Seller finance subto .com

Ways To Own With Any Credit Score & Less Cash Down

Seller Finance SubTo

.com

This website is for general informational-purposes only, from an investor perspective. It does not provide legal nor tax advice - only opinion based on education and collective experiences of many investors, homeowners and related professionals associated in such. For legal advice, definitions, procedures, tax strategies, etc., consult with applicable professionals. It is necessary that everyone does their own due diligence when selling and purchasing any item utilizing creative finance or other strategies.

Sell NEARLY ANYTHING FASTER...
Generate More Cash Flow...
Buy on 'Terms'*...
...via Creative Finance

We’ll show you here, real examples of opportunities from our IG account.

As a Buyer, CREATE YOUR OWN LAYAWAY PLAN! It makes buying affordable.

Depending on the deal structure, Sellers can generate LOTS more cash flow!

Also, LOTS can be made on the 'referral' side (introducing Sellers to Buyers and vice versa).

Creative Finance opportunities for real estate and vehicle purchases can be PHENOMENAL!
🏠🚗🚚🚍

*** WHICH ITEMS WOULD YOU LIKE TO BUY &/OR SELL? ***

NEARLY EVERYTHING IN LIFE IS NEGOTIABLE!

tO sELLER: HOW MUCH CASH FLOW COULD YOU GENERATE?
TO bUYER: wHICH ITEMS would YOU BUY if you could negotiate the PAYMENT TermS to fit your budget?


ANYWHERE USA

1) MAKE A DEAL WITH THE SELLER ON PRICE!   2) AGREE ON 'TERMS'!   3) CLOSE THE DEAL!

What Is 'Creative Finance (in a nutshell)?

• Seller Finance
• SubTo
• other (Lease Option, Land Contract, etc.)

For funding, PML and Hard Money lenders are typically utilized in real estate deals including mobile home parks and renovations; and private money for vehicle sales, when needed. Oftentimes, the qualification requirements are less restrictive than traditional financial institutions and likely offset by the 'Terms' of the loans (interest rate, shorter time period, or other). There are many advantages to their utilization though, once the pros and cons are understood.
Creative Finance deals can include any combination of Seller Finance, SubTo, Cash or all three. A Land Contract may possibly be considered to get the deal across the finish line. It can serve as a safety net in certain circumstances.


When Might Creative Finance Be Used?

• Anytime a Seller wants to sell at a higher purchase price than what cash can provide

• When the Days on Market (DOM) is more than was anticipated regardless of the reason
• When the Seller wants to supplement their monthly income from elsewhere
• When the Seller wants to pass down cash flow to e.g. their offsprings, grands, or provide for steady charitable contributions, etc.
• When the Seller is trying to mitigate capital gains based on advice from their tax professional
• When the Seller prefers not to have a large sum applied as income per the advice of their financial advisor
• When the purchase price of the property is too high for cash to make sense

• When a Buyer does not buy with 'all cash' because that ties up their cash and may limit their ability to purchase more properties in the short run
• When a Buyer needs to renovate a property utilizing hard money which requires 'skin in the game', possibly their own cash e.g. 80/20 or 70/30 (hard money/investor)
• When a Buyer wants to pay less in interest for the property which can become $tens of thousands of dollars more otherwise, over the Term of the loan

• When the exit strategy of the property is a rental whereby the cash flow or overall profit would be negatively effected by a cash purchase

• When interest rates are 'high' causing cash to be expensive; the pool of Buyers in the market becomes lower and properties sell slower and DOM increases

• etc. 


NOTE: ‘SubTo’ is an abbreviation of "Subject To"; Purchasing a property 'Subject-To' involves a Buyer taking over (not an 'assumption') the Seller's existing mortgage balance without formally notifying the lender. The property's Deed is transferred to the Buyer at the close of Escrow. This strategy is widely favored by real estate investors and, in times of increasing interest rates, can also become an appealing financing choice for traditional homebuyers. PML is Private Money Lender. A Hard Money loan is a brief financial arrangement typically requiring the borrower to pledge an asset, such as a property, to serve as security for the loan (a secured loan). Many hard money lenders do not consider the borrower's credit history whereas others may. If the loan is not repaid, they have the right to go after the property that was used to secure the loan. Land Contract is utilized when the Seller prefers to 'hold onto' the property's signed Deed for transfer until a negotiated future date or when a condition(s) is met. The transfer of the Deed is not recorded at close of Escrow with the County Recorder's office. The property is therefore not officially transferred until recorded. The pre-signed Deed is oftentimes held by a 3rd party (attorney, Escrow company or other) until it is time to record it with the County. Side Note: A Land Contract can be converted to a Subject-To before the property is paid off if in the negotiations, the condition(s) for transfer was satisfactorily met. Sometimes utilizing a Land Contract could be that the Seller is not completely comfortable with the Buyer whereby it gives the Buyer time to prove themselves trustworthy to the Seller. If it turns out that the Buyer did not keep up their end of the bargain, the Seller could get their full property rights back more easily that a foreclosure proceeding. 

