I buy Sub2...that's what I do. - Posted by $Cash$

Posted by Marcos on July 17, 2002 at 09:54:15:

I’m not actually talking about my investing, I’m talking about your strategy.

Here are the issues as I see them

  1. $12k down on a $100k house. Honestly, there just aren’t that many buyers that have the $12k down. Here are just a sample of a few of the LIVE ads in my paper today.

4/2 - Owner will finance. $2500 moves you in. Great neighborhood. $700mo. 710-7860.

OWNER FINANCE, NO QUAL! Minimum $4K down. From $759/mo. 24hr 1-866-202-6076 x4

Some of the investors in my area do really stupid things. Owner finance for less than 5% down. Do a Lease/Option with $500 down, etc. I’m in Jacksonville, FL by the way.

You seem to have found a way to get people into your houses that have $12k down. I think that in reality that is VERY difficult to achieve. If you took 100 bad credit individuals, only 1 or 2 could conceivably come up with that much money down. No matter what the terms.

Now if you’re in California or some other high dollar area, and you somehow found a $100k house, then I could see that happening. But not here in Florida. When I sell a home, I have to use down payment assistance programs as noone seems to have cash these days. Either that, or I pay for their closing costs.

  1. Different scenarios that could go wrong. You talk about preferring properties with no equity.

The problem comes when something bad happens. You sell to a lawyer, and they decide they aren’t going to pay you. Hell, you can’t even report their delinquency to the credit bureaus. Now, you have to get a lawyer, and it might take you 12 months to foreclose. Have you ever had someone fight you in the process. It’s not pretty. How do you explain to the judge that I sold it to this guy, yet I haven’t recorded the deed, and the note is not in my name. I mean there are a lot of pitfalls here. That’s one scenario I see.

Another possible scenario. The note gets called due. And you have no equity in the property. Yet you’ve sold the property to somone else, and they can’t qualify for a new loan yet. How do you counter that?

I mean, I could dream up a thousand nightmare scenarios of what COULD happen. The point is, when there is no equity it’s very hard to have a Plan B. I don’t like the idea of setting up a strategy of getting properties subject 2 that have no equity. Sure, you might have decent cash flow, and small lump sums of cash. But, if/when something goes wrong, it could be disastrous.

But, of course that is just my opinion.


I buy Sub2…that’s what I do. - Posted by $Cash$

Posted by $Cash$ on July 15, 2002 at 18:31:52:

Received a few (whew!) personal e-mails lately asking advice on REI, which I do not mind. There are areas of real estate investing that I would hesitate giving advice on because me expertise is very limited in those areas. So here is what I do.

I buy Subject two (Sub2?s), that?s what I do. I have bought houses with, tax liens, foreclosures, rehab?s, L/O?s and PDYQ?s (don?t ask me). Did I make a few dollars? Yes. However, it is too long a process for me, I like the ?Chase?. There are others who post on this board with far more knowledge than I in these areas.

So I can only give advice on Sub2?s. I know that I can drive into most any city (except maybe Philadelphia I spent a week there one night) in the USA, with a population over 500,000, (I am a numbers kind of Guy), do what I do buy and sell one house and make $6K to $12K in 30 days. Can I buy more than one house? Yes. But follow me for a while, as I will get to that point later. If you live in an area with a population under 500,000 it still can be done, just not as many people from which to choose from.

You new people ?newbies? in real estate investing seem so concerned with finding a motivated this and that and all of the ?BUZZ? words I read. You should realize that you are the one that should be motivated. I wish that I had a dollar for every time I heard over the phone ?this isn?t one of those darn things where the loan stays in my name is it?? Heard that one before too?

Think for one moment, buy one house and make $6 to $12K. If you just did one house a month, would that not be great? Work about 6 hours per month; calculate that on an hourly basis. Forget about the Gazillion dollars others make or promise to make you in your first thirty minutes in this industry. Get your first deal and go from there. It gets easier and easier from there on.

I have grown fond of Wayne; so Wayne, listen up.

Here?s what you need to have and do to buy that one house.

A telephone.
Advertising albeit in a newspaper ad or by direct mailing?s with your phone number in the ad.
The seller calls. Answer the phone, get their address and set an appointment to meet with the sellers at their house.
Be on time for the appointment; make sure all the decision makers are there, the owners.
Use your knowledge about real estate investing; tell them how they will make a good decision by selling to you. Close the sale.
Advertise the house for sale.
When the phone rings, pick up the phone. If it is a buyer, set an appointment to show the house.
Meet the buyer at the house. The house will sell it self. Have them sign an Offer and Acceptance Form, collect the down payment and give them a receipt.
Give the O & A to the people who will do your house closings. These people will call your buyer; they will set up an appointment for the final closing. The people doing the closing, the Title Company, Escrow Company, Attorney, etc., should have all the State Specific forms required to keep it legal and protect you.
After the closing pick up your money from wherever the buyer closed on the house.

