Subject-To Real Estate Deals Explained (Even a Beginner Can Do It With This Guide!) 💡🏠

Carl, what is going on? Good to have you on here. Everybody that's tuning in, what are we going to be going over today? How to fill out subject-to paperwork. Because Carl, the man, he's got a deal right now. Carl, congrats, man. Good job.

Thank you.

So what we're going to do again is how to fill out subject-to paperwork. So Carl, you've been doing this for a month or two now, right? Like working with us, and you've been talking to a seller that's in pre-foreclosure, and he doesn't really know what the heck's going on, right? He's like, yeah, I think he's moved out of the house, right? And he's something that he was rehabbing a little bit, but he's moved out. And yeah, so he's— you've been texting, following up with him, and pretty much you're saying he's like, yeah, man, I'm ready to go, right? Like he just wants to be done with it out of his name. What did he say? He's like, I don't need to make anything off of this. I just need to get it out. Exactly.

Yeah. He's like, just take it off me.

So what do we do here? So, Carl, I've asked you and you know this, but you reached out to him and you asked him for his mortgage statement because we need to know, you know, exactly what he owes, when he bought it, you know, what his payments are, and he's not 100% sure what he owes. He thinks he owes around like $380,000, and his interest rate, like, those are all things that we need to know, right? But he's not 100% sure. So what do we do in this situation? Do we just wait, just wait a couple weeks until he gets the paper, like, gets the mortgage statement, or do we just proceed and fill out paperwork the best we can, knowing that we can always add addendums to contracts and, you know, fix it and just get it to the title company? They can sign a power of attorney with the title company, he can, so they can find out all the information. So that's option 1, is just wait for him to figure it out, or 2, have him sign, send all the paperwork, do, uh, get the title company to figure out everything and just proceed and get the ball rolling. What do you think we should do, Carl?

Uh, definitely not wait.

Okay, I agree. So, so is this 100% a deal? We're not 100% sure because according to him, $380,000 is what he owes. The house is worth about $500,000. We need to go in there and do our inspection to verify. We have to see what his payment is to make sure it cash flows, but there seems to be quite a decent spread and the house seems newer, so we're going to roll with it, okay? And what we let these, you know, the seller know is, hey, we're planning on purchasing this. We buy it with a couple of our partners in the area and you just need to verify everything to make sure everything works out. That's it, okay? Because really, this is a verify— like, we got to verify a lot of things from pre-foreclosure. We got to make sure the payments— we can get the right information to catch everything up. So before we dive into the paperwork and Any questions before we break the deal down and proceed?

No, no, I'm good to go.

Okay. And if you guys are watching live, make sure to pay attention because you're going to get exactly how to fill out this information for a deal maybe that you don't have all— for sub-2 deal, maybe you don't have all the paperwork on. I'm going to show you how to do it. So why do we wholesale this to a flipper? Why are we trying to buy this on terms? Well, Carl, the reason is because let's just say $500,000 is what this house is worth. He owes $380,000. He says, oh, you know, I don't need anything out of this thing. If we were were to flip it, I think it's a bigger house, right? It's not like— it's probably like around 2,000 square feet.

Yes.

So if we were to— if a flipper is to buy this thing and you get hard— a hard money loan, he would put, you know, be 12% interest, 2 points, uh, to borrow the money, 15% down. It might take 5 months, 4 or 5 months to flip it. We'll just say 5— sorry, let's just say 4. 3% on the buyer's commission when they end up listing it after flipping it, and closing costs. Now let's say this house, it is a medium rehab. $48,000. Or if you say it needs everything, it's going to skyrocket up, right? But just medium. So, and that's if we were to flip it ourselves. This is not with our wholesale fee, right? So it's in the red. Somebody probably would not take, you know, you never know. There's always buyers that are willing to do stuff, right? But it'd be a 5% return, $26K off of spending $48K and doing this. If you did it, if we wholesale this to somebody, I'm sorry, not if we wholesale, if we flipped it ourselves, it'd be $26K. Now the problem with this is, you know, numbers can change pretty quickly. You know, you could budget $48,000, but it could end up costing you $60,000, just because you might find something you don't want as you're rehabbing it. Now, you got a very low return, and it's not really worth the risk. In order for this to be a good wholesale deal, you'd need it at $320,000, $340,000. Again, we're not even at the 70% minus ARV minus rehab. We're above that, and it's still not making sense, right? If you drop this down to the 70%, of ARV, you would be— let's see, it would be a deal, of course, right? But that's, that's super low, and he, he owes more than that, right? So that's going to be difficult to do. So anyway, that's why we go terms. Now, all this depends on the, the monthly payment that he has and, uh, you know, the interest rate. But, you know, and he's not 100% sure, and that's why we're going the route we're going to fill out paperwork. So what do we do, Carl? Step number 1, I'm going to step back and, um, share my— show the TV screen right here. Step 1, PandaDoc, baby. Okay. Why PandaDoc? It's free. Why not? It's free. Okay. So PandaDoc is— DocuSign is the competition. PandaDoc, we use it because it doesn't cost any money. I don't like spending money on stuff that I don't have to. Real estate purchase contract. You have to get a standard real estate purchase contract. Now, I know a lot of people do that do sub-to. They have— there's so many different ways to fill out paperwork. What I do is I do a real estate purchase contract, and in the purchase price, I say, see addendum. So they see that the addendum, all the terms are laid out in the addendum. And number 3, you prepare the addendum and then you put it on the PandaDoc and you send it to the seller. Okay, Carl, any questions on this so far?

