I didn’t forget. I still have my notes from the intensive in May and wanted to get them out to you before I published my next podcast. The NRU Intensive in Austin, TX was a two day FREE learning event for NRU members and their guests but you must have a ticket to attend. They hold these intensives about every 2-3 months in Austin and there is always one going on somewhere in the country. If you are interested in attending any of them, just ask me to send you a ticket and I will get one for you. The content you receive is worth millions, the ticket to the 2-day event is worth over $3500 and you can get it free as my guest.

At the local Intensive in May, I saw Curtis De Young of American Pension Services and Isaac Spencer of Jean Paul & Associates speak. Curtis spoke about using retirement plans to invest in real estate and Isaac talked about how to do a Subject-To Deal. Since it’s best to receive this information first hand at the event, I will only give you a brief overview of both strategies and recommend you purchase the materials on the subject from LearnREI.net or attend an Intensive yourself..

CONTINUED FROM PREVIOUS POST...

Part 2: How to do a Subject To Deal...

I’ve spoken about Isaac Spencer before and how he was a great help to me personally. Isaac is here locally in the Austin, TX community. He focuses on Subject-To deals. His websites are NewHouse4You.org and WeBuyHousesQuickly.org. You can meet Isaac personally by attending one of our Austin NRU meetings held weekly on Thursdays at 7 PM. Click here to learn more.

Subject-To deals are a great investment tool when you have a seller that has had the house on the market for a long time and can’t sell it or they’re trying to get out of it quickly due to unable to pay for it anymore. It’s also a beneficial strategy for buyers who don’t have the greatest credit scores but have a good size down payment or do have great credit scores and no down payment so they are unable to get a traditional loan especially now during the current credit crunch.

In this type of strategy, you act as a realtor, mortgage broker, and investor. You will need an attorney and title company. Below are the steps..

1. Pre-Screen your Sellers. Why are they selling? What is their asking price? Is it reasonable? What existing financing do they have in place? Are their payment current?
2. Set an Appointment. Once you have done your homework and want to move forward, map the property, gather your seller documents (tax records, equity breakdown, pictures of the property, etc).
3. Present the Offer. This should include your listing offer, selling price, related costs, repairs, net sales revenue and comparables.
4. Letter of Intent to Purchase: This includes three options. Option 1: $0 cash paid upfront by seller to investor. Investor takes over all payments 30 days after a buyer is found. Option 2: Seller pays X amount upfront, investor takes over all payments 30 days after buyer is found and seller receives a lump sum profit 90 days after the property has been refinanced for the new buyer. Option 3: Seller pays larger X amount, investor takes over payments 30 days after buyer is found, seller receives lump sum profit 30 days after the property has been refinanced for the new buyer.

All of this is taken place “Subject-to” the current mortgage staying in place while the new buyer fixes their credit or prepares themselves to refinance into a traditional mortgage. The investor takes responsibility of the lien and pays the loan directly to the lender. The investor should have enough resources to not default on this responsibility. Once you have a buyer, you do the following…

5. Pre-Screen Your Buyer. Do they have enough cash on hand to pay the Owners Finance Fee? If not, do they have a high credit score? What is their desired location? What is their desired monthly payment range? Are they flexible?
6. Send Buyer to the House. If they like it, have them fill out an application and collect a deposit to hold. Fax the application to a lender to see if they can be worked with to qualify for a traditional loan.
7. Present them with an Option to Buy. This will mostly consist of a fixed owner finance fee, a monthly payment amount, and an amount due to the investor at the time when the loan is refinanced through a traditional mortgage.

Everyone comes out winning with this strategy. The Seller sells his home, the Buyer gets a home much easier than through a traditional method, and the investor collects cash up front, monthly cashflow, and later when the property refinances. Isaac loves this strategy.

If you want to learn more visit LearnREI.net and you can learn more about it through The College or you can visit the local NRU meeting and ask Isaac a few questions. We meet every Thursday at 7 PM currently at the Holiday Inn Aboretum between 183 & Capital of Texas. Just sign in as guest of Flower De Raadt and you are in!

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