All Forum Posts by: Curt Smith

#1 there's alot of BP sub to threads all repeating..  Wish there was less duplication.

#2 per Wale but updating;  sub to still takes cash, at least the cash to cover closing $1.5k to 4k.  Today there's probably equity to give the seller, and possible mortgage arears.   $???   All houses need some fix up.  They might be living in now but they need at least paint some fixtures and usually flooring.  I like to replace hvac same time.  I'm keeping as rentals and its costing me total to have rented;  $40k to $60k cash.  My last sub to was 40k to the seller for his equity, $3k to close and $5k to fix up.  The prior sub to it was opposite, nothing to the seller but $50k to fix up... No way to use debt unless its personal unsecured debt for the cash you put into a sub to.   

It is possible to assign for a fee a sub to.  I paid $5k once.  But I used 100% my own documents, contracts.  Never use the wholesalers contract with the seller on a sub to!!   Connect to me, PM me for my training PDF on how to paper/close a sub to.

JV / partnerships on buy and holds are too messy for me so I'd gnaw my arm off before I JV (again). Theres more negatives to JVs then talked about or you imagine the joy of taking someones cash to fund a deal. LOL

Just adding that there are no zero cash deals.  Maybe wholesales but today they are so difficult forget wholesaling folks.

Best to all, curt

Same as others, never. I recently bought a sub to, FHA that was in forberance. Today this is the new problem twist for us professional sub to buyers. Im properly finished forbearance by stressed sellers willing to sell sub to is something for us buyers to look for. Sellers (mine) did not know accurately what the status of the forebearance was. I had to make up $11k of arears I didn't think was needed at closing. I had to fix the forbearance AFTER closing the worst time, post me moving the deed into a trust. It got gummed up. There are decent fixes for ending forbearance and putting the arears on the end BEFORE closing.

To newbies.  Connect then PM me.  I have a free pdf on how to close a sub to training.  With examples of all docs needed.  I like helping via my email the numbers.  

Tip: JOin your local REIA(s). Local experts

Buy books on creative;  BPs zero down.

FWIW: I disagree with the Gurus telling to buy sub to and sell on a wrap with no renting for 12 mo in between.  Too many reasons why NOT to sell without renting and might as well hold for 12 mo for long term cap gains vs ordinary income.   Morby and others wrongly say take installment sale tax treatment on the sale on a wrap.  IMHO you are selling inventory not investment prop.   Tax on gain is due in the year of sale..

@yang;  he'll pay cap gains via installment sale tax treatment which is to his advantage.  Google installment sale tax treatment on capital gains.   Its the BEST scenrio for the seller here.  He gains via when he gets less cash at the time of sale.  and pays gains only on the principal recieved via the wrap note per Don.

Any decent closing attorney can write up a wrap note.  BUT iif it where me I would NOT pay the underlying mortgage to the seller.  I'd create 2 payment methods. One to the seller for his portion of the eequity in the wrap and another directly to the bank.  I would NOT trust any seller to continue making the underlying mortgage payments.  What if he just stops and pockets the whole check you give each mo?

Still might make sense.  You did not give every number, the address, all the numbers to give more feed back.

Hi, You MUST keep the borrower as a named insured, in addition to you (or your LLC or preferably the Trust you created at closing) on the policy. IE there will be both borrowers if 2 plus you as named insured. AND the lender... Please please connect then PM me I'll send you my how to close a sub to correctly doc. You have many problems you have yet to hit you. Read my doc.

Best of luck to all, curt

@kerry, all benefits follow who owns the the property, the warrantee deed. Just get the 1098 from the bank, see my training doc on use of the POA, power of attorney (etc) to work with the bank changing the mailing address, you are now the trustee of 123 Main St Family trust (see my training) and thus have full control over the mortgage in the bank's eyes. Never a problem. A few times some more hoops to jump per each bank, but with POA and deed in a trust you can work through the issies.

But taxes, depreciation, interest paid; you as owner just claim on your Schedule E for this house what you paid.  Depreciation is calculated based on your cost basis;  See the closing statement for the "price paid" which is the balance of the mortgage plus what you gave the seller, closing costs, AND fixup costs = cost basis.  Schedule E depreciates your cost basis over 27.5 yrs.   No changes in how you file taxes for buying sub to vs cash vs new mortgage.

best to all, curt 

Hi Cheryl, Every spread sheet deal calc I've seen newbies trying to use to eval deals spits out loosing offer prices.  IE they are excellent deal killer tools.   ;(

What to do?   Yes get the BP deal calculators.  Look deeply at the numbers, expenses as an educational effort.  Then toss the tool.  But use what?  Real estate is a knowledge business not a black and white line, good / bad, buy/sell.  IE read books, get educated.  And the fastest way to get education is to join your local REIAs, found by googling and in meetup.org.  REIAs are where old timers doing this hang.  Good folks here in BP, but the generous take you under their wing old timers are locale in real estate investor associations.

