How to structure a RTO rehab deal

5 Replies

I'm still new to investing and working my tail off to find deals, investors and information as I go along. BP has been heaven sent no doubt. All that being said heres my question\situation. There are a lot of vacant houses in my area which I've been targeting the most. Some of these properties need extensive work and some need very little. I talked to one of these houses today(the home owner, not the house. I'm a girl and of course i'm crazy but not crazy enough to talk to houses) and was asking the owner about RTO. He sounded interested. Now I could take the little bit of money I have and purchase the house out right but would be left with nothing to rehab it with. I'm wanting to do a RTO so I can leave my funds available for the flip. Is there a way to do something similar to a wrap or sub to on a property owned outright? I don't want to drop 20k on a property to find the owner has changed his mind and no longer wants to sell or he wants more money now that he see's what the house has become. Of course I'd have my RTO contract but if he wont show up at the closing table to sign the papers then I'd be screwed. How can I go about transferring the deed into my name to insure everything will go smooth when I finish the flip. I have been researching wraps and sub to's and am starting to understand them but am still unsure if or what can be done when there is no traditional mortgage and it will be completely owner financed.

@Alisha Mingus

Solution 1. Buy it Sub2 and give a note with no payments for 6 months, fix it, sell it, profit, have a party.

Solution 2. Do a JV with the Seller, Sign a JV agreement, Buy it Sub2 and give a note with no payments for 6 months, fix it, sell it, profit, have a party. Seller gets more money with the JV.

DO NOT EVER Lease w Option on a REHAB.  Get on TITLE before you rehab.

Read

http://www.biggerpockets.com/search?utf8=%E2%9C%93...

for sub2 posts.

Originally posted by @Brian Gibbons :

@Alisha Mingus

Solution 1. Buy it Sub2 and give a note with no payments for 6 months, fix it, sell it, profit, have a party.

Solution 2. Do a JV with the Seller, Sign a JV agreement, Buy it Sub2 and give a note with no payments for 6 months, fix it, sell it, profit, have a party. Seller gets more money with the JV.

DO NOT EVER Lease w Option on a REHAB.  Get on TITLE before you rehab.

Read

http://www.biggerpockets.com/search?utf8=✓...

for sub2 posts.

 Mr, Gibbons sir. I do believe that should I ever make it out to California I'm definitely going to owe you a drink. You have helped me far more with information than any other member yet. THANK YOU. 

So sub to's aren't just for mortgages. They apply to any property? I was misunderstanding the term I guess. I thought sub to meant subject to the original mortgage. So I would use my attorney or title company transfer the deed to my name and put in place the financing agreement? The home owner in essence would be,the bank with a promissory note recorded that he be paid on x and x terms? 

Originally posted by @Jonathan Towell :

@Brian Gibbons

What does JV stand for?

 Good question. I probably should have asked the same,thing but I assumed it meant joint venture. Thank you for,asking and clearing that up for me as well. 

@Alisha Mingus

Call me Brian :)

Is in example let's say there is $100,000 home ARV or after repair value

Is the first mortgage that's 95,000 balance, $5000 equity

You're basically taking over the payments of the first mortgage, you getting the deed and title subject to the existing financing; Think of it like you can have ownership and have somebody else be on the financing

If you're on the deed, you have legal title

so Sub2 is the strongest way for you to buy a property and strongest title ownership without a bank, better than a wraparound mortgage, better than a lease option

Just remember subject to you shouldn't hold title very long because there is a due on sale clause issue, where the bank could call loan due, so that's why subject to is good for fix and flips

And yes nine times out of 10 on BiggerPockets JV means a joint venture :)

If you have any questions give me a call :)

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