Subject To and Lease Option investing in Arizona

9 Replies

Originally posted by @Roderick Spiller :

I’m a new real estate investor in the state of Arizona, and I’m trying to find out how to work a subject To and lease option deal from start to finish which won’t violate any Arizona laws.

 That's kind of like saying "I want to build a car, can someone tell me what parts I need?" Sure, but when you have the list what do you do next?

Give us an idea of what you want to accomplish, what you know about real estate, contracts, financing, and why you picked Subject To and Lease Options. I'd be happy to help, I just don't know enough about what your goal is.

That's kind of like saying "I want to build a car, can someone tell me what parts I need?" Sure, but when you have the list what do you do next?

Give us an idea of what you want to accomplish, what you know about real estate, contracts, financing, and why you picked Subject To and Lease Options. I'd be happy to help, I just don't know enough about what your goal is.

I do not want to be a Deadhead anymore. Yes, this is a word I thought I made up, but I Googled it about a month ago and found out it's a word with the meaning that I thought it meant. Google it and see for yourself. I'm surrounded by Deadheads all day long at my job, and they only have one thought and that's to be all they can be for the company that's screwing us all. I swear at times I feel like I'm in junior high school. If you do a good job, you're called a top performer, and you get a certificate. It's like getting a pat on your head and a gold star on your paper from your teacher. People perk up with their corporate smiles that make them look like the Joker from the Batman comics. However, I know their stressed from using all of their intellect to solve problems for a company that doesn't care about them. I asked my supervisor as a joke last Friday if she'll be at work on Saturday, and she said yes. I almost feel out of my chair. She said she was going to work 6 hours which is 2 hours short of a full day, and she wasn't going to get paid for working the time, because supervisors aren't paid overtime. I just wanted to yell in her ears. Go create your own wealth!!! If you're going to be stressed like this, you might as well have the opportunity to obtain an unlimited income. What I've learned is that employees don't understand time and money, and they don't see the future. I asked a few people even my supervisor what they do other than working here, and they said nothing. My supervisor even described herself as a Deadhead. She didn't call herself a Deadhead, but she what she told me about herself was the definition of a Deadhead. Companies aren't in the business of making employees wealthy, and they don't care about what employees will live on in retirement. They want to use an employee's time to create their wealth, so their families are taken care of.

I have to be honest. Even though I say this about people, I'm one of them too, but it's by choice with me, because I need benefits for me and my son. However, I still feel my mind has been freed from the shackles of the corporate world for years. I felt it was freed when my wife and I bought the Ron Legrand course back in 2000 or 2001. Listening to the courses and traveling to the venues he had in Dallas and Orlando helped me more so than my wife with my real estate knowledge, and I say me more so than my wife, because she introduced me to real estate when we began dating in 1999. I didn't know what I wanted to do with my life right out of college, but her introducing me to real estate helped me to see that there was a financial salvation. However, we were never able to fully pursue real estate the way we planned after our marriage in 2001, because as the years passed from 2000 or 2001 to 2012 we always let other things get in the way (Deadheads), and that was our fault. My wife became sick in 2012, and I didn't care anything about real estate at that point. It just kept my head down and continued working in corporate America coming into work tired everyday fearful of losing my job in order to take care of her. She continued even in her illness to study real estate. She passed away last year, and while going through the papers she left behind, I saw that she was studying Subject To and Lease Option. I want to do this in her memory as well as solve problems for sellers and buyers. I know they're hurting as much as I am, and I want to help alleviate their pain. I remember very little about Subject To and Lease Option from the days of Ron Legrand, but that won't matter anyway, because I'm sure some changes taken place with how it's done as well as with the laws in Arizona.

