All Forum Posts by: Bob Daniels

@Jay Hinrichs While I appreciate your extreme concern for the seller, I am in a solid financial position and could write a check if needed.  However just because I can come up with that money, doesn't mean that I want to if there is a better way to do things.

Regardless of my particular financial situation, from a purely educational point of view, how do people go about eliminating some of these aforementioned problems?

@Jay Hinrichs I have a few rentals already leveraged at a modest ~60% LTV, and my W2 is with the military and due to living frugaly I am able to save ~3k/month from the military income alone and have more than enough cash reserves so I am not worried in the least about being overstretched and unable to pay the loan.

Even if you are able to buy a property at a discount, a 25% downpayment is still relatively expensive so the ability to avoid that problem would be nice.  It also eliminates the need for appraisals, and the annoyance of detailing every minor financial transaction while you apply for a new loan as well as loan origination costs etc and since you don't have to deal with the bank  you can close a lot faster.

I love the theory behind a subject to deal, however i'm curious how some of you guys handle the potential drawbacks of the deal.

I'm not very worried about the due on sale clause, it seems that this happens so rarely that statistically it can almost be ignored.  Worst case scenario you can still either give the house back, sell it, try to refinance it, or find hard money as a stopgap.

Insurance:   Since the insurance has the original owners name on file, wouldn't any check that results from a claim be sent to them instead of you?  Even if you list yourself as an additional insurer, doesn't that just mean that both people would need to sign the check?  Do you cancel their old insurance policy and just start a new one with your name on it?  If so then wouldn't the original owner get a refund check from the insurance company for any unused amount, and then you be required to post a years worth of insurance payments immediately similar to your prepaids at closing?  And if so, how does the bank react when the original name is no longer on the insurance policy?

Bank statements:  While you might be the one paying the debt every month, the bank will still be sending the original owner the statements.  If that is the case how do I know that the bank actually received my payment and is properly crediting the correct account?  Also without statements how do you go about properly claiming items such as interest deduction / property taxes etc when its time to file taxes?

Selling:  Eventually it stands to reason that at some point you will decide to sell this property.  When that happens and the original loan is paid off, won't the bank send a check to the original owner for any amount that still remains in the escrow account?  

Sub-2 sounds so amazing, but it seems to get very messy very quickly unless I'm missing something.