Why not purchase it via assuming the mortgage?
There has been a whole lot of approvals happening with that nowadays. Keeps it simple.
. He can't prove income or reserves. He has not money. The bank wouldn't approve him. At least that's what he's telegraphing.
Because his is in (his words) "I am also in a high level subject-to mentorship that teaches this in detail." and spent all of his money joining the mentorship.
While ya-give me a bit of a chuckle Ken, I don't think that's true in this case.
I think he is fishing for recruits. Persons he can get DM's from to then bring into the "community" and gain a commission on. Or sell his own education/mentorship to. That's how it all smells to me.
And we all know only the best quality products and services sell themselves through roundabout guise....... Or NOT.....
3 bed 2 bath with bonus room 2,000sqft in a nice "newer build" neighborhood, does have HOA but the exit strategy would be mid-term rental 30 day minimum which I already have experience in.
Current loan balance: $249K
Arrears: $8.8K
Seller receives: $5K at closing
Wholesaler receives: $5K at closing
Buyer pays closing costs (roughly $2.5K)
House is could use about $10K in repairs to be rent ready and I already have furniture in store to fully furnish from staging my flips. I'd spend probably another $1.5K to fully stock the house as a mid-term rental.
So, $249K balance + $20,000 cash to close and pay everyone, catch up arrears and closing costs. Brings you to about $270K to own the house but 8% cash needed to close and take over mortgage.
Monthly mortgage: $1,842.23/month
Interest rate: 2.75%
Lender: Movement Mortgage
Projected midterm gross revenue $5K/month at $167/night (focus is corporate housing & insurance claims NOT traveling nurses)
Total all in cost to reinstate, pay everyone involved and fix up the house = $30K + $249K balance = $279K
House worth $300K - $310K today
What are your thoughts!?
Why not purchase it via assuming the mortgage?
There has been a whole lot of approvals happening with that nowadays. Keeps it simple.
. He can't prove income or reserves. He has not money. The bank wouldn't approve him. At least that's what he's telegraphing.
Because his is in (his words) "I am also in a high level subject-to mentorship that teaches this in detail." and spent all of his money joining the mentorship.
While ya-give me a bit of a chuckle Ken, I don't think that's true in this case.
I think he is fishing for recruits. Persons he can get DM's from to then bring into the "community" and gain a commission on. Or sell his own education/mentorship to. That's how it all smells to me.
And we all know only the best quality products and services sell themselves through roundabout guise....... Or NOT.....
Investor 路 Greenville, S.C. 路 Member since 2023 路 17 posts 路 11 votes
1y
@James Hamling I offer my phone number because talking on the phone often avoids these kinds of misunderstandings. I'm not click baiting or fishing for anything. I knew a post like this would open up dialogue of great questions and answers and discussion for others to learn from.
it unfortunately has turned into a couple of guys who feel they are "right" rather than offering your opinion on whether you would buy that deal or not. I never asked to get into why you would use another strategy.
sorry you feel the way you do but if you can't have cordial dialogue about real estate questions and discussion, maybe just don't leave comments.
@James Hamling I offer my phone number because talking on the phone often avoids these kinds of misunderstandings. I'm not click baiting or fishing for anything. I knew a post like this would open up dialogue of great questions and answers and discussion for others to learn from.
it unfortunately has turned into a couple of guys who feel they are "right" rather than offering your opinion on whether you would buy that deal or not. I never asked to get into why you would use another strategy.
sorry you feel the way you do but if you can't have cordial dialogue about real estate questions and discussion, maybe just don't leave comments.
. You're new here so, welcome. However, be aware you are a few years late in entering into SubTo discussions No, you're not going to hurt @James Hamlingfeelings.
It's just a lot of guys like you have come and gone and some wind up like this . . .
