Making Your Own Sub2 Luck...

My partner Jim called me up a day ago and said we need to go 'drive for dollars' tomorrow (or something like that). I said, "Great, let's go!"

So we arranged to meet at our regular car pooling place at the bourgeoisie "Le McDonald's" home of "Le Big Mac de Deliciose". After getting on the road, Jim pulled out his folder packed with prospective deals, and gave me directions on where to head.

We drove by some familiar houses that we'd negotiated on, and a few others that had just become obviously vacant and abandoned.

After driving around the farm writing down new addresses for about two hours or so, we came across a house that once had quite lush landscaping. I pulled in the driveway, got out, and walked up to the garage door and found it unlocked and opened it. Thankfully, someone had already bashed in the entry door from the garage to give us access! Jim and I went in and explored. It was beautiful and well laid out. Later, I discovered that the owner lived around the corner.

As we continued driving, we saw a woman out in her front yard appearing to rake the dirt of her rental house. I got out and jokingly asked if she was preparing the house for rent? She laughed, and said, "No, I live here." I laughed, too, and added for giggles if she was interested in selling. Before she could answer, I said, "Come on! Tell me you want to sell this place." She laughed again at my forwardness (I think), and said, "OK, it's for sale, if you say so."

With the conversation set firmly on friendly ground, I was able to discover that she owned a condo nearby that was in foreclosure, but the bank hadn't filed an NOD yet. She had just stopped making payments when the renter bailed. Her interest payment was very low, but the rent didn't quite cover everything.

My mind whirled. If I sub2'd this condo and resold it on a Land Contract for the loan balance, but at market interest rate, I could not only get a $10,000 down payment; make a couple hundred dollars a month on the payment spread, but save this lady's credit, and become a hero. At this point Jim interrupted me and saved me from offering this woman any money! Just kidding. I didn't offer her a dime.

Bottom line: We're taking title, reselling the condo with $10k down; making $200 a month in cash and giving the seller nothing, but a credit boost. Yay. All that just by asking a "landlord" if she wants to the sell the 'hell hole' that she's raking the dirt on.

Back to the other house. We're talking to the seller, offering them a few hundred bucks for the right to control the property, lease it out, and negotiate a loan modification (if that fails, we've collected rent for about 18 months at $1,300 a month) without paying property taxes, but maintaining the seller's fire insurance.

Both these prospects came just from driving around YESTERDAY! Does this happen every time? No. But it happens often enough to keep us jazzed up about doing small sub2 deals.

BTW, how much money does this mean we made with our two hours of driving around? Well, $1,300 x 18 months is $23,400. Then we've got the condo with $10k up front, and $200 for another 18 months. That's another $13,600. So we will have made $34,000 in 18 months for maybe 2 hours worth of prospecting.

Now you might ask, what's it gonna cost to fix the condo and clean up the house? We'll have $3,500 invested total. So, $30,500 isn't too bad. That's still about $15,000 an hour less prep work. Okay, Jim and I are splitting the profit so it's actually $7,500 an hour. That's better than my surgeon makes an hour.

If you'd like to know exactly how Jim and I put these profitable sub2 deals together click the link below.

You'll have an opportunity to provide your name and email address and then be directed to the Screw The Bank information page via email.

Screw The Bank! Sub2 Profit System

The Sub2 Chihuahua Rides Shotgun!

This is my Terrier/Chihuahua mix Wolfie resting on the way home from a prospecting journey.

We checked out a new farm of multifamily income properties that look like fabulous Sub2 deals in the making.

Nobody knows these properties are for sale! YES! And the sellers are scared spit-less about the vacancy rates in the area, and don't have the courage to weather a storm. YES!

Not to mention that the unit prices are shaping up to be fantastic high cash flowing deals for a knowledgeable investor. Meanwhile, taking over poorly operating buildings and getting them turned around without any financing obstacles is REALLY nice, if not just a giggly thing to ponder.

Did you know the most cash flowing properties are the same ones the bank is least desirous to lend on, or likely to finance for a decent rate?

Yes, we can find the baby cash-cow dumps with a potential 25% capitalization rate, but because those properties are located in C-minus or D-plus areas, the bank holds its nose and says, "no thanks" to our requests for loans. How come the most secure deals are the ones banks don't like, I ask?

Here's one hypothesis. Banks are like low-return pride of ownership types of buyers. They like to plow money into low-return ["A"] projects that they can point to and say, "We lent on that!"

How nice.

