All Forum Posts by: Ryan Urban

John, thanks as always.

I think I'll continue by trying to assemble a team (Title, Insurance, perhaps this or another attorney if I can find one) - and if I can put a group together that all agree with the process, I'm good to go. If I cannot due to their issues with the process, I'll know it's probably not best for me to proceed.

If I may ask one more question - If I can create a contract package on my own (with help from books like Bronchick, etc), is the attorney necessary? I obviously need Title and Insurance pros on my side to do the deals, but what about the lawyer?

Seems to me there are two benefits to using an attorney: First to provide legal advice and support, but second to send a not-so-subtle message to the seller that this is being done by the book.

Your thoughts?

I'd appreciate your input on this.

I've been looking into the Subject To strategy, but I've been concerned with the legal and ethical issues involved. So I scheduled a meeting with a local RE attorney to discuss it. I had to contact several attorneys, as most of them said they wanted no part of Subject To deals.

I'll try to condense a 45-minute meeting into a few primary bullet points:

1. He agrees with virtually everything I've read about the Due on Sale clause, in that it's highly unlikely that a lender is going to (a) even recognize that someone else is paying the note and (b) go out of its way to act on it. However...

2. It is certainly possible that a lender would act, and if they do, it can involve more than just calling the loan due. "If you're willing to risk the small chance of being contacted by the District Attorney for fraud, give it a try. I've seen it happen." Moreover...

3. By far the bigger concern he has is action by the seller. He has seen several cases in which the seller claimed to be "duped" out of his equity by the Subject To buyer. He says that no contract will hold up in court, because all the seller has to claim is duress. And since the Subject To buyer is practicing a questionable purchasing strategy, he would not have much legal support.

The feeling I took away from this meeting is this: If you don't have much to lose, if you're willing to take on significant legal and financial risk, go for it.

Look, I know that many people are practicing Subject To purchasing regularly and with success. But even if I wanted to take all this risk on, I can't locate an attorney in my area who is willing to work on these deals. And that's quite a red flag, right there.

Before I toss the Subject To strategy out the window, I'd appreciate your thoughts.

I'm not a long-time REI veteran, but I'm doing two deals right now, and I can't imagine getting this done without my realtor. She's been great, organizing, clarifying, negotiating, researching, advising.

Worth a few points on the deal? Absolutely.

I just got the pitch today.

Rehablist appears to be the REI version of Match.com - The site includes several people trying to sell homes and evidently several people looking to buy them. They "sell" you a protected county (the counties I asked about were not available - at least they don't flood the area, good sign), and then give you first crack at all the new listings.

You then blast email your group of investors (a combination of names provided by Rehablist and names you get on your own). The idea is that you have fresh, new, exclusive properties that you can wholesale to your group of investors.

My take is that it's a good idea and the business model is legit. Of course, I also thought the Broncos would win the Super Bowl last year.

The nearest county that is available would cost $500 per month. The first three months must be paid in advance, then it goes month-by-month. This money essentially replaces the expenditures for advertising, direct mail, signs, time, gas, materials, etc., as acquisition costs.

Now that I think about it, it's essentially a turn-key wholesaling franchise, and there are benefits to buying a franchise. With a franchise, most of the elements are provided to get you up and running immediately, then you add on your part. The question is, does this particular franchise model work or not?

For those who want to hit the ground running, it may be a possibility. Is anyone here involved?

I've read everything I can get my hands on regarding this, and it's clear that Sub2 can be both completely legal and ethical.

From the standpoint of the seller, as long as (1) they understand how the process works and (2) they understand the potential risks involved (such as the buyer dropping the ball with payments), it's a great deal for both parties.

I say "can be" because I also know that many so-called "real estate investors" are indeed dropping the ball by trying to do Sub2 with virtually no money, no funds to fall back on if they need to handle the payments themselves. I spoke with one at my local REI group who exhibited virtually NO guilt, NO remorse for letting a seller go into foreclosure. These are the people who can and probably will cause damage to the efforts of those of us who are trying to do this correctly.

As with any business, many people try to run things on a shoestring when they should not. If you can't run a business properly, it's best not to start it in the first place. If you don't have the money to do it right, save up until you do.

The one ethical issue I'm trying to deal with is the relationship between myself and the lender. Virtually everything I've read on Sub2 involves fooling the lender via Land Trusts and LLC. If I have to fool anyone, this strategy won't be for me.

My goal is to do this the way John Corey mentions above - by officially alerting the lender immediately so that everything is on the table. My goal by meeting with attorneys is then to make sure all paperwork in the deal is appropriate and complete.

I'm looking forward to these meetings!

Sure will.

I'm on a business trip right now, I'll try to get appointments for the week of Oct 29.

Great stuff, guys, thanks. I didn't know it was possible to personally guarantee a loan for an LLC. I'll look into this.

I had just begun shopping for a liability policy for these first two properties. Do you feel that, if the properties are owned by an LLC, that the liability insurance would not be necessary?

Can we get a little more specific about this process?

Here's my situation - I'm closing on two properties at the end of the month. For both, I've put 10% down and used my personal credit.

I'd love to form an LLC and slide those properties immediately into the LLC. But:

1. Doesn't that require a Quit Claim?
2. Wouldn't that trigger the Due on Sale clause?
3. Would it be difficult to get insurance?

Thanks for your input.

In another thread I described how I've contacted several local Real Estate Attorneys about doing Subject To deals. To say the least, most of them are not very fond of the strategy. I have two questions:

1. A couple of them said that they know of several lawsuits that are in process over Subject To deals. What are investors doing to end up in court? What can be done to avoid a trip to see the judge?

2. I'm considering Bill Bronchick's "Alternative Real Estate Financing" course partly because of the recommendation of John Corey, whose opinion I value. Also he's from Colorado, and my guess is that he knows the laws of my state inside and out. If followed to the letter, is it a safe bet that Bronchick's course will keep the lawsuits away?

As always, thanks for the input.

I've looked at a variety of REI strategies to supplement my standard Down Payment/Finance/Buy & Hold approach -- from mobile homes to foreclosures to wholesaling -- and I'm now considering Subject To.

It's clear, from reading MANY articles on the topic, that it's somewhat controversial and borderline ethical at best. Any strategy that involves keeping secrets from a lender has red flags all over it. Call the use of Land Trusts and LLC's what you will, it's less than 100% honest. Further, it has been fascinating to see how many books and articles deal openly with methods for fooling lenders.

That said, I've contacted several local real estate attorneys, asking if they handle Subject To closings. The responses I've received so far:

3 said "I'm buried and I'm not accepting new clients"
5 said "I don't do them, I wouldn't do them, I wouldn't recommend them"
2 said "We're dealing with lawsuits over these things, beware"
2 said "Yes, I can help"

Not exactly promising. I'll meet with the two who showed positive interest and see what they have to say. I want to find out if this can be done ethically, legally, without hiding ownership. I'll report back.