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Real Estate Investing Forums  |  Real Estate Investing  |  Sub2, Owner Finance, Options, Lease Options Forum (Moderators: $Cash$, Bluemoon06, kdhastedt, Mdhaas)  |  Topic: NEW SUB 2 DEAL
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escrow
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« on: February 25, 2016, 11:09:24 PM »

Deal : Loan amount $290,000. 

interest only mortgage payment of $900 month.
Tax $2600 years Insurance $150 month.

property worth $320,000.

owner just wants to walk away, Deed to me. SUB 2
______

Not sure how these loans work? Do they stay the same? how do you pay off just refi? or sell the property.
Thank you  biggrin
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Gold River
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« Reply #1 on: February 26, 2016, 01:48:29 AM »

Hi,

     Run Away! Run Away Quickly! Run As Far and As Fast As You Can! Don't Pass Go / Don't Collect $200 Dollars!

Don't Buy This Property!!!!!!!!


               GR
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Randoskie
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« Reply #2 on: February 26, 2016, 02:02:54 PM »

This does sound like a deal from hell, you will be paying about $1200 a month and the principle will always be the same, and then at some point you have to refinance cuz the balance is due as in a balloon payment.
However, I bet I cud sell this deal by bringing in a new buyer to take over these terms and get a 5K assignment fee.
I have flipped some crazy ass lease option deals that were seriously underwater. Buyers have the cash and income but their credit is out the window or they can't get a conventional loan because they live under the table.
But yea, if you are upfront with the terms with seller and buyer and have them sign your I'm only the middle guy and you wont hold me responsible when the crap hits the fan disclosure contract, your good to go.
I wud get this deal on contract for the balance owed and the terms and start marketing it as rent to own, $1,300 a month, $5,000 down, no credit or back ground check. I get a lot of calls using this wordage. 
Take the money and run.
However you may want to help buyer with credit repair & make sure they understand there is a big risk.
Rando
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« Reply #3 on: February 26, 2016, 08:23:00 PM »

Deal : Loan amount $290,000. 

interest only mortgage payment of $900 month.
Tax $2600 years Insurance $150 month.

property worth $320,000.

owner just wants to walk away, Deed to me. SUB 2
______

Not sure how these loans work? Do they stay the same? how do you pay off just refi? or sell the property.
Thank you  biggrin


If the house doesn't need anything, or is otherwise in good shape, you can probably make about $65 or 70k on this deal.

I would sell on a contract for $370,000, over five years, all due in five years.

That is, I would offer no qualifying financing for 60-months, with anything over $30k as a down payment, and finance the balance at $1,238/mo p.i.  There's not enough principal reduction over five years to worry about, the balance won't fall below $290,000.

Meantime, effective interest rate looks like a screaming deal. 

  $370k  price
 -$ 30k  down (up front)
=$335k  balance with payment of $1,238 (p.i.) or 2% interest, fully amortized, 30yrs
 -$290k  first mortgage
=$  50k  balance of equity profit to be paid at time of refinance.

This would be geared for a fast, no questions, kind of a sale, for some investor with no money to work with, but the knowledge to put the deal together, and a buyer who needs financing and can't get 2% fixed interest anywhere, regardless of his credit.

Again, if the house was in marketable condition, as in newer and nicer, I would do the deal in a heartbeat and have done deals like this one.

However, I would probably adjust the payment to where I was pocketing five/six hundred dollars, not $338.  In this example, the seller is creating a payment spread of about $338/mo.

In this example, the buyer is not likely to refinance the loan, and so I'll get this house back, and I'll resell it again the same way.  However, the law says I must finance a buyer for at least 60 months at a fixed interest.  I've done that.  I just haven't qualified the buyer through a loan originator, which is not my practice anyway. 

This would be a classic, profitable, 'subject to' financing flip.  It would be a terrible, conventional flip.
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« Reply #4 on: March 01, 2016, 03:36:50 AM »

Hi,

     Well the problem with trying to sell property for more than it is worth is just that "Who wants to buy property for more than it's worth" in todays markets? You would be better off lease / optioning the property on a five year agreement with price to be determined based on market when the option is exercised, as you are more likely to find a potential lease party who can put up 1st, last and a security deposit with a $10k option consideration.