(continued)

Creative Finance

"Creative Finance" is a term that is often used to describe innovative or unconventional approaches to financial management or transactions. It generally refers to financial strategies or methods that go beyond traditional or conventional practices. Creative finance techniques can be used by individuals, businesses, or financial professionals to achieve specific financial goals, often by thinking outside the box or finding alternative solutions.

When a traditional lending institution like a bank rejects your loan application for a real estate investment or other goods and services, creative financing becomes a viable alternative. This approach becomes necessary when your credit score or collateral doesn't meet the lending institution's requirements or when interest rates are prohibitively high.

Creative financing in real estate involves exploring unconventional sources to secure the funds required for a real estate transaction, circumventing traditional banking channels. This also applies for the purchase of everyday items, as well, as transactions are primarily direct between the buyer and the seller. Oftentimes, the goal is to use as little cash upfront or use other people's money as possible.

Where To Find Seller Finance & SubTo Opportunities?

1) MAKE A DEAL WITH THE SELLER ON PRICE!   2) AGREE ON 'TERMS'!   3) CLOSE THE DEAL!

Run the Numbers!

This is a 'LIVE' Calculator.
Best on Tablet or PC. Scroll left/right on phone. Click light green button to get result.
Also, hover your mouse or tap on the graphics to see additional data.
The mortgage calculator is often used to create Terms options to negotiate offers.

mortgage Scenario: A 'Subject To' Offer vs. Cash Offer:

Meet the Smiths, a young couple in search of their first investment property, a single family home. They've found the perfect house in a desirable neighborhood, but they have limited cash on hand. The house is listed for $400,000, and they have two potential options: a 'Subject To' mortgage offer and a cash offer.
 

    'Subject To' Mortgage Offer:
    The Smiths decide to make a 'Subject To' mortgage offer for the house. Here's why it's a better choice for them:
 

    a. Down Payment Challenge:
    The Smiths have been diligently saving for a down payment, but they only have $40,000 in cash. This amount falls far short of the $400,000 price tag and the required 20% down payment ($80,000), making a traditional cash offer impossible.
 

    b. Strong Pre-Approval:
    They have a strong financial history and a pre-approval from a reputable lender. Their credit scores are excellent, and their income is stable, making them an attractive candidate for a mortgage.
 

    c. Investment Opportunities:
    The Smiths are aware that tying up their entire $40,000 in the purchase would leave them with no financial cushion. By making a 'Subject To' mortgage offer, they can allocate their cash to other investment opportunities or emergencies.
 

    d. Potential Tax Benefits:
    Being able to secure the purchase of this property could provide a significant tax deduction which can lower their overall cost of investment property ownership and possibly offset taxes from other sources. It could take several more years to save enough to purchase the traditional way and therefore not have this tax benefit.
 

    e. Better Negotiation Position:
    A 'Subject To' mortgage offer allows them to negotiate the purchase price, with the flexibility to potentially offer a higher price than a cash buyer. The Seller may be more willing to consider their offer, knowing they are financially stable and have strong financing.
 

    In this scenario, the Smiths submit a 'Subject To' mortgage offer with a competitive price and get the house they've always wanted, utilizing their cash reserves for other purposes.
 

    Cash Offer:
    If the Smiths chose to make a cash offer, they would deplete their savings entirely, leaving them without an emergency fund or investment opportunities. This might also make it harder for them to negotiate a better purchase price. Furthermore, they would miss out on potential tax benefits associated with mortgage interest deductions.
 

In this case, the 'Subject To' mortgage offer proves to be a better choice for the Smiths because it enables them to secure their first investment property while preserving their financial cushion and flexibility, positioning themselves for a brighter financial future (cash flow) to purchase another.

 

SubTo Scenario: Traditional Single Family Home Buyer & Seller

Uninformed Buyer & Seller (not told):
Buyer could pay an additional $86,400 over loan Term; slower paydown, less equity gained
Seller could have made more money and possible Net Cash even in a no- or low-equity situation

Missed SubTo Purchase Opportunity

Buyer's Perspective

Purchasing at 7.5% for 360 months (= $86,400+ more)

$ Purchase Price

Single Family House 

● Buyer finds the house, either independently or through a realtor. At that point, it had been on the market for over 90 days.
● Buyer falls in love with the house, which is in good condition and move-in ready for renters.
● Buyer has the financial means to purchase the house, thanks to a $100,000 mortgage pre-approval from a lender at a 7.5% fixed interest rate for 360 months, with a 20% down payment.
● Buyer acquired a realtor who submits an initial offer to the listing agent at 20% less than the full purchase price, even though the house was already priced below market value.
● The offer is deemed a good deal, supported by comparable property prices in the area.
● Surprisingly, the Seller accepts the Buyer's offer due to the length of time the property stayed on the market when the Seller was ready to start their new life with family. On the surface at the time, it appeared to be win-win.
● As the closing date approaches, everyone anticipates a celebratory moment with champagne.
● While there is still potential for a monthly positive return on investment (ROI), the Buyer never knew how much sweeter the deal could have been if their interest rate were as low as 2.8% combined with the accelerated principle paydown since 60 months was already paid by the Seller, a nice headstart.
● The lower interest rate would not only increase the property's equity growth rate, but also make it easier for the Buyer to consider purchasing another investment property in the near future due to the increasing equity position.
● With SubTo &/or Seller Finance, the Buyer would not need that sizeable loan amount. The Buyer would be taking over the monthly payments (not an assumption) instead. Taking over payments would not involve the lender as it is an arrangement directly with the Seller. There are caveats that MUST be understood in advance prior to making a formal offer. Also, it is necessary that the Title company (&/or Transaction Coordinator) chosen is experienced with SubTo and Seller Finance transactions.