I need to learn Subject To and Lease Option step by step from setting up my business to closing a deal with a seller and buyer. I will tell you in a bit what I know or think I know so far, but I want to say this first. I have a family member who will loan me money to start set up my LLC as well as for other things, but they will not under any circumstances loan me money to purchase more education due to all the education my late wife and I have already purchased, and they check my purchases. Yes, there was more than just Ron Legrand. Now, this is what I know or think I know. First, I know I need to know the laws in Arizona for doing Subject To and Lease Option. Is there a way to find that out for free? Next, I think I need to set up an LLC, and I say I think I need to set up an LLC, because there's also S Corp, C Corp, Sole Proprietor and maybe more that I don't know about. I need to know which is the best for doing Subject To and Lease Option. I know I can set an LLC, S Corp, C Corp, Sole Proprietor or whatever with Legal Zoom. After the LLC, S Corp, C Corp, Sole Proprietor or whatever is set up with Legal Zoom, I think what I should do next is get a business bank account and a mailbox for business mail. Next, I think I need to market to buyers for free, and I know I can market through Craigslist. Next, I need to market for buyers the same way. I know I can also call Zillow listings for buyers and sellers. Now here is where I have the problem. I need to know how to talk to a seller or buyer while filling out a contract. I need to make sure all the paperwork is filed and filled out in the correct places and in a timely manner. I need to know how to read a title. I need to know if any minor repairs need to be done, because if I'm doing Subject To and Lease Option, the house repairs from what I've been told should be minimal to no existent. If repairs need to be done, who should pay for them. I need to know how to transition the seller out of the house, so I can put in a tenant buyer and know eviction laws in case I need to evict the tenant buyer which I hear is rare when doing Subject To and Lease Option. There are probably other things I can't think of right now that I need to know, and I need people to say to me "Hey you forgot about this.", and tell me what I need to do on the things I forgot about that aren't on my list above.

@Roderick Spiller It's good that you have taken courses on real estate. It's bad that you didn't do anything with that knowledge. But, time marches on. This is now. This is a new day. Take a deep breath . . .

Okay, here we go: 1) No, you don't need an S Corp, LLC, Trust, or anything like that to get started. Don't waste the money. 2) The laws in Arizona regarding Subject To and Wraps are very simple "don't cheat people & tell the truth" 3) The paperwork is simpler than it appears. 4) You have to have money to do Subject Tos and Wraps. You are taking over people's loans and making their payments. You are hiring attorneys to do closings. There are title reports to pay for. On some properties you are paying property taxes if they are not included in the monthly payment. 5) You don't need to pay for any more classes. It won't help in your situation. You've already shown that. 6) You need to team up with someone doing Subject Tos and Wraps to learn to do them the right way.

  • 1)No, you don't need an S Corp, LLC, Trust, or anything like that to get started. Don't waste the money. (Do I need a business mailbox and business bank account? Also, if I don't have an S Corp, LLC, Trust, or anything like that, how will I be protected if somebody tries to sue me?)
  • 2)The laws in Arizona regarding Subject To and Wraps are very simple "don't cheat people & tell the truth" (I think I have a pretty good idea of the meaning of a Wrap Around Mortgage, but it’s still a little hazy. Do you have a scenario?)
  • 3)The paperwork is simpler than it appears. (What’s a list of all the paperwork that I’ll need to do a Subject To and a Wrap, and how do I fill it out?)
  • 4)You have to have money to do Subject Tos and Wraps. You are taking over people's loans and making their payments. You are hiring attorneys to do closings. There are title reports to pay for. On some properties you are paying property taxes if they are not included in the monthly payment. (In response to your first sentence, why is it that I hear it can be done with no money down? I’m just trying to understand, because Ron Legrand would say it. The YouTube videos say it, and they give examples of how it can be done. Are they lying, or are they leaving out tons of steps? You see this is the problem I’ve always had with real-estate. I hear stuff, but it seems as if there’s a lot of gaps in the information provided to me that need to be filled. I need somebody to help me fill those gaps. In response to your third sentence, how much does an attorney cost? Also, I thought everything was done at a title company in Arizona. Why is an attorney needed, when I thought title companies were used for closings in Arizona? In response to your fourth sentence, how much are the title reports?)
  • 5)You don't need to pay for any more classes. (I wouldn’t be able to if I wanted.)
  • 6)You need to team up with someone doing Subject Tos and Wraps to learn to do them the right way. (I don’t have anybody to team up with, and I don’t know of anybody to team up with. I don’t have any friends or family in Arizona. I need to work to my strengths and that is for me to work alone. I would like to continue asking questions on how to find deals, what to say to sellers, what to say to buyers, etc.)
Originally posted by @Roderick Spiller :
  • 1)No, you don't need an S Corp, LLC, Trust, or anything like that to get started. Don't waste the money. (Do I need a business mailbox and business bank account? Also, if I don't have an S Corp, LLC, Trust, or anything like that, how will I be protected if somebody tries to sue me?)
  • 2)The laws in Arizona regarding Subject To and Wraps are very simple "don't cheat people & tell the truth" (I think I have a pretty good idea of the meaning of a Wrap Around Mortgage, but it’s still a little hazy. Do you have a scenario?)
  • 3)The paperwork is simpler than it appears. (What’s a list of all the paperwork that I’ll need to do a Subject To and a Wrap, and how do I fill it out?)
  • 4)You have to have money to do Subject Tos and Wraps. You are taking over people's loans and making their payments. You are hiring attorneys to do closings. There are title reports to pay for. On some properties you are paying property taxes if they are not included in the monthly payment. (In response to your first sentence, why is it that I hear it can be done with no money down? I’m just trying to understand, because Ron Legrand would say it. The YouTube videos say it, and they give examples of how it can be done. Are they lying, or are they leaving out tons of steps? You see this is the problem I’ve always had with real-estate. I hear stuff, but it seems as if there’s a lot of gaps in the information provided to me that need to be filled. I need somebody to help me fill those gaps. In response to your third sentence, how much does an attorney cost? Also, I thought everything was done at a title company in Arizona. Why is an attorney needed, when I thought title companies were used for closings in Arizona? In response to your fourth sentence, how much are the title reports?)
  • 5)You don't need to pay for any more classes. (I wouldn’t be able to if I wanted.)
  • 6)You need to team up with someone doing Subject Tos and Wraps to learn to do them the right way. (I don’t have anybody to team up with, and I don’t know of anybody to team up with. I don’t have any friends or family in Arizona. I need to work to my strengths and that is for me to work alone. I would like to continue asking questions on how to find deals, what to say to sellers, what to say to buyers, etc.)