Mm-mm.

Okay. All right. Pretty simple, right? It's not that difficult, right? Like, what did we do? I pulled my real estate contract that I use. It's been battle-tested, battle-approved. Attorney wrote it up and it's withstood the test of time and battles, people trying to get out of contracts after they've agreed and everything. So anyway, Simple real estate purchase contract, seller information, address, me or you, the address of the property, see addendum. You don't have to write term, anything with terms, because it's all going to be in the addendum. It's got all the, you know, the different language in the contract that makes it so you can purchase this property. Acceptance, I usually put N/A, not applicable, because the guy's going to sign it or not. So I don't really put a time, because the thing is that's annoying about putting like a specific time is like, If they don't sign it by that time, then you have to send like new paperwork, which is annoying. Deposit. The cool thing about the deposit is we do it after our due diligence period is over. So you would, in this situation, like it doesn't really matter until— because we're going to find a buyer or we're going to cancel, right? Or we're going to tell them, hey, we don't have anyone to partner with. Like, this is not something we're going to move forward with, right? So we could put really anything we want. $1,000, $500, probably put like $1,000 or no, we'll probably do like $500 and see what he probably is Cool. $500. You can even do like $10, but we'll do like $500. Okay. Or we might do $100.

We'll see.

So then you got closing will take place on or before, and then we just put out a month out because it might take some time to get this paperwork figured out. Other agreements. This is the part that allows you to assign it to your buyer. Buyer assign or otherwise transfer buyer rights to the buyer, another buyer. And then you just sign the buyer signs and you sign. Okay. So what is the seller finance addendum? All it is is it's just laying out how you're purchasing the property. And I have— I've had my title company, like my escrow officer, she's prepared a lot of this for me. I didn't have to make all this up. I just have to change, you know, the term, like the numbers according to what we're buying it for in here. So it just lays out, you know, that we're taking over the property. The buyer is responsible for taxes, blah, blah, blah, blah, blah. All right. So we send this and we send it to him in PandaDoc. And he needs— basically, he just has to sign both. Once he signs both of these, we take it to We send it to the title company that you reached out to, if they're investor friendly, if they're good. And we just say, hey, here's the signed REPSEA, here's the addendum. Can you reach out to him? He's in pre-foreclosure. He means you need— we need to figure out how much he owes, all that, all the juice, all the good stuff so we can move and continue forward. So that's, that's what we're going to do in this situation. What I'm going to do is we're going to get him to sign. As soon as that's happened, I'm going to send you the paperwork and you're just going to reach out to the title company and you're going to email all that information over to them.

Okay.

And you're going to give the contact information for the guy to the title company as well. And at this point, bro, they pretty much take care of it. Now, if they're like my title company I usually do deals with, they're pretty versed in subject-to, so I don't really worry too much. They tell me exactly what needs to be done. Hopefully they're the same way, but if they're not, then obviously we can take the next step, make sure everything's ironclad. We could talk like, you know, I'm not going to— I'm not an attorney, and I would just advise somebody that knows like subject-to really well so we're doing it the right way. But also, The other thing is when you can wholesale a deal to a buyer, they're pretty much buying the contract. So if they want anything specific in there, they can kind of tell you like, "Hey, you know what? I want this," or whatever. And basically you're just going to make sure it makes sense for both parties, right? Right. For the seller and the buyer. So Carl, that's pretty much it, man. Do you have any questions at this point?

Not at the moment. My questions tend to creep up later on. It's almost never an immediate thing. I'm just thinking of like, I know, bro.

You hit me with those questions. I know. I'm sorry. Love it. But that's the amazing thing. You learn through the process of doing, right? A lot of people will sit there and they'll study subject-to or they'll study wholesaling for years. But when you're doing it, that's when you really learn, right?

Yeah.

And I'm assuming you feel like that. You're like, "Whoa, I've learned so much." I don't know. You tell me. Have you learned a lot more in the last 2 months than just trying to figure it out?

Yeah. No, I mean, yeah. You just like, through the realistic experience of it, you're like, oh, like, you know, it brings up questions and then you're like, I wouldn't have like foreseen that or like been prepared for that if I had just like, you know, tried to prepare before actually doing it.

Love it. Okay, man. Well, pretty much at this point, I'll, I'll just write up the paperwork and I'll send it to him. You give me his information. I'll let you know. I mean, I don't, you don't really need to watch me fill it out unless you want to. Do you want to watch me fill it out? It'd be nice, yeah. Okay. I mean, yeah. Yeah, so that information is personal, so we'll hop off this live. But everybody that's been watching, if you found value from this, please like, subscribe, hit the bell icon, and, uh, we'll see you guys on the next one. Peace out, everybody. Oh yeah, last thing I'll say, join the free Facebook group if you want to learn more, because we got a lot more where this is coming. Peace. Hey everybody, what's up?

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