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When doing a subject-to deal, you send a notice to the bank to change the mailing address so the statements come to you.
At closing, I have the sellers sign a document to cancel their homeowners insurance and have unused funds sent to my company at my address.
I also have them sign a power of attorney so I can sign the check in their behalf when the check comes in.Before closing, I contact my insurance company to get insurance on the house in the name of the Trust with my company names as additionally insured and