This video will cover three things that you need to know about subject-to that no one's telling you.
Hey, welcome to my channel if you're new. Welcome back if you're true
I'm Dara, real estate investor, entrepreneur, and consultant out of
Atlanta, Georgia and I'm going to jump right into this video because it's very
important that I get the word out about this topic here. So, before we get started
make sure you subscribe to my channel, and also be aware that I am not a
tax attorney, tax professional, accountant, CPA, or anything or anyone that claims to be.
I am just
Dara, a real estate investor, entrepreneur, and consultant out of
Atlanta, Georgia. Alright but yeah, so this is me talking from experience
And I just want to share, because subject-to is one of those subjects-- I'm just playing
It's one of those topics that a lot of investors, when they're new, hear about it
and they're like, "Oh my gosh, great let's do it!" Because it's no money down
It's sexy, it's cool. And then a lot of homeowners hear about it and think, "Scam!"
So, I'm here to tell you three things you need to know about subject-to
Whether you're a homeowner or an investor interested in pursuing this strategy.
First thing is that it's not a scam. It's not a scam; it's a real, actual way to
sell a property or to acquire property or get rid of a property. So yes, you can
sell a property subject to the existing financing. I'm in Georgia, that's the only
state I'm gonna speak of, but I think a little birdie told me that a lot of the
50 states in the United States of America, you can do this strategy too.
But speaking only from what I know, what I've done in Georgia, subject-to is an
actual, legitimate way to acquire property. Now, are there people who are
scammers out there? Of course. Are there people who take advantage of others or
homeowners who are in vulnerable situations such as pre foreclosure?
Does America start with an A?
Right. But just so everybody knows, subject-to is not
a scam in its own right; it is a very legal way to acquire property. Again, I'm
not an attorney, don't claim to be one, and you should seek the advice of a
legal counsel. Now that that's out the way, it's not a scam that was rule number--
tip number one, secret number one: it's not a scam and can actually be done,
let's get into the real nitty gritty of this video. So first things first
something that nobody ever talks about when it comes to subject-to is insurance!
Now I got a question on one of my videos about subject-to and the specific deal
that I acquired this way, and I was like "Wait that's a great question, and you
don't have the answer because nobody talks about it." So here I am talking about it.
Insurance: who, what, when, where, why, and how?
So as you may know, a mortgage is your
principal, interest, taxes, and insurance. So P-I-T-I.
P-I-T-I
So this last "I" is your insurance. So if you're taking over somebody's mortgage, you're taking over
their mortgage payments, you're paying their PITI, you're also paying insurance.
So, the question I got was, "When you take over subject-to, do you have to get your
own insurance policy?" And that's a great question my friend, cuz I thought the
same thing. I actually went out to some insurance agents that I know and I'm
like, "Hey can you insure this property for me?" No need, because you're already
paying it, so instead of getting your own insurance policy, what you should do is
have the mortgage holder--the previous homeowner--add you on to their insurance
policy as an additional insured. When it comes to subject-to, a lot of times you
get a lot of backlash, a lot of negativity, and it's probably from
hearsay or maybe horror stories of experiences that have gone wrong and
the first objection that I think most people hear, besides being a scam, when it comes
to subject-to is, "Oh no, you're gonna get caught with the due on sale clause."
Right, now I'm no expert in subject-to so won't claim to be, but I do know
investors whose sole business model is on subject-to. So they've acquired over 50
properties this way and out of their 50, zero have been called due on sale.
A lot of people lose sleep at night about this three-word phrase, and the
truth of the matter is it's very unlikely to be called. Now, I'm not gonna say what
causes it or what triggers it; you can definitely do your own research on that
but as far as the payments being made to the bank, they really just want their
payments on time. That's all. So make sure you get those payments into them on time
it doesn't matter if it's coming from John Doe, the mortgage holder or
My Pretty LLC, you know? So just make sure you pay on time and you really don't
have to worry about the due on sale issue at all. So this leads me to my next tip
being: it doesn't matter what account is making those payments as long as those
payments are being made. So the bank isn't gonna say, "Hmm. John Doe used to pay me
every single month, now My Pretty LLC is paying me. Well who's My Pretty LLC?
Let me go investigate and make sure they don't keep paying me on time." I mean what?
I don't-- I don't really know, but it doesn't matter who the money is coming from
as long as it's paid in full--you pay more, that's better--and on time. Period.
The last and final tip that I want to share with you guys that nobody else
talks about when it comes to subject-to is good old tax season. Now again, I made
that disclaimer in the beginning and I personally don't even know much about
taxes myself, but this one thing, you're gonna need to know. So like I
mentioned when you're paying a mortgage, you're paying PITI. That last "I" was
insurance, that first "I" is interest. And if you don't know, when you pay interest
on a mortgage, you can deduct that on your taxes. So when tax season rolls
around, you want to make sure that you have an agreement along with telling
your mortgage holder--the previous seller-- like, "Hey, could you add me to your
insurance policy as an additional insured?" You want to have an agreement
with them that "Hey, since I'm making these payments, which includes the
interest, will you allow me to write that off on my taxes? Will you allow me to add
that on my taxes, because you ain't getting the benefits of what I'm doing."
You know what I'm saying? I hope that makes sense, just trying to break it down
mano-a-mano so everybody can understand. But yeah so with [interest]
you want to have it arranged with the previous homeowner--the current mortgage holder--
that you will be the one to write off and deduct that interest that's being paid.
So, there it is guys. Now this is gonna be the one rare video where I
do not encourage you to ask me questions in the comments, because like I said, I'm
no way, shape, or form a professional-- a tax professional or an expert. So if you
have any further questions or need clarification, that's when you call your
tax expert, call your real estate attorney, call your tax attorney, call
your CPA or accountant, but don't call Dara. But I hope these three tips I
shared with you helped. If so, give me a thumbs up, share this video and
subscribe to my channel.
Wait! Before you go, read down below in the description box.
If you have any other questions pertaining to real estate wholesaling
getting started or getting to that first deal, go ahead and schedule a one-on-one
consultation with me. If you like this shirt that I'm wearing, let me know and I
might mass produce them for all the pretty little flippers out there. So
again, thanks for watching, I will see you in the next one.