All Forum Posts by: Sarah Reece

 Makes total sense!  Thanks Mike

After a lifetime in residential real estate I'm finally wising up and wanting to diversify a bit and start dipping my toes in the HM/PM space. I've got about $400k to loan and if I can prove my model to myself, I have access to another $1m in cash. I am getting clear on my buy box and hoping to stay local (WA state) with my lending. With all that in mind, I'm assuming that my first step is to create an LLC entity for protection and then have an attorney create a loan package with a note...right? I posted on a local group asking for attorney referrals and got some responses about my plan that made me question if this is infact what I need to do to start as a number of people said escrow will create these docs for me.

What say you oh wise ones with experience?  What are my first moves to take action?

Quote from @Account Closed:

Quote from @Sarah Reece:

Quote from @Bj Meadows:

I have read and read about subto deals... does anyone have luck with this? HOW do you find these deals? How do you find these distressed home owners without paying a ton of money for some of these lists? Is there anything out there that really works? Any advice appreciated!

This is exactly the question that I have as well. I have a background in lending, have been a Realtor for 25 years, understand creative financing really well...however in all of my asking about this I have not yet found anyone that has successfully closed a subto in a fully legit way. There's a lot of people that say you can just take over the payment of the seller and have them sign a silent DOT, but without approval/knowledge of the underlying bank. I'm sure that is true, because most mortgage companies aren't going to go searching for issues when there aren't problems - but in the truest sense of the word this is loan fraud and I'm just not up for it in my portfolio.

I did hear from a friend of a friend type that she was able to close a subto with a small local bank somewhere in Georgia (property was also located there) because of a long standing relationship with the bank.  Who knows if that is true or urban ledgend.

HUD (Housing and Urban Development) the people who bring you the lending industry, seem to think it's okay.

It's line 503 on your closing statement
Click to enlarge

You can click on my website link below and see a whole slew of Subject Tos we've done 

I'd be happy to answer any questions 

 With respect, there is a difference between having an available line on the settlement statement versus approval of any action.   

As I stated, I'm sure people are doing it and this happens every day.  The mortgage company is still getting payments, so they aren't going to go looking for anything unusualI until their is cause or unless they stumble on it. I am also willing to bet you dinner somewhere that the loan docs on the underlying mortgage have somekind of prohibition on doing exactly what is being done.  People have all kinds of different levels of risk they are willing to take...and from what I can tell most often worst case scenario is that they call the note due.  That said, that isn't the kind of action I'm personally cool taking part in or giving advice to others to do.  I live in Seattle and not jazzed about getting a $500k+ mortgage called, you know what I mean?

If I can be proven wrong I would LOVE that, becuase it means that there are a crap ton of creative ways of helping people with 2-3% mortgages achieve all sorts of things while keeping their loan that they don't think they can...

@Jay Dhanak - I'm in Edmonds and have been doing proformas all week on investing "locally" versus out of state at aprox. the same price points. I'm looking at north Snohomish county to make it work...but not going further north than marysville/east out to Sultan due to commute times. I'm assuming low cash flow for the first few years, but stronger appreciation in those areas. I would also recccomend looking into the passing of the ADU/DADU (Bill 1337) that is really changing what can be done on properties closer in to urban areas. I'm looking in Everett, Edmonds, Lynnwood, Mt Lake Terrace for those (Everett has already adopted new rules pertaining to the bill, the others are slow rolling a bit and most brokers don't know yet how it will impact value).

This is exactly the question that I have as well. I have a background in lending, have been a Realtor for 25 years, understand creative financing really well...however in all of my asking about this I have not yet found anyone that has successfully closed a subto in a fully legit way. There's a lot of people that say you can just take over the payment of the seller and have them sign a silent DOT, but without approval/knowledge of the underlying bank. I'm sure that is true, because most mortgage companies aren't going to go searching for issues when there aren't problems - but in the truest sense of the word this is loan fraud and I'm just not up for it in my portfolio.

I did hear from a friend of a friend type that she was able to close a subto with a small local bank somewhere in Georgia (property was also located there) because of a long standing relationship with the bank.  Who knows if that is true or urban ledgend.

Hey Jason! I'm in your area (Edmonds, WA) and shocked that you can find anything upright at those prices. I'm impressed!!

My question would be how much noise are you up for and what are your longer term goals?

The rehab property obviously has a ton more potential...is that what you are looking for? A lot of the neccisary work will be expensive without much short term ROI. Plumbing/electrical, etc. is not for the faint of heart and only make sense to me if you are looking a buying and holding for an extended period of time. With a 203K you won't be able to do much of the work for yourself, so that is a limiting factor on how much you can get done astetically in the begining. Homes like you are describing are a bit of a lifestyle for awhile (not a bad thing as long as you know that is what you are doing for the weekends and with your free money). The other home sounds like more of a set and forget type - move in and then get back to living your life as you see fit. Your investment will grow with the market, which based on our geography will continue to be increasing for a bit since we are so limited on supply.

 How are you able to get the seller's bank to accept a subto deal?  What incentive do they have to extend the mortgage to another party?  Every lender I've had this conversation with has said they hear a lot about subto deals, but nobody they know actually DOES them.