All Forum Posts by: Andrew McGuire

Apologies as I have not read all the replies. I remember in 2012 I had a friend jump on a plane with a suitcase full of cash to buy up properties in Phoenix for 50% of what they had been worth in 2008. He doubled his money when the market recovered. That’s the only way I’d buy property there, no way would I pay more than current market value at the tippy-top of the market cycle in a classic boom/bust location. Add in the sub2 shenanigans and it just gets even uglier, potentially. Odd strategy IMO but good luck, I hope it works out for you. 

Yes! Real estate investment is a long term game. I would say if you are ready and comfortable then you go for it, we can never time the market! 

Quote from @Andrew McGuire:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

Quote from @James Hamling:

Quote from @Don Konipol:

.... If I were to sell the property, and merely not inform the lien holder, I’ve committed no fraud....

So an action by two working together to convey real estate, and pass-on a mortgage to a person who never was qualified or received such is a-ok huh??? Google took about 1.7 seconds to sort this out....

James,  major difference here is sub to almost always the mortgage has been in effect for many months or years.. Straw buyers are  doing things to acquire the asset at the same time they acquire the mortgage.. I have been approached my many who thought the straw buyer concept was great but of course I would not participate.. loan fraud like that is 5 years in federal prison and they will come after you years after the fact.. I have seen it happen and have been interviewed by the FBI twice on this by clients of mine who went to the dark side..

As a HML for a long time  started in the late 80s.. I am very familiar with the small print and the covenants Don is talking about and he is absolutely correct.. Alienation of title gives the beneficiary of the loan the Right but not the obligation to accelerate the note and call it due.

Where the abuse is going to come into play with this is many of these so called sub  2 buyers will take their play book from the wholesaler world IE hide everything no disclosure of anything just get them to the closing table and off you go.. Whereas, Don mentions are we talking home owner with zero sophistication or A deal between Don and Me  or Me and You..

I can see a potential gate keeper like we are seeing a little bit in wholesaling out here on the west coast where the title companies are making the wholesaler disclose all aspects of the transaction to the seller before they will issue a new policy.  Maybe on Sub 2  they can do something similar or at least have a disclosure document like we see in all the 50 disclosure docs RE agents have to use to sell houses. ???  Maybe ??

Can SubTo be done legally, Yes 100% as we both know. But, and it's a HUGE but; it requires doing things in a correct manner. A manner which is NOT being touted far FAR too often and which the vast majority are completely violating. 

The vast majority I have heard anything around promote, encourage, even celebrate the actions that would enact various degrees of fraud. namely, the #1 I hear is some narrative of "no no no, don't worry about your lender, we will just keep this quiet and between us alone, they don't need to know, all they care about is getting there payments, nothing will happen, let's just keep this quiet".     And when look at all things on Straw-buyer, it fit's that mold perfectly EXCEPT it's on conveyance and not origination. That is a differentiator I don't see saving persons from penalties as it's the exact same intent, same mechanisms, just different in time. 

Be honest, how often do we see anything on SubTo speaking of disclosing and all that? All but never. UNLESS it's a headline of how SubTo is fine, a-ok, legal, and then details buried way down into text. 

The vast majority doing SubTo are doing it illegally. I have seen it, I know many others who have as well. Rarely, less than 1% rarely have I ever seen a fully legal legit one. I only know of 1 ever that was fully legit. 

I know of dozens upon dozens where it is the "sshhh, let's keep this quiet and the bank shouldn't find out" and the buyer has no capacity to actually purchase them if/when it comes unraveled, none. And I know of a few dozen that have come unraveled. 

Finance starts getting burned on these, it starts hitting a certain "temperature" level, I assure the criminal charges will start happening. And when they start, you know how this song goes, it's all the look-backs and all of a sudden an avalanche of "stings" and what-not. 

 @James Hamling You do know that real estate people have been doing Subject To's for over 30 years, way before it went mainstream. Some of the most prevalent have done thousands and are Real Estate attorneys and own thousands of wraps today. You know there are Title companies in many states and Real Estate attorneys that specialize in this transaction? I agree if people are doing it recklessly without the proper legal advice, title companies and disclosures there will be some problems. You are not doing Subject To but you are seeing all of these done wrong, curious how? What I am seeing is most are doing it correctly not as you claim 99% doing it illegally. 

Lol really.... So apparently you've been living under a rock because there is a mob of people worshiping a guy who's name rhymes with "Orby", who all but uniformly do things in a callous, reckless, wildly INCORRECT manner. 

How I know what I know.... It's an insider perspective and I will leave it at that. 

I will add, it's this frenzied fervor that's also the issue. Anyone speaks out on any critical issue with SubTo and it's this crazed frothy mouthed response of "how dare you say anything" and demanding all just speak nothing but glowingly on it.     

SubTo is NOT simple, it's IS detailed, and NOT a universal fit. There IS serious implications to it and steps to do it correctly. But no, speak nothing of this....... pretend all is a-ok....... 

Quote from @Jay Hinrichs:

Quote from @James Hamling:

Quote from @Don Konipol:

.... If I were to sell the property, and merely not inform the lien holder, I’ve committed no fraud....