#2 read the paper linked off my BP profile 1st paragraph, how to buy a bullet proof rental portfolio.   Not exactly what you are asking for but its core / foundational to buying good deals.  IE what is a good deal for YOU?   The answer is surprising.  Read bullet proof to find out.

#3 like said;  a good deal is a function of details unique to you and your goals.    New folks think they are buying "houses" you are NOT buying houses in a buy and hold business. Read bullet proof.

#4 In todays elevated market, but sellers have stopped over bidding, stopped bidding on less nice houses has created a great op for folks with cash and ability to get bank loans. For those with lower credit and no or not good job (w2) you still have access to lenders called DSCR / non-qm lenders who lend based on the rent income not your income. IE lendingone.com and kiavi.com are a few of many lenders in the DSCR lender space. Bank (Fannie) will be highest LTV and lowest interest rates but the nost painful to get underwritten.

#5  IN todays market trend toward cuter, nicer houses.  Quality allways is a hedge against risk, and appreciate best.  I'm not talking about big or many bedrooms or newer, I'm talking about from a buy and hold and tenant bait perspective "good deals".  My ideal rental is:   1300sqft to 1500sqft 3 bed a full 2 bath house tucked inside an ok neighhood 10 min to a freeway 30 min to the edge of where there's jobs.  "near in" family style houses will rent quick, stay rented, appreciate the fastest.   IE "starter home",  Not a McMansion.

#6 get on zillow and realtor.com and search your area for 3/2, 1965-1980 , split level or ranch, in a nighborhood at 80% of the asking for a recently rehabbed house.  You can tell from pictures the new rehabs.  80% or so will find the deals.  You do small amout of rental grade rehab to be all in for less then full price.  BUT most importantly the "fixers" don't have the retail, occu9pants bidding against you.

Best of luck.  Get educated,   get into a network of other locale investors (buy and hold).   Curt

Hi Jourdan,  #1 search BP for subject to, sub to, sub-to.  A few good threads.   I offer a sub to training pdf by you connecting and PMing me.  I hate to let good deals get screwed up as sub to is very complicated.

Re your MA question;  this is exactly why my #1 tip is for everyone to join their local REIAs, real estate investor associations.  Old timer experts are in the REIAs, the local old time RE groups.  IE for your local how, and if, quiestions.

I don't know MA, but I do know sub to.  I know of no legal issues of "taking over paying a sellers mortgage" where a state would get involved.

Find the other BP sub to threads where I outlined how to quiz local RE attorneys/title offices re if they are "investor friendly" "creative deal friendly" and "closing a sale without paying off the mortgage" friendly.  The local RE legal experts have the experts say.  

1) join local REIAs, best tip for you anyway.  2) get referrals for MA / your area RE closing offices 3) ask the quiz questions... 4) get my sub to training pdf;  connect then PM. 5) buy BPs creative books (all) IE Zero down.

Best to all, curt

Hi Ya,  connect them PM me for my sub to training doc.  An attorney will NOT give you any of these docs.   Extremely important;  call all the local RE closing attorneys (in FL they are Escrow / Title offices) and ask these exact questions:

"do you close a sale where the loan is not paid off?"

"If you do close subject to the existing mortgage, do you allow me to bring all my own trust and power of attorney docs to be signed at the same time?"

If any attorney/title office says yes to closing subject to the existying mortgage but we (they) will prepare a wrap note to protect the seller, RUN FROM THESE GUYS. Do NOT close using a wrap for sub to IMHO. Use my doc templates in my training; the Trust/POA style of closing sub-to is the std way to close.

My doc also gives the extremely important steps post closing.  In sub to the most important work is after closing;  working with the lender changing mailing address setting up auto-pay,  canceling the home owner style insurance policy and replacing with yoiur landlord policy but adding the seller/borrowr as an interseted party an adding the trust as the named insured and the lender as the escrowed lender.

Much to say, not possible in one post.  The above is key to finding an attorney. YOU NEED TO CALL around yourself.

