All Forum Posts by: Doug Davis

Most loans today have a Due on Sale clause, that means any change of title or in some instances, the intention to change title, means the lender can but doesn't have to call the loan due and payable. There is no legal requirement to tell the lender. Obviously, telling the lender is taunting them. It's up to the lender to decide if they want to call the note due. I do not inform the lender. Choose which way you want to handle things.

Quote from @Doug Davis:

I've been watching YouTube videos, reading, listening to podcasts.   A couple of investors said that it was important that homeowners had a certain amount of equity before they make an offer using the subject to finance method.  I didn't really understand why as long as the loan was not underwater and they didn't explain it.  Why would equity be important when acquiring a house via subject-to?

Also, if I am a homeowner, I can't think of the benefit of selling "sub to".  I would think that the bank is still going to hold me responsible for the mortgage and that the mortgage would still count against my debt to income ratio, making it more difficult to get another house.  Is there any advantage to selling  sub to?  Or is it just that people want to get rid of the house so bad they take whatever option is available.

Subject To benefits a very small group of sellers.

Some people define "benefit" only in monetary terms. But, for instance, someone who has lost their job, probates, someone who has been transferred, needs an immediate sale, it's been a long time on the MLS but hasn't sold, plus properties not up to MLS standards so they won't list well on the MLS, and other of "life's occurrences" are all reasons some people sell on subject to. Is it better that the seller's mortgage gets paid (by someone else) and the property turned into a rental or should the seller simply 'walk away" and stop making payments and the property become vacant ?

I am not advocating nor dispelling the practice. I do them frequently, but I know what I'm looking for. I'm just providing an answer to a question. Total disclosure is essential, however it is often downplayed.

Yes, the seller is at great risk. But, some sellers will take that risk for time & convenience reasons.

The reason it is dangerous for a buyer (yes, foolish & dangerous) to buy a property without equity, using subject to, is simply the DOS. If the Due on Sale is called and there is no equity, the buyer has to bring in thousands of dollars to close when they sell. If they can't sell, it goes to foreclosure and destroys the seller's credit. Upon which occurrence, the buyer can be sued.

Hey Doug,

I hope you're doing well! I read about your challenges with bird-dogging for properties, especially in areas outside your current location. I’ve faced similar hurdles, being based in San Diego, where the market isn’t ideal for Buy and Hold Deals. It’s tough, isn’t it?

To tackle these challenges, I leaned on my background in Software Engineering and developed a tool designed to make the bird-dogging phase a bit smoother. It allows users to enter a location or zipcode, and it color-codes properties based on specified investment parameters. It sounds like this could be a handy tool for your out-of-state investment ventures.

I’d genuinely love to assist you in navigating through this process and finding a good deal. If you’re interested, I can set you up with full access and some free credits to explore the platform. No strings attached – I’m just looking for feedback from fellow investors like yourself.

Check it out at https://prpgt.com and let me know what you think! I’m here to answer any questions or offer further assistance.

Looking forward to hearing from you and best of luck with your investments!

what area are you specifically interested in?

I’m a real estate investor in Tallahassee, but I’m selling off some properties right now. One of which is a quad and an awesome investment I’m sad to part with, but we’re pulling money out to buy a [very fun] second home. I can’t message directly because I’m not Pro on BP, but I’m selling through Christie Perkins of Coldwell Banker, who is the most knowledgeable person I know about the Tallahassee rental market and real estate in general in this city. Reach out to her about any properties she’s selling that would be good rentals. Ask about Megan’s quad if you want to hear about what I’m selling. One unit of the quad is vacant and it can 100% be house hacked if you really want to get into rentals easily. If you can DM me I’m happy to chat, but I’d rather not put my contact info on the forum. Best of luck with your future investments!

Stop looking for "good deals,"....instead focus on buying a quality asset in a quality location.

It's very hard to know if you're estimating your rents correctly without knowing more about your property. This is where MTRs vary the most from LTRs or STRs in my opinion. For LTRs, you're going to get the going market rate. For STRs, you're going to price according to your market but also most likely using a dynamic pricing tool to take into account location-specific demand fluctuations. With MTRs, there are many sub-groups within the broader MTR niche. For example, travel nurses and digital nomads are typically looking for very different property types than a family relocating to an area. Likewise, a family relocating to an area probably has similar needs to an insurance placement situation, but the insurance placement will almost always have a much larger budget to work with. You have to know who your property is likely to appeal to and price it accordingly. The property location, configuration, decor and amenities factor into who is going to want to rent it and how much they're willing to pay. 

I would not assume renting by the room is going to yield higher gross rents overall or decrease your vacancies. In fact, just the opposite is possible. RBR is a lot to manage with guests having different lengths of stays and managing move in/move out for some of your guests at any given time. In other words, you lose the efficiency of being able to turn over the entire property at once. You also need to make sure your guests are compatible. You don't want to place a couple of digital nomads who will be in conference calls all day in the same property as your travel nurse who worked the night shift and is trying to sleep during the day. Unless you're doing something like Crashpads where guests know what they're getting into an are specifically looking for that model it could be a lot of hassle. 

I also would not budget more for CapEx per @James Carlson's explanation. As for cleaning, we charge a cleaning fee to cover the cost of cleaning at check out, just like you would in an STR. We haven't yet required or charged for any mid-stay cleanings, but as people are starting to request longer stays, I'm contemplating starting to charge for one thorough clean a the 3-month mark if someone wants to renew. That way we get eyes on everything and things don't build up making that final clean far more expensive than we anticipated or budgeted for.

It sounds like you're on the right track with your analysis. Make sure to factor in any potential maintenance costs, like repairs or upgrades, especially since you mentioned a few fixes are necessary. It's also wise to consider the time and effort required for managing the property, whether you decide to self-manage or hire a property manager.

Additionally, think about the rental demand in your area and how that might affect your vacancy rates. Overall, it's great that you're thinking ahead and considering all aspects of the rental!