Subject to questions... - Posted by Jim

Posted by Jason (AL) on May 05, 2006 at 19:46:36:

Hey Jim,

Interested in sub2 deals and you’re 24?
Seems like we have a couple of things in common.

As far as sub2 deals having little equity, generally, this is not the case.
You don’t HAVE to purchase houses with little equity subject-to.
It works with either little, “mediocre”, or a ton of equity.

Personally, the majority of my sub2 deals have fallen in between little and “mediocre”. Of course, houses in my neck of the woods are 10 times LESS than what you’re talking about in your area.
Besides, it’s not like I’m going to find houses with $20-$50k in equity all day every day.
Given this, MY risk is lower (lower prices), most other investors are fighting each other for those few and far in between high equity deals, and I know how to make $$$ on the deals I’ve done.

If you feel that if you purchased one of these houses in your area subject-to and thought it was going to sit on the market for months and months…well, would you feel comfortable being responsible for someone else’s loan obligations…and do you have the necessary funds to keep your deals afloat in the meantime?

Not trying to discourage ya, just keeping things real.
Don’t jump into risks and obligations you can’t handle.
When you start in the great biz, I want you to experience success, not peril.

Take care.

Subject to questions… - Posted by Jim

Posted by Jim on May 05, 2006 at 08:31:48:

Hello all. I am new to this group, so I hope you will have patience with me while I ask my first few questions. I am 24 years old, with very little capital. I have about 8 to 10K. I have a few “subject to” questions.

I suppose I am trying to determine everyone’s opinion on these types of deals and determine the risks. My questions are as follows:

First, It seems to me you make money when you buy, and these deals generally have very little equity. Is this generally correct?

Second, what in the heck would you do if you couldn’t fill the house you just bought “subject to”? As I said above, I don’t have a lot of funds, and going a few months worth of mortgage payments would hurt.

Third, the starter homes in my area are literally $400K and above. I live in Florida, and speculators have driven the market up several years in a row. Now, there are so many of these homes on the market while everything cools down. In fact, brand new homes are sitting on the market for months. Therefore, are “subject to” deals even a legit investment vehicle in my area?

Thanks in advance, and I appreciate any feedback.

Re: Subject to questions… - Posted by MM

Posted by MM on May 06, 2006 at 04:57:06:

Jim ,

Any time you obligate yourself to do something, you should first make sure you can, even in a worst case situations, it’s contingency planning. I think lease options, and flips are usually the best places to start, but I also don’t try to conform deals to my ideals either. By that I mean if it’s perfect for a subject to , and I can handle the burden, then a deals a deal, but if it’s a sub to but I couldn’t handle the burden I wouldn’t pass it up I would try to flip it by controlling it with a straight option, or purchase agreement (include contingency clauses to leave yourself a out in a PA of course).

If you have it set up to be purchased subject to in your purchase agreement, and make the PA assignable it opens you up to that option.
You don’t have to only flip to investors either, you could also flip to a buyer who plans to live there (for those no equity situations).