Subject To – Why You Need Money To Buy Using "Subject To" (SubTo) - Safely, Legally

[Account Closed]

Subject To is definitely NOT a “No Money Down” technique”, Here’s why . . .

The obvious question is: "How Do I Keep Finding These Smokin' Deals"

It costs money to locate a willing seller. One of the largest wholesalers in Phoenix says it takes them $2,220 to get a wholesale that closes. It’s about the same for securing a Subject To. Think about the time and money you put into marketing. I do it for a lot less than that, but I’ve streamlined the process. Yet, $2,220 is the normal.

Here is an example of a Subject To I did, in foreclosure, bringing their loan current, taking over their loan and giving them “cash out”, they had a previous loan mod as a 2nd loan. Think of it this way, if they aren’t paying their mortgage, chances are they don’t have money to move, which creates a problem. So, give them money to move.

Bought for $157,100.38 ***

***

ARV

$245,000.00

5 bed 3 bath – Phoenix AZ

These are the numbers from the HUD statement

Bought for $157,100.38 ***	*	ARV	$245,000.00
Existing Loan Amt Payoff $118,145.37	*	Subject To	$118,145.37
****
Closing Costs From HUD
Title			$1,045.00
Escrow			$1,400.00
County Taxes			$538.38
Recording Fee			$120.00
Cash to seller			$10,000.00
Misc other charges			$525.00
Total Amount Due $			$13,628.38

***
Arrears To Bring Account Due
	Total Number of Missed Payments:		11
	Total Payment Amount		$10,095.47
	Unpaid Late Charges		$146.84
	Additional Amounts:
	Foreclosure Fee/Cost		$354.19
	Unpaid Advance Bal		$1,101.75
	Total Amount Due $		$11,698.25

***
	FHA Loan Mod 2nd			$11,582.44
***
	My Out of Pocket			$36,909.07
***
	Total Cost Basis of Purchase			$155,054.44
	ARV (After Repair Value)			$245,000.00
	Repairs Post Purchase			$ 5,000.00 +/-
	Unrealized Profit			$84,945.56
***
	Equity (ARV minus Subject To payoff)		$126,854.63
***

I strongly recommend having 3 months reserves as follows:

	Monthly Mortgage		$917.77
	(Taxes included)
	Electric Monthly		$362.21
	Water & Sewer Monthly		$102.80
	HOA – None		$0

Reserves

3 months mortgage payments @ $917.77 per month = $2,753.31

3 months Electric payments @ $362.21 per month = $1,086.63

3 months Water payments @ $102.80 per month = $ 308.40

                                                            Minmum Reserves Total $4,148.34

Then I turned around and sold it on a Lease Option for $265,000 getting $20,000 down on a nonrefundable Option fee, and rent of $1,900 a month.

***
	My Out of Pocket			$36,909.07
	Option Fee To Me			$20,000.00
	My Adjusted Out of Pocket			$16,909.07
*** ***	My Cash Flow	*		$ 982.00 monthly

*

*

So, I sold it for $20,000 more than street value, I get tax write offs, I got $20,000 back immediately as an Option fee, I cash flow at $982.00 a month and if they exercise their Option, I’ll get $146,854.63 (minus the $20,000 Option fee) equals $126,854.63 cash along with any pay down during their Option period. If they don’t exercise their Option, I’ll do another Lease Option.

That’s why you need money to do Subject To, the right way, wisely & legally.

If you would like a copy of the spreadsheet so you can calculate your potential profit when you do Subject Tos, and how much money you should be working with, send me a DM with your email address (don’t post it here, that’s crazy to do ;-) ) and I’ll send you the spread sheet.