Subject To Deals (Eager to Get Started)

[Shantel James]

Hello, Everyone. I am a newbie from in the Dallas/Fort Worth area (Euless/HEB). I've been firming up my knowledge base by listening to the BP podcasts, reading the forums, watching youtube videos, and reading.  Now, I'm ready to get my feet wet.  I’m looking to invest/acquire properties via sub 2 and owner-finance deals (first choice) or rent the properties (second choice). The focus is on cash flow and creating multiple profit centers per deal (e.g. down payments, monthly payment difference, sales price difference). My current plan and associated questions are as follow:

Finding/Qualifying Properties

Plan: To find motivated sellers, the plan is to driving for dollars, old MLS listings (90+ days), FSBO, Craigslist, networking, county records (taxes, absentee owners, etc).

Question(s):

1) Which of these strategies are the most value-added regarding producing leads and/or getting offers accepted?

2) What are the best scripts/questions to ask for discovering sellers needs/wants that would help to solve their issues and make offers more attractive?

3) What is best criteria when vetting properties? (e.g. title reports, loan balance, etc)

4) Would prefer to do no money down (of course), but what is reasonable amount to have ready to offer up as enticement for owner?

Finding/Qualifying Buyers (Renters)

Plan: Use signs, networking, social media, and internet to advertise to buyers (renters) that can help them where banks/other avenues can’t and promote inventory

Question(s):

1)What is best criteria to use when vetting buyers (or renters)? (e.g. credit scores/history, rental history, references, income, employment, background checks, etc)

Contracts/Insurance

Plan: Use attorney/title company for contracts and insurance

Question(s):

• 1)Anyone know of any DFW attorneys (familiar w/ sub 2s)?
• 2)Any recommendations for title/insurance for sub2s (sub2 friendly)? Have been reading that some title companies will not provide insurance for sub2 deals. What is recourse?

Exit Strategies

Plan:

1) Have enough in reserves to pay note in event no buyer/renter to protect the seller

2) Have buyers refi w/ 3-5 yrs (if not sooner)

3) I refi w/ PML/Local Bank (will build rapport/relationship so can get better terms) if DOS activated

Question(s):

• 1)What is recommended time to keep a sub2 owner-financed?
• 2)If want buyers to the have ability to refi in 3-5 yrs (if not sooner), what are the best qualities to look for in the buyer? (e.g. credit scores, etc)
• 3)To ensure refi occurs/is attempted w/in certain timeframe, can it be written in contracts that buyer will do so by certain date?
• 4)Who are the best lenders for refinancing owner-financed deals for buyers w/ “bruised” credit?

Miscellaneous/ Lagniappe

Saw this a previous post but there was no answer: What happens to the sub2 deal if the owner dies before the terms have been fully met? E.g. It’s year 3 of a 5 year deal, and the owner dies? What becomes of the deal? How will bank handle? What happens to buyer/renter?

I’m eager to get started, so your insight is greatly appreciated.  Please feel free to add anything I may have missed.

Also, I would love to partner w/ an investor experienced in sub 2 transactions and would split the deals we work together. Let me know if interested and I look forward to your responses.

Thanks!

[David Lecko]

Hi @Shantel James, great questions! I will answer about Finding/Qualifying properties since I spend most of my time focused on that topic.

1) Your results may vary. You may want to try several of the methods you listed (maybe not all at the same time) and test the methods against each other. Pick 1 or 2 methods and get a large enough sample size to measure the results. 

For Driving for Dollars: I would get to 100-200 houses and then gauge your response rate.

For buying a list: Saw this recommendation from Yellow Letters .com about sending to a list of 2000 and sending to them 4-5 times consistently https://www.biggerpockets.com/forums/93/topics/477...

Also in that thread, the Open Letter Marketing guys mentioned buying a niche list was the best way to start out (the absentee owner list you mentioned would be pretty broad. Possibly narrow that down in some way)

Lagniappe: I saw a post about a student who got her first deal with a marketing flyer at a discount grocery store. :-) https://www.biggerpockets.com/forums/12/topics/477...

2) Here's a basic list of questions you can ask a seller:

• Why do they want to sell?
• How soon do they want to sell?
• How much would they like to sell for?
• What parts of the property need a repair?

3) This may depend on what list of houses you're looking at. If it is a list of houses going into foreclosure, you might prioritize the houses where the owner has the greatest % equity first. If it is a list of absentee owners, you might prioritize those owners that haven't paid their taxes first before you look at the mortgage balance.

Does that make sense?