Seller's Perspective

Mortgage at 2.8% 300 months $PREMIUM

$ Purchase Price

Single Family House

● Seller's motivation for selling: After being a landlord for 20 years, they want to move closer to family in a different state and start a new chapter in life.
● Seller's current mortgage terms: A 2.8% interest rate, 360 months, with less than 10% real equity based on market conditions and loan balance. There are 25 years left to mature on the loan.
● Full price offer: The Seller has accepted a full price offer from the Buyer, who was pre-approved for a loan at a 7.5% interest rate.
● Realtor's omission: The realtor(s) did not inform either the Seller or the Buyer that the Buyer would be obtaining a 7.5% loan to pay off the Seller's 2.8% loan because the realtor handled traditional real estate transactions.
● Consequences of not having the loan details: Due to the buyer's higher interest rate, they would end up paying thousands more dollars for the house without understanding the loan terms and how to negotiate the deal properly.
● Potential out-of-pocket expenses: Depending on the financial details, the Seller may need to pay the realtor from their own funds and not receive upfront money in a traditional transaction.
● 'SubTo' transaction option: In a Subject-To (SubTo) transaction, the Seller may receive a higher purchase price and additional cash at closing and possibly more over time in the future to make the deal more appealing to them. Remember, there is a possible $86,400 negotiation difference!
● 'Seller Finance' all or a portion of the equity in addition to SubTo to 'sweeten' or create leverage for the deal (an additional negotiation strategy to increase Win-Win).
● Miscommunication impact: The lack of proper explanation led the Seller to accept the lower "cash" offer which paid off the mortgage balance, closing costs and realtor commissions (maybe out-of-pocket) instead of considering alternative Creative Finance options that could have been much more beneficial.

NOTE: In a scenario where the Seller had a significant amount of equity and a mortgage, the seller could have also made a lot more than their accepted purchase price over time if in addition, that Seller financed a portion of the equity and walked away with a steady additional monthly income with interest (would have become the bank) for several years in the future and with negotiated cash upfront. The Buyer oftentimes in these types of Creative Finance deals have a down payment less than a financial institution requires depending on the loan type e.g. bank 10% or even 0%, and an interest amount that the Seller would receive instead of the bank.

Volume of properties sold would increase where low ALL Cash offers couldn't; Days on Market (DOM) would then decrease

🏡Low interest rate properties are literally EVERYWHERE NATIONWIDE!

NOTE: This same offer scenario is also applicable in owner-occupied purchases. Why pay $thousands more than necessary over the loan period? Why use up so much cash otherwise where it is not available for something else? Striking these types of deals, you'd be able to purchase a bigger and better property!

FOR KICKS (Buyers):
On the Mortgage Calculator above, calculate the monthly Payment + Interest (PI) for 2.8% and 7.5% then compare. Which would you rather pay for the same house? Try a $100k purchase price and others.

FOR KICKS (Sellers):
Run the same calculation so that you see what the buyer may be attempting to negotiate. Figure out what a win for you could look like if you have no equity, although you have the interest rate and enough spread between rental rates in your area and your PITI (PI + taxes and insurance;  your buyers should obtain from the seller the PITI, utilities, etc. to complete their calculations to determine what would make a good deal for both sides.
 

    Compare Rental Exit Strategies e.g. STR, MTR, & LTR - Maximize Your ROI

    There are several exit strategies for non owner-occupied properties. Those that are applicable would, of course, depend on the property's location and characteristics. STR, short-term rental is e.g. Airbnb where the rental could be hours, 1 day, or months for the same renter. MTR, mid-term rental would be for transient tenants e.g. doctors, nurses, corporate, et al. where the stay could be 3 months or more on average. LTR, long-term rental is typically a traditional rental where the lease is annual or month-to-month. STR and MTR can pay an owner e.g. double its LTR counterpart for the same property.

    Therefore, before investing in a property, think seriously about why rental type a property qualifies for before counting your chickens.

    EXAMPLE: STR: Airbnb.com (there is also a way to find out if a property fits in and estimated revenue)
    EXAMPLE: MTR: FurnishedFinder.com (you can see nearby rents of an entire property or per room); Corporate Rentals
    EXAMPLE: LTR: Traditional rentals

    TIP: Know your exit strategy BEFORE making an offer as the offer is dependent upon the exit strategy! VERY IMPORTANT!
     

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