Posted by Berno on October 05, 2006 at 07:53:49:
Ads belong in a special section on this site, not on the message boards.
-Berno
Hope this isn’t a dumb question! - Posted by mir
Posted by mir on October 03, 2006 at 18:16:14:
I’ve been reading as well as anyone has on this site who is serious about investing. But I am still not sure what is a “subject to”…I see it all the time and even when googling, it doesn’t give a whole lot. What does this mean? what are the inner workings of this term, and how is it beneficial? Thanks ahead of time for patience and wisdom, I really appreciate it!
Re: Hope this isn’t a dumb question! - Posted by mir
Posted by mir on October 04, 2006 at 10:26:41:
Thanks so much Ed and Frank, that really cleared some cob-webs…makes much more sense now!!! Kudos!
Re: Hope this isn’t a dumb question! - Posted by Frank Chin
Posted by Frank Chin on October 03, 2006 at 18:39:35:
Mir:
Short answer: Someone deeds you the house, and you take over HIS mortgage payments, usually not notifying the lender.
Why?? The seller may not be able to make the payments, but the buyer may for various reasons not be able to qualify for a mortgage. By taking over subs 2, he does not need to get a mortgage.
How is it beneficial: The buyer does not have to qualify for a mortgage.
The downsides: First, the mortgage is still in the sellers name. Second, the bank can call the loan if it finds out.
Hope this helps.
Frank Chin
Re: Hope this isn’t a dumb question! - Posted by Ed Copp (OH)ee
Posted by Ed Copp (OH)ee on October 03, 2006 at 18:38:22:
Subject to: simply means that you as an investor purchase a property by taking the deed, SUBJECT TO the existing mortgage. In other words the mortgage signed by the seller stays in place and he remains responsible. He does not get released until the lender wants to release him from his liability. Usually when the loan gets paid off.
Major benefit is that you as the investor do not have to get a loan. You need not qualify, or sign the note. Most lenders object to this procedure, by having a “due on sale” clause or some other type of restriction in the language on the note. The lenders rarely call a note due, but they can.
Now in the olden days, (20 years or more ago) all V.A. and FHA loans were what is called readily assumable. It was a simple matter to take deed subject to the existing loan, because the lender had no objection. The government guaranteed the loans. An investor could buy 100 houses this way, with the blessing of the lenders.
It is more difficult today, and there is more objection but it can still be done.
Re: Hope this isn’t a dumb question! - Posted by c. mitchell
Posted by c. mitchell on October 04, 2006 at 13:03:19:
I have been investing since 1989 and I love sub2 deals the most…the best material that I have utilized was “The ABC’s OF SUB2’s”. Contact me for funding solutions or for assistance with your projects. mitchell.chris@hotmail.com or 708.743.4957
Re: Hope this isn’t a dumb question! - Posted by Frank Chin
Posted by Frank Chin on October 05, 2006 at 09:42:56:
Chris:
I don’t doubt doing a few subs 2’s is OK. One has to be careful.
I was following a discussion here a while back, the Porter case, where a women did about 50 “sub 2’s”, from what I recall. The idea is she rents the places out, pay the mortgages. The problem was that she started to have a few vacancies, started to miss a payment here and there, and finally missed payments on all of them.
And the women was not a newbie, she was the head of some local RE orgainization, as well as a broker. But, if you fail to keep promises to over 50 sellers, its a major catastrophe. And if the state AG was doing his job, he’ll be checking out sub 2’s.
Here in NYC where I am, few sub 2’s are done. A typical 2 family in my neighborhood goes for 800K and up, and mortgages of 500K and up. Even so, the equity is quite substantial, and few people would walk away trusting a stranger with 500K in debt.
Frank Chin