All Forum Posts by: Ken M.

Quote from @Chris Seveney:

Oh boy - no he doesn't have one loanlooks like he has 11 and if they are 11 then he just syndicated a deal

i woukd be $50,000 those investors lose all of their $ then be on sites wondering why they lost their money and how bad an experience it was 

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I simply started racking up the complications with this deal in my mind and realized what a very foolish approach this is. Actually, it wasn't hard to see right away.

One correction in the market and whoosh . . . disaster

1. These 11 would be unsophisticated investors, who likely wouldn't have $5,000 they could afford to lose if things went bad.
2. The unsophisticated investors couldn’t possibly understand the risk
3. It’s likely that the property is now 100% levered or worse
4. What happens if the Due on Sale is called
5. If any one of them next month needed their money back for an emergency, how does that get paid
6. These loans are presumably for the rest of the length of the underlying loan, which could be 25 years
7. The lead investor is in business for very little money out of his pocket with a whale of a lot of responsibility with a dozen people he doesn’t know
8. There are always, always, always people that misunderstand what you’ve told them and will likely get burned which in turn will burn the lead investor’s reputation
9. How are each of the loans secured
10. Who makes sure everyone gets their monthly payment
11. Making sure each investor gets their $50 every month is a pain in the a**
12. Who is going to handle proper reporting for tax purposes
13. What happens if there is a vacancy, no money coming in
14. What happens when a new roof or HVAC is required
15. Who’s name is the insurance
16. Depending on how it’s structured, there are other issues

It just seems like something from a Michael Mastro diary.

“Michael Mastro started his career in the real estate business in 1967, developing real estate projects worth at least $2 billion over 40 years, including commercial buildings and houses.

He was involved in hard money loans, mostly to desperate real estate developers, with second or third deeds of trust on projects as collateral.[11]

His company, Michael R. Mastro Properties, was well known in and around Seattle, the location of most of its projects and properties. “

He eventually went bankrupt and a lot of people got hurt.

I just watched a guy on youtube claim he bought a property with none of his own money. He said he did a SubTo, taking over the existing mortgage.

Then he says, to cover the money that he needed in order to complete the deal, he needed

1. The cash to give to the seller for their equity
2. The money to bring the loan current
3. The money to pay for late taxes
4. The money to pay the real estate agent and
5. The money for closing costs

He says he needed about $55,000 cash total

Here’s the part that confuses me:

So, To get the $55,000, he found 11 investors who each contributed $5,000 for a total of $55,000. He said each investor is making 10% on his money

1. He then says “so, I bought the property using none of my own money and I have one loan on the property, the original loan”.

Is this a common SubTo set up?

Is this called “gator” lending?

Where do you find investors that will do this?

Where is the best place to do these? CA, AZ. TX, NC, GA?

Quote from @Mark Klinkov:

Quote from @Carlos Ptriawan:

Quote from @Tom Gimer:

Obvious answer: sell it

Reason: subto is not a viable long term hold solution

 I am almost laughing at the question itself. Who on earth would give their money to second position sub-to ?

 It's a VALID question. I have over $50K of equity on a SUBTO property I acquired 3 months ago. For every problem there is a solution! And if there isn't one then the people who ask these questions while you laugh at them are the very people who will create these solutions.

Stop shaming ppl for asking questions. This is a community and we should be helping each other. If you don't have anything positive to add...ZIP IT!

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Your comment: "Stop shaming ppl for asking questions. This is a community and we should be helping each other. If you don't have anything positive to add...ZIP IT!"

Helping ppl commit fraud is not helping them.

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Quote from @David Abarca:

I have a question for all the subject to people out there.  How do you pull your equity out of a property that is subject to?  I have a property that we took over payments of the loan on and it has a 3% interest rate on it.  I would not like to refi it since rates are around 7% as of this writing.  Is there another way or company that allows you to pull that equity out?

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Your Question: "How to pull equity out of a subject to property?"

You can't, without going to jail.

Quote from @Jasmine Jasmine:

Hello, I own a property with someone else but they have been MIA, what can I do if we have papers to sign?

Check the local pokey. He may be playing poker with a cell mate.
You can always hire a private investigator.

Quote from @Duncan Forbes:

Hello Everyone!

.  Hope all is well. I wrote a message a long time ago about Preforeclosures, and I have researched a lot of information and learned alot about the pre-foreclosure process. I would like to have a program / calculator for Preforeclosure deals and came across REIPro that has calculators for pre-foreclosures. 

Can someone recommend other calculators / programs that have helped them out with Preforeclosure deals? And can recommend a good Real Estate lawyer in the NY Westchester Area? 

Thank you so much!

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@Duncan Forbes: There is a lot to know about preforeclosures/foreclosures/REOs/Short Sales
I've done them for30 years.

1. There are Federal laws you have to follow
2. Each state has their own laws and they vary from state to state.

When people do it incorrectly, they wind up getting sued and or law enforcement gets involved. Take your pick, neither one is pleasant.

Here is a document that tells you what NOT to do, I suggest you read all 81 pages. The 56 people and entities believed/were told that what they were doing was "okay". I think they may not have paid attention to what they were being told and slipped into what was "convenient".

Click on the images to expand them to read.

Download the lawsuit by the attorney general of AZ by clicking on the link.

CLICK ON THE LINK TO GET A COPY OF THE LAWSUIT. IT IS ALLEGED THEY WERE OPERATING IN CA AND TX AS WELL.

