3 ways to structure a "“subject to” " dea
Welcome to Mr Investor, with MyRealEstateDOJO, One of the three things can happen when you buy a ““subject to”, okay. Three different outcomes, and those outcomes are, there’s different ways to structure it, there’s millions of different ways to structure but basically three different ways, okay, that can happen. That’s the formula.
Number one, you as the investor, you give cash to the seller. So again, number one thing that can happen is you, as the investor gives cash to the seller, directly or indirectly, okay.
Let me explain to you, let me give you some examples. Direct way to give cash to the seller is because the seller has equity. An indirect way that you pay cash to the seller, might be that, you’re going to fix their problems in their house or you’re going to pay for their closing or you’re going to pay some money to help them move, things of that nature. So that’s some indirect ways that you’re going to payment to the seller, okay. So the first thing that can happen is that you pay money to the seller.
The second thing that could happen is, that you, as the investor, you pay the seller zero dollars, directly or indirectly, okay. Again, you do the transaction, the seller ends up paying for your closing costs, there’s no repairs, there’s no back payments, so you pay to sellers zero dollars, okay. I like these, okay, way better than number one.
And my favourite, and you know a lot of people asks me, “How does this happen, Mike?” is that the seller, gives me, cash to buy their house, and I love this, ok.
Now I bought a house in McKinney very beautiful house where the seller gives me five grand to buy their home, okay, and when I spoke with the seller originally, the house was behind on payments, three months, okay. Now the seller, wasn’t financially in a hardship position but mentally didn’t want to deal with this house anymore. So I spoke with them, and I explained to them the importance of their credit and how I can help them with their problem, so the seller was willing to pay which is about three months, okay, couple of grand, paid me five thousand, and also pay 750 bucks towards closing calls, guys. So I love these, because you know I told the seller, Hey seller, you owe a hundred, the fair market price is a hundred, so this house is upside down, why should I buy this? and they convinced me that I should buy it from them and so I tell them hey this is how much I need from you, to buy this property because this risky business, they cost a lot of money to hold property, and I’m taking all the risks, I got to put the renter in there, I got to babysit the renter, I got to, you know, make sure the renter doesn’t tear up the place.
But they do tear up the place, I’m the one that has to fork over later, fix it, which I don’t have a problem to if I made a commitment, but what I’m trying to explain the seller that there’s a lot of risks involved, there’s a lot of babysitting involved, and if I’m going to do that, it needs to be worthwhile for me. I’m here to make money as well, I can’t just jeopardize my money, and my time, and get nothing, actually lose money, okay. So I can’t do it like that, I needed to create a win-win situation.
Guys, pay attention, three things that can happen you give the seller money, you don’t get the seller nothing, or the seller gives you money, okay.
Now a lot of new students are always focusing on what can I give the seller, remember guys there two other phases here you don’t have to give the seller anything. I like to negotiate when the seller gives me money. So if you’re going to buy a “subject to” and there behind three payments negotiate for the seller to bring the three payments up front, negotiate with the seller to bring half of the month okay month and a half or one month or negotiate for the seller to pay 700 outwards closing or half the closing or negotiate that if we are going to give them some money if you’re going to give them some money that they throw the car or they’re going to give the couch and throw the boxing bag in or whatever guys okay.
So, most of you think that we have to give them some money because the sellers are allowing us to buy their house “subject to”. No guys, you could do a deal, where you don’t give the seller anything or you could do a deal with the seller gives you something.
So I like option two and three and I always shoot for two and three and sometimes I’ll do option one, but there has to be equity. The house has a cash flow, has to be an appreciating area for me. For other people, depends on the exit strategy, there is no right or wrong. It depends on your goals, how much money you have, what is your tax liability, and what are you trying to do. For me, rental properties, so I want the seller to come to closing with something to show me they’re really really motivated and they really want to save their good name because I only want to work with people that want to save their good names not saying that I can to a deal if the seller doesn’t care about their credit and their good names if there’s enough money in there I will but if I had to buy a property that had no equity or no equity, I want to deal with the seller that’s really motivated about saving their good name and they’re really care about their good name then doing the deal with someone who doesn’t give her roots ass about what happens to him or her, okay.
So I’m here to help people that want to help themselves, I’m an emotional guy, guys sometimes I see a seller and I really feel their story and I know they’re compassionate and telling me the truth and a lot of times, I’ll give more than they deserve. I give them more money than the house deserves, because I’m a passionate guy, other times, like that McKinney property I was telling you about, the sellers were not financially motivated okay they were going in a hardship, their motivation is they’re dealing with this property and they have money so why should I bring five months or three months in the rear up for them? if they really want to save their good name they got to bring some money to closing you can’t just be me doing everything for them we need to create a win-win and for me to save their good name they have to step up to the plate as well, this just can’t be me.
Now if the sellers in a situation where they have no money and they have equity then I might do that or if I love the house or I think it’s going to be a lot of appreciation or I have a buyer already lined up, I might give them some money but don’t just always offer to give sellers money, however, there’s two other ways.
They give you money or you don’t bring any money, okay. This is mike with Mr Investor, go out there, hustle, and bustle. Don’t listen to the naysayers, okay. Don’t tell me you can’t do this.
Guys i came to America with nothing. We lived on government cheese okay, our food stamps. My parents they don’t got no high school education, okay. Not in America, but from the third world country that we’re from, okay. Look, my mom is illiterate guys, okay, I do have a college degree but I’m trying to tell you this, and it doesn’t matter where you’re coming from. It doesn’t matter, what situation you’re in. All that matters is your burning desire, all that matters is your discipline, all that matters is if you’re willing to work hard, if you have those ingredients and you have a dream, you believe in yourself, the rest is history man. This is America, guys.
Go out there, bust your balls, bust your head, cry, bleed, sweat, and bang your head. It’s okay, it’s okay that’s the way to success and the other people they’re telling, you know, that it is not the way, pat your back and they want to hear your sad story, well they’re not going to do far in life, and you don’t want that for yourself. That’s why you’re here watching me, that’s why you want to improve yourself, to you reach your financial goals.
So go out there, because it’s not about the education, okay, that’s part of it. Majority of your success and your greatness is going to come by you, saving yourself by going out there and taking action, tackling your fears, not taking no for an answer, stopped seizing, freezing, because you don’t know what to do. Do something, something is better than nothing. I read a quote just the other night that says that you miss one hundred percent of all the shots you don’t take. Take the shot, if you never play basketball, take the shot, you have a better chance of scoring, okay.
And that the story tonight guys, go out there, make some money, hit me up with questions and I will hold your hand so you’re out there, helping other people reach their financial goal. This is Michael, Mr Investor, this is MyRealEstateDOJO, remember actions to keep.
Have a great night.