subject 2 investing

[Kenneth Shelley]

I have  seller willing to let ne take the house Sub 2. It is in the suburbs of Philadelphia and is a 40k take over on an arv of about 150k. Is there any investors here familiar with the transaction? I know this is tricky and any local assistance is greatly appreciated. I am interviewing local real estate attorneys any references would help. This is my first sub 2 acquisition. Thanks for any advice or help

[Al Mcbee]

@Kenneth Shelley I did my first Sub 2 late last year and it is going great. I have had many other opportunities to do this type of investing with other property owners, but it is tricky and risky. Make sure your I's are dotted and your T's are crossed. Make absolutely sure that the home owner knows ALL the risks associated with this strategy. Be very transparent with the home owner as to what you are going to do with their home.

I have been finding that most people that wouldn't mind allowing me to do a Sub 2 already have a payment that's to high for me to set a rent amount above that for me to show a decent return, much less a lease/ option. Late last year it all came together. I finally got a call for a home owner who was two months in arrears on her mortgage. Her monthly payment was small enough for me to cash flow nearly $100. This may not sound like much, but it's my end game is what's important. The new tenant should be buying this property within a year netting me 20k. 

Ok, that's the short version of my story. Here's some of the details that must be followed.

- Be sure you have the ability to access funds to purchase the property in the event the lender calls the note due in full. 

- Be sure the home owner understands that there is risk of the lender calling the note due. Be sure that it is in writing. (although, I have not heard of a lender calling a note due, the risk is always there)

- The home owner will need to sign an Authorization to Release Information form. Make a copy for yourself and have the home owner send one to the lender. You need one because lenders always misplace these and you will likely have to scan one to your computer and email it to them the first time you try to talk to them about this account. 

-Have the home owner call their insurance company and have them add you as an "additional insured".

- Get access to the online account to which the payments are being made so you can track the activity. 

 - The home owner Deeds the property over to you at the closing.

- YOU DID IT! now celebrate!

- Start making the payments, on time every time.

-Now proceed with your exit strategy!

Any other questions? don't hesitate to call, text, or e-mail