@James Hamling Hey James, thanks for posting but you may not agree with me here and that's okay, but as an investor we are always weighing out options. What's the easiest, most simplist and cheapest but most effective way to execute a transaction. It sounds "simpler" why not just assume the mortgage, but if you've explored that route, it requires much more paperwork, cost and quite frankly time that a seller doesn't have when it a foreclosure situation. The seller I'm buying this Subto from and honestly, all of my Subto purchases, have been in a tight time crunch and highly motivated position to work with someone with a creative mind who can execute a transaction quickly and the most simply. The "challenges" and concerns you hear about Subto do not weight out the benefits of Subto when done correctly in my opinion. Happy to chat more about it over the phone and give examples but love the question for sure!
Myles, I understand if you hold a tinge of automatic defensiveness but my question in discussing was legitimately exactly that, just a question in discussing, not a hidden slight of any kind.
And you may be surprised to find myself as a more senior person within that exact SubTo community you keep referencing, FYI.
My question stands, as as of yet has not been legitimately answered; why not try a mortgage assumption first?
The time is a non-issue. That statement of yours on such only makes me question your motives here and your actual experience in foreclosures.
I have dealt with a plethora of foreclosure situations, over many many years. And in virtually every instance I was very easily and readily able to get the foreclosing entity to put a hold/freeze on everything.
It's a simple phone call, discussing situation and that I have the property under contract. From there I have found every bank I have ever worked with, big, small, microscopic, very receptive to working together to bring a positive end.
Because despite the tin-foil-hat-club's thoughts on it, finance entities don't want to take the property back, it's a giant pain in there azz.
SubTo is NOT some fit-all magic wand.
SubTo has some very legitimate MAJOR pitfalls, and risks.
SubTo is far more complex and complicated than a purchase with mortgage assumption, by a multiplication factor.
SubTo has it's place, there is a place for it, and that place is FAR from being the 1st go-to transaction tool.
I notice you employ the use of the strategic "in my opinion". So I will clarify, my "opinions" above are formed & supported by the facts of multitudes of transactions, not feelings.
If I come off a bit annoyed it's because I am.
The now clear and obvious click-bait of this post, not being written as any legitimate question but as a quazi promotion of self or SubTo is annoying.
The assumption of general superiority and talking down to persons is annoying.
my question is how realistic is 5k a month for a MTR on a 300k house.. I get 4200.00 mtr on a 700k house in Vegas and I have to think Vegas maybe a little higher.. just seems like 5k a month in that area might be a tad high.. Of course I dont know for sure just asking.
@James Hamling Hey James, thanks for posting but you may not agree with me here and that's okay, but as an investor we are always weighing out options. What's the easiest, most simplist and cheapest but most effective way to execute a transaction. It sounds "simpler" why not just assume the mortgage, but if you've explored that route, it requires much more paperwork, cost and quite frankly time that a seller doesn't have when it a foreclosure situation. The seller I'm buying this Subto from and honestly, all of my Subto purchases, have been in a tight time crunch and highly motivated position to work with someone with a creative mind who can execute a transaction quickly and the most simply. The "challenges" and concerns you hear about Subto do not weight out the benefits of Subto when done correctly in my opinion. Happy to chat more about it over the phone and give examples but love the question for sure!
Myles, I understand if you hold a tinge of automatic defensiveness but my question in discussing was legitimately exactly that, just a question in discussing, not a hidden slight of any kind.
And you may be surprised to find myself as a more senior person within that exact SubTo community you keep referencing, FYI.
My question stands, as as of yet has not been legitimately answered; why not try a mortgage assumption first?
The time is a non-issue. That statement of yours on such only makes me question your motives here and your actual experience in foreclosures.
I have dealt with a plethora of foreclosure situations, over many many years. And in virtually every instance I was very easily and readily able to get the foreclosing entity to put a hold/freeze on everything.
It's a simple phone call, discussing situation and that I have the property under contract. From there I have found every bank I have ever worked with, big, small, microscopic, very receptive to working together to bring a positive end.
Because despite the tin-foil-hat-club's thoughts on it, finance entities don't want to take the property back, it's a giant pain in there azz.
SubTo is NOT some fit-all magic wand.