Tip; this is my biggest tip for everyone, especially new folks; find your local REIA groups, real estate investment associatkons in your area and join them all, Find the ones with the most older experienced local investors. They know the investing ropes. BP is good, local REIAs are best IMHO. Use meetup.org to find REIAs and real estate groups to check out.

Best to all, curt

Update re doing suh-to purchases going forward today, 12/2022 forward, now in the post covid forbearance was easy to get period and now those stressed sellers are wanting to get out from under their mortgages and / or the owners often un-doable "work out" scenarios the servicer can offer.   

My help is;  you have to ask the seller "where you ever in forbearance in the recent past?".   Hopefully they will be honest and admit Yes.   BTW I've not had a willfull lieing or dishonesty in a distressed seller.  Often their lives are in such chaos they don't remember everything.  THEN ask;  have you gotten a work out from the bank (servicer) to re-instate the loan so you are making monthly payments now??   Are you making payments?  Y/N.    Can you give me a copy of the monthly statement from the bank/servicer?    You really need to do a 3 way call where the seller calles the servicer and gets a human on the line.  Then tell the owner to give premission for you to talk.   Ask;  "is this loan in forbearance?"   If yes;  what are the arears?   If yes:  can the borrower get a work out to re-instate the loan by putting the arears on the end of the loan?   The person will give a list of choices.  Ask the seller/borrower if they can satisfy any of the choices?

Bottom line;  DO NOT close until the forbearance has been ended AND the loan is re-instated and normal mo payments can resume.   

My closing training; Connect then PM me, closes you with a POA, power of attorney to talk to the bank post closing and change the mailing address etc, and setup autopay the normal mo payment. You can't setup auto pay if the loan is still in forbearance. This what caused me to fork over $11k post closing to settle the earrs post closing and the seller / borrower was off the hook and long gone. Now I can setup auto pay.

It was MY FAULT for not getting all doc prior to closing. The seller was having trouble getting current doc. Bad luck. the loan was xfered to another servicer same time. The seller thought forbearance was ended. I agree that the seller was fibbing a bit when he said was current and making mo payments. My Bad, my fault for closing anyway. Pre closing I'm 100% certain the seller could have satisfied the easy (enough) FANNIE/FHA reqs to put the arears on the end. After closing, me being the Trustee and the deed now in a trust I couldn't get FHA to work with me. My only choise was to pay off the earears. Amnother $11k into the deal, needlessly. Good think I'm experienced and with resources. A newbie would (may) have been sunk!

Let me say clearly;   I like sub to, and today exclusively focus on buy rentals I keep via sub to because I like helping stuck, stressed sellers, 2) I have the knowledge so why not 3) I hate banks.  4) I will deal with banks if I'm forced to but with enough rental income to live well, I now do what I like to do, not what I have to do (use banks to use OPM to leveraged buying).

Buyng sub to deals is NOT a low / no cash scenario.  As in above.   You might close for just closing costs, zero given to the seller, but those deals 100% need nearly a full rehab to rent up.  Or at least a full rental rehab (paint, flooring, fixtures, cleanup which today is up to $20k easy).   You NEED cash cash, real green stuff, no borrowing this rehab cash on top of someone elses 1st mortgage.  BUT its a great deal since the debt is not on yoru credit report and often there's little compition.  Just you and the seller talking about how to solve their problems.  "I'm sorry John about your situation.  I wished I had more options, but the best I can offer is to buy your house, and I take over making the payments on your mortgage.  You can move onto a better life, I fix the house up and rent it forever, keeping the mortgage current.  I know this is not what you wanted to have happen, but it will solve your needs to be rid of this house and be able to move on... " .   Honest;  a truely motivated seller will jump;  where do I sign.   New folks;  You will not have to have some complicated explanation of why you need to take over the paymetns.  Just make the ofer simple, only UNmotivated sellers will push back and quize you or say no.   Just DRIP on the no's and circle back in 30 days if you really like the house and numbers.  Else just move on.

Good luck to all,  Curt 

BTW connect then PM me for my sub to training.    Call all attorneys including the above referral.   Ask specifically;

- would you close a purchase where the mortgage is NOT paid off, I bring the trust docs and POAs I need signed AND an Affidavid of Trust to be appended to the warrantee deed.  Other docs are signed where the seller acknowledges the loan is not being paid off.

The above is key.  DO NOT allow an attorney try to sell you on the necessity of doing a wrap note where the seller is the lender.  This is NOT needed and I'd never close a sub to where I am not the trustee of the 123 Main st Family trust and get POAs to work with the bank.

Best to all, curt