All Forum Posts by: Jon Quigley

Though I'm a newbie I've done a lot of reading and a consistent rule of thumb I see in many places is the 50% rule, where you only structure a deal if you take 50% of the expected monthly rent, then subtract the note (PI) and what remains is often a good estimate of return in the medium & long term.  The idea is that the first 50% which you cut out captures an aggregate of Insurance; Taxes; Vacancy; Repairs; CofO fees; etc.      

Another rule I add to that is for SHF the cash flow estimate from the above equation needs to be $250/mo - this provides even a bit more buffer and also ensures that the time to do PM ends up worth it (vs making $5/hour kind of thing).  

How does your property fit to those two rules?       

Great info thanks!   Yea one thought I had is that the rental market would be stable to even better, because the higher rates would move a segment of the population from affordable to not (i.e. have to rent) - but perhaps that gets cancelled out by lower house prices.   Seems a lot of dynamics are at play at all times so hard to predict the result of single variable changing.    

I hear that Kevin O'leary from Shark Tank is predicting that as interest rates begin to hike, home values will go down or at best stay even for many years.   What do folks think about how the coming rate hikes will affect the RE business and more importantly how should we position our investments?      Thanks.  

Great questions - I too want to understand these "low level mechanics" of Sub2's. One thing I can add - I recently discussed with a title agent about various types of closings including Sub2. She said they won't do the closing for sub2 and everything else she said was consistent with what Jerry W wrote.

How do/did you know exactly which contracts to use?  Did you find some off BP or the web or ?   I guess there's two questions there - 1) what is the full list of needed contracts and 2) exactly where to find those contracts so they are legal in the state of transaction.    

@Chris Ambrosio it would be great to get more details on "creative structures" when you can find the time.  Thx.  

@George P.  thank you.  So it sounds like if needed, the building dept will do an inspection on a property that is under contract - good to know.   Do you know if they have a list of the keymost items either online or hardcopy?   Also once you have this information back, have you gone back and re-negotiated the price due to the needed fixes?   

@Kelly N.   Thank you.  You are in SE Mich, have you worked in Livonia or Redford?

@Lynn M thank you for the tip!    I will for sure give that a try.  

I've since found some great web resources for Subject To's.  First - it is not legal to try and conceal anything from the lender....full disclosure is the key.   Any investor who tries to prevent the lender from knowing a change took place is breaking the law - so DON'T GO this route.    The right path is that you follow all proper procedures including filling out the form which informs the lender of the change.   The risk that you must decide if you want to take as an investor is that the lender will not call the note due, since it is likely going to be a better performing loan (by the investor).    This assumption could backfire if interest rates go up and lenders want to recapture the funds so they can originate new loans at a higher rate.    Summary:  Follow the law and ethics for a Subject To and don't try to conceal anything.   

Hi.  I have a question regarding city inspection.  Where I live, the city must approve a certificate of occupancy in order for an investor to rent their property.   My question is, if I'm looking to purchase a property that is in generally good shape, what is the best way to know which items the city will require to be fixed?   

These inspections by the city can be over $400 and I'm not even sure the city will allow their inspectors to come into the house while it's under contract (vs me already owning it).  But i need this information to be able to make any modifications to the purchase price based on inspection clause.  

I know of landlords who had to invest many thousands of dollars to bring it to a level the city would approve - in some cases they force modern upgrades on homes that met inspection 20 or 30 years ago but not now.   Do private inspectors have enough knowledge to point out which are required by the city and which are more for general improvement?   Anyone have experience with this?  Thanks in advance.