All Forum Posts by: Michael Page

 I occasionally teach a class on Subject To & Foreclosures in Phoenix and from the posts I've been seeing it might be time to do one again. I Usually just have a meetup at Arriba's Mexican Restaurant and go over the basics, how it works, what to avoid, then I show a couple of actual properties, etc. It's free but you buy your own meal if you want one. ;-) There is no upselling and I don't have anything to sell at the get together. Just an opportunity to meet new friends and let you pick my brain.

If there is enough interest in Phoenix, Glendale, Mesa I'll put that together.

Why would I do that, you say? Because, I want the people who choose to do "Subject To" and/or chase Foreclosures to NOT do bone headed things and mess up the market. When things are done legally, properly and professionally, it keeps everybody happy. 

It isn't possible to cover every aspect but it's enough to get some guidelines. It's a starting point for anyone interested in Subject To and/or Foreclosures.

from my POV you need to determine what financial freedom looks like.. and how you would get there in 4 years.. starting from scratch and working a full time job. those of us that have done a lot of sub too its quite a bit of work and almost a full time job in of itself .. MLS agents are not going to know what your talking about half the time . and if folks are in foreclosure your going to be 1 of probably at least 100 investors that will contact that same person with the same pitch . And then what kind of delta do you think your going to make on sub too per deals.. lets say you get super lucky and you get 500 a month on the delta how much do you need to live on 5k 10k 15k 20 k.. its always way more than you think . unless you have nice retirment income or bult up a very nice 401k or ira were you can take early distributions. So lets say 5k a month is your financial freedom number that would be 2 to 3 deals a year probably doable with a ton of time and effort.. lets say you need 10 to 50k per deal to buy them . Rare is it that you can get them with nothing down unless they are hood rats or need tons of work. So work you numbers backwards figure out what you need and then set a goal and off you go. U need money though up front you have to have a down payment usually some fix up work and rare is it a property performs every single month you own it so you have vacancy factor plus you have fix up factor etc etc. Good luck with it ..

My opinion is worth what you are paying for it. ;-)
I'm not aware of any limitation on item 7 for AZ. However, it's better to ask your attorney. Proceed at your own risk if you don't know what you are doing.

8. "If you miss payments on the underlying loan you can go to jail after a very unpleasant investigation."

Why would you buy a property Subject To if you can't make the payment? 

Of course it's a big deal if you miss payments. You are negatively affecting someone's life and it's treated that way by various levels of government.  

9. "The seller can come back in a year or two and say the sale was unfair and they were taken advantage of and an attorney will believe them and sue you."

I had that happen. I bought a property in foreclosure in 2001 and in 2008 I was sued because the seller claimed I took advantage of him and now that the house was worth hundreds of thousands more he wanted his house back. 

By the way there was a 3 year SOL on contracts and this was 7 years later but that didn't matter. Also, I had paid every payment on time. That didn't matter either. It was his "claim" that had to be settled or go to trial. He'd have settled for $1,000,000. But, I don't settle, I fight. I eventually won in court but I should never have had to go through that. He was found to be a "liar" (they call him a "non-credible witness") at trial but nothing became of his libel and perjury. He should have been tried for lying in court.

So, can these things happen? Yes. Is there a way to avoid them totally? Yes, choose to do some other type of investing.

Is Subject To a valid technique? Yes. 

Do you know what you need to know to stay out of trouble? Not likely. 

Can one of the gurus teach you how to stay out of trouble? I haven't seen one yet that addresses the shortcomings sufficiently to make me believe they even understand the traps, that why I wrote that post. 

 there is going to be a ton of gurus preaching this BP just had one on a pod cast and at BP con.  with markets that get slow like now and millions of 3 to 4 % mortgages out there sub too foreclosure bail out will come back into play as it was not really viable in a big way last 7 years or so. EACH STATE is quite different so one cant just listen to a guru talking basics without thorough knowledge of state laws.  And now with the internet and social media risk are higher that some seller will lawyer up and ruin your day. 

Yes, there are very real concerns about buying foreclosures using Subject To or using any other technique.

It isn't something I would do without working with someone who really understands what they are doing. After you get a few under your belt, you will probably have enough knowledge and experience to proceed on your own. There is  lot of nuance.

You can see some of the things NOT to do at 

https://www.biggerpockets.com/...

Check items 6 and 7 and 8 and 9 specifically.

 Sure, I did a post on it at https://www.biggerpockets.com/...

Another big issue is that he has people lend money in 2nd position on creative financing deals. That part is reckless and I can't imagine peole understand the risk. When the peanut butter hits the fan and eventually it will, a whole lot of people are going to lose money and they will contact the AG's office for relief (that means lawsuits). Not a pretty picture. 

In the post I didn't name him specifically because there are common errors taught or omitted by the "guru's". 

Someone said he charges $7,800. And a common complaint is that people end up not buying a property. That part isn't his fault.  People underestimate the time, money and amount of work this takes. If fact you don't need to pay to have a guru teach you. You can team up with someone and use that money to buy a house. But, if it makes some feel good to give their money away and join a "happy" club, that is up to them.

Pace has been doing Subject To for almost two years now from what I can gather. He is in fact advocating a couple of things that are not prudent and I believe are reckless, but that comes from a lack of seasoning. 

I think most of his background is fix & flip for iBuyers and in which he seems to have done well in that arena.  

I've been doing Subject To for 25 years and in several states. I have never heard of Insurance for Due on Sale and I find it improbable that the insurance would actually be honored in the event it was needed. There are a dozen reasons insuring against Due on Sale is a non-winner for the insurance company. 

In 25 years I've had two loans called because of Due on Sale. 

One was in 2006 when someone I bought a house from in 2001 (5 years earlier) sued and claimed he never sold the house.  Later in court he was proven to be a liar, but the loan was called anyway. I had to pay it off. But, that's a long story for another time & Yes, of course I won the case. You learn all of the weaknesses of Subject To when you've been through a few lawsuits.

The second time was in March 2020 when I did a Subject To on a Reverse Mortgage. The house sat vacant because I was busy with a few other flips and just hadn't gotten to it. A homeless "crowd" broke in and started creating problems in the neighborhood. The bank was notified by the police & I received a letter giving me 30 days to pay off the loan or they would start a foreclosure. I simply paid off the loan and life went on.  

In case one, no one is going to have that happen to them. It is an entirely bizarre and psycho event.

In case two, if I had been working on the property or had someone living in it, the squatters would never have been a problem and the bank would never have been called.

 So, had I bought Due on Sale Insurance, (which is like unicorns farting rainbows) the clause that says you can't have done something stupid like let squatters overrun your vacant property or let psychos sue you, would negate the insurance company's need to pay the insurance and I'd have to sue the insurance company for specific performance. And 2 years later and lots of legal fees, the courts would decide who is right. And I'm guessing the "insurance" provider would have a pretty strong case that they don't have to pay out.

There is great reward in using Subject To, legally and ethically and correctly. There is great risk in not knowing what you don't know.

@Michael Page you will likely be focused on the suburbs and be prepared to make a huge down payment if you want to reach positive cash flow. 25% down or lower won't likely get anywhere close to positive cash flow in the metro or surrounding areas, especially with higher interest rates and property taxes. Happy to chat about the market in more detail.