So an action by two working together to convey real estate, and pass-on a mortgage to a person who never was qualified or received such is a-ok huh??? Google took about 1.7 seconds to sort this out....

James,  major difference here is sub to almost always the mortgage has been in effect for many months or years.. Straw buyers are  doing things to acquire the asset at the same time they acquire the mortgage.. I have been approached my many who thought the straw buyer concept was great but of course I would not participate.. loan fraud like that is 5 years in federal prison and they will come after you years after the fact.. I have seen it happen and have been interviewed by the FBI twice on this by clients of mine who went to the dark side..

As a HML for a long time  started in the late 80s.. I am very familiar with the small print and the covenants Don is talking about and he is absolutely correct.. Alienation of title gives the beneficiary of the loan the Right but not the obligation to accelerate the note and call it due.

Where the abuse is going to come into play with this is many of these so called sub  2 buyers will take their play book from the wholesaler world IE hide everything no disclosure of anything just get them to the closing table and off you go.. Whereas, Don mentions are we talking home owner with zero sophistication or A deal between Don and Me  or Me and You..

I can see a potential gate keeper like we are seeing a little bit in wholesaling out here on the west coast where the title companies are making the wholesaler disclose all aspects of the transaction to the seller before they will issue a new policy.  Maybe on Sub 2  they can do something similar or at least have a disclosure document like we see in all the 50 disclosure docs RE agents have to use to sell houses. ???  Maybe ??

Can SubTo be done legally, Yes 100% as we both know. But, and it's a HUGE but; it requires doing things in a correct manner. A manner which is NOT being touted far FAR too often and which the vast majority are completely violating. 

The vast majority I have heard anything around promote, encourage, even celebrate the actions that would enact various degrees of fraud. namely, the #1 I hear is some narrative of "no no no, don't worry about your lender, we will just keep this quiet and between us alone, they don't need to know, all they care about is getting there payments, nothing will happen, let's just keep this quiet".     And when look at all things on Straw-buyer, it fit's that mold perfectly EXCEPT it's on conveyance and not origination. That is a differentiator I don't see saving persons from penalties as it's the exact same intent, same mechanisms, just different in time. 

Be honest, how often do we see anything on SubTo speaking of disclosing and all that? All but never. UNLESS it's a headline of how SubTo is fine, a-ok, legal, and then details buried way down into text. 

The vast majority doing SubTo are doing it illegally. I have seen it, I know many others who have as well. Rarely, less than 1% rarely have I ever seen a fully legal legit one. I only know of 1 ever that was fully legit. 

I know of dozens upon dozens where it is the "sshhh, let's keep this quiet and the bank shouldn't find out" and the buyer has no capacity to actually purchase them if/when it comes unraveled, none. And I know of a few dozen that have come unraveled. 

Finance starts getting burned on these, it starts hitting a certain "temperature" level, I assure the criminal charges will start happening. And when they start, you know how this song goes, it's all the look-backs and all of a sudden an avalanche of "stings" and what-not. 

OP I’m going to go with you in this.  Although this is nothing I would do.  

Risk Reward.

My wife and I have two different Risk Reward levels.  She likes cash and I hate cash.  As we did our financial planning she needed comfort.  Asked her what her comfort level was in terms of having cash on hand.  She ended up at 5 years living expenses as cash or cash equivalents on hand.  I hate that because we could quadruple that in 5 years.  But I went with it.

My point is I can’t and won’t go bankrupt at this point in my life.  I also won’t go back to 8 to 7 corporate life or greet people at Walmart and live in a trailer.  I can’t take on the exposure inherent in your deals.  

I agree RE will go up and is part of our business model.  Working thru a 75 acre country subdivision with 2 to 6 acre lots for sale.  We don’t build.  We have 50% equity and a loan on the other 50%.  our business model is 120% return before taxes over a 5 year period.  Even if we fail, we come out positive.  

 Now if I was in your shoes??? I would and have risked it all on an investment, not my life style.  My logic was sound, the return was there, then corporate stupidity beyond reality occurred.  The president of the investment decided that -1 plus -1 came out a +2.  Still remember his name.  

I say go for it.   As to the original owners.  A drunk , drug addict, gambler always needs one more fix and you are helping them.  They are okay with it at the moment.  

Phoenix Arizona is a great RE market. It had both one of the sharpest drops in price and sharpest recoveries.  You just have to be on the right side.  

Quote from @Jay Hinrichs:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

Quote from @James Hamling:

Quote from @Don Konipol:

.... If I were to sell the property, and merely not inform the lien holder, I’ve committed no fraud....

So an action by two working together to convey real estate, and pass-on a mortgage to a person who never was qualified or received such is a-ok huh??? Google took about 1.7 seconds to sort this out....

James,  major difference here is sub to almost always the mortgage has been in effect for many months or years.. Straw buyers are  doing things to acquire the asset at the same time they acquire the mortgage.. I have been approached my many who thought the straw buyer concept was great but of course I would not participate.. loan fraud like that is 5 years in federal prison and they will come after you years after the fact.. I have seen it happen and have been interviewed by the FBI twice on this by clients of mine who went to the dark side..

