Real Estate Investor · Vancouver, WA · Member since 2008 · 387 posts · 8 votes
Do you guys usually keep subject to's for rental properties and just wholesale other deals? If I were to wholesale it how would I determine the price to sell it for to investors?
Real Estate Consultant · Seattle , WA · Member since 2008 · 53 posts · 4 votes
17y
I usually wholesale subject-to's. Most of the time they are easiest to sell since the buyer generally doesn't have to worry about financing or having enough cash to buy. If you are able to cash flow quite a bit and there is lots of equity I would suggest keeping it yourself though.
To determine what to wholesale it at, I just basically do what I do with any other property and base it off comps and repairs needed. I just add my fee on and have the buyer put down that and any amount of payments the owner is behind on (and if they have tons of equity and are getting something out of it, their money too).
You should find that if the price is right (and maybe even a little higher than most deals because of the terms) subject-to's and anything with owner financing will be the easiest to get rid of.
Real Estate Consultant · Seattle , WA · Member since 2008 · 53 posts · 4 votes
17y
I usually wholesale subject-to's. Most of the time they are easiest to sell since the buyer generally doesn't have to worry about financing or having enough cash to buy. If you are able to cash flow quite a bit and there is lots of equity I would suggest keeping it yourself though.
To determine what to wholesale it at, I just basically do what I do with any other property and base it off comps and repairs needed. I just add my fee on and have the buyer put down that and any amount of payments the owner is behind on (and if they have tons of equity and are getting something out of it, their money too).
You should find that if the price is right (and maybe even a little higher than most deals because of the terms) subject-to's and anything with owner financing will be the easiest to get rid of.
Flipper/Rehabber · Tampa, FL · Member since 2008 · 403 posts · 109 votes
17y
Good info, Steph. Although the buyer will not have to get a loan, he or she will still have to pony up for your fee. So, thinking they will bring a check for $20k is unlikely. $5k-$7500 seems like a number I've ended up at several times.
Real Estate Consultant · Seattle , WA · Member since 2008 · 53 posts · 4 votes
17y
Yes that is true. I have had someone who was able to put $50k down though (he was a very experienced rehabber). But in most cases they will probably only be able to come up with a smaller amount.
Real Estate Investor · pottstown, PA · Member since 2008 · 22 posts · 1 vote
17y
I am so glad I found this thread! I had a couple of Oppertunities to Wholesale "Subject To's" and I was so scared that it wouldn't work out that I "Chickened Out" at the last minute! So, Investors DO Wholesale "Subject To's", Well i guess it's back to the Drawing Board.
Real Estate Investor · Vancouver, WA · Member since 2008 · 387 posts · 8 votes
17y
Since writing this thread a while back, I'm trying to get as much access to private money as possible so I can keep sub2 deals for rental properties and just wholesale the cash fixers.
Flipper/Rehabber · Tampa, FL · Member since 2008 · 403 posts · 109 votes
17y
It's certainly not dangerous. Nothing about wholesaling is dangerous, which is one of the main reasons we became wholesalers... no risk. Once you assign the sub-2 contract, your job is done. What the buyer does after that is his call. We can't sit and hold the buyer's hand, and make sure he makes every payment. He should, but if he defaults, he and the seller need to work it out.
Real Estate Investor · Vancouver, WA · Member since 2008 · 387 posts · 8 votes
17y
Andrew,
Maybe what people were talking about with regards to protecting themselves is explained in this article
http://fieldguide.reitactics.com/articles/if-you-wholesale-protect-yourself
Flipper/Rehabber · Tampa, FL · Member since 2008 · 403 posts · 109 votes
17y
What I do is look for a seriously distressed seller, who is willing to let his property go for what he owes. If that's the case, and his existing loan, interest rate and monthly mortgage payment are favorable, I contract on the property the same as I normally would, and then assign it to a buyer. The title company will take care of everything. I use the same purchase contract. I only fill it out slightly different.
Real Estate Investor · Vero Beach, FL · Member since 2008 · 268 posts · 89 votes
17y
Andrew,
How many sub2 flips have you done?
Here is the reason I am asking. I have done several sub2 type transactions. Never wholesaled one. I know all the courses have there CYA documents and NO FOUL language in there. But when you are standing in front of a judge.....ooops.
Maybe I am just parinoid. I have been in court on real estate issues. It is not fun.
Flipper/Rehabber · Tampa, FL · Member since 2008 · 403 posts · 109 votes
17y
I've never done one myself, but have coached individuals in flipping sub-2's. There was never a hint of anything we could get in trouble with. No court dates, and no judges. We contract and assign, the same way we normally would. However, instead of putting a purchase price on the contract, we put their existing loan amount in the subject to line, and then add to the notes a few lines regarding their loan and payments.
I have no clue what you mean by foul language. In my 4 years flipping and coaching, I've never even sniffed a court room...
Real Estate Investor · Vero Beach, FL · Member since 2008 · 268 posts · 89 votes
17y
I know you have seen all the CYA documents. I more or less call it FOUL LANGUAGE..probably a misuse of the word.
Well I am glad for you that you have not been in court in 4 years. Hopefully you never will.
