subject to

[Lori Vines]

Hi BPer's 

My first question/post here. I'm a Realtor so not new to Real Estate but new to the creative options. (and excited about them!) I'm considering approaching one of my clients with the option of buying their house subject to because I don't have 20% down (and I want to get my feet wet on this) and just offering them some $$ upfront (they need some of their equity) and taking over payments and leasing it out... then I can continue to pay them an agreed upon amount towards that additional equity. Will I be able to refinance to get it in my name and if so, how long is title seasoning or is there, since it's subject to? And if so, can I, since I will have all that equity in the home, cash out some of it to pay them off on the refi?? Also, since it's in an HOA, how does that work on something like this? I already have a rental in the neighborhood so I know the transfer fees etc... but how to handle me taking over that too on a subject to?

Any advice or other creative thinking?- I'm open

[Dion DePaoli]

Sub2 means you take title leaving their exiting mortgage in place. This means, that mortgage stays attached to the Subject Property and will be factored into their credit until such time as it is satisfied in full.

It's not real clear you are aware of the real risks with this type of scheme.  Sounds like you have only heard creative guru stuff, allowing you to get something for nothing.  I suggest you do some research in the threads so you understand the upside and down side risks in all of this.  

If you do not have 20% now to put down, it is unlikely you will earn enough equity within the minimal seasoning requirements for a refinance, which is 12 months, to allow you to refinance a non-owner occupied property.  If you are trying to arrange the deal with some innate amount of equity for you to step into, not saying you mean to, but if you are thinking that, you are not acting in the best interest of your clients.  

There are lots of threads here on BP around the matter that have done some pretty good jobs of presenting both sides of Sub2 investing. A quick search for Sub2, Due On Sale, FHA Assumptions and some other key words will point you in the direction to a fair amount of reading on the subject matter.

The HOA topic has not been covered all that much though. The HOA may have terms in their CC&R that can prevent this from taking place or that have restraints on the use of the property as investment. Perhaps once you explore some of the other ideas and look at the CC&R's, you can come back an ask specific questions about that and they can be addressed.

Good luck.