Investing in residential houses, condominiums, apartment buildings, or whatever you would like to do within real estate, there are several creative payment methods. My favorite turns out to be SUBJECT TO, since there is nothing better. Where else can you buy your dream home and five others, without touching your own credit, assuming you have good credit, and closing all five in a matter of days? So the pros and cons of my favorite method below.
Advantages
1. Speed and time: The number one advantage to closing deals is that they are VERY FAST TO close. With a traditional home buying process, you have to wait 15-60 days before you can qualify for a mortgage or hard money loan, let alone find the contract that meets your needs and purchasing power. With a theme, you are simply limited in the time it takes to find a motivated seller with a large investment.
2. No Down Payment – In some cases of finding the best deals, sellers can often pay you to buy your home. That’s right, it’s true when you hear people talk about no down payment deals. The way this happens is when the market value and the loan value (LTV) are relatively equal. When that happens, sellers’ homes are “upside down” with little or no equity to cover closing costs. In a typical buyer’s market, sellers DO…let me say, again they DO have closing assistance, which at a minimum must cover your area’s registration and transfer taxes. When this happens, you get paid and you might even walk away with cash in hand, if you’re a good negotiator. Now, just because you can get no-down-payment settlement assistance, if a home and area are great, you can take the risk and cover the cost. Me, never pass up free money if a seller is able and willing to help.
3. You have bad credit – WHO CARES: With tied offers, you get the best of both worlds, the property you want and no credit burden. If you’ve had a couple of bad grades, filed for bankruptcy, got divorced, or for whatever reason have less than excellent credit, it doesn’t matter. Acquiring properties subject to existing financing is excellent for investment properties or your personal residence. Now, with that being said, if the cause of your credit problems is your inability to pay on time or just something you forget, then we recommend that you go out and get some financial planning assistance. That said, your credit will not prevent you from purchasing an investment property.
4. Control Existing Payments – If you’re lucky and smart, you’ll find great deals from motivated sellers who secured homes with EXTRAORDINARY interest rates and VERY LOW payments. Once you get those low payments and get a home under contract to closing, you can now take care of the current mortgage payments, but being smart, you’ll never pay them, as your RENTERS will be paying monthly mortgage payments for you. plus a hefty raise to generate you a POSITIVE monthly cash flow. Unless you feel pain, DO NOT take over payments if, at the very least, you cannot get a tenant/buyer to cover the full amount, otherwise you will start losing money right away.
5. To allocate or not to allocate – Now, since you were smart and secured the deal, you can either buy it yourself and play owner to build generational wealth or you can sell wholesale (or some investors refer to this as an option of ownership). to another investor) for a quick cash fee. This CASH is yours WITHOUT CONDITIONS or property ownership. The new investor will cover the rest, the closing cost and more.
Disadvantages
Well, as with most things in life, using the Subject To method also has some challenges. Here are the top 2 challenges, but I can certainly list many more, but you don’t want to spend the weekend reading this article.
1. Integrity, Honesty and Ethics – When you start talking to sellers or motivated buyers/investors, you will have one thing to deal with… EARNING THEIR TRUST. No matter how motivated the seller is, you’re not just buying good fortune from him, sellers trust him to keep his word, pay the mortgage, and of course, buy the house from him. The downside is that not all investors are trustworthy and they ruin people who are real investors and are NOT looking to take advantage of people. Not only that, but some of us need help and training in the honesty department.
2. Ugly Mortgages – Have you heard of negative ARMS or AM? Oh! For some of us, we don’t realize mortgages are bad until we spend too much time in the process. Change your number one process, but STAY AWAY FROM THE GUNS!!!