Overly simplified? No. A little bit smart-assed? Yes. The truth? Yes. Just trying to point out how really easy it is to get your first house. The important part of my message is your KNOWLEDGE in this industry.

Quit spending so much time analyzing the situation, unless you show up at a serial killers house, (if anyone posts back that would probably happen to me it probably will). All the people can do is say NO, and that?s when the sale really begins. From that point forward use your real estate knowledge and sales techniques, you have far more of it than the sellers do.

I have never read a real estate investment course. Between a good book on sales techniques (Zig Ziglar, Closing the Sale) and advice from postings on this board, you would have all the information you need to buy that first house. Zig was a pots and pans salesman, but probably sold enough metal to build a bridge around the world. By the way, I have never met Mr. Ziglar, nor attended his seminars, just read his book. GL (ON) pointed out to me that a new person would do well to take a course in public speaking and acting. It would be a help to you in getting over the first time jitters, don?t wait to take a course, get out there now, that was not listed as an excuse for you to wait. It?s not mandatory, but will enhance your abilities in reacting with buyers and sellers.

Yes, when over the phone or in the house of the seller what am I but an actor, whose performance will be judged by the seller with a ?yes? or ?no?. That?s why there are phone and sales presentation ?scripts?.

Just insert real estate jargon in place of pots and pans and start building your bridge; get the first sale.


Hear ye Here Ye: To all ye ?Garuships?, I beg thine humble forgiveness for mine post but Sub2?that’s what I do. God save the Kings and Queens.

Re: I buy Sub2…that’s what I do. - Posted by David G (OR)

Posted by David G (OR) on July 17, 2002 at 15:29:33:

In your area, what ways of marketing work best?

What ways of marketing would you recommend for RE investors looking to expand into Sub2?

David G.

to clarify… - Posted by ken in sc

Posted by ken in sc on July 16, 2002 at 08:25:00:

when you say you give the O a A to the closing agent to call and set up a time - you mean in two years when they get their loan, not to close the deal on the Contract for Deed originally, right?

Also, do you declare tax on the full gain (not yet realized) in year one, or take installment sale, or some other reporting method?

Also, what percentage actually close (refi) within the two years, what percentage default, and what percentage pay the $2500 to continue?

Great post.


Re: I buy Sub2…that’s what I do. - Posted by LeonNC

Posted by LeonNC on July 16, 2002 at 01:22:26:


You buy sub2 and immediately try to sell retail to a qualifying buyer or what? I’m sorry if you’ve posted this before, this is the first post of yours I’ve read. Can you talk a little about the selling side and how you make your money. You’re right, when buying sub2 the buy part is easy.


Re: I buy Sub2…that’s what I do. - Posted by Kristy

Posted by Kristy on July 15, 2002 at 23:14:59:

I have to agree with $CASH$! I had never invested in Real Estate before. I never bought any courses before investing. I did have Real Estate knowledge, but never invested. 2 years ago, we took the plunge and started buying houses at auction! Rememeber, we never bought any courses!!!

We took a loss on our first investment. Took us a month to rehab, then 6 months to sell at an 12% interest only loan. Finally unloaded the darn thing, brushed off our tails and went back at it.

We now buy a house a month now at 18% intrest and have made great money. We learned from our mistakes on the first one. My husband quit his job of 8 years in January to do this full time. (originally it was supposed to be just for extra cash) Now he spends more time with the kids. ( 5yr old & 3yr old) The kids love the houses, they get to paint and make a mess!

I did spend alot of time researching things, but I fianlly decided, enough is enough! And just jumped in and bought a house! I NEVER bought a course until recently. And that was to see what all the fuss was about in L/O and Sub-2’s. I got some helpful info from the course, but nothing compares to the help that is gotten here! (I found this site AFTER I bought the $1,100. course)

L/O and Sub-to’s sound great! Just need to money to throw away on bandit signs and flyers etc. So we decided to try on Wholesaling. (Flipping properties) After sitting and thinking about all the negatives, and trying to get out of our “Comfort Zone” we just made 5 offers tonight to distressed properties and REO’s.
Will they get accepted? Don’t know…
Will we keep making offers? YEP!!
Have we done this before? NOPE…
Do we have the CASH to buy? NOPE…
Are we nervous? YOU BET
Do we have buyers lined up? NOPE- But there are plenty advertising in the newspaper. :slight_smile:
But we will never know unless we try. And we want that extra cash.
So Yes $CASH$ your post of basically -JUST DO IT!! is right on the money! Thanks for the great post. It made me feel better about those 5 offers I just faxed out.