SubTo has some very legitimate MAJOR pitfalls, and risks.
SubTo is far more complex and complicated than a purchase with mortgage assumption, by a multiplication factor.
SubTo has it's place, there is a place for it, and that place is FAR from being the 1st go-to transaction tool.
I notice you employ the use of the strategic "in my opinion". So I will clarify, my "opinions" above are formed & supported by the facts of multitudes of transactions, not feelings.
If I come off a bit annoyed it's because I am.
The now clear and obvious click-bait of this post, not being written as any legitimate question but as a quazi promotion of self or SubTo is annoying.
The assumption of general superiority and talking down to persons is annoying.
my question is how realistic is 5k a month for a MTR on a 300k house.. I get 4200.00 mtr on a 700k house in Vegas and I have to think Vegas maybe a little higher.. just seems like 5k a month in that area might be a tad high.. Of course I dont know for sure just asking.
My opinion, as a person who does both corporate and insurance MTR's, the juice isn't woth the squeeze.
In theory, yes one could get $5k mnth on a $300k home, or more, I have. But, and a BIG but, your getting paid for the actualy property and then for the furnishings.
So now your in the furnishing rental biz too. And that's how it goes. It's not like STR. You get so many requests and changes on furnishing that like I said, the juice isn't worth the squeeze.
What I do now is I lease the property and just connect the tenant with CORT, which is a furnishing rental biz.
The rents I get, it's a fantasy to think one get's 2X market rents or something crazy like that, not how it works. Maybe 120%, maybe.
I have done many of these and have a history and track record so I tend to get "premium" but even that isn't anything worth bragging, it's rather minimal.
@James Hamling I offer my phone number because talking on the phone often avoids these kinds of misunderstandings. I'm not click baiting or fishing for anything. I knew a post like this would open up dialogue of great questions and answers and discussion for others to learn from.
it unfortunately has turned into a couple of guys who feel they are "right" rather than offering your opinion on whether you would buy that deal or not. I never asked to get into why you would use another strategy.
sorry you feel the way you do but if you can't have cordial dialogue about real estate questions and discussion, maybe just don't leave comments.
Why is it a go-to of the Sub-To-Kool-aid-Brigade to (a) ask a question (b) argue the answers on feelings vs facts (c) tell people who don't agree or have undeniable counter-facts to not post unless the post will be in agreeance ????
That's not how this or BP works.
I asked a very simple, and very legitimate question of why not do a purchase with mortgage assumption.
You replied with non-sense. That it's in a foreclosure status and blah-blah-blah.
Truth and fact's are one can very easily get a foreclosure process PAUSED to allow a transaction to go through. I know because I have done this many times. It's not hard, or rare or unique, it's normal.
You use pie in the sky perfect case scenarios for revenue production. For transaction forecast, for this that n the other.
Those are the exact "deals" and people we have seen time and time again have everything blow-up in there face.
Your mentioning to use wildly high levels of leverage, that blows-up in peoples faces all the time.
So your asking us Miles if it's a "good deal" to go tap dancing in a mine-field while juggling hand-grenades.......
Look, anyone who would even entertain such a venture has already decided there gonna do it anyways so why are you wasting everyone's time even asking?
I get it, you wholesale (sell) these deals and want to drum up interest and thought this was best approach.
It's not.
Just keep things real.
SubTo is a bit shady a thing, it is, that's just a fact, so suck it up that others call it out and state there dislike of it for that fact. Don't try the garbage of saying how safe and secure SubTo is because it's NOT, that's just reality.
Do some get away with it, even "many", sure but it changes nothing of the fact. Due On Sales is an ax hovering over the neck at all times and all the other negative potentials that circle around it. These things are real, they can and do happen.
Is there ways to do SubTo "more right" and "more wrong", heck yeah. But there is no way to do it 100% safe and secure, that's just a fact.
Hence why one should first explore other options that ARE free of such risks, like a purchase with mortgage assumption. Or a Contract For Deed.
