Subject to Financing

You take over the payments for the existing loan. In other words, the title of the property transfers to you, the buyer, but the loan remains the same for the seller for an indefinite amount of time. While the loan legally stays in the name of the original borrower, you, the buyer agree to make all payments in a timely manner. This technique is best when the seller is behind on payments, and foreclosure is around the corner. They are more ready to work with you on since the other option is to lose the house anyway.

The key is that you are working with a motivated seller.

So What about the Due on Sale Clause? Lenders are in the money lending business. It does not make sense for them to take a performing loan, then exercise the due on sale, putting it into foreclosure. The due on sale is a right to call the loan due...that does not mean that the bank will automatically do it.

That being said, keep up to date on current legislation, as rules are always in flux. As of this writing, do not do this technique with FHA, VA, or HUD loans. They will invoke the due on sale clause.

Make sure you understand the terms of the loan you are going to take over. You need to know if it is fixed, or an ARM. Also-you will have to bring the loan current first.

When doing a Subject to deal, you should have a few other exit strategies in place so you are not stuck if the bank exercises the clause. Remember, if they exercise, you have 60 days to either, refinance, sell, or line up a private investor.

Private Investors

Private investors are individuals who are not lenders like banks. They can be your neighbor, friend, anyone who has money. How many people can you think of that has money in a low interest CD? How about an IRA?

Every one of these people can be a lender to you.

Here are some advantages:

You negotiate the terms.

The funds are quickly available because the funds are typically in a liquid fund until you are ready to invest.

No qualifing for each loan. Once you build up your relationship, you can re-invest over and over with the same money.

Access is unlimited based on your ability to attract and recruit new lenders.

Loans don't show up on your credit report.

You need to market to attract lenders.

Then create an investor packet that outlines deals you have done, testimonials, and show them how you work. You need to build credibility.

Once you have your lenders, and you find the deal, you set it up at closing that they have a lien on the property that you are borrowing the money based on.

If you use multiple lenders on a single property, make sure you create a separate lien per loan. If you "pool" funds, you run under SEC regulations, and that requires separate reporting--too complicated.

Also make sure you borrow for deals in the same state. Again, crossing states runs into federal lending guidelines...SEC issue.

Seller Financing

There are some deals that you will come across that the sellers have significant amounts of equity. They may own the property out right.

If this is the case, then you are looking at a prime Seller Financed deal.

Basically, the seller, becomes the bank and loans you the money. If they own the home, you can negotiate to have them finance 100% of the deal to you. You negotiate the interest rate and the terms.

There are people out there that just want recurring payments, and don't need a lump sum.

Attempt to keep the interest rate as low as possible, ideally close to 0% as you can.

Basically, you are turning the seller into a private lender. The process from this point is the same.

At the closing, you set up a first or second position lien on the property.

Unsecured Lines of Credit

What we are going to discuss right now is Corporate Credit, or credit that is extended to businesses.

Can you get access to corporate credit? The answer is yes! I need to make sure that we are clear about what I am saying%u2026You can get corporate credit for legitimate use in your real estate business%u2026for the sole purpose of and intent of making a profit. Do not mistake this discussion as a way to get credit to go on vacation!

Some of the benefits to corporate credit as compared to personal credit are that corporate credit does not report to your tri merge, or credit score. You do have to sign as a guarantor of the loan, so you are guaranteeing or promising to pay back the credit used, but again, when done correctly, will not affect your personal credit score.

The second benefit is that this is an unsecured line. Which means that the line of credit is not tied to any assets. A mortgage is tied to the house. A car loan is tied to the car. Credit cards are basically tied to your worthiness as a responsible person who can manage their finances.

To access this kind of credit, you need the following:
A legitimate business presence. Yes, we are talking about creating a corporation and it is not as complicated as it may sound.
Good credit. Either you or your partner.
With these two items, you can start applying for credit and within 6 months to a year, have access to $200,000 in credit.

This credit can be used for repair costs, mortgage payments, marketing, education, and even down payment money. If you could tell someone you could buy their house today, with cash, don't you think you might be able to get a great price?

Once you have established the legitimate business presence, then you or your partner, who has good credit can start applying for cards. Look for cards with low introductory and regular rates that are favorable.

Apply for cards slowly over time. You want to apply for one every month or every other. Too many applications will have a negative effect on your personal credit. When you apply, they do check your credit, but once approved, the credit reporting goes with the entity.

As you need more credit, your partner can also apply. See how, gradually over time, you can accumulate large amounts of credit?

To learn more about corporate credit as a strategy the way I learned,  CLICK HERE

for your access to a free report that outlines more of the "myths of credit" and how you can use credit instead of cash to fund your Real Estate Investing.

 Unsecured Lines of Business Credit