Real Estate Investing: Beware of "Subject To" Promises
Posted by Jeanette Joy Fisher
For beginning real estate investors, looking for an owner willing to sell their property "subject to" the existing loan adds a frustrating component to the search for a profitable property.
Another real estate writer's mini course, full of promises and fluff, ended with a "lesson" on why you need to buy his book so you can finance multiple properties "subject to." The reason, he said, "because banks won't let you finance more than ten mortgages." This simply isn't true. First, banks let you finance as many mortgages as you can pay for. Some banks limit the number of loans made to one person. Experienced real estate investors just move on to another lending institution. I know one investor who owns more than one hundred single family homes. All have mortgages. He constantly refinances one rental for the down payment to buy the next. Besides living off the cash flow from his rentals, he also refinances a rental occasionally to take his family on a first-class vacation. Another investor, my friend who owns the carpet company we use for our fixers, owns more than fifty rentals. None were purchased "subject to" the existing loan. Many were purchased "all cash" for quick closings, with mortgages added later. For beginning real estate investors, looking for an owner willing to sell their property "subject to" the existing loan adds a frustrating component to the search for a profitable property. Today's savvy home sellers just won't sell to a buyer who can't cash them out. Of course, some investors offer "subject to" and lease-option purchases. But, properties with most of the equity stripped out come with payments too high for rental income to support. These properties make better candidates for owner-occupant home buyers with poor credit who don't mind paying more for a house. Beware of "subject to" seminars, books, and promotions. This real estate investing method worked last century. Copyright (c) 2005 Jeanette J. Fisher. All Rights Reserved. Jeanette Fisher teaches real estate investing and credit college courses. She became a credit expert to help her real estate students buy their dream home and multiple investment properties. Jeanette is the author of "Credit Help! Get the Credit You Need to Buy Real Estate" and other books. For a free report, "Credit Tips for Mortgage Financing," visit the Real Estate Credit Help Center http://recredithelp.com
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