Lots of Hype But Not How to Own Real Estate

There is a lot of hype in the real estate investing world. Everyone is looking for their special angle. That leads some people to skirt the ethical edges in search of an advantage. That's not how to own real estate.

Learning how to own real estate involves learning to do it ethnically. Technically there is no sanctioned term for "assignment of mortgage". What

it is actually referring to is "subject to existing financing".

It requires the seller to keep their existing financing in place.

The assignment of a mortgage involves you as the investor acquiring the deed to a home and then assigning or selling it to someone else along with the existing mortgage. The hype is that every wins in the deal. It's true they do until the seller doesn't win.

Learning how to own real estate includes knowing where the risks and pit falls are. The seller does win when they sell for more than they owe. Sometimes even for more than market value when they provide financing assistance by keeping the existing financing in place. The risk is they give up the title but are still on the hook for the existing financing. If the end buyer stops paying on the existing mortgage the lender is going to come after the seller. Depending how the contract is written the seller may or may not have recourse to take back the home. Being in the middle of that deal is not how to own real estate.

Learning How to Own Real Estate Means Knowing the Details

When you learn how to own real estate, do it with ethics

When it comes to assignment of mortgages or subject to existing financing, the devil really is in the details. It can be done ethnically but at a minimum, it requires full disclosure to everyone in the deal and especially to the seller.

Learning how to own real estate involves knowing when to have attorneys involved. Not only to protect your interests but even when it's for the benefit of the seller. This is one of those times.

An attorney for the seller makes sure they fully understand the details and risks involved in the deal. This is ethnical but more than likely, the attorney will

talk them out of signing the contract or will put very strong language in to protect them.

There is also the issue of sophisticated and unsophisticated parties to the deal. An investor knowing how to own real estate using many methods is a sophisticated party to the deal. Most states have specific laws holding sophisticated investors to higher standards than unsophisticated sellers. Just something else you need to know as you learn how to own real estate.

Checkout my article on subject to existing financing in your quest to learn how to own real estate.

Read my book on Investing with Lease Options and Subject Tos before considering my course or anyone else's on subject tos.

Thoughts?  I'd enjoy hearing your comments on this or any other technique about how to own real estate?

A What?

A lease with an option to buy, aka rent to own, involves leasing a home from a seller who might not be able to sell it, or rent it, otherwise. It allows the investor to rent it and then buy it, without having to use money or credit.  There is no bank financing or approval required.  You can do this over and over again. The technique of lease with option to buy is what helped me get going “full steam ahead” in the real estate business. Creative seller financing is my favorite way to invest in real estate.

Investing using the subject to technique involves having the seller sign the deed of their home over to the buyer “subject to” the existing mortgage. The seller keeps the mortgage in their name, but the buyer/investor owns the home and is responsible for the payments of the mortgage. The investor does not have to qualify for a new mortgage using this method. The technique of subject to allows the seller to move on and get out from underneath their payments and the investor the ability to buy many homes without using his or her own cash or credit.

Both methods, when done properly, should result in a win/win situation for the investor and seller. I would only teach my students how to use these two methods in a fair and ethical manner. When all parties are treated fairly everyone wins and things work out for the best. I truly believe this is the only way to invest in real estate!

To find out more you can check out my book on Lease with Option to Buy and Subject To Investing

Check out more about lease option and subject tos on my site and my blog.  You can always use the search button on my site to find other related articles and posts with more detailed information.   I look forward to working with you soon....

Answer: I personally do not like the ideas of assigning a subject to contract.  why? because the seller has NO clue who they will end up with and they have zero control to get that person out UNLESS their is a quit claim deed held by an attorney that will be recorded if they don't pay or are late (something to get it back).

I haven't ever done it, but if I were to do it, all parties would be well aware of what was going on and my CYA clauses (Cover your ASSets).

See my book on lease options and subject tos which has many of the CYA clauses and other things to protect yourself when you do a subject to.

Thoughts?  Feedback?

