All Forum Posts by: Brad Pickett

@J. Martin Thanks for sharing your success story.  It is so important that all of the newer investors, that are going through the struggle, realize that persistency pays off.  Great Job!

@Brian Gibbons 

@Bill Gulley 

Thanks for your detailed response.  It is clear that I have some learning to do!  My intention is always to help everyone involved in a transaction, you brought up some very good points that will help direct me in the future.

Thanks

Brad     

First of all sub2 is not my preferred strategy but I believe it can be used for more than just short term deals.  Any danger of the loan being called due will most likely occur in the first year anyhow so I am not sure how your strategy is any different.  If the loan gets called due we pay it off, not to mention in our sales disclosure we outline in detail the due on sale clause and its ramifications among other things.    

That being said I am here to learn, I would be interested in hearing of investors who have had loans called based solely on due on sale clause (loans that are current and performing).  I am not trying to argue a point but within our network we must have upwards of 100 sub2 deals none of which have been called.  Lets also remember that the due on sale clause give the lender the right, not the obligation, to call the loan due.  Last time I checked the average foreclosure costs a bank 17k not to mention that non performing paper effects the institutions lending ability and credit rating.  So if a note is performing, is it in the best interest of the bank to call it due and proceed with a foreclosure?  I dont think it is, and in my experience (all be it not as vast as some members on BP) they don't.  All investing comes with a risk and as long as you have an exit strategy and protect your seller, its a low risk that I am willing to take.  

Please share experiences of large institutional lenders (not private loans or local credit unions) that have called loans due based solely on transfer of title.  

Food for thought also: is transferring a property into a trust not a violation of the due on sale?  How about a Lease option?  Renting an owner occ loaned property?  Again the bank has the right but is it in their best interest?

Like I said I am always open to learn from others experiences...

Definately check and see what it will cost to get it "rent ready", but if it is minimal here is what I would do.  Acquire the property subject 2 (lots of details on this make sure you do it correctly).  Then turn around and lease option it on a 2-3 year term with minimum of 4k down and a sale price of 60-65k.  Make a little on the front and a little on the back and help out two families while doing it.   

 Great insight and structure.  This would open a lot more sellers, that feel they still have equity in the property, up to subject to.  So far I have only used sub to for people with little or no equity.  Great tips!

 As mentioned in another reply these sellers are usually ready to walk away.  They are looking at either a foreclosure or deeding the property to you to avoid foreclosure.  They do not want to make the necessary repairs and or become landlords.  You need to convince the seller that you can and will make the payments regardless, AND MAKE SURE that you do.  In my situation I explain to them that I have a portfolio that generates cash flow every month so even if this property remains vacant I will have no problem making the payments.  You need to be able to develop trust with the seller and you need to follow through on your commitments in all real estate dealings.  Once you get one of these done it becomes a lot easier for the next... good luck :)    

@Jay Hinrichs I agree with that.  However if the non qualifying buyer defaults I will still make payments as I agreed to, until I get it filled again, or sold.  Also this would not have been a small down payment, in this case it would have been 10k or >10%  

This month I closed a subject to deal.  I know that a lot of people are hesitant to take over existing loans so I wanted to share this success story.  I will keep it short.  

I purchased the home subject to for 0 money down.  The house was in pretty bad shape but had strong bones so I was up for the challenge, or should I say the risk.  I purchased it for 91k and sold it conventionally 1 month later for 99.5k.  After closing costs and one months mortgage payment I made 7k.  Not bad.  

I originally marketed it as owner carry, and got a lot of interest. I was asking for 10k down, a payment that was 100 more than my PITI, and a 3 year balloon, possibly a 5 year. I planned to do a contract for deed and hold it in a long term escrow (some may call this a wrap). However when I got the cash / conventional offer I decided to take it because of a couple of reasons. One, it was a sure deal, and two I felt an obligation to get the mortgage paid if I had the chance to benefit the seller.

I have 2 other houses in my portfolio that are also subject to and they will both create great returns!

I agree with some earlier replies stating that starting a PM company is a low return and a lot of headache.  Not to mention a lot of liability when working with trust accounts, OPM etc.

I haven't tried this idea but my mentor shared it with me and if I find the right person I will strongly consider it for my small (14 properties) portfolio.  The idea is to find a small PM company in your town ran by a single person.  Figure out if you can trust them by giving them 2-4 properties, letting them know you need a discount as you have several more properties if they can do a good job.  If they do a good job, ask them if they are interested in growing their personal portfolio, and if they are offer to help them by providing them with some opportunities that you are passing up.  As the relationship develops you send all of your properties to them (for management) and help them grow their net worth keeping them happy.  They begin to realize you are the mainstay of their business and eventually you can make them an offer to own the PM company, since it is well over half of your properties, if that is what you want.  

You get a great experienced person that you can help become more successful, and you didn't have to learn PM so you were able to stay focused on your front end / marketing side of your business.   I realize this takes an ideal situation but there are small companies out there that would appreciate your business and experience, and it might just be a win win for everyone.  

As far as starting your own PM company, I personally wouldn't do it. 

Hello,

My name is Brad Pickett and I do holds, flips, and wholesales. I started as a loan officer in Southern California, then went on to work as a title representative, then a mortgage broker (smaller brokerage), then a real estate broker, and finally onto the freedom of just strictly being an investor.

I like to stay on the front end of my business, focusing on marketing and talking to sellers. However, I do find myself doing repairs and talking to tenant and buyer from time to time :), not quite big enough yet to have that stuff all outsourced yet. In 2015 I did 17 SFR's 14 of which I have held. All of these were done with no bank loans.

I still have a lot to learn, I am enthusiastic about this career and absolutely love the thrill of the deal. Looking forward to doubling my numbers in 2016. I came to BP primarily to sharpen my marketing skills. I look forward to being a part of the community!

Brad