Sub2…Anwers to post and e-mails. - Posted by $Cash$
Posted by $Cash$ on July 17, 2002 at 13:35:29:
I felt that since this was a post to me about ?Sub2, that?s what I do? deserving an answer, because the general drift of the questions asked and amount of personal e-mails are about the same.
I would like to answer all the emails received but I would be at it a long time so if this post cuts down on answering some of these e-mails it will at least help me.
New persons starting out may find solace in what I say also. It is long so anyone to who it doesn?t pertain to I apologize for taking your time.
Marcos: I’m not actually talking about my investing, I’m talking about your strategy.
Here are the issues as I see them
- $12k down on a $100k house. Honestly, there just aren’t that many buyers that have the $12k down. Here are just a sample of a few of the LIVE ads in my paper today.
4/2 - Owner will finance. $2500 moves you in. Great neighborhood. $700mo. 710-7860.
OWNER FINANCE, NO QUAL! Minimum $4K down. From $759/mo. 24hr 1-866-202-6076 x4
Some of the investors in my area do really stupid things. Owner finance for less than 5% down. Do a Lease/Option with $500 down, etc. I’m in Jacksonville, FL by the way.
You seem to have found a way to get people into your houses that have $12k down. I think that in reality that is VERY difficult to achieve. If you took 100 bad credit individuals, only 1 or 2 could conceivably come up with that much money down. No matter what the terms.
Now if you’re in California or some other high dollar area, and you somehow found a $100k house, then I could see that happening. But not here in Florida. When I sell a home, I have to use down payment assistance programs as noone seems to have cash these days. Either that, or I pay for their closing costs.
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I checked back to see if I misled anyone that you could get $12K down on a $100K house all the time. I believe I said that I get $6K to $12K down. This would depend on the condition and area location of the house on what I received down. Can you get $12K down on a $100K? Yes. Would I advise doing this on every $100K house? No.
I would not sell a $100K house for less than $6K down. If I did not believe I could get a minimum of $6K down I would not buy the house.
When I first started I did just to get the practice in talking to house sellers and honing my sales skills.
You pointed out that only 1 or 2 could conceivably come up this that much money down. You were referring to $12K down. In my opinion that would be all I need 1 or 2 to sell the house to.
I also related that if I took a partial down let?s say $3K down, I would set up a note to get my other $3K before they had to refinance.
I do not care what the rest of the investors are doing in my area; they also do the $1K down. So what does that mean to me? Nothing. They must be stupid here too just like in your area.
Here is an example maybe not related to buying and selling houses, but you will get the drift.
I owned a radio station in the Jacksonville area (your area) so I am familiar with the area. I over heard my salespersons talking about how no one had any money to advertise and how bad the economy was and all the other negative reasons they could not sell advertising. I said to them that I would prove that what they were saying was not true and challenged them to give me a potential client they thought was the toughest and would never buy advertising.
They gave me the name of a bicycle shop owner who owns a shop in Jacksonville. I cut what we call an advertising spec spot on tape. Took my tape recorder and my spec spot along with an advertising contract for $10,000 to the owner of the of the bike shop.
The spec spot started out?3 different ladies one after the other saying ?I peddle it all over Jacksonville?, Then the announcer said They all peddle it all over Jacksonville on a bicycle from Norwood (I think that?s the name, maybe they are still there) Bike and Mower etc.
The owner signed the contract for $10K. Darn good thing I didn?t listen to those salesman.
Buy the way the owner did very well with his new advertising campaign. Even had T-Shirts made up saying ?I peddle it all over Jacksonville with a bike from Norwood Bike and Mower?. (Feminists, please my wife put her shoes back on years ago.)
Marcos: 2. Different scenarios that could go wrong. You talk about preferring properties with no equity.
The problem comes when something bad happens. You sell to a lawyer, and they decide they aren’t going to pay you. Hell, you can’t even report their delinquency to the credit bureaus. Now, you have to get a lawyer, and it might take you 12 months to foreclose. Have you ever had someone fight you in the process. It’s not pretty. How do you explain to the judge that I sold it to this guy, yet I haven’t recorded the deed, and the note is not in my name. I mean there are a lot of pitfalls here. That’s one scenario I see.
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This one is easy DO NOT SELL TO AN ATTORNEY, I am not found of them anyway.
Jhyre, you answered a question I asked this does not include you.
If you are not recording anything to protect you and your buyer then you are doing something wrong. I cannot recommend what to record to do this I am not an Attorney or one to give advice in this area, but they are ways. Read the archives.
Marcos: Another possible scenario. The note gets called due. And you have no equity in the property. Yet you’ve sold the property to somone else, and they can’t qualify for a new loan yet. How do you counter that?
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Since I have only personally been involved in only about Five Hundred Sub2 property transactions and never had the Due on Sale Clause invoked on me it is hard for me to answer. Guess the legal paperwork that I record has never triggered the DOS clause. I do have an answer but this post is long enough.
Marcos: I mean, I could dream up a thousand nightmare scenarios of what COULD happen. The point is, when there is no equity it’s very hard to have a Plan B. I don’t like the idea of setting up a strategy of getting properties subject 2 that have no equity. Sure, you might have decent cash flow, and small lump sums of cash. But, if/when something goes wrong, it could be disastrous.
But, of course that is just my opinion.
Marcos,
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Marcos I do value your opinion, I only keep about $150K in the trust account at my Loan Servicing Company, should I increase this amount?
$Cash$