Those who do not have the capital reserves IN HAND to readily clear that mortgage interest, should NOT ever do a SubTo - FULL STOP.
No, you CAN'T reply on ability to finance out. What if property value drops 20% from what you thought it was? Or worse. Yeah, that's a very real risk.
Especially for fact most being done are being purchase ABOVE market value, because if under market value that seller could have just sold at market in a normalized way, cleared the foreclosure and took the overage to the bank to pay for next place. I have NEVER seen anyone give up the $20k, $50k, $100k+ net+ they could get at regular sale to instead SubTo it...... Not 1 ever.
So the risk of being underwater and over-leveraged is generally the standing from start. That's not a place that lends opportunity to finance out.
Now in Commercial, SubTo is a whole different world and rather normal actually.
But in Residential..... It's far from the magic-wand all too many want to propagandize it as.
Lender 路 Asheville, NC 路 Member since 2016 路 1k+ posts 路 1k+ votes
1y
Hi, Myles - a couple of thoughts for you: First, have you take into consideration South Carolina's property taxes for non-owner occupied properties? If you're using the current property taxes to underwrite your deal you're going to need to 3x that approximately. They are exceptionally high for non-owner occupied properties. This might not come up because you're doing sub-to, but it certainly may and definitely will if you have to refinance it or end up selling to an investor.
Second, $5k/month in Greenville for a 3/2 sounds like best case scenario but not a number I'd use for my underwriting. I personally underwrite conservatively for MTRs, using 1.5x - 2x long term rents. You may get those highly coveted insurance placements but I'd want to really understand the demand before using that as the baseline for my underwriting.
Hi, Myles - a couple of thoughts for you: First, have you take into consideration South Carolina's property taxes for non-owner occupied properties? If you're using the current property taxes to underwrite your deal you're going to need to 3x that approximately. They are exceptionally high for non-owner occupied properties. This might not come up because you're doing sub-to, but it certainly may and definitely will if you have to refinance it or end up selling to an investor.
Second, $5k/month in Greenville for a 3/2 sounds like best case scenario but not a number I'd use for my underwriting. I personally underwrite conservatively for MTRs, using 1.5x - 2x long term rents. You may get those highly coveted insurance placements but I'd want to really understand the demand before using that as the baseline for my underwriting.
This is my favorite response because it answers the question asked. It addresses the underwriting and assumptions about whether this is a DEAL or not. Thanks for providing context on non-owner-occupied properties, @Bonnie Low
Investor 路 Greenville, S.C. 路 Member since 2023 路 17 posts 路 11 votes
1y
@Caleb Christopher exactly!! I never said I was closing on this deal but merely a deal I was looking at and thought it would be a great discussion on why someone would or wouldn't close on to help reveal all kinds of different perspectives. I'm sure there is a ton of value here in the Bigger Pockets forum but definitely seems like unfortunately growth in numbers has been the baseline rather than upholding a positive and helpful culture. Thanks Bonnie! I make sure that all of my underwriting takes in account the lowest level of income being long-term rentals and even worst case if it had to sit vacant for 3-6 months, but love that you shared such great insight! This was a post to encourage positive discussion not assumptions and ego. You rock!
@Caleb Christopher exactly!! I never said I was closing on this deal but merely a deal I was looking at and thought it would be a great discussion on why someone would or wouldn't close on to help reveal all kinds of different perspectives. I'm sure there is a ton of value here in the Bigger Pockets forum but definitely seems like unfortunately growth in numbers has been the baseline rather than upholding a positive and helpful culture. Thanks Bonnie! I make sure that all of my underwriting takes in account the lowest level of income being long-term rentals and even worst case if it had to sit vacant for 3-6 months, but love that you shared such great insight! This was a post to encourage positive discussion not assumptions and ego. You rock!
I'm not really sure why the conversation went so sideways but there are certain subjects that trigger very strong opinions. Generally, I think people are just trying to be helpful. I'm glad I could be anyway.