If the tenant never exercises his or her option you get the property back and do it all over again. In fact you can get extra money in a lease that can be applied to purchase and the odds it the tenant will ever exercise the option is only around 15 or 20%.

I believe most consumers to be fairly smart and in todays market have no inclination to pay much more than a property is worth in order to find a place to live. Some real estate methods are good in certain markets but todays market does not support a method of overpaying when homes and financing is readily available at basically FMV.


                    GR
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« Reply #5 on: March 01, 2016, 11:29:24 AM »


Hi,

     Well the problem with trying to sell property for more than it is worth is just that "Who wants to buy property for more than it's worth" in todays markets? You would be better off lease / optioning the property on a five year agreement with price to be determined based on market when the option is exercised, as you are more likely to find a potential lease party who can put up 1st, last and a security deposit with a $10k option consideration.

If the tenant never exercises his or her option you get the property back and do it all over again. In fact you can get extra money in a lease that can be applied to purchase and the odds it the tenant will ever exercise the option is only around 15 or 20%.

I believe most consumers to be fairly smart and in todays market have no inclination to pay much more than a property is worth in order to find a place to live. Some real estate methods are good in certain markets but todays market does not support a method of overpaying when homes and financing is readily available at basically FMV.



                    GR

Everything you say is true, except not all of it.

I'm just gonna have some fun with you GR, because you are offering the same arguments I heard back in 2007, as to why you can't make money 'in this market,' that I was paddling against, while doing exactly that; making money.  And doing it today.  I haven't stopped.

But just for giggles...

I don't sell to bargain hunters.  I don't market to them.  I don't want them anywhere near me.

Meantime, I am forced by law to finance a retail buyers for five years.  Five years!

I don't want to finance for that long, but it's the law.  So, I do.

As a result, I want 'today's down payment equivalent' but tomorrow's price, when I offer financing with no credit check ...for five years.

It's exactly like Rent-A-Center.  People with no credit, get financed for some ungodly length of time, with a ridiculous price that nobody bothers to mention.  Meantime, the objective is not to bargain shop, but to "own" a couch and a refrigerator, if not a bedroom set and mattresses, for $100 week until Moses comes back.

They want the benefit.  They can afford the payments, and the price is irrelevant.

I'm not gonna try to sell you on this idea, I'm just telling you what's happening in real life. 

Of course, I'm a professional marketer and a negotiator.  And so I say there's hard-selling a turd price, and then there's helping someone become a homeowner.  I do the second thing. 

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« Reply #6 on: March 14, 2016, 08:59:33 PM »

I've successfully done deals like this.....remember when you acquire a Sub 2 Deal and resell, you can structure your deal/paperwork anyway you want to accommodate your needs and those needs of the new buyer/occupant.

Just make sure you advertise 'owner financing, no credit required' and you will find someone who can afford the house, wants the house, and does not have the credentials to buy through traditional methods....that gives you a 2 products in one that you can sell for a premium; the house and financing as a package....for that, it is a special value.

In other words, when you offer a house with private no credit check financing, you do not use 'conventional wisdom' to value the home....that being an appraisal.....NO....you use your own value because you have something the most of the comparable homes do not have....private financing where you can approve anyone....that is where you get the premium value.

The value is in the financing included with the house...not in the appraisal......if it were me, I would take the deal, then offer a private deal without credit requirements....if the buyer can prove with evidence he can make the payments and gives me enough of a down payment to gain confidence, he can move in by dinner time.....I've done it hundreds of times....and you can too!

Hope this helps.
Rob
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« Reply #7 on: March 14, 2016, 09:14:37 PM »


I've successfully done deals like this.....remember when you acquire a Sub 2 Deal and resell, you can structure your deal/paperwork anyway you want to accommodate your needs and those needs of the new buyer/occupant.

Just make sure you advertise 'owner financing, no credit required' and you will find someone who can afford the house, wants the house, and does not have the credentials to buy through traditional methods....that gives you a 2 products in one that you can sell for a premium; the house and financing as a package....for that, it is a special value.

In other words, when you offer a house with private no credit check financing, you do not use 'conventional wisdom' to value the home....that being an appraisal.....NO....you use your own value because you have something the most of the comparable homes do not have....private financing where you can approve anyone....that is where you get the premium value.