Most of the court actions I have been involved in have been small claims and to me it is all based on the law of equity. Some judges will see the case as it is and some don't.
I am not saying that I would never do a sub2 flip but I would be sure I had the seller sign off on it and maybe even have the closing recorded.....just parinoid.
I see you are in Florida. I am in Vero Beach on the other side of you.
Well it has been an entertaining and thoughtful thread for sure.
Altus, OK · Member since 2008 · 2k+ posts · 690 votes
17y
Originally posted by Andrew Massaro:
What I do is look for a seriously distressed seller, who is willing to let his property go for what he owes. If that's the case, and his existing loan, interest rate and monthly mortgage payment are favorable, I contract on the property the same as I normally would, and then assign it to a buyer. The title company will take care of everything. I use the same purchase contract. I only fill it out slightly different.
Nice so what happens if say your buyer backs out what is a good way to get out of it if you can't do the sub2 yourself?
Real Estate Investor · Vancouver, WA · Member since 2008 · 387 posts · 8 votes
17y
Yea, I'm guessing if you have everything notarized including disclosures and those disclosures are up front, then a judge would see that you were attempting to do what was right.
Real Estate Consultant · Centennial, CO · Member since 2009 · 17 posts · 0 votes
17y
Stephanie and Andrew,
I'm just digging into the subject to arena and was wondering if you could clarify the process. Is there any need to put the property into a land trust?
Real Estate Investor · Vero Beach, FL · Member since 2008 · 268 posts · 89 votes
17y
I guess if I was ever to approach any transcation such as flipping a sub2 I would do it with an option. that way it is truly transparent between Assignor, Assignee and the seller.
Flipper/Rehabber · Tampa, FL · Member since 2008 · 403 posts · 109 votes
17y
Guys,
Everyone is making it much, much too complicated. The process is for flipping/assigning a sub-2 deal is the same as a regular flip. The same purchase contract and the same assignment contract. The only difference is, instead of putting an offer on the contract, you list the seller's payoff on the "subject to" line. Your purchase contract should have a line for this, or at least a box under how you plan on paying (cash, financing, subject to), that you can check off.
Once under contract, you market it as a sub-2 deal, and disclose the seller's loan type (fixed or adjustable), interest rate and monthly mortgage payment. And, of course, your fee. Once you find a buyer, you collect a non-refundable deposit of $2k (or whatever), have him sign the assignment contract and forward both contracts to the title company. They will take it from there, and pay you the remainder of your fee at closing.
If the buyer backs out, you keep the deposit, and either cancel your sub-2 contract with the seller, due to a failed inspection, or if you have time, you begin to market it again for another buyer.
All of this is the same as a regular flip. The only difference is how you fill out the purchase contract. However, it should still be the same contract.
Flipper/Rehabber · Tampa, FL · Member since 2008 · 403 posts · 109 votes
17y
It should, as long as the option contract states that you are intending on locating a party to take over the monthly mortgage payments. All an option does is allow the seller to continue shopping themselves, while you are looking for a buyer.
I wouldn't use an option contract. If the sub-2 deal is good, and the seller agrees to it, then lock it up under a sub-2 purcahse contract. That way, it's yours legally, for the duration of the contract.
Flipper/Rehabber · Tampa, FL · Member since 2008 · 403 posts · 109 votes
17y
IMO, the only time you want to use an option is if you are iffy on finding a buyer. If you are confident, lock it down. Option contracts give the options to the seller, not to you...
Real Estate Investor · Vero Beach, FL · Member since 2008 · 268 posts · 89 votes
17y
Jeff,
I think it will. If a seller is willing to give you a deed to a home. An option is much less of a problem to get over that hurdle.
I have optioned properties to buy on a lease option. Not the lease option agreement itself. Just the option to buy on a lease option and then I have sold my terms that way.
But it seems it is less risk for a BUYER (us) using an option.
Real Estate Investor · Vero Beach, FL · Member since 2008 · 268 posts · 89 votes
17y
Originally posted by Andrew Massaro:
It should, as long as the option contract states that you are intending on locating a party to take over the monthly mortgage payments. All an option does is allow the seller to continue shopping themselves, while you are looking for a buyer.
I wouldn't use an option contract. If the sub-2 deal is good, and the seller agrees to it, then lock it up under a sub-2 purcahse contract. That way, it's yours legally, for the duration of the contract.
Andrew,
I am sure you know the difference of Exclusive and Non Exclusive. If you work with Non Exclusive Option agreements then the seller can shop it around. But the best way to work is to get an exclusive and to get the seller to sign a Memrandum of Option. Which I use with my Short Sales. It is the same type of agreement.
A Purchase and Sale agreement is also good to use. It really boils down to intent and the strength of the deal itself.
I agree that this can be done with minimal paperwork like you had mentioned. I like options. Been using them for years. Learned them from a guy on your side of the state known as Jack Miller.
Flipper/Rehabber · Tampa, FL · Member since 2008 · 403 posts · 109 votes
17y
Why would I use an exclusive option contract when I can just use my regular purchase contract? I use a total of 3 contracts - purchase, non-exclusive flex option and assignment. For my business, I see no reason to use any other. Not saying you shouldn't use whatever contracts you want to. Just saying I don't...