Subject2 Investing: Finding Deals & 2 Key Questions to Ask Sellers
Note from Shae: If you missed my introduction of Nick Johnson and his Subject2 investing article series on GoodFaithInvesting.com, please watch the video from last week’s post first.
Today’s post is an article from Nick on Subject2 Investing (and make sure to read the entire thing and get some cool freebies at the end that Nick is providing!):
How to Find Deals & 2 Key Questions to Ask Sellers
What are you doing for marketing right now in your real estate business?
What if I told you that by doing nothing more than you’re already doing, you could get Subject2 deals across your desk without even knowing it, would you believe me? You should.
The difference between your standard wholesale deal where you’re trying to get the seller to agree to a deeply discounted price and then assigning that contract to an end buyer/investor and a Sub2 deal is two questions. That’s right, two questions you can ask will make all the difference in the world and in some cases actually make your more money!
First let’s talk about the top 3 methods for finding Subject2 deals. They are:
- Mortgage Brokers
- Realtors
- Landlords/non-owner occupied
Mortgage Brokers
Utilizing Mortgage brokers as a lead source will pay out big dividends. A lot of sellers who are not motivated typically go to a mortgage broker to refinance their home and when they find out they can’t, they become motivated quickly. When that same mortgage broker knows someone like you who can help that client, then it’s a win/win for everyone. Particularly once you learn how to take care of that same mortgage broker on the back end or on another deal, you’ll create a friendship and loyalty with that broker.
Realtors
The same holds true for Realtors. When you get an agent on your team who understands that encouraging their clients to sell to you Subject2 will benefit them when they are truly in a hurry to sell (considering all the additional holding costs the seller is going to have to pay), you really are doing everyone — including the realtor — a huge favor!
Landlords/Non-Owner Occupied Properties
Lastly, marketing to non-owner occupied properties (NOO) as many wholesalers do anyways. Instead of only submitting an all cash offer for a ridiculously low price that will almost always get you a rejection, you can offer Subject2 and show the seller how you’ll be helping them solve a problem. In a lot of cases, even in a down market, the seller/owner will have some equity, when you learn how to do Subject2s and incorporate a ‘Wrap’ into it, you’ll be able to close more deals that make sense and you’ll make a lot more money than just ‘wholesaling’ them to a cash investor/buyer.
So, what about these two questions I mentioned?
Here they are and they are used by almost every Sub2 investor I’ve ever met.
#1: Would you be willing to sell for what you owe?
#2: Would it help if I took over the payments until I found an end buyer?
When you ask these questions, you’re setting them up for a Subject2 deal and you’re also gauging their response. If they’re willing to sell for what they owe, they’re either upside down on their mortgage (which you wouldn’t want to Sub2 anyways) or they’re really motivated to just get out even if that means they make no cash from the sale. You’re also providing them with a solution to taking over the payments until you find an end buyer, even if you don’t have the cash reserves to actually pay the monthly payments, you can still do these deals very easily, more so than your standard ‘wholesale’ deal.
Coming up in next week’s article: What about Land Trusts and the Due-on-Sale clause you keep hearing about? I’ll give you the insiders knowledge on them in the next post and this you won’t want to miss!
Final Quick Note from Shae and some Freebies:
Nick has offered to provide a couple items that will help you if you’re looking to delve into the world of Subject2 investing! To download, simply right-click on the link and select “Save Link As…”
#1: Letter Of Intent — this is the letter Nick uses to present multiple offers to a seller
#2: Free Subject2 Marketing Report — this is the report Nick uses to attract sellers for Subject2 deals.
You can learn more about Nick here. He recently launched an e-book on Subject2 investing and is giving away the first chapter for free so I encourage you to check it out!
Related posts:
- Subject2 Investing with Nick Johnson
- How rude! (Another edition of “Fun calls with Sellers!”)
- I guess it ain’t over til it’s over!
- Promoting mentor’s deals – building buyers list
- Determining your goals – 7 questions to ask yourself
Category: Books I Recommend, Investing Strategies, Subject2 Investing
Hey Nick, can you please provide a little more detail regarding this “Wrap” that you mention?
Happy Thanksgiving!!
Happy Thanksgiving to you too, Kelly!
Here it is!lol. Yeah, I want to add the 90 day option to my FSBO’s. Have you decided if your going to get your RE liscense? I know Steph seems to think its a great idea. I got all the info on that today.
LOL! Hey Scott
I have no plans to get a RE license. That could change in time, but its not in the plans as of now. That being said, I think there are great advantages to doing so I’m certainly not closed minded to the idea of either myself or my hubby getting one.
Shae, I think the best idea is for your husband to get licensed while you stay the investor or the other way around. This way you have all the tools available to you and you can also collect commissions.
As far as your questions regarding the ‘Wrap’
A ‘Wrap’ is short for ‘Wrap Around Mortgage’ You can google it and find plenty of explanations. The easy way to remember a ‘Wrap’ is when the seller has a lot of equity and doesn’t want to sell for what they owe but would be willing to hold a note on the property and become ‘Junior’ or 2nd position to the first/primary lien holder.
You can work this however you want as far as terms and if you pay the seller directly or pay an escrow servicing company who distributes all the payments properly.
The way to incorporate this into your Subject2 investing would if they don’t go for a straight up Sub2 deal or they want some cash for their equity(which is completely fine as long as the numbers work for you) you can ask if they would be willing to take it as a note against the property. Lets put some numbers behind this to make more sense and sorry for the long comment, I could really do a whole another post about it
Property is worth 100k
seller owes 55k so they truly have 45k in equity
they agree to a sub2 but want some cash for their equity or they don’t want to sub2 because of the amount of equity they know they have. You could (and get out that form I gave you to follow along)
Offer 5k cash upfront for their 45k in equity and sub the first or if you don’t have that, offer them 5k as a note on the property so you would sub the first and then pay them monthly payments as well.
I would start by trying to get 5k paid to the seller when you re-sell the property, or 5k note 0% interest etc… Try to make it beneficial to you. Don’t offer from the get go to pay 20k with 20% interest. You always want to pay the least amount and take the longest time to repay it and work your way from there if they don’t go for it.
I hope that all made sense, if not, just try to remember, you’re giving them ‘SOME’ money for their equity preferably in the form of a note/2nd position lien against the property.
Nick Johnson´s last blog ..I Will Fear No Evil
Maybe next time I’ll do a video response LOL!!
Nick Johnson´s last blog ..I Will Fear No Evil
LOL! Yeah, I think I’ll need this in video format too
Just kidding around. Thanks for this explanation — I’m going to have to read it a few more times to make sure I REALLY get it! Have a great Thanksgiving with your family, Nick!