Now if you ask the bank's borrowers what their returns are on those same "A" properties, they might say, "Uh, about 2.5 percent." Uh, huh.

Well, I like bigger returns. We prefer meaningful returns, not ones that can't even match the costs of rising energy. We find these juicy returns where the average investor doesn't want to shop, and the average bank doesn't want to lend. Yay!

There are so many opportunities waiting for the courageous and the proactive. Meanwhile Wolfie, the Sub2 Dog, will ride soon again looking for stray cats and bicyclists to bark at while we talk with sellers who don't know how to turn a lemon into lemonade the sub2 way!

If you would like to know how Wolfie buys cash-flow opportunities without a credit check or down payments, click here: "Screw The Bank!"

"Pimp My Sub2..!"

Only in San Bernardino, CA will you find the "Pimp my Tattoo" mobile tattoo clinic and bus conversion! [well, i guess this bus actually goes 'anywhere']

Yes, friends step aboard and take a trip directly to the psychedelic express to "tat" nirvana! Or not.

I barely got this photo snapped before the bus turned left at the next light. If you notice the graffiti all over the back of the bus in white spray paint. I had to laugh at the graffiti on graffiti situation. I could barely tell which was supposed to be there, and which was not. [It's supposed to be there! Who knew?]

Meanwhile, the bumper read: "pimpmytattoo.com" so I gleefully refer you to them, because I'm so impressed with their marketing gimmick! At their site, you'll see better pictures of the actual bus I saw (being driven in Ohio).

The real reason I post this, is because it draws attention to the cash flow opportunities that exist in these areas. These are management intensive locales, but at the same time opportunities to create an income stream that doesn't require an arm and a leg to get into.

Anytime I hear someone say that there's no opportunities in real estate anymore, I now just direct them to San Bernardino County. Owners change hands often in these places. Often the owners that knew there was cash flow, also didn't know how to manage a business, or how to market correctly. They're the same ones that become, "don't wanters," as Robert Allen describes them; those who want out of their properties. These same owners will accept very creative terms just to save their butts.

I bought an apartment building in an economically depressed area very similar to this. I got in free. All I had to do was apply my professional management skills to turn the place around. It didn't need rehabbing as such. It was just in need of some a consistent, professional, management application to create both cash flow and a substantial amount of equity on paper.

It's simple, but not always easy, however. Tenants that were used to a loosey-goosey management style from the previous owner, which created the mess for the owner in the first place, underwent a severe case of "management overhaul shock" after I pulled in.

Many tenants bailed on the situation, because they had no intention of following any "new" rules, or actually paying their rent on schedule. Did I mention my gigantic late fees?

Anyway, Sub2 financing came in so very handy for this situation, because nobody in their right mind would have tried to get financing on this failed management hell hole, otherwise. The seller knew it. I knew it.

Find a seller with a problem, not a property with a problem, and get rich solving the seller's problem with the property. Yay Sub2!

If you would like to know how I bought that property without new financing click here: "Screw The Bank!"

"Creating Money Out of Thin Air...the Sub2 Way...!"

Sub2 financing can offer the fastest track to wealth creation ever.

When my family first started investing in single family homes in the late 1960's, credit was THE most important thing to "worry" about, apart from scraping up the 20% for a down payment on a conventional loan. Of course that was for our OWN home, not for an investment property. Trying to get a loan for an investment property was a whole different animal. The rate and terms were worse, AND you had to qualify for the loan as if you were servicing the loan yourself, without considering the rent from the property.

Things have changed since then. What hasn't changed, is the practice of taking over existing loans. This method has been used to get around the qualifying process banks have required since loans were invented.

However, the government institutionalized 'non-qualifying' loan assumptions. Wasn't that convenient? Yes, one person would originally pull their pants down and expose their financials to some bank, and qualify for the Federal Housing Authority-backed loan. Then when it was time to sell, they could just let somebody take over their loan just by signing a couple of documents.

This was technically "subject to" financing, but had no name until after the "Due on Sale" clause was invented. Meantime, there was no income verification and no credit check to take over these FHA loans! Yay. And the original borrower, yes, was still on the hook for the loan...! Nothing had changed. Except...

Eventually conventional lenders stopped allowing their loans to be taken over without qualifying. They included a term called a "Due on Sale" clause. Why did they do this? Because they were losing money when sellers would allow buyers to take over their low-interest rate loans at 10% instead of qualifying for brand new 18% loans. Well, this 8% spread wasn't going to be lost to a bunch of amateurs! Nosirreee Bob!

