All Forum Posts by: Ken M.

Quote from @Natalia Ladzinska:

Hi - it is my first time purchasing a property on a Subject To basis. The exit strategy is a Mortgage Wrapper. Can anyone share their expertise when it comes to the home insurance, creation of a land trust, or other general advice? Thank you!

 Well, if I understand what you mean, you plan on buying using Subject To (taking over the mortgage) and then selling the property using a Wrap (which means you have a mortgage with the buyer who makes monthly payments to you, then you make a payment to the bank)

Very dangerous for a new investor.

1. If the person you sell to stops making their payment to you, you still have to make your payment to the bank or they property goes into foreclosure and you are in a heap of trouble.

2. Since you will no longer own the property, you are forced to do a foreclosure on your buyer if they stop paying. That means costs, court action and questions from the attorneys.

3.You must disclose you are doing that, in writing, and get the seller's signature that it's okay with then to do it, or you have no defense in court.

4. If the person you buy from, or the person you sell to, files for bankruptcy, you are now in bankruptcy court with them with lots of questions to answer to the judge.

5. If you don't follow Dodd-Frank, you could wind up in court.

6. In a Subject To, there is a paragraph called Due on Sale. It's generally Paragraph 18 or 19. It says they can call the loan due (you then have 30 days to pay it off entirely) or they will foreclose. No, deeding it back to the guy you bought from does not work. Read the Due On Slae. That also is a violation. A contract for deed is a violation. Any executory contract is a violation. Any INTENT to change ownership is a violation. If the lender finds out (say the original seller wants his name off the loan, so he contacts the lender, the lender finds out he no longer owns the property, so they invoke the Due on Sale clause. 

You can't sell the property to pay off the underlying loan because you no longer own the property. You can't sell what you don't own. The guy that bought from you has no reason to sell, he hasn't violated the terms of your Wrap. When the house goes into foreclosure, he sues you for breaking the Wrap. A court case costs about $25,000 in legal fees and a year and a half to prosecute and you lose because you have no defense. And in the current climate you may avoid jail time if you did everything absolutely correctly, but maybe not.

7. Demand your money back from whoever you paid for this ridiculous idea or set aside cash reserves to pay off the underlying loan on a moments notice. 

This is not the entire list of reasons, but I've said enough. Have whoever you paid to teach you that, post a response here as to why that is not the most absurd approach for a new investor. Here are some more:

Using Subject To, to Get "Free" Properties - A Quick Guideline

https://www.biggerpockets.com/forums/311/topics/1188416-usin...

I'll give you the court cases if you are interested.

Have a nice day.

Quote from @Luke Tamez:

Okay this helped alot.  Im going to renegotiate with seller,  using the uninsured lot as the reason, because the heir issue is always a risk.  I will talk to the sellers realtor and find out when the property was sold to them.  Thanks for the help, i will keep you updated

I was under the impression since it is land, it's a cash purchase.

If it is cash, my suggestion stands. However, if there is a lender involved, they will require the title to be clear and the issue has to be solved or move on.

But I do think you should negotiate the selling price if it's a cash purchase.

Quote from @Eduardo Cambil:

Quote from @Ken M.:

Quote from @Eduardo Cambil:

Hey BiggerPockets community!

My business partner Rudy (US citizen & Texas resident) and I (non-US resident based in Europe) are buying through our LLCs registered in Texas.

We’ve got a turnkey property under contract for $58K, already rented at $1,890/month with Section 8 Tenants, and appraised at $67K. The plan is:

1. Close with a hard money loan—interest-only, 6–12 months.
2. Then refinance into a DSCR loan once we season it or get a new appraisal up to $75K, allowing us to ideally cash-out or at least refinance the full amount.

Here’s our challenge:
We want to put as little money down as possible—ideally 0%—or structure it creatively with gap funding, seller-held second, or any other method that makes sense.