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Here is what Billionaire J. Paul Getty had to say about investing in down Market:

“If you want to make money, really big money, you do what no one else is doing. Buy when everyone else is selling and sell when everyone else is buying. This is not merely a catchy slogan. It is the very essence of successful investment.”
J. Paul Getty – Billionaire

While the opportunities are great in down markets, investors need to be aware of some of the deadly mistakes that can occur.
Here are the Top Three:

1. Not Getting Cash Flow
Cash flow is king, especially in down markets. It’s harder to get cash flow in seller’s markets, and even in some areas of the country, in a buyer’s market, because the prices are still too high for area rents. In down markets it’s very important to make sure your properties provide cash flow. You can’t count on appreciation in the short term in down markets. If a property cash flows, you can hold it forever, no matter what the market does. So, if it stays a down market for a while, you are okay because it cash flows. If the market goes back up, you can make money off appreciation too. Sell it then if you choose. The choice is yours then, because you’ve got the cash flow. CASH is KING!

2. Making Excuses
I touched on this before. If you want to succeed in real estate, you have to set aside the excuses and do it. Excuses are typically hidden in reasons why you can’t do it now. “I’m too busy.” Or the fear to take action by over analyzing every deal, “This property makes $5 less per month in cash flow than I really want.”
You’ve got to take action now. Picturing in your head all of the money you’ll make and the better life you’ll have with real estate investing is only fantasizing. If you want to make money in real estate; get started, take one step and then another. No one expects you to do it all at once or even do everything right, just get started.

3. Not Using a Proven System
There are some things in life we have to learn for ourselves. Making every mistake possible in real estate, just to learn the right way to do something is not one of those times. If you try that route, it will take you so much longer to get anywhere. You will literally be years behind, if you don’t give up entirely. A proven system is someone else’s road map that you can use to learn a real estate technique.
Proven systems give you the opportunity to skip the “getting lost” part. They move you forward at a much quicker (and safer) rate than if you tried to do it all on your own. It doesn’t matter what type of investing you want to do; short-sales, rehabs, or lease options, they will save you tens of thousands of dollars in mistakes, legal fees, etc.

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Two-Day Seminar on Lease Options and Subject Tos
with Wendy Patton and Kris Kirschner

Dear Fellow Real Estate Investor,

If you want to crush your competition…pull in the BIG Money…and can spare just one weekend – then I have some terrific news for you today…

Because on February 27th & 28th, I’m inviting you to learn – quite simply – the best techniques for Super-Charged real estate investing in this beaten down market.

Discover how to easily create winning deals every time with Lease Options and Subject Tos…

If you let me, I’ll show you how to score a $300,000 home for $10 bucks…or even nothing at all.

You see, motivated sellers are all over the place…pouring out of the wood work in this admittedly weak market. And how you move through this market could mean the difference between the Big Money and NO money.

I should know – I learned the hard way…

But that’s good news for you because I’m willing to share all of my Insider’s Secrets with you on February 27th and 28th.

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Investing using the subject to technique involves having the seller sign the deed of their home over to the buyer “subject to” the existing mortgage. The seller keeps the mortgage in their name, but the buyer/investor owns the home and is responsible for the payments of the mortgage. The investor does not have to qualify for a new mortgage using this method. The technique of subject to allows the seller to move on and get out from underneath their payments and the investor the ability to buy many homes without using his or her own cash or credit.

Both methods, when done properly, should result in a win/win situation for the buyer and seller. I only teach my students how to use these two methods in a fair and ethical manner. When all parties are treated fairly everyone wins and things work out for the best. I truly believe this is the only way to invest in real estate!

In my personal opinion, the best and most ethical way to handle a subject to deal is to be totally honest.  Let the lender know you did it.  Send the lender a certified letter informing them of the ownership change.   Keep proof of the letter and return receipt in your files.  If they don’t respond (most won’t), then the law may hold that they have accepted the change by ignoring your letter.   If they actually try to foreclose, then you may need to pay off the existing mortgage and refinance the property into your own name.  If the property doesn’t have enough equity to justify refinancing into your own name, then it probably was not a worthwhile deal to begin with.