As a HML for a long time  started in the late 80s.. I am very familiar with the small print and the covenants Don is talking about and he is absolutely correct.. Alienation of title gives the beneficiary of the loan the Right but not the obligation to accelerate the note and call it due.

Where the abuse is going to come into play with this is many of these so called sub  2 buyers will take their play book from the wholesaler world IE hide everything no disclosure of anything just get them to the closing table and off you go.. Whereas, Don mentions are we talking home owner with zero sophistication or A deal between Don and Me  or Me and You..

I can see a potential gate keeper like we are seeing a little bit in wholesaling out here on the west coast where the title companies are making the wholesaler disclose all aspects of the transaction to the seller before they will issue a new policy.  Maybe on Sub 2  they can do something similar or at least have a disclosure document like we see in all the 50 disclosure docs RE agents have to use to sell houses. ???  Maybe ??

Can SubTo be done legally, Yes 100% as we both know. But, and it's a HUGE but; it requires doing things in a correct manner. A manner which is NOT being touted far FAR too often and which the vast majority are completely violating. 

The vast majority I have heard anything around promote, encourage, even celebrate the actions that would enact various degrees of fraud. namely, the #1 I hear is some narrative of "no no no, don't worry about your lender, we will just keep this quiet and between us alone, they don't need to know, all they care about is getting there payments, nothing will happen, let's just keep this quiet".     And when look at all things on Straw-buyer, it fit's that mold perfectly EXCEPT it's on conveyance and not origination. That is a differentiator I don't see saving persons from penalties as it's the exact same intent, same mechanisms, just different in time. 

Be honest, how often do we see anything on SubTo speaking of disclosing and all that? All but never. UNLESS it's a headline of how SubTo is fine, a-ok, legal, and then details buried way down into text. 

The vast majority doing SubTo are doing it illegally. I have seen it, I know many others who have as well. Rarely, less than 1% rarely have I ever seen a fully legal legit one. I only know of 1 ever that was fully legit. 

I know of dozens upon dozens where it is the "sshhh, let's keep this quiet and the bank shouldn't find out" and the buyer has no capacity to actually purchase them if/when it comes unraveled, none. And I know of a few dozen that have come unraveled. 

Finance starts getting burned on these, it starts hitting a certain "temperature" level, I assure the criminal charges will start happening. And when they start, you know how this song goes, it's all the look-backs and all of a sudden an avalanche of "stings" and what-not. 

No argument for me.. I have been saying this from Day one when the Morby and sub 2 guys started touting and charging for this .. that you are going to have a train wreck follow these transactions . And those are from those folks who have good intentions up front then you have the crooks in this industry or those with no morals and lack character. And we know distressed real estate is full of those dudes and dudettes.

So for the last couple of days, I've been thinking. What is the percentage of people that simply walk away from their house and let it foreclose compared to the people that has had a Sub2 gone bad? Without any sort of pre-determined agenda, I think there's more people that has walked away from their houses and let it go to foreclosure. Has there been some Sub2 buyers that have trashed the sellers credit? Probably….I don't know them personally if they did though. I have run into a number of people that have let their house simply go back to the bank, so I am assuming that is way more prevalent…

Lol. That's simple, but I get how you could confuse a "noob" with such fancy talk. 

A C4D is an equitable interest in property, aside from all other facets. So if inferring one could simply "loose" the property, there funds etc., nope, not reality, and every Real Estate attorney, like mine, knows this. 

Now, just because there is laws against say robbing a bank doesn't mean nobody ever breaks the law. So is there instances where someone could try to F someone over with a LEGAL C4D, yup, for sure. And that's why we have courts, and contracts. 

But in your instance, it's really simple, the C4D holder simply talks with the bank and it's resolved then and there. I have seen instances of this happen with commercial property and what happened was that bank actually made a separate deal with the C4D holder to finance them, at the sub-market rate the seller had. So, it worked out to buyers benefit actually, got seller off property. 

But let me guess, your going to say how with SubTo people can't ever go into BK, right..... 

Just posting so I hopefully get an update on these "investments" in a few years...lol. Guessing things don't go quite as well as anticipated. 

Here is a very simple, LEGAL way to do this all Andrew. Buy via Contract For Deed..... done. 

SubTo, by it's very nature, is FRAUD. Go ahead people, try attack this, but it IS.

Telling a property owner to VIOLATE terms of there mortgage to make a deal with you is party to FRAUD. It's a scam at best. A conspiracy to commit mortgage fraud is most accurate. 

When the very intent of the actions is to circumvent a legal binding financial agreement what would one call that? Oh, jazzy business? Ok, you go try that with a Judge, let us know how that goes down. 

Long standing LEGAL instruments of real estate transition exist. LWO, C4D. The only argument one can have against these is, it cost's too much.... That they can't "get" the, say $400k property, with just $4k. And, yup, you'd be correct. Because that's a BONKERS concept to hold, and ya know NO financing agency on earth would ever do such. 

So, again, back to beginning, SubTo is JUST a fraud scheme, end of story.