The value is in the financing included with the house...not in the appraisal......if it were me, I would take the deal, then offer a private deal without credit requirements....if the buyer can prove with evidence he can make the payments and gives me enough of a down payment to gain confidence, he can move in by dinner time.....I've done it hundreds of times....and you can too!

Hope this helps.
Rob


That sums it up nicely.  The value is in the financing, not the price.

The marketing is aimed at a completely different buyer, than what conventional sellers are looking for.

Great post.

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« Reply #8 on: March 22, 2016, 04:06:53 PM »

So I got the house.
 
$290K. It cost me $2000 for Escrow fees.  payment is $900 month for the next 2 years and than $1600 after that.  Im going to live in it for now and sell it in 2 years, or stay there until I find a better deal.

I love sub 2. This is my 3rd deal so far all of them have been great!

Thank you all.   smile
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« Reply #9 on: March 29, 2016, 03:17:26 PM »



I believe most consumers to be fairly smart and in todays market have no inclination to pay much more than a property is worth in order to find a place to live. Some real estate methods are good in certain markets but todays market does not support a method of overpaying when homes and financing is readily available at basically FMV.


                    GR

Buyers are in fact smart, which is EXACTLY why they will pay more than market value.  They realize there is a premium to be paid for non qualifying financing, and consider the above market price to be part of that premium.  Repairs are another premium they are willing to deal with.  I just sold a house I got on Sub2 @120,000.  Market value is around $130K, but I sold it for $139,900 with $5K down (had two other buyers back out, just wanted gone or would've gotter more down).

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« Reply #10 on: August 04, 2016, 10:23:21 PM »

So I sold it to a Tenant/Buyer for $350,000.
$35,000 cash down $1,650 month and the loan balance due in 2 years.

not to bad of a deal for only 4 months, Im in escrow buying two more with the funds.
both sub 2 deals. One at $160k and the other $150k both of the people are moving out of state
and need someone to take over their notes. I love sub 2 investing.  Shocked biggrin
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« Reply #11 on: August 04, 2016, 10:46:58 PM »


So I sold it to a Tenant/Buyer for $350,000.
$35,000 cash down $1,650 month and the loan balance due in 2 years.

not to bad of a deal for only 4 months, Im in escrow buying two more with the funds.
both sub 2 deals. One at $160k and the other $150k both of the people are moving out of state
and need someone to take over their notes. I love sub 2 investing.  Shocked biggrin


Congratulations on your deal!  I don't find $150k deals where I'm at.  That would be like finding and flipping a dumpster ...very nearly literally.

I thought you were gonna live in this deal? 

On your subsequent deals, it's probably wiser NOT to give the sellers a lot of money.  The more you give them, the more you've got to get on the exit.

The most I agree to give a seller is 1% of the retail value.  Beyond that, and the deal starts getting slim on me, and starts eating into my profit margin.

BTW, is there is a reason you refer to your buyers as a "tenant/buyers?"  Sounds like you got a whopping option consideration, if this was just a lease/option deal.  Just axing.

Congrats again!  Let's do this! 

If you do just six more of these $350K deals this year, you'll make more than 99% of the average person in America. 

Isn't that's what real estate is ALL about!

 beer
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« Reply #12 on: August 04, 2016, 10:57:23 PM »

I have a question I'm having trouble with one of the insurance companies not putting me as additional insurred due to the seller not living in the property. They are saying I have to get my own policy any advice? help
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« Reply #13 on: August 04, 2016, 11:00:56 PM »


I have a question I'm having trouble with one of the insurance companies not putting me as additional insurred due to the seller not living in the property. They are saying I have to get my own policy any advice? help


That's legal advice, that I don't share on these forums for most likely obvious reasons.  However, if you wanna pm me, I can maybe tell you what I do.
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« Reply #14 on: August 09, 2016, 01:11:04 PM »

Hello, everyone, I am new to investing and SUB 2 is the way I want to go. I have read all of the responses posted here on this feed and want to thank you all for opening up my eyes to what's possible. I teach people all the time to ask the right questions and be open to the answers so you can learn, and I have learned much from this feed alone. Thank you all again. Can't wait to read other feeds and learn more. You all know I'll be asking for help soon, LOL.  biggrin
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