Making Subject-to Investing Work In Any Economy
Many people think that subject-to investing and other types of creative real estate are only good when the economy is also good
. They may believe that they need easy credit or lots of available money for down payments in order to insure that they will be able to make money on subject-to properties. However, in reality, a bad economy can be just as good, if not better, for creative
real estate investors than a good one.
In fact, I know several investors who were good at subject-to investing before the real estate market tanked who are now really making a killing in this new market. However, it is integral to their success that they were not stuck in preconceived notions about how subject-to investing works. They were willing to bend their own rules to make this new economy work for them.
Ill tell you one way that real estate investors all over the country are making subject-to investing work in this new economy:
Traditionally, in subject-to investing you would locate a homeowner that wanted to sell their home quickly. This would make them a motivated seller. Then, you would work with the old lender, your lawyer, your homeowner and their lawyer to establish a good way to take over that loan. Frequently, your new agreement would give you somewhere between 1 and 5 years to get a new loan plenty of time under the old rules.
However, the old rules no longer apply, and because we do not know the final state of the new rules for credit and bank lending, it is not reasonable to plan to be able to pay off the old loan and get a new one in any set period of time. This makes many homeowners reluctant to sell using subject-to investing even if they really need to get out from under their house. My colleagues are getting around this reluctance in several ways:
1.They are using private money
More and more investors are working with private lenders not just for short-term loans, but for 15- and 30-year notes as well. The rates, while high by todays standards if you have excellent credit and ready money, are pretty low compared even to just a few years ago, and many lenders are lending at well under 10 percent. This is a pretty good deal if you have a buyer who needs the home but does not have the credit (and that is most of them out there) and a motivated seller who is afraid to simply hand over the mortgage without some kind of guarantee that at some designated point the issue will be off their plate.
2.They are writing subject-tos into lease-options
A lease option basically means that at a certain point in time if you pay your rent in a timely fashion, you have the option to purchase the property for a fee. This is a good way to show a timid homeowner that the buyer will indeed be reliable on payments and even build up some additional down payment money in the interim.
As you can see, with subject-to investing and any other type of investing, you may need to get creative. However, that will always be the nature of the real estate investing game.
Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit.
www.CoachingByPeter.comby: peter V
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