Our Questions:

✅ Has anyone pulled off a hard money loan with 0% or minimal down on a deal like this?
✅ Any lenders (preferably familiar with Texas) willing to fund the full purchase or with creative terms?
✅ Any gap lenders or strategies you've used to plug the down payment temporarily until the DSCR refinance?
✅ What obstacles should we expect when refinancing from a hard money loan into a DSCR loan if one partner is a foreign national?

This is a strong deal in terms of cash flow and equity. We just want to maximize leverage, move fast, and recycle capital.

If you've done similar deals or know hard/private lenders comfortable with this kind of setup, we’d love recommendations. Open to partnerships or creative structures too.

Thanks in advance for the help! 🙌

 Your comment: "We want to put as little money down as possible"

Now, I've never heard that one before ;-)

Run your numbers at 12% money. Hard money isn't going to be less than that. 101% of hard money lenders base their numbers on "turns", so to find one willing to finance you for a long period of time for zero down is not going to be simple and they will want something to compensate.

 How about equity on the deal till refinace?

They likely would want 50% equity or some amount that you wouldn't want to agree to. But, until you ask, you never know.

Quote from @Katrice Shields:

First time looking into purchasing land. Looking in the St John's area in Arizona. I have been trying to research all the requirements but i also want to look into any disadvantages of acquiring land so that i'm well versed in all areas of topics. If anybody has any experiences and tips/tricks they'd like to share about the area. 

Also, has anybody heard of a situation where they offer a shared well for the community where you're allowed to get a certain amount per said timeframe. I don't know if that's just too good to be true or if there's something hidden maintenance that will come with this deal. 

Any insight and advice is greatly appreciated. 

Depends. A lot of that land is tribal land that can't actually be bought. It can be leased but not bought. If it's on county land, you check with the county. If it's on tribal land you check with the county and with the tribe.

Quote from @Eduardo Cambil:

Hey BiggerPockets community!

My business partner Rudy (US citizen & Texas resident) and I (non-US resident based in Europe) are buying through our LLCs registered in Texas.

We’ve got a turnkey property under contract for $58K, already rented at $1,890/month with Section 8 Tenants, and appraised at $67K. The plan is:

1. Close with a hard money loan—interest-only, 6–12 months.
2. Then refinance into a DSCR loan once we season it or get a new appraisal up to $75K, allowing us to ideally cash-out or at least refinance the full amount.

Here’s our challenge:
We want to put as little money down as possible—ideally 0%—or structure it creatively with gap funding, seller-held second, or any other method that makes sense.

Our Questions:

✅ Has anyone pulled off a hard money loan with 0% or minimal down on a deal like this?
✅ Any lenders (preferably familiar with Texas) willing to fund the full purchase or with creative terms?
✅ Any gap lenders or strategies you've used to plug the down payment temporarily until the DSCR refinance?
✅ What obstacles should we expect when refinancing from a hard money loan into a DSCR loan if one partner is a foreign national?

This is a strong deal in terms of cash flow and equity. We just want to maximize leverage, move fast, and recycle capital.

If you've done similar deals or know hard/private lenders comfortable with this kind of setup, we’d love recommendations. Open to partnerships or creative structures too.

Thanks in advance for the help! 🙌

 Your comment: "We want to put as little money down as possible"

Now, I've never heard that one before ;-)

Run your numbers at 12% money. Hard money isn't going to be less than that. 101% of hard money lenders base their numbers on "turns", so to find one willing to finance you for a long period of time for zero down is not going to be simple and they will want something to compensate.

Quote from @Adam Hoffmann:

Hello - We have done over 70 transactions in our former market of Kansas City, and have recently moved to Phoenix and are building our network of investors, buyers, and agents to get back into real estate investments, particularly fix and flips. We are also looking for buyers in fix and flip network should we come across deals that dont fit our needs. I look forward to connecting!

Welcome, you have joined a very, very crowded market. :-) Most Phoenix serious investors are looking at places other than Phoenix or are spending a hefty sum to find deals.

Quote from @Luke Tamez:

So I'm under contract on a lot purchase but the seller did the deed incorrectly from the owner before them and it needs to be corrected before we can close so that title can insure the property..... Well we've had to extend twice because no one has been able to get in touch with this guy.  I'm wondering what we should even do now.  Title told me without this guys signature they cant insure the lot.  Should we keep trying or just move on and quit wasting time.  Has anyone else been in this situation / what advise would yall give. 