Re: I buy Sub2…that’s what I do. - Posted by EricD.

Posted by EricD. on July 15, 2002 at 23:12:09:

Great post!

One simple question for $Cash$…

Do you promise (may be in writing) to the seller to have their loan paid off in a certain amount of time? Say a few months as incentive to do business with you, since you are going to sell the home quickly anyway.


Re: I buy Sub2…that’s what I do. - Posted by Lucky In KY

Posted by Lucky In KY on July 15, 2002 at 20:34:57:

$Cash$ Great Post! NT.

Re: I buy Sub2…that’s what I do. - Posted by $Cash$

Posted by $Cash$ on July 18, 2002 at 20:34:41:

David G,

Glad to meet you.

It used to be one investor and I advertising in the newspaper, “I Buy Houses”, except when the Guru’s came to town and held a seminar. Then there would be 30 ads the first week, 5 ads the second week and the third week just I and the other guy were running ads. Now there are 30 ads every week “I Buy Houses”. I still use the newspaper but my as has been in there a long time. Repetition helps day after day after day.

So I started using DataQuick and direct mailed to house owners that had properties 1 to 2 years old. Sometimes the local newspaper has this information by Zip Codes. I found this group to be the most receptive. Start slowly making sure can sell the first property then move on from there. Get comfortable with your program for buying and selling on Sub2.


Re: to clarify… - Posted by $Cash$

Posted by $Cash$ on July 16, 2002 at 09:18:38:


Glad to meet you.

I use a closing company to close on the Contract for Deed with the new buyers at the time the house is sold by me. At this time it is explained to the new buyers what they are signing and when the house must be re-financed. Doing it this way eliminates the “Who said What” problems.

I use a Certified Public Account for my taxes.

About 70% pay the fee, the first time. Most have re-financed by the end of the extension.

About 15% default. I handle the defaults with out going to court. I make them an “offer they can’t refuse” MONEY to leave. Remember I always have the house to re-sell so I am not out anything, just more money when the house sells again.


Re: I buy Sub2…that’s what I do. - Posted by $Cash$

Posted by $Cash$ on July 16, 2002 at 10:38:06:


Glad to meet you.

I do not sell to a qualified buyer. My ad reads in part as follows:

$12K Down - No Qual.
Then I give a description of the property. I show the Down Payment and Monthly Payments, this pretty much eliminates alot of the do not have any money people.

When you advertise No Qual, the people that call you have no credit or very little credit, but have the money for the down. Maybe they got the money from Mom, Uncle Joe, etc. The are only interested in the down payment and monthly payments. You may not believe this, but I almost never get asked how much is the house or the interest rate.

I found a niche in the 1 to 2 year old houses with little or no equity. I give the sellers $500 to $1000 for their equity, remember when they call me they have a problem, and I help solve their problem. I would be here all day if I listed some of the problems I have heard.

I sell the house for $6K to $12k down, which non credit people will buy. They are paying for not having credit, just like the hard money lenders do if your credit is a little shaky. So the no equity in the house does not mean anything the way I sell, actually I prefer it that way.


Re: I buy Sub2…that’s what I do. - Posted by $Cash$

Posted by $Cash$ on July 16, 2002 at 24:07:46:


Glad to meet you.

I am very proud to meet you. You will do just fine I am sure.

I am never wrong, well maybe once, and that was someone elses fault.


Re: I buy Sub2…that’s what I do. - Posted by $Cash$

Posted by $Cash$ on July 15, 2002 at 23:58:17:


Glad to meet you.

No, I never promise the seller when their loan will be paid off.

When I buy Sub2 it gives gives me the latitude in not having to be concerned with financing I am using the house owners loan.

If the question comes up I say “usually when I sell the new buyers re-finance in two to three years, sometimes less, however I cannot guarantee that, but that seems to be the norm.”

I sell a house under Contract for Deed, which may go by a different name in different States. In my contract, it states that the buyer must re-finace in 2 years. Sometimes they don’t in which case I charge them $2,500 to $3,000 for a one year extension. I call this an extension fee it is not taken off the price of the house. The buyers will pay the fee.


