Subject-To’s and Wholesaling - A Match Made In Heaven
When I think of “subject-to” deals my mind immediately goes back to when I first started in real estate and all the creative financing seminars I went to. I actually took quite a few properties into my portfolio with this particular strategy. But once I realized that landlording was giving me gray hairs and putting me at risk for an early death I simply stopped utilizing the technique. I had found my new love - flipping contracts en masse.
So why the heck are we talking about this? I’ll tell you why. Actually no I won’t. First let me explain what a “subject-to” deal is in the first place for anyone who doesn’t know. Oh - congratulations mister. You already know. Well how ’bout a little patience for the newbie reading who needs this? Stop rolling your eyes and hold your horses (’Hold your horses’. Ha. Why do we still say that when nobody rides horses? It’s like, “Hey, either everybody start riding horses already or else stop saying that.” Right?).
Subject-to means subject-to-the-mortgage. Long story short we go in and take over responsibility for the mortgage payments. It’s easier than it sounds. Sometimes we give the seller a little cash up front, but hopefully we don’t. It all depends on how good a negotiator you are. You need to sharpen up your negotiating skills by the way. I recommend Roger Dawson’s products for education in that arena.
I’m telling you this because just this week I contracted on four different houses, marketed them, and only sold one so far. That’s not good. My phone barely rang. Now maybe these just didn’t happen to be the right houses in the right areas. Who knows. Certainly not us; that’s for sure. We don’t ever even see these houses for the most part. They could be next door to cemetaries for all I know. (quick tip - don’t buy houses next to cemetaries. People don’t like those houses. Ask me how I know.)
But, I find it curious that this same week that things seemed a tad slow I happened to stumble across a subject-to deal that I sold literally a couple hours after I got it.
My phone was ringing off the hook with hungry buyers.
This happened to be a deal whereby the seller was actually one of my previous buyers who had bought my property, rehabbed it to the NINES, but then came across tough times. He just wanted out. He couldn’t afford the payments. “Please just take over these payments for me” he said.
There are plenty of people out there willing to both sell their houses like this and buy like this, my friend. Way more than are willing to sell for 50 cents on the dollar (man I love those people) or put fresh financing on a house. The market is changing rapidly. The secondary mortgage industry is in total chaos. I recently refinanced a property that I own personally and the next month the bank I used was out of business. Bankrupt. I wonder if they’ll just forget about me and I won’t have any payments forever. That’d be nice.
This is your wake up call. Things are changing and you better have a plan.
“But how do I make money as a wholesaler in this situation?” you ask. Very easy. In the example above I simply advertised the house as “For Sale. Subject-To. With $12,000 down.” Guess who gets the $12,000. That’s right. WE do.
How do you document this transaction? Sorry, I’m tired of writing for today. My students know. You should consider becoming one of them! No quicker, better, funner, sexier way to get started in real estate. That’s for sure. Click here for details.
Have a great weekend and God bless.
© 2007 R. Preston Ely
all rights reserved
Real Estate and Success Coach R. Preston Ely publishes the critically acclaimed bi-monthly ezine The Flip Factor. If you’re ready to jump-start your life, quit your job, make a bajillion dollars, and have more fun and freedom, get your FREE 7 Day Mini-Course NOW at http://www.learntowholesale.com !
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