Since I don't know what the issue really is, it's hard to guess the solution. Titles get minor corrections all of the time. Are you reasonably certain the seller to your seller had the right to sell the land?

It may not be as big of a problem as it seems. The worry should be that the previous owner or an heir would pop up out of nowhere and file a claim of ownership. How likely is that to happen? If they can't be found, it's hard to believe that person would show up one day to claim the land. Your seller is likely closing with a Warranty Deed to you that they will defend their sale to you in the event that happens. Possession is 90% of ownership (the point is, it's a lot harder for someone to prove the property should not have been sold to you, than you might think).

If you fulfill the adversarial possession requirements, the problem goes away eventually anyway. 

You could do a land contract until the title issue is resolved (ask your attorney or closing agent)

If the sale between them was years & years ago, it is unlikely. If it was in the last year, it's a little riskier. If the amount of  money involved is small, it's probably not worth worrying about the missing seller. If it's expensive land, it's a little riskier. 
 

You have to ask yourself, how much is at risk, what do I plan to do with this property, is there a better apparent opportunity I am leaving behind if I go forward with this one.

Quote from @Harvey Gill:

The biggest complaint I hear about realtors is that they don't respond quickly enough to leads.

Why is that?

Would an AI chatbot that can answer questions about their listings and book appointments help solve this problem?

That's because they are all fat and happy and making lots of money 
or they are arrogant and have a mistaken idea of their value
or it may be they are poorly trained, lazy and scared of people

Enough of that.

Do you really want to deal with agents that fit your description? 
You've listed a property, someone is interested in buying and they won't return the phone call?

Good agents are worth their weight in NAR lawsuit paperwork, you should keep them. The others are simply waiting for that revolving door to open and to walk out 

Quote from @Erika Montane:

@Ken M. Thanks Ken! I plan to but the monthly payments are interest only and I'm at the point of just keeping it and waiting to rent it next December. Is there another loan option?

What I do is sell on lease option. That is, I get 10% down on an option then lease it at a cash flow rate. That doesn't get you out of the underlying loan though, so it's not likely to help. 

Quote from @Ken M.:

Quote from @Scott Johnson:

Let me be more specific. I didn't have enough space in the Title:

Novations where the investor uses a Limited Listing that puts them as the primary contact for scheduling showings, receiving/accepting offers and negotiating are brokering without a license.

Novations where the investor actually hires a real estate broker to handle the aforementioned for the seller are not included. As far as I'm concerned, they're a great way to wholesale in states where they've outlawed wholesaling. 

And yes, I'm a broker. I've got something to gain. I'm Novation Listing Friendly. Deal with it.

Correct me where I'm wrong but Novations can be executed by either a Power of Attorney being given to the investor or by an investor just doing the paperwork, both being done after they secure their interest with an option contract (unless there's some other creative thing I haven't heard about yet). With the Power of Attorney, there may not be an issue. 

All I can say is that when an investor is the person who's doing the job that a real estate broker is commissioned to do, per state law, that's brokering without a license, which is no bueno and shouldn't be allowed. 

If novations are done using a broker, it's straight up CYA. Work their commission into your numbers, especially if they understand novations. 

.
My understanding of a Novation is where the "Investor" puts up the money to fix up the house, without buying the house and no loan paperwork, then splits the money when the owner sells. Obviously very risky for the investor. The owner could easily change their mind and not sell and there is nothing the investor could do about it. Investor recording a memorandum against the property is likely illegal. The investor may or may not be an agent and may or may not represent the owner in the sale.

I am not an agent and I would do your definition or my definition for various reasons.

What is a "limited listing"?. Is that the same as a "pocket listing"?

,
Correction: I said 

"I am not an agent and I would do your definition or my definition for various reasons."

Meant to say: 

"I am not an agent and I would *NOT* do your definition or my definition for various reasons."