The problem is much more than buying using SubTo (Subject To). It was their misunderstanding of how and when to apply the technique.

https://www.azag.gov/sites/default/files/2025-03/CV2025-0084...           **Lawsuit Link Download**

Some highlights

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I'd be happy to answer any questions. Do not assume that someone on a forum understands the law though. It's clear the advice given to these characters was insufficient. They either didn't know what they were doing or they were simply ignoring the law and ignoring best practices.

Quote from @Christopher Bell:

Quote from @Ken M.:

Quote from @Christopher Bell:

I might be crazy but…..would you?

Scenario: 

Have a chance to assume a loan that has 28 years remaining, 5% interest, and in a very quickly growing suburb of Raleigh NC.

The townhouse would lose approximately $300/mo. Total payment is $2150/mo and market rent is $1850-$1900/mo. 

Loan assumption Is essentially at market value $298k, but the $0 down outside of closing cost on loan assumption are what’s hooking me. I can put 25% down and get a $300k Townhome to cashflow near 0.

Also, the family is looking to buy a SFH and would be using my wife (realtor) to buy. Therefore, we would make about $8000-$12000 in commissions from the purchase.

Am I crazy to be considering this? 

I don't see where you stated what you would do with the property

 LTR

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LTR means a lot of capital expenses downline.

Quote from @Christopher Bell:

Quote from @Drew Sygit:

@Christopher Bell have done several assumptions, land contracts, etc.

You state property value is $298k, but what is loan amount?
- What would the sellers walk-away with if they sold on market and paid agent commissions?

What will happen to property tax & home insurance amounts once you convert to a rental?

Even with 0% down, negative cashflow ONLY makes sense if something offsets it.

If the property has no equity, can't see any value-play.

 Tax and insurance would remain the same - Loan amount is $296k. If they sold with an agent they would walk away with about $280k. My wife is an agent and her getting the commission helping them buy another hose was attracting me because with the commission we get a rental for about the $280k with her commission so more/less below the market value. Plus the commission pads the negative equity for about 2-3 years (assuming 100% vacancy and self managing - which is tight).  

It does seem that the general consensus is that it's likely not a very good idea. There is a lot more risk than reward on this deal it appears. I just like the area, see a future in appreciation here, and thought being able to get an asset for $0.00 down and maybe tlose $300/mo in the long run might pan out in 3-5 years. I'm in a position were earning the 4-5% on the current cash can be utilized to offset that $300/mo loss in cashflow. 

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I always ask myself, "for the risk and amount of effort, can I do better on this project or by using my time to find a better project. Time is the big unknown, we only know if we were right by looking back. Going into to it is by "best" guess.  With my experience, my best guess is find a better project.

Quote from @Miranda Bilodeau:

From the looks of the filing, the plaintiffs are angry that third parties are encouraging homeowners to use equity stripping techniques to make their properties appear encumbered to avoid lawsuits or liens. However, I could be misreading the provided information.

Equity stripping can be helpful for homeowners and for rental owners to prevent third parties trying to place a lien on a property or pursuing legal action to claim the property through a frivolous suit. This can be effective, especially for high-value properties. 

LLCs can be helpful entities to protect assets, if they are used correctly and the operating agreement governing the entity includes necessary protections.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

You obviously know the difference between equity stripping (when done legally for asset protection) and equity skimming which is a type of fraud that deprives a homeowner of their equity. "Normal people" ;-)   i.e. the average investor, doesn't know that technique and I'd say probably doesn't have enough earned equity to worry about protecting equity. 

In the case mentioned above, the AG is complaining about using deceit to gain the confidence of distressed homeowners in order to transfer ownership of a property with substantial equity from the distressed homeowner to the fraudster. The fraudster receives all of the benefit through deception. The homeowner receives no benefit. The state argues that the homeowner in distress, at least receives the excess funds from the foreclosure sale if it goes that direction. There are numerous other charges as well.  

Some people use "equity stripping" and "equity skimming" interchangeably, of course there is a difference, one being legal, one being illegal.  

But, for the purposes of addressing the slang usage which is common among unsophisticated investors and for getting the message across, "equity stripping" was used. They will hash out in court if this case was either one.

The matter before the "lurkers" and this is for those of you who are, is that just because someone in the Subto community says they "made" $40,000 "helping someone save their home from foreclosure" does not mean that it was a legal transaction, does not mean that it will be overlooked, does not mean you won't eventually be charged. These people have been doing this for 10 years according to the complaint. They are now facing millions of dollars in restitution, loss of the ability to transact, and a possible referral to the DOJ.

Don't do what they have been doing. Some of it is pretty subtle stuff and is said to be "okay" by some "gurus'. It is not "okay", it's just a matter of time. 

Quote from @Christopher Bell:

I might be crazy but…..would you?

Scenario: 

Have a chance to assume a loan that has 28 years remaining, 5% interest, and in a very quickly growing suburb of Raleigh NC.

The townhouse would lose approximately $300/mo. Total payment is $2150/mo and market rent is $1850-$1900/mo. 

Loan assumption Is essentially at market value $298k, but the $0 down outside of closing cost on loan assumption are what’s hooking me. I can put 25% down and get a $300k Townhome to cashflow near 0.

Also, the family is looking to buy a SFH and would be using my wife (realtor) to buy. Therefore, we would make about $8000-$12000 in commissions from the purchase.

Am I crazy to be considering this? 

I don't see where you stated what you would do with the property