So, banks scared off the "sheople" (who were otherwise seller-financing new buyers at 10%, instead of 18%) by including the dreaded "Due on Sale" clause in all new loans. Now this clause didn't mean that a bank WOULD call a loan that was not properly assumed, but it just wanted the right to make more money off the new buyer in the event it was profitable for them.

Well, ever since interest rates fell to the point that most seller financed deals were MORE expensive than conventional bank's terms, no bank in their right mind would call in a perfectly healthy loan.

As a result of the lower conventional rates, the DOS clause has been a flaccid threat to anyone taking over a loan the old fashion way.

Now, how do we create money out of thin air with Sub2?

There are two ways (at least), but the fastest way is simply to resell a house for a higher price, on terms to someone who "really" wants your house, who cannot qualify for the "cheaper" conventional loan. This could be for reasons including being new to the community, changing careers and employment, recently losing a house in the bubble market crash, and other reasons that temporarily keep them from qualifying for a new conventional loan without putting up 20-25% down.

So how exactly does this help us create money out of thin air, again?

Well, we're not going to sell a house to a buyer who needs financing from us for the same amount we paid. We're going to raise the price as a premium for our service. Typically we'll raise the price by 10% over retail ----- or if we got the house for 10-20% under retail, we can ensure a FAST resale by offering the house for today's retail value, and then work to get our buyer refinanced as soon as possible. Usually this takes at least 12 months.

The second way to create money out of thin air, is to charge a slightly higher interest rate than what we're paying. This isn't usually a large amount, but it all goes directly to our bottom line.

So creating money out of thin air just means that we created extra "value" out of thin air. We market our houses to a niche of potential homeowners that will pay a premium price in return for the privilege of owning their own home --- without having to qualify for a loan, or even having their credit checked, and most importantly putting up less down than any bank would require.

The value of what we offer is SO POWERFUL that we can actually create value (money) out of thin air!

Meanwhile, our buyers will beg, borrow, and 'probably' steal to give us a down payment and take advantage of what we have to offer them with sub2 financing.

For more information about a turn-key system that will allow you to do this over and over again like clockwork click here: "Screw The Bank!"

Open Wide and Say "Sub2!"

Getting information out of some sellers is like pulling teeth.

I had to laugh last week (again), when a FSBO kept answering my leading questions with "I don't know," and "no" and "yes" answers.

I mean, they were playing so close to the vest (which isn't unusual for FSBOs) that they couldn't expound on the description of their house to save their life.

It was ready to water-board them!

One answer that is always hilarious to me when I request the seller to describe his house is, "What do you want to know?" Is that the worst answer ever?

What do I want to know!!!!!!?????

Just tell me about your friggen house!

However, I used to confuse this with lack of salesmanship on the part of the seller. Not anymore. Sellers that can't express themselves are often hiding a problem they need us to solve. At the same time, "un-forthcoming" sellers often need desperately to sell, but are in denial, or exhibiting "pain avoidance."

On the other spectrum, we have the "Chatty Cathy" who cannot stop talking about her house, and expounding on every single real and imaginary (as in made up) feature and benefits of her house. Sometimes, these folks are as desperate to sell as any close-vested seller out there. However, the "Chatty Cathy" is going to be less work to close on, if it's gonna happen.

So what? Well, it's important to figure out if we're dealing with a time waster, or as as Robert Allen puts it, "a wanter," or a desperate "don't water." Either way, we NEED to know why a seller is selling.

This usually requires a 30-minute routine of friendly questioning according to Barney Zick. He said that a seller can't lie to us for more than 30 minutes about why they're selling. I agree. However, some sellers are so slow at giving information we can't tell what they're lying about for probably 45-minutes.

It's in the cases where the seller is not forthcoming that we might be tempted to walk, or short-change the negotiation process by not allowing ourselves, and the seller time to "work" on the deal.

We don't like to admit that, as buyers, we have a need for satisfaction in the negotiations just as much as the seller does --- even if the seller is not aware of his need.

So going slow, controlling our emotions, and allowing the conversation to meander across all the seller's motivational elements, allows us time to naturally develop a rapport with seller, find the "becauses" that are necessary to justify what we want, and find out what we can give up in order to give the seller what he needs (and less about what he might "want") --- and achieve satisfaction in the negotiations so that all parties know they worked their butt off to get a deal struck. This is an important moment to remind ourselves why we want all the decision-makers present during the negotiations or "everybody" won't feel satisfied."

Meantime we'll equity strip the fast-talking, motivated sellers that have diarrhea of the mouth! j/k