No Equity Sub2

[tedjr]

I have had discussions with several investors that say that no equity sub2 deals are worthless. I voted on the Club poll that I would buy all kinds of deals. I thought I would open a discussion on how to profit from these deals over the long run. Your comments and suggestions would be appreciated. It would be my plan to buy all these I can with zero or little down and then do a lease purchase for say ten grand higher in a few years. If I could do lots of these I could get rich again over time. I could also charge a hundred or so more than my payment to the new buyers.
I would also appreciate and leads anyone has. I may be contacted at 512-301-9171 or tedstokely@austin.rr.com

[Admin]

Ted,
I'll be happy to load you up with some no equity sub2's for say, $500 per property?  As my buying criteria has consistently tightened over the years, I have some props that no longer fit my desired guidelines.  I've pruned some, but have more to go.  I have an appointment tomorrow to hopefully remove one more from the list.

As far as profiting from them, in my opinion the only way to do that is to be able to handle the carry until the property is sufficiently paid down, appreciation gives you a decent leverage position, rents climb significantly, or some combination of each.

If I were buying those same deals in today's market as opposed to buying strong into the hottest seller's market Austin's seen, things would be slightly different down the road.  However, I still like a more conservative buying strategy.

[David Alexander]

If someone is willing to hand me a near current loan at say 6% - 7%.....

No repairs.... I'll generally take the deal....

That's like someone loaning me low interest rate money....  The house is just the vehicle to move the money....

My opinion is that everything is based on tens.... in our system....

And you can always find someone willing to pay that... so in this case that would 10%....

In fact alot of times I might structure the deal where the payment is based on a 9% interest rate of the same value, and have it go up every year by 1% until it reaches 12.

But, it also, depends on how good you are in this game... can you weather the storm...  do you have partners, access to cash... or are you good at generating cash....  

If you use the strategy... do it with partners...  or be willling to keep cash back in  a reserve fund...

David Alexander

[David Alexander]

why does everyone have a picture of some sort and more houses than I do.....LOl....

David Alexander[/img]

[Admin]

DA,
House images are based on the number of posts and you're just a "one house" kind of guy right now...

The board term for the pictures is avatars and you can view some choices in your profile from the user menu bar on top.  Click on your profile and go to the bottom to see instructions for viewing gallery.  If you don't see anything you like, you should be able to upload your own.

[JT-IN]

Hey David:

You should have a Gazillion houses next to your name, the way you do the Subj To deals...    

I don't have the answer to your question, (I suppose Tim contols those houses, like a monopoly game... LOL).   I really just posted to say Hey...   and see how you been doing...?   Drop me a private email, if you get time, just to update me on what's new in your life and business.

I may have to get down south to visit some of "y'all" since we won't be at the cre conv...

JT-IN

[Admin]

JT,
You got it, yep, it's all about control... familiar theme amongst Sub2 practitioners.

Hey, I've got four houses, where's my freaking hotel?  I want my earnest money back...

[Jim FL]

Tim and others,
This is my first visit to this board.
I like it, the functions seem kind of neat.

As for the gentleman asking about "No equity" subject to deals, I think you will find by and large, those of us who have purchased a number of houses subject to are now tightening our buying criteria.
I know I am and it has everything to do with the market conditions.
The newspapers all seem to write about property values constantly going up, new home sales on the rise in the upper single digits, and existing home sales on the rise in the double digits.
What they fail to let you know, is that the sales data for existing homes is flawed, many of the transactions in their statistics are refinances, people not moving, just getting equity out and dropping interest rates.

Just this week, two of my houses with T/B'ers in them were appraised, and they came in lower than expected.
This tells me that values are really stagnant around here.

Because of this, I want plenty of equity in any house I purchase, just in case I have to liquidate it, or rent it for less than it is now.

Always have a backup plan, and keep your ear to the ground in your local market.
If you buy right now, things will really be beautiful in a few years when the market turns.
I generally stay in the 70-80% of value range now with my subject to deals.
However, I did recently take one at about 90%, but the loan was brand new and at 4.85%, so this house will cash flow well.
I'm keeping it.

Good luck, and Tim, thanks for the heads up on this board.
Very nice indeed!

Jim FL

[WilliamGA]

Hmmmmmmm........sub2s with no equity. Should we buy them?

As a beginning investor, when I was still amazed that anyone would sign a blank deed for me, yes, I took deals with -0- equity.

Would I today? Not likely, although it really depends on the deal.

Today I look for a MINIMUM of 20k in real equity in any deal I pick up. Actually, I am looking for more if I am paying cash.

I don't believe buying a FEW sub2s with no equity are a bad thing given the right circumstances. To BASE your business plan on targeting and buying these properties is suicide.

For me to even consider one today, they would have to meet several benchmarks.

1. Super low interest rate loan as in 5-6%
2. House in like new condition as in needing NO work
3. In a super hot area as in I already have more than a few potential   buyers for it
4. A minimum of 300 per month positive cash flow

These are just criteria for me to CONSIDER it. Of course I have cash and the ability to get more cash so I have the wearwithal to make payments or repair it if the worst happens. Were I a newbie, possibly without the means to cover if I had to, I wouldn't go near them.

[agkatz]

William...

By definition, I don't see how you could buy a house with no equity and get $300 positive cash flow from it?  Am I misreading your post?

If this were the case, you could go out and buy everything at market (or slightly below)... 95%-100% financed... and get great positive flow from it.

If this is the case... please let me know where you live... I'm moving!

[WilliamGA]

Lets say someone calls you with a 100k house with a 6% loan. They owe 95k, been in it for 2 years. They have -0- equity as far as I am concerned.

Their payment is 690 per month PITI and I can get 995 per month rent.

Don't find alot of these but I do see one from time to time. As I said in my earlier post, the interest rate on the loan and it being in a nice area is key.

This works for most properties in just about any price range here as I am still able to get 1% rent to value on most any property.

As far as telling you where I live, I could but then I would have to kill you.

[firepro]

I personaly think Willian is on the right track.

To me its all about RISK.

I was buying house in Houston in the RTC days when all the outlying subdivisions with no equity in the houses had 30-40% foreclosures.  Those houses dropped in value substantially.  Taxes and insurance didn't drop.  Rents also dropped (goodbye cashflow).

HERE'S THE PROBLEM.  Are you going to walk away from the subject to property if this happens.  If you say yes how do you plan on doing this, really really think about it.  

If you have good properties with low Loans to Value I think your bullet proof, unless of course someone tries to take your assetts because you made promises that you can't keep. Like telling a buyer on one of your subject to properties that you would do a lease option with them,  or maybe one of the "subject to" sellers doesn't like the way you ruined there credit when you have to let the property go into foreclosure.  Of course we wouldn't do this unless the economy turned to crap, then how could you stop from doing this.  I don't think it's possible to  prevent this I also think normal good people would do everything they could to prevent this but eventually all your good properties would be at risk whether your a good guy or not.

That being said I think Subject To's are a great Ideal.  But if you have any net worth and you want to stay business in up markets and down markets you better have 1)good equity's in some properties, 2) Severe separation from Subject To's and other Assetts and 3) The Mind Set( I don't know how else to say it) to walk away from the Subject To properties.

[Monique]

Hi All,

First time posting here as well.  The message board is slick -- very visually appealing!

JT says ... "I may have to get down south to visit some of "y'all" since we won't be at the cre conv..."  Bummer!  I was so looking forward to meeting the man behind all the great posts. Maybe next year!

Monique