What A Pro Looks For In A *Residential* SubTo Purchase

[Ken M.]

This will be boring - I don't do anything "fancy" or "innovative" or "guru like" that is half baked false hoods.

The first thing I look for are people who want/need to sell quickly. They have already called a real estate agent to list on the MLS and when the agent comes over to take the listing, they tell the prospective seller that the dog poop in the living room has got to go.

The rot in the bathroom behind the toilet needs to be fixed. The broken kitchen sink needs to be replaced. The swastikas in the son's bedroom have to be painted over. The septic needs to be covered, the roof needs to be replaced, aluminum wiring needs to be upgraded from 60amps to 200amps with romex according to code. You get where I'm going.

I buy houses realtors won't/can't list. The people still need to sell, but no one in their right mind will buy it. Enter me.

Being terribly deranged in a nice way, and eternally optimistic, I make an offer. It's an offer, people, not a directive! I offer what the property is worth to me, because I am the one making the offer. If they want an MLS offer, they are free to make the repairs and list the property.

So, the SubTo part, I am very, very experienced. I am well capitalized. I do not borrow money for the EMD. I only buy if I can have equity right from the start. I never pay MLS list price. They haven't fixed the house up to MLS list price level, so why would I pay that price?

If they have a loan at a favorable rate, I give them additional money to take over the loan. They benefit based on the interest rate. If I don't have to put down a large payment on a new loan, it's worth giving them more. I also save on origination points, I save on interest rates. I pass on extra money to them. They like that.

My super duper, proprietary "Quick Calc Pro" spreadsheet tells me in minutes what price I can pay for the property, what my cash flow will be, what my entry fee is, how much I can wholesale or fix & flip it for, how much to give the seller, and a ton of other items that only someone deranged and experienced would care to know. And it works, for TX, AZ, CA, GA, FL, TN, OH and so on.

Yes, and it works for buying pre-foreclosures, too..

I always get a title report, I always disclose, I always use escrow, I always record, I never try to hide what I am doing, I don't use Trusts. There are legal reasons for all of these decisions. I use professionals when I need to.

I've had only two Due on Sale called in over 30 years. The first was in 2006. I have been sued, investigated, audited and commended by judges. I've won every time that an issue has arisen. I document, document, document. And I keep my deals clean.

Life is good when you are bullet proof. Just be fair and honest and follow the law. That's all I ask.