Subject To Rental properties, anyone done it?

Question

I have a desperate landlord that has moved out of state. He is willing to owner finance all of his properties.  The purchase prices are very reasonable. I am debating seeking a hard money lender for them, and I know and use some but they only do flips. Either way I would need the down payment for the owner fi, so what are your recommendations. Won't last long. I look at the properties tomorrow. Thanks BP family for any advice! Have a blessed week!

Account Closed · Answer

@Corey B.  If you're doing a Sub2 deal, you're not making the payments to the seller, you make the payments directly to the lender.

Corey B. · Answer

Yeah, it would not be a subject 2 deal unless I turned it into that. Thanks!

Corey B. · Answer

Rick, I appreciate the reply. I always have more to learn but have always considered subject to basically owner financing. Yes I know you pay the mortgage company directly, in fact that is how I purchased my home. I have power of attorney over the property and the mortgage and make the payments direct to the mortgage company. But I also pay the owner an additional payment to help him pay his rent at his current address. I agreed to that because my wife had wanted this property since she was a child. I also currently purchase flips and wholesale. My main question was what hard money lenders lend on buy and hold properties? I can just buy them outright for $32k or I can owner finance them. I guess I was asking what people thought would be the best option in this situation as it is my first opportunity at buy and hold. Thanks.

Rick Pozos · Answer

When you talk with the owner ASK him if they are owned free and clear or if there is a mortgage. When you make first contact you should get all the details of his situation including the need to sell, financing, condition of property, location, and about 20 other questions.  If the owner only needs 5k down, you can probably put that on a credit card cash advance and pay it back over the first year. Sure you pay higher interest but you dont have to share a deal 50/50 with anyone.

Also, learn the difference between sub-to and owner finance. In fact learn ALL about the business that you are in so that you can talk to sellers or other investors with knowledge.

Corey B. · Answer

@Rocky V. Thanks for the reply and willingness to share your knowledge. I am looking at the properties tomorrow but knowing the town I would say one will rent for about $600 and the other for around $400. Ok. I understand the difference now in the two. So yes this would be owner finance, I would have my attorney draw up the contract and get power of attorney. My only real fear on my end is if the owner doesn't pay his mortgage and they go into foreclosure without my knowledge. I would think POA would satisfy the mortgage company and allow me first option to purchase??? Thanks guys!

Rocky V. · Answer

@Corey B. I have several Sub2 properties that I keep as rentals.  Not sure if this particular deal qualifies as one.  Looks like seller owns properties free & clear so he would be seller financing these to you and have a promissory note in 1st lien position.  A sub2 deal is where current mortgage stays in place and new buyer agrees to make payments on seller's mortgage.  Deed is transferred to new buyer but not remains in original owner's name until paid off.  Either way I would definitely use a title company or attorney to close this deal.  What can you lease homes for?

Corey B. · Answer

Thanks for the reply Ray J. I understood Subject To to basically be owner finance. Owner finances the rentals to me subject to me paying x amount down, for x amount of time, putting my name on deed, getting a power of atty on property and mortgage if one exist.....??

I currently have private lenders for flips and will run this by them tomorrow. He wants 5k down for two properties. Both properties total purchase price will be 32k.

Currently no tenants, properties ready to rent, owner moved out of state and is getting rid of rentals. I will continue to rent them, but I do love your suggestion to pay off the short term loan quickly.

The only thing about a partner that I don't like is that I would always be splitting the income with them unless they allowed me to buy them out at some point. I would rather just get the loan and be sole owner on such small purchase price rentals.