If you really want to make a lot of money in real estate, you must learn how to leverage a small amount of your resources to control a large amount of property. One of the techniques that I like to use the most is Subject to financing.
Although some states are trying to pass laws to regulate or prohibit this practice, it is still one of the best ways to easily finance a purchase. My advice is to check with a local attorney to see if any laws have been passed in your state regarding the Subject to Existing Mortgage purchase.
What makes subject financing so powerful is the ability to take title (ownership) of a property while maintaining existing financing. In other words, the ownership passes to the Buyer, but the loan remains in the name of the Seller, or more precisely, in the name of the original Borrower. You can easily see why this is such a powerful tool – you can finance most or all of the purchase price of a home with the loan already in place! The Buyer simply makes up the past due payments to bring the loan current and agrees to the Seller to make timely payments in the future, but does not need to obtain new financing.
What about the expiration-to-sale clause that most mortgages contain today? It’s true. The lender has the right to claim the loan due, but NOT the obligation to do so. In fact, it doesn’t make sense for a bank, an institution that is in the money business, to declare a current loan past due and risk forcing it into foreclosure. After all, a bank would rather have payments on time than real estate.
What about the seller? Why would they agree to put their credit at risk? Since the loan remains in their name, they remain financially responsible. However, a motivated seller is desperate to eliminate the responsibility of payments. Usually they are facing foreclosure. He is offering the opportunity to eliminate the burden and, at the same time, improve your credit rating with timely payments made in his name.
Are you currently using this powerful technique in your real estate business? Unless your state prohibits it, Subject to Financing should become one of your first choices for purchasing investment property. The bank benefits from having the loan payments up to date. Seller benefits from debt relief and credit improvement. And best of all, you benefit from leveraging a small amount of money to finance your real estate transactions.
The best of success and abundance,
louis castillo