@Caleb Christopher exactly!! I never said I was closing on this deal but merely a deal I was looking at and thought it would be a great discussion on why someone would or wouldn't close on to help reveal all kinds of different perspectives. I'm sure there is a ton of value here in the Bigger Pockets forum but definitely seems like unfortunately growth in numbers has been the baseline rather than upholding a positive and helpful culture. Thanks Bonnie! I make sure that all of my underwriting takes in account the lowest level of income being long-term rentals and even worst case if it had to sit vacant for 3-6 months, but love that you shared such great insight! This was a post to encourage positive discussion not assumptions and ego. You rock!
I'm not really sure why the conversation went so sideways but there are certain subjects that trigger very strong opinions. Generally, I think people are just trying to be helpful. I'm glad I could be anyway.
. I don't think for most people it's a question of whether Subject To is legal. When done legally.
But the way it is thrown around like the poor man's solution to wealth regardless of the ability to make the payments and regardless of the consequences to the seller, are what set people off. (This is not directed at the original poster, in fact it has nothing to do with him at all.)
Because of the endless posts on the subject and the obvious attempt by a guru on Facebook to get people directed to his Facebook page, people get tired of it.
It comes across as "Is this the proper way to rob an Ice Cream truck"? "No, ? " "Well I found just the guy who knows (for $12,000) how to "Rob Ice Cream trucks". "He's over at . . . "
He has performed over 10,000 transactions here in Texas. I would love to invite you to one our meetings to discuss your opinions. Scott Horne, licensed attorney in Texas, performs contract for deed. If an attorney is executing these contracts, I don't see them being illegal/he would have been censured already. DM if you want to talk, I live in Sequin Tx and always come down to San Antonio.
He has performed over 10,000 transactions here in Texas. I would love to invite you to one our meetings to discuss your opinions. Scott Horne, licensed attorney in Texas, performs contract for deed. If an attorney is executing these contracts, I don't see them being illegal/he would have been censured already. DM if you want to talk, I live in Sequin Tx and always come down to San Antonio.
My Comment: "I don't think for most people it's a question of whether Subject To is legal. When done legally." In your argument you say "Scott Horne, licensed attorney in Texas, performs contract for deed."
Unfortunately, you seem to Not Know that "Subject To" and "Contract for Deed" are two entirely different things.
Your reasoning and information are seriously flawed. Your lack of attention to detail will, not might, but will get you into trouble with creative finance.
It's like me saying that "Butterflies fly through the air" and you respond with "But jellyfish sometimess sting" It's not related and it's incomprehensible.
Contract for Deed is executed when Due On Sale is triggered by the bank. Scott Horne and his team help execute this.
Subject to is (a) strategy I use to acquire properties.
Contract for Deed is an executory contract that violates the Due on Sale clause. Ask your banker or attorney.
19. Transfer of the Property or a Beneficial Interest in Borrower. For purposes of this Section 19 only, "Interest in the Property" means any legal or beneficial interest in the Property, including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract, or escrow agreement, the intent of which is the transfer of title by Borrower to a purchaser at a future date.
If all or any part of the Property or any Interest in the Property is sold or transferred (or if Borrower is not a natural person and a beneficial interest in Borrower is sold or transferred) without Lender's prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument. However, Lender will not exercise this option if such exercise is prohibited by Applicable Law.
I have no idea who Scott Horne is. ;-) But, he should actually read the Due on Sale clause before he passes on more bad information.
Contract for Deed is executed when Due On Sale is triggered by the bank. Scott Horne and his team help execute this.
Subject to is (a) strategy I use to acquire properties.
that wont stop a lender/note holder from following through with the Alienation clause that is in almost all mortgage/deeds of trust.. your getting some bad advice.. sub to is fine but you do need to be able to refi or payoff in the unlikely event of a water landing.. nothing else will stop the foreclsoure action and if it starts teh people you bought it from are going to be very Peeved as their credit is going to get trashed..thats why its just plain stupid for most sellers to sell sub to if their credit is at risk.