If you have assets, you are worth suing and need an LLC. If you are broke and just starting out, you have nothing to sue for. There is no reason to sue you, because they can't get any money from you. For now, you protect yourself with umbrella insurance. You don't need an LLC yet. Wait until you have a couple of properties.

You need a purchase & sale agreement, a disclosure telling the seller the risks and a written authorization from the seller to you, to allow you to talk to their bank. The attorney prepares the rest of the paperwork. That is about $1500. You need a title report about $400, you need escrow costs $800 you need 3 month's of mortgage payments in the bank in case you don't find buyer right away so about $4500 for that, you need money for utilities, you need money to give the seller for their equity. In this market almost everyone has equity and won't sell to you for zero down. That is where the zero down comes in. The amount you give to the seller. You still have all of the others costs. You will need from $5,000 on up to give to the seller to make them happy. Sometimes, you will need much more if you are going to do that deal.

Think about joining AZREIA.org They are an active investor group (about 2,000 people) and have lots of classes that are free or maybe $20 or so. You will meet people in those classes that can help you along the way.

Another way is to find the deal then get a partner to help you complete the deal and split the profit.

@Roderick Spiller the investor you have been going back and forth with is an expert at subject to properties. He would be a great resource for you. 

My partner and I did 16 lease options in Arizona last year and have done 4 more so far this year with another 5 in the rehab stages. You are welcome to come to my meet up next week if you are interested in learning more about lease options. You can find the meet up info on the networking tab above. It is located in Mesa, Arizona.

Title is down through escrow, but the benefit of an attorney on this type of deal is super valid. As a real estate broker I've done several of these, including for myself and the added layer of protection is worthwhile. I've saved a couple houses from foreclosure, one of which got some money out of the deal once I remodeled and flipped it (upon successful closing seller was paid). This one was a past client who died young and I wanted to get her daughter at least some money out of the deal. We netted $30k, which I split with a partner who did the work and put up the materials. I had about $18,500 into it reinstating the loan and paying utilities and payment.

I’ll look into joining Azreia, but let me ask you this question. I saw the post you sent me that there are a lot of costs such as attorney, title, escrow etc. How is that a person who has absolutely no funds whatsoever break into this business, because there are people out there who are looking to build their futures through real estate, because they know their employers aren’t going to set them up for retirement, and they’re living paycheck to paycheck. How are those people saved from eventually being broke when they can’t answer the call of their employers anymore? I know this is off topic, but I was one those people at one time, and even though I say there’s somebody who will back me for the expenses you mentioned, they’ll only back me to a certain point, and this is beyond their point.

Mike, is there a way to structure a deal, so the $1500 attorney fees, $400 title report, $800 escrow, 3 months mortgage payments, utilities, and any other cost not mentioned other than the equity cost you mentioned in your previous post can be paid out of the seller's equity at closing?