This has been the year that if you do just a few things well you could set yourself up for life. Why do I say that? Well, the conditions are amazing. Never in my 15+ years of investing have I seen the opportunity to succeed so great.
Realizing people need solutions and many just want out of their homes for various reasons coupled with banks becoming more agreeable than ever, this is a great time to learn the strategy of subject to purchases and their benefits.
Subject to means that you purchase the property and take over the existing financing with the mortgage still staying in the seller’s name. Why would anyone do this and even more importantly, is it legal? Why should you consider this form of purchase and what about the all important “due on sale” clause included in the fine print of every loan?
First, why would anyone do this? Many people have little to no equity in their properties and if they need to relocate they may actually have to PAY to get their house sold. For instance, if I bought a home 4 years ago for $170k (at the height of the market) and put 5% down ($8,500) that means that I owe about $160k on my home. If the value adjusted to $160k and I sell it with a realtor (paying 6% commission) the seller would have to pay $9,600 in realtor’s commissions just to get out of the home. There are A LOT of these situations out there. If I were to buy the home taking over his/her payments and they did not have to pay almost $10k in fees do you think they might be interested?
There are many who have already left the area, making double payments, and will have to pay to sell their home. If I purchased their home for $160k and they had a 6%, 30 year mortgage with a payment of $1,100/month PITI (principal, interest, taxes and insurance) I could then rent it for $1,200/month for a profit each month! I could buy many more properties with little cash, risking none of my credit and in turn own a fleet of nice homes in nice communities that after 5-10 years of proper management will have built up equity OR I could keep them for 20+ years and get tenants to pay them off. At that time I could use the rent as retirement income or sell the free and clear properties and re-invest the proceeds. As an aside, you could also look to do a 1031 tax free exchange for even more profit and passive income and just hire a property manager for the larger property (i.e. commercial or apartment buildings, office parks, etc.)
Second, is this legal? In one word, YES. You will do this process with an attorney and I will be teaching further classes on the specifics to how the process works.
Third, what about the infamous “due on sale” clause which entails the lender to call the loan due in full when it transfers ownership? To be frank, banks are calling us these days – they are lenders who are not in the businesses of taking back and managing real estate.
This is the ideal time to get involved in real estate. It is an awesome thing to know how to buy property “subject to” without having to get a loan, pay cash or get private funding. If purchased properly this can make you very wealthy in a very short period of time. If a property cannot be purchased “subject to” and be rented or sold rent to own or with owner financing for at least a $200-$300/month cash flow then you can consider doing a short sale or if it is a very expensive property but they want all cash and it is a great deal you can put an option to purchase on the property. These are techniques we teach at VREM. If you are serious about investing in real estate consider becoming a member.
We look forward to seeing you soon!