Forget looking for assumable loans. That will be like looking for the needle in a hay stack. ALL loans are assumable whether they say they are fully assumable or non-assumable. It doesn’t matter. You can assume any loan! What you need to learn is HOW to assume those non-assumable loans by assuming them “subject to”.
By assuming a loan “subject to” the loan stays in the sellers name. You get the deed to the property and take over the payments. The seller remains liable for the loan. But before you go out and do these types of deals you need to read up on putting properties into a trust and how to properly structure this type of an assumption with giving full disclosure to the sellers on any risks involved.
The key isn’t in whether the loans are assumable or not. The key is whether the seller is “MOTIVATED” or not. Look for MOTIVATED sellers and the deals will follow.
Where’s the beef?! (assumable loans) - Posted by Keith (MI)
Posted by Keith (MI) on June 06, 1999 at 03:28:00:
**I may mention Carleton Sheets here, but don’t worry, this is a “general” question, I think…
I’m a little ways into Sheets’ real estate course, and to the part where he’s making actual calls on the phone for ads that look promising. I haven’t gotten to his main techniques yet, but already I’m a tad confused. A couple of promising properties he’s passed on due mainly to the fact, it seemed, that the loan is a non-assumable one (tho maybe there were other factors). But he seemed to look down on those types of properties and said there are too many better and easier deals out there than to mess with these rigid conventional loans (at least on the properties in question).
Basically, my problem is this: Several years ago when I first bought some books and a couple of courses on creative REI, even back then the authors were quick to point out that the “assumables” are getting harder and harder to find these days. I know now they must be even rarer (I’m guessing). I remember back then making LOTS of calls here in suburban Detroit–and even finding a few properties that seemed promising–and not ONE of em was assumable. They were all non-assumable, conventional mortgages. It was very disappointing, since that really would seem to make that first deal a whole heck of a lot easier for the newbie! But geez, my point is, if nowadays I throw out any deal that ISN’T assumable, I fear I won’t find anything in my local market! I didn’t back then. Maybe Sheets will clarify later, and perhaps he was just trying to keep things simple at that point for those calls, but if I have to disqualitfy anything that isn’t full-assumable, I’m hurtin’, I think. ARE there still assumables around in decent numbers??
Ah, maybe I’m just getting ahead of myself–and the course.
Re: Where’s the beef?! (assumable loans) - Posted by Mark (SDCA)
Posted by Mark (SDCA) on June 07, 1999 at 11:20:43:
Not sure if you got the specific answer you wanted, but here it is. No, there are not the freely assumable loans that Carleton was talking about in great numbers. The vast majority of them have been re-financed out. The assumables that do exist are 1) recent adjustable rate mortgages or 2) very old fixed rates which would now have a very low loan balances (ie you would have to come up with a lot of additional money in one form or another to buy out the seller’s equity and assume the loan)
Re: Where’s the beef?! (assumable loans) - Posted by Stacy (AZ)
Posted by Stacy (AZ) on June 06, 1999 at 12:33:08:
In addition to what Bud and JohnBoy wrote, I’d like to point out that subject-to and sandwich L/O assumptions carry a risk. If the underlying loans are not the “assumable” variety, there is a due-on-sale clause that could be exercised by the lender. Since you are new to these strategies, I just thought it would be good to mention it so you can read-up and understand the ramifications. There are a couple of strategies that most investors use. One is using a Land Trust to help hide the fact the title was transfered, and one of the newer options being proposed by some is the PACTrust.
Bill Bronchick has a couple of great articles in the “How-To” section of this site that speak of the due-on-sale clause and how to get around it.
One of the other appoaches to non-assumable loans is the sandwich lease option. You control the property by a master lease with an option to purchase. In turn you lease out and option to sell to a tenant buyer for more than you are paying. You control without owning. You have little risk because you don’t have your cash into the deal. There are numerous variations. L/O work well when there is lower equity as the seller realizes it may or may not be real. You can do the “assumption” as Johnboy alludes to and sell on a L/O. And then there are various contract for deed approaches than do similar things while making you a profit.