To learn about other risks when dealing with Subjects Tos and how to avoid them you can read my Investing in Real Estate with Lease Options and Subject-to Deals book.

Knowing when to use one is very important.  Many times, investors try to fit one technique into every situation.  That can be a very dangerous approach.   You must know which technique – Lease Option or Subject To – to use with each seller, to protect not only yourself, but your tenant/buyer as well.  Knowing which technique to use for your seller and their situation can save you tens of thousands of dollars in profit. There are many advantages of Subject Tos (some are the same as an option)

1.    Minimum or zero down.  Usually you only need to pay the seller a small amount to sign the deed over to you.  If they owe more than you are willing to pay, then there are times that they will pay you to take the deed from them.

2.    No financing required. When you do a subject to you don’t need to get a mortgage because you are taking over the seller’s mortgage payments.  Technically, you are not assuming the seller’s mortgage.  You are just making the payments on their existing mortgage.

3.    Ownership. The day the seller deeds the property to you it is yours.   You are the true owner of the home.

1. No income or credit checks.  Not once has a seller ever asked to look at my income or check my credit.  They are more worried about their situation and how to get help from you.
2. The Seller will love you!   You will be making a positive difference in someone’s life.

Look out for my next blog.  We will be discussing Subject Tos-The Risks and How to Avoid Them.  To learn more about Subject Tos and the advantages you can read my Investing in Real Estate with Lease Options and Subject-to Deals book.

There are different circumstances and situations in the lives of people that motivate them to need to sell their home.  These reasons can include a job transfer, bankruptcy, foreclosure, divorce or upgrading to a bigger home.  The final factor likely to affect sellers’ level of motivation is the state of the real estate economy itself. You have to know what’s happening in the real estate market in your area or in the area where you are interested in finding your investments, and the best place to begin is at the official website for the National Association of Realtors.

The kind of motivation you are looking for is not someone just wanting to sell their house but someone who either is motivated to get rid of their good debt or their bad debt. Here are 3 out of 16 techniques listed in my book Investing in Real Estate with Lease Options and Subject-to Deals that have worked for my students and me over the years:

1. Tear-off flyers in local drug stores, convenience stores, party stores – wherever you can get them posted.   These tear off flyers can say the same things as the signs and ads.  The tear off parts should have your phone number, website if you have one, and a short statement – We Buy Houses.
2. Out of state owners – There are services in many cities that allow you to find all out of state owners, or owners where tax bills are sent to addresses not at the property (non-owner occupied).    Out of state owners are far away from their property and many times want to get rid of the far away headache and move on with their life.  Also, they may not really know what the current market is anymore and many may not even care.  They may simply want to get rid of that unwanted home in a far away place.
3. Real estate investor clubs always have other investors with homes that they haven’t sold or want to sell.   Network and let others know what you do.  I have bought several very good deals from other investors, either because they had their hands full at the time with their own deals, or they were out of their area.  Some investors only wholesale their properties.   Wholesalers buy low and then resale low.  You should be a member of a local real estate investor club and be regularly attending meetings.  It is one of the best places to network.   Check out  The National REIA website for a group of local real estate groups in your area.

You can learn all 16 techniques to finding motivated sellers in my book Investing in Real Estate with Lease Options and Subject-to-Deals.

• What strategies work best right now in today's market
• How to maximize your profit potential when using these investing strategies.
• Strategies you'll be able to implement the very next day!

The training offered at this event will be, without question, some of the best you have ever been a part of at any real estate event. You'll walk away with the ideas and concepts that can put tens of thousands of dollars in your pocket! This Boot Camp will also be saturated with strategies and concepts that work in today's market. As most of you know, I specialize in Lease Options and Subject To's. Both of these strategies will be covered in detail during the Boot Camp!

And, given the current real estate market's condition, this couldn't be a more perfect time to attend the “Soft Market Investing” Boot Camp.

The first Boot Camp was held June 26-29 and was sold out! Hurry up and Register….Seats are filling up fast!!

Click Here to Register