Re: CAUTION - Posted by BrandonT(So.IL/St.Louis)
Posted by BrandonT(So.IL/St.Louis) on January 23, 2002 at 10:58:34:
Erik,
Hold on a moment… First let me say, granted, I’m no veteran but I’ve now got a bit of experience and have been learning non-stop about Sub2 deals. You say you’re going over there with a blank warranty deed? Do you have a course on Subject2 deals? How do you plan on making out this deed?
I mean no offense but for your own protection I want to make sure you know exactly what’s going on if this is your first one. For example a newbie who reads this board might be under the impression that it’s ‘that simple’ from the posts he’s read where experience investors’ sum up their experience with a sub2 deal by saying ‘I got the deed’… And perhaps the newbie would think its as easy to do the deal as to simply have a seller deed their property right into the investors’ name, and the deals done.
Just want to make sure that for example
A. Deed format you plan to use is legal in your state.
B. Seller will be deeding property obviously into a trust and not into your name.
C. You’ve done your due diligence for the area and you are certain that his payments will be manageable to where you can cover it with a tenant/buyer.
Erik also, some investors advocate that you file the deed immediately ( after you are certain about the balance of the mortgages and sure you want to do the deal %100 )to make sure no more liens or encumbrances can possibly be placed against the home.
But especially in your case if this is your first one, in my opinion only I would wait until you were sure the prices were reasonable AND the guy truly moves out and leaves the home in good condition before you put your neck on the line. Assuming of course you researched the title and it is clean beyond the two mortgages.
As far as your exit plan, you never want to sell Subject2 because it gives you very little control, and that’s what being an investor is all about. “Own nothing, control everything” maybe that’s not the only way to invest but it’s better when you have the easy option, to take the path that leads to you having more control and protection. I would think that as ‘Oh-So-Many’ other investors do when they get Sub2 deals, you would want to Lease/Option the house. Not only can you get above market rent but also an above market final sales price, along with money up front in the form of the non-refundable option consideration that I’m sure you wouldn’t mind having in your pocket.
If you know the seller wouldn’t mind having the loan in his name for an extended period of time it would be possible you could consider selling the home on a Land Contract/Contract for Deed/Bond for Deed (whatever you call it there in NV).
One more thing I’d like to point out, if you look around at the experienced investors who have been doing sub2’s for years you’ll see the consistent fact that the Lease/Option is far and away the most common exit plan due to the demand in the market-place (perk being getting the home filled quickly and relatively easily) and the different advantages for the investor (money up front, money over time, money on the back end, ability to simply evict instead of forclose in worst case, the list goes on).
Again for all I know you’ve done a hundred deals and I have simply misinterpreted your post but I’m simply pointing out that you want to be sure what EXACTLY you are getting into if this is your first Sub2 (or deal whatsoever) and to make sure you have faith in the home and the area to be able to fill it quickly.
Perhaps post more details and continue to keep us posted,
Brandon Treat
Southern IL/St. Louis