Re: to clarify… - Posted by ken in sc

Posted by ken in sc on July 16, 2002 at 10:28:09:

OK, so when you say you go to the closing agent to get a check, that is the remainder of the downpayment? You said you collect a deposit when you sell the house. So an example might be:

You buy on sub2 with a mortgage $85,000
You sell on contract for $100,000
You collect $500 deposit on date of contract signing
You collect the remainder of the deposit, maybe another $3500 at closing.
You collect majority of profit at second closing when they refi.

If this is the way you do it, how do you get $6000 to $12000 per house? Upfront as downpayment? or total after two years? Maybe the prices are more where you live. I find it nearly impossible to get $6,000 down, much less $12,000. They don’t have that much! I wind up with maybe 3% down on average, amd my average house is around $100,000, so a house a month is not a decent living.

Am I following you correctly?


Quick question, $Cash$ - Posted by Drew

Posted by Drew on July 16, 2002 at 13:37:14:


Thanks for posting your methods, it’s good to hear from the experienced. Would you expound on the following a bit:

“So the no equity in the house does not mean anything the way I sell, actually I prefer it that way.”

I’m not sure why you’d prefer no equity, would you please explain?


PS - Thanks for answering all of these questions, this is a very interesting thread.

Re: I buy Sub2…that’s what I do. - Posted by LeonNC

Posted by LeonNC on July 16, 2002 at 12:59:04:

cash, nice to meet you!

Ok so you sell on a land contract. Sounds like a niche to me! A little risky in this market but if you’re socking the money away then I’d say you’re safe.

Are you in a state that is seller friendly towards land contracts or in one like mine that’s really not and is costly?

How many payments on average do you have to make before you sell your houses?

What’s your stategy for a loan being called on a house that’s probably fully leveraged?

This does sound like something that would work in my area. I believe I would run a few ads first advertising houses I didn’t have just to see how many if any calls I got. It seems most people only have a thousand dollars around here when it comes to buying a house.

Best Wishes,


Re: I buy Sub2…that’s what I do. - Posted by EricD

Posted by EricD on July 17, 2002 at 24:17:02:

Thanks for your answer that helps a lot. If you don’t mind…are you making any money each month off of these houses or they just paying the sellers loan payment? I assuming yes. With the contract for deed you are selling at a high percentage (10-20%)?

And…do you fill out a lease with the seller to make it easier for them to get financing for another house or do you just assume they are going to be renting for awhile?

I am sorry if these are very ignorant questions but I am new to Sub2 (and RE) and would like to get one or two in the bag in the next month.

Again, thanks a ton for your answers to my questions and to other’s questions, it has helped me a lot.


Re: to clarify… - Posted by $Cash$

Posted by $Cash$ on July 16, 2002 at 10:53:22:


Read my post to Leon, just below. I get all my money up front at closing in the majority of cases. I do not know what the condition is of the houses you are buying, so I cannot determine why you cannot get $12K down. I have recieved $30K down depending on the house.

If you need to carry back on the balance owed you on the down, make it in note form with the so much of the balance paid to you every 3 months. Get all your money out before the final closing. Incentive for them to re-finance and keeps your default rate down.


Re: Quick question, $Cash$ - Posted by $Cash$

Posted by $Cash$ on July 16, 2002 at 14:06:15:


If the sellers have no equity in the house, they do not expect to recieve much money for their equity. Good for us. We buy low!

The buyers on the other hand have no credit and have to buy their credit if they want a house. We sell them the credit with big downs. Good for us. We sell high!

Got the picture?


Re: I buy Sub2…that’s what I do. - Posted by $Cash$

Posted by $Cash$ on July 16, 2002 at 14:28:09:


Risky is playing the stock market, real estate is the “basis of all wealth”.

I am not familiar with the laws in North Carolina, so I can not comment.

The longest I have had a house on the market is 2 weeks, I am not in the business to make mortgage payments for someone else. I have a pretty extensive background in advertising. This problably helps in what I say in my ads to sell the house fast.

I have never had a loan called on the Due on Sale Clause, however their are some excellent posts on ways to protect you investments written by some experienced people, check the archives. If I told you how I did it and it didn’t work for you, we would both feel bad, only you would feel worse in the pocket book.

$1k down sounds like some carpet bagger hit your town, down in Dixie.

Bull to $1K down, be very selective in your purchases, evaluate what you feel you can get down, set yourself above the rest of the low down people.

Run an ad and see what the response is, are you going to be a serious player, or one that has paralysis analysis.

Ask and ye shall recieve, and not in the biblical sense.