Epic Real Estate Investing - Subject to (Step by Step) | 990

Episode Date: April 16, 2020

Buying properties, subject to the mortgage, can be an invaluable weapon in your real estate investing toolbox! Therefore, Matt explains how to do it, step by step, and shares all the documents that you will need in the process. Tune in, learn these steps, and significantly increase the number of closed deals! Learn more about your ad choices. Visit megaphone.fm/adchoices

Buying property, subject to the mortgage, most commonly referred to as buying subject to, can be an invaluable tool in your real estate investing toolbox that can significantly increase the number of deals you do each year. And right now, I'm going to show you how to do it, step by step, including sharing with you all of the documents that you're going to need to pull it off. All righty. So let's get started. This is Terio Media. Success in real estate has nothing to do with shiny objects. It has everything. to do with mastering the basics.

The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit r-e-I-Ase.com. Here's Matt. Hi, I'm Matt Terrio, CEO of Epic Real Estate. And if you're wondering how to buy real estate subject to the mortgage, then you're in the right place.

I'm going to show you. Like I've shown thousands of my clients to do just that. And I'm going to walk you through it step by step. Then after, if you want some more help, I'll show you how to get that too. Okay, simply put, buying a property subject to the mortgage means this. You are buying a property from a seller that has a mortgage on the property. But for any number of reasons, they need to sell and sell fast. And for any number of other reasons, maybe they can't sell the property any other way.

So you come in to buy the property. You'll go on title as the owner. yet the mortgage stays in place in the seller's name. So you own the property, the seller is still responsible for the debt. Pretty cool, right? Is it that simple? Yeah, it is that simple. And I'm going to walk you through how to do it step by step.

So first, what you're going to need is to find a seller in a situation where they need to sell fast. Or they have exhausted all other options, and this is all they've got. And then once you've found the seller, and they agreed to you buying subject to the mortgage, in its most simplest form, it looks just like this. Not terribly different than any other way that you'd purchase a property with the mortgage. regular purchase agreement. You go ahead and you just place your agreed price right here on the contract just like this and then in the terms you'd go ahead and write subject to existing mortgage. And boom, you're done. That's enough for your closing agent to know what to do from there.

Can you do this? Of course you can. I mean, could it really be that simple and risk free? Well, actually it is that simple. And there is a slight risk though. It's very small one, but it exists. And what I'm referring to as a clause in the seller's mortgage. It's an acceleration clause. commonly referred to as the due on sale clause. And what this clause states is, if for any reason title is transferred without paying off the mortgage, the bank can call the loan due, the whole note. Sounds scary, I know. It stops a lot of investors dead in their tracks, but I literally have never known anyone to where this has happened.

But the risk it exists. And I used to say, I only know of one person to where this has happened just to cover my butt, but I didn't really know that person. I just heard about a person that happened to. but now I do actually know a person and it happened to be a student of mine I mean what are the chances really really slim

almost non-existent but lightning can strike so what happened well my client Parker who's very successful by the way he runs one of the more successful wholesaling businesses in the whole country and one day he received a letter from a bank

that owned the note on one of his properties that he had taken over subject to the mortgage and in this letter the bank was calling the loan due They wanted the whole amount paid off. So he called the bank to explain, and the conversation went kind of like this. Hello, bank, I received a letter notifying me that you're calling the note due

on this property I own. Well, the previous owner couldn't make the payments, so I'm making these payments for them because I can, and I'm going to continue to do so. And then the bank replied with, oh, okay, no problem. That letter gets triggered automatically, but now that we know what's going on,

no worries, please keep making the payments. Thank you. And how is it? That's how it went down for the one person in more than a decade of creatively investing in real estate that I know where they heard from the bank in such an instance. So with that said, if even the slightest risk of something like this is just too much for you to handle, there's another way that you'll totally be able to appreciate. So instead of you directly buying the house that I just showed you, that I just showed you how with the purchase agreement, the seller first would then transfer the property into a trust making you the trustee. and the seller becomes the beneficiary. Now, the seller is no longer the owner, because the trust now owns the property.

You manage the trust as the trustee. The seller is the sole beneficiary to what the trust owns, the house. And what this does for you is it qualifies you for the one exception, the one exemption that does not trigger the due-on-sale clause. And it states that a transfer of property into a living trust where the borrower remains the sole beneficiary and does not result in a change of rights of occupancy. the bank cannot call the loan due in that instance. This type of transfer is conducted on a daily basis

as a standard estate planning practice. So when this type of transaction happens, it doesn't even throw up any red flags. The bank typically pays it no attention at all. And even if the bank did, they couldn't do anything about it. So now, how do you become the owner of the property? Well, there's a second document that you need.

It's an assignment of beneficial interest to where once signed by the seller, you become the sole beneficiary of the trust. And this document, this one is not recorded. So nobody, including the bank, will ever even know that it exists. They won't know that you're the beneficiary.

So you just take this assignment document, file it somewhere nice and safe, and then just enjoy your new property subject to the seller's mortgage until you're ready to sell a refinance. All righty, I'll see you next time. Take care. Cash flow. Yeah, yeah, we got the cash flow.

Yeah, yeah, we got the cash flow. The podcast is a part of the C-suite Radio Network. For more top business podcasts, Visit c-sweetradio.com.