Marko Rubel- How to invest in real estate without banks

6 Replies

Anyone have any opinions on this book, or Marko Rubel himself? I find his technique of "Unlimited Funding" without banks and zero down interesting, but some of it is a tad hard to believe.

I'm paraphrasing a lot here, but so far here are my takeaways from his book: 

He advises finding sellers in distress, offering to buy their property (Take over payments) "Subject To", getting the deed put in your name, then taking over payments from the sellers- and/or getting them current on their loan if needed. Since the seller's name and credit are still on the bank loan, they have to be in such a bad position that they fear foreclosure and embarrassment/ bad credit more than they do you not making the payments.

He then turns around and does a "Lease to own" deal with another buyer, giving them 24 months to line up financing to buy the property from you at an option price, which is, of course, higher than what you paid the seller for it.

He claims that while banks can call the note if they find out about this "Subject to" sale, it has never happened one time that he's aware of.

I already own 3 rentals, looking to pick up another one. But dealing with the banks can be a drawn out tedious process that isn't moving as fast as i'd like. 

So, for anyone using his system, what are your opinions? Thank you in advance!

Ryan, "Subject to" deals mean a faster, easier purchase with no costly or hard to qualify mortgage loans. It also has the potential for more profit if you ever decide to flip or sell the property. But this type of deal can put you as the buyer at risk. Since the property is still legally the seller's liability, there is always the risk of a bankruptcy which means that the bank would take the property. As you mentioned, the bank would also activate the "Due on Sale" clause if they see that the home has transferred hands. There may also be issues with the home insurance policy as well.

With all of that said, I see investors use this strategy a lot and I have yet to find one that has had the "Due On Sale" clause activated.  It is a fairly common strategy and if you know the science of it then you should be able to use this strategy without issue.  I would suggest finding someone in your area that has used this technique to get a better understanding of the process though.

I don't like "subject to's".  Let's think about this for a minute.  The biggest problem has already been stated, but not yet detailed...what if you sell the option to another buyer and the seller doesn't make the payments on the original loan and is foreclosed on?  I hope you know a good lawyer because you're going to need one to get out of jail for fraud.  Why?  You sold something you didn't own.

Hey Joe- thanks for the reply! I appreciate it.

In his book he claims you do own it, because you get the deed put in your name by a title company once a deal is reached to take over payments... "Subject to".

He states in his book that many lawyers and realtors will tell you it isn't legal, but so far, not one attorney or realtor has been able to point out how this is illegal when they look into it. The guy claims he speaks at all the big real estate conventions and has a best selling amazon book so if this was illegal i'm betting he'd be called on it and not invited to these events. But then again, I like to do my research before jumping in to something. Your feedback is much appreciated! Voted up.

@Ryan Gougeon

Subject to deals are perfectly legal. Title is passed to the buyer. Although transferring ownership is a violation of the convents of most mortgages or deeds of trust, this is a civil matter; it is not in any way illegal or criminal. Selling after purchasing subject to is not fraud as you are selling your ownership interest as it is, not a "free and clear" property.

The problem is in the deal numbers, not necessarily the structure. Most, if not almost all sellers willing to sell on a subject to basis have loan that are at, or exceed the value of the property. If they did a conventional sale, paid a Realtor, paid normal closing costs, etc., they'd have to bring money to the closing table. So, to just get out, or put a minimum amount in their pocket, they're willing to accept the risk of remaining legally liable for a loan secured by a property they don't own. This can get ugly should any one of a number of issues occur.

The second part of the “deal problem” is that the buyer would have to find a tenant willing to pay above market rent or a 2nd buyer willing to pay above market purchase price. The gurus handle this by suggesting the renter pay additional for a option to purchase, or the buyer pay over market for easy, highly leveraged, built in financing. It may work, or much more likely it won’t.

This is about the same as telling people offer all cash and motivated sellers will sell for 30% under market value. It happens, sure. But not often. And takes A LOT of work to find the needle in the haystack.

None of these, or any other real estate strategies is the Holly Grail. Some people make lots of money in the real estate industry, some do rather mediocre, and some end up in investing he'll. Education, knowledge, experience, ability, capital and luck have much more influence on success that the strategy chosen. All these strategies are good to have in your toolbox when a deal appropriate to a particular strategy comes across your desk. A few people have even specialized in one strategy and done well. But no one strategy is "the way" to get rich. Unless of course your the one selling seminars, books, mentoring, etc.

As Don said if done properly you do own the property, but you'll want to ensure payments are being made to the bank. It's not really a special "system" just sounds like a sandwich lease unless I'm misreading. It's a nice thing to know about or have in the toolbox, but I'm not sure how often most investors will use it.