Creative Financing in Real Estate: Subject-To Deals

Introduction

• Discussion on creative financing in real estate.
• Featuring Jerry Norton and Pace, focusing on a Subject-To deal.
• Subject-To involves taking over a mortgage without paying it off.

About Jerry Norton

• Host of flippingmastery.com, focuses on flipping and wholesaling real estate.
• Offers a "Virtual Flipper Kit" for flipping houses remotely.

Introducing Pace

• Respected figure in real estate, neighbor to Jerry.
• Known for solving complex real estate issues, especially through creative financing.
• They are partnering on a Subject-To deal.

The Deal

• The deal involves a luxury home worth $1 million.
• Liens on the Property:
  • First lien: $450,000 with New York Bank.
  • Second lien: $191,000 personal loan, now in foreclosure.
• The property owner, Don, is facing foreclosure in 9 days.

Strategy and Structure

• Subject-To Strategy:
  • Take over the first mortgage of $450,000 without paying it off.
  • Pay off the second lien of $191,000 to stop foreclosure.
  • Total cost to Jerry and Pace: $650,000.
  • Seller retains option to buy back in 12 months for $865,000.
• Benefits for Seller (Don):
  • Stops foreclosure.
  • Can continue living in the property for 12 months.
  • Potential to walk away with $100,000+ if sold or refinanced.

Potential Scenarios

• Best Case for Jerry and Pace:
  • Don refinances or sells, paying them $865,000.
  • Profit: $235,000 in 12 months including mortgage paydown.
• Alternative Upside:
  • If Don doesn't buy back, they could sell or rent the property.
  • Rental could provide cash flow and tax benefits.

Risks and Considerations

• Potential Downsides:
  • Don fails to buy back or damages the property.
  • Market decline impacts resale value.
  • Eviction costs and time delays.
• They assess that even worst-case scenarios still provide a return on investment.

Key Takeaways

• Understanding Subject-To:
  • Allows acquiring property by taking over existing debt.
  • Helps sellers in distress while providing investment opportunities.
• Due Diligence:
  • Always assess risks and downside scenarios.

Final Thoughts

• Jerry and Pace aim to complete the deal in 12 months.
• Offer an audio recording of their negotiation process for educational purposes.
• Next steps include opening escrow and finalizing contracts.

Additional Resources

• Creative Financing Hacks guide and information on subtwo.com.
• Inviting viewers to learn more about creative financing strategies.