Subject To Deals aka Get the Deed

Subject to deals (aka get the deed), offer several creative ways to control more properties without investing money of your own. It’s a great way to invest using other people’s money. The financial rewards are huge and the risk is extremely small. I’d use subject to deals almost every time if I could.

Subject to Deals (aka Get the Deed) are a Type of Owner Financing

Subject to deals are a form of owner financing. The current owner already has financing in place. Instead of the investor going through the painstaking (and costly) task of applying and being approved for a new loan, the investor simply takes over the sellers existing loan. The seller can make a profit on the deal but that becomes a second mortgage owed by the investor (without a mortgage application).

Like most creative financing deals, there are several ways these deals can be put in place. The one thing that needs to happen is the terms of the original loan contract need to be adhered to. Here are three common ways that subject to deals (aka Get the Deed) are put together:

  1. The investor obtains the original loan account number, mailing address, and due date to make the monthly payments. As long as the payments keep coming, the lender isn’t likely to call the “due on sale” clause (no matter whose name is on the check).
  2. Another common scenario is for the investor to send the original loan amount plus the amount for any second mortgage directly to the seller. This is not a preferred way to write a subject to contract. Especially if the seller has a history of credit/finance problems.
  3. The third common method is using a third party to distribute the money. The investor sends the money to a third party (essentially an escrow company) and that company sends one check to the original lender and another check to the seller for the second mortgage. This is the most secure but has the added cost of the third party.

From a Lease Options to Subject to Deals (aka Get the Deed)

The main reason more investors don’t use subject to deals (aka Get the Deed) is that it takes some trust on the part of the seller. After all, the seller is transferring ownership to you but their name (and responsibility) remains on the loan. This is why it’s extremely low risk to you but the seller still has some risk. The secret to making this happen is by building trust between you (the investor) and the seller.

A great way to build this trust is by starting with a lease option. A lease option doesn’t transfer ownership to you but does grant you control of the property. It also relieves the seller of the monthly mortgage burden.

A lease option does several things towards building trust to make the seller secure with transitioning to a Subject to Deal (aka Get the Deed). Besides no longer worrying about coming up with money for the mortgage payment, the seller is no longer responsible for maintenance and minor repairs. Additionally, you have a sales price agreed to via the lease option. All hassles of owning the property have become a distant memory for the seller. His or her only remaining concern is hoping you complete the purchase. After all, you still have the option to walk away.

There are several reasons the seller will agree to convert to a subject to deal. One of the most motivating is when you agree to complete the purchase well before the end of the option period. If the seller will pocket money from the sale, you may be able to finance this with installment payments (coming from your tenant/buyer). Or you may have to give them a balloon payment. There’s still room for negotiation when you convert the deal.

Why You Want Subject to Deals (aka Get the Deed)

There are good reasons that you want to have possession of the deed to the house. These sellers often have bad debt or other financial problems. These people are likely to be behind on the mortgage, have lost their job, acquired an illness, going through a divorce, etc. Although your risk is very low with a lease option, it becomes even lower when your name is on the deed and you make the payments.

In these situations, you want to get the deed with a Subject To Deal. Your main concern is that this type of seller will continue to have financial problems that could affect the title to “your” property if the deed is still in their name. For example, if this seller gets judgments from creditors, the creditor can attach to any real estate the seller owns.

This short article is not intended to provide all of the details for subject to deals. But rather to show when you should consider this investment technique.

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

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Working With Realtors® as an Investor

Does your Realtor® understand ARV? If you’re working with Realtors® as an investor, he or she should be able to intelligently discuss After Repair Value (ARV) with you. Unfortunately, most Realtors® aren’t fluent in the language of investors. They’re fluent in calculating down payments and pointing out the shiny stainless steel appliances in the kitchen – the language of white picket fence buyers.

An investor savvy Realtor® won’t be asking how many children you have and if you want a backyard swimming pool. Instead, he or she is asking what your investment strategy is? Is it fix to flip or long term rentals? Are you looking for distressed properties or turnkey rentals with a qualified tenant in place? Do you want to hear about every property that comes on the market or is it the agent’s responsibility to screen for only the best opportunities?

How to Find the Right Realtor® When Working with Realtors® as an Investor

Realtors® interested in investment properties hang out at the same places as investors do. These aren’t the open houses showcasing the most polished house in a neighborhood. However, it can be worth your time checking out Realtors® that specialize in the types of houses and neighborhoods you invest in. Drive through these neighborhoods looking for “For Sale” signs. Also call on listings in marketing brochures. But remember they need to speak your investor lingo.

Just because an agent is the office “Rock Star” doesn’t make him/her a good Realtor®` for investors. Working with Realtors® as an investor still means they understand phrases like “hurdle rate”, “cap rate”, “rate of return”, and “income vs. capital gains”. You can check out some Realtors® by making telephone calls or sending out emails asking the right questions.

A better avenue to finding a Realtor® knowledgeable in working with investors is one of the thousands of real estate investor groups across the country. Most of these groups welcome real estate professionals as members. Realtors® join these groups because they want to work with investors. Even if he or she is new to the group and not yet up to speed, you know you are working with someone interested in the investment world. You can find local groups on websites such as REIclub.com and NationalREIA.com or by simply doing a Google search for real estate investing groups in your city.

How to Best Work with Realtors® as an Investor

One way you benefit by working with Realtors® as an investor is having them keep you current on market trends. You probably have your own secret formula for rehabbing houses that sell fast and for top dollar. But the market is always changing. Today’s megatrend is driven by the Millennials that now dominate the market. Are you fully up to speed on their needs and wants?

Where are the best rental opportunities? Which neighborhoods are ‘hot’ right now for sales? Where are new jobs being created or new schools being built? This is information Realtors® are often more tuned into than investors are.

However, it’s a two way street. The more he/she knows about your objectives, the more useful a Realtor® can be in tailoring your efforts to help achieve them. Once they master bringing you the best deals, he/she needs to specialize in is closing the deal tomorrow.

When you have a shortlist of Realtors® wanting to work with you, the next step is having a face-to-face conversation. You need to be clear about what it means to be working with a Realtor® as an investor. You need to be clear about your investing strategy. You need to let him or her know your price range, your neighborhoods, and what your exist strategy is. You need to let them know if you expect to be shown the interior of every potential house or if the Realtor® only needs to forward you prospective houses and you’ll drive by to view the outside but only ask for access to the interiors when you are truly thinking about making the purchase.

Ultimately, working with a Realtor® as an investor often works best when he/she is an investor them self. There is a possible conflict of interest here because the Realtor® might scoop up investments that you would have been interested in. However, there are usually more than enough to go around. Another work around to this issue is having more than one Realtor® working with you. You shouldn’t have any trouble finding as many investment grade properties as you want.

What you need to do now is TAKE ACTION!

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

 

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