Thanks for clarifying. Is it still worth the trouble in pursuing a sub2 loan or will lenders do something quickly? Are there better ways to structure deals with owner financing on a non assumable commercial loans or does commercial mean off limits?
After reading this website for about 3 months,I finally realize how I am going to make money in real estate. Originally, I was going to purchase multi units with 10% of my own money and finance the rest because I thought it was safer to have the equity in the property. Yesterday I calculated the difference in payments between 100% financing and 90%. The sale price I used was 125,000 and the difference in monthly payments was about $80. THAT MEANS I WOULD TIE UP 12,500 FOR $80 PER MONTH!!! Just because you have the money to do something doesn’t mean that is the best way to do it. Now I see the error of my ways.
Now I will look for sellers of muli units and buy from them subject to and use the money for something else. Thank you all who contribute to this site as I continue to learn and make my breakthrough.
Let me save you a little time. When you say “multi units” it really doesn’t define what your plan is. For example, if you intend to buy 5+ unit buildings subject to, it would be important for you to know that there is no exemption to the DOS clause provided under the Garn St. Germaine Act for deeding to a trust when concerning 5+ units.
One other point: the idea here is not necessarily to buy with no cash. The idea is to figure out an “exit strategy” for your cash.
My plan is to purchase 4plexes and duplexes. As of right now I am more concerned with replacing my employee income with passive income. I really don’t want to sell the properties anytime soon.
My exit strategy would be to purchase the 4plexes cheap enough that if the rental didn’t work out I could sell it for a profit.
Is there anything else I should be considering? Also do you recommend a course for doing 4plex “subject to” for the purpose of using them as rentals?
A subject to transaction will trigger the DOS clause on any property type. But, if the loan is a 1-4 unit type loan you may deed the property to a trust…that transaction is exempt under Federal law from the DOS clause. If the property is 8 units, there are no exemptions to the DOS clause.