Big Risk - Buying "Subject to" and Selling with a Lease Option
Recently I have been watching some real estate investing videos on YouTube (not Bigger Pockets videos) and I kept seeing a certain strategy being promoted over and over. Buying properties using "Subject to" financing and then turning around and selling the property using a lease option.
At first I was really intrigued with this idea and thought this might be a really great way to buy property with no money down and then turn around and get money coming in by having the new tenant buyer pay the mortgage. I'd have no money invested and since it's a tenant buyer and not a renter, the tenant would take care of all the repairs. This is a really hot strategy these days. This video walks you through what those terms mean and the risks that exist for the investor when using these strategies together.
At the end of the day I'm not saying that you should never do this strategy, but I do believe you should consider the inherent risks that you are exposing yourself to. Click on the below YouTube link to watch a quick 5 minute video about the risks you should consider.
Comments (1)
Hi Michael,
The system you described above is taught by RE gurus Sean Flannagan and and Marko Rubel...There are more scary scenarios than: "banks raising interest rates and calling the loan"....Interest rates going up to 8-10 percent are unlikely....
My main concern is:
1) the tenant/buyer stopping rent payments (it would take a minimum of 6 months to evict them in my area)
2) the tenant/buyer stopping payments and trashing the house....
If we can't afford to make the mortgage payments or the house is trashed (and they leave) we may not be able to make mortgage payments triggering a foreclosure to the original mortgagee....
I've bee thinking about a different exit strategy, Getting control of the house "Subject To" and they wholesaling it to (assigning it) a property management company for 10K profit (I live in Brooklyn NY and junk houses cost 500K)....Any thoughts on this strategy?
Duane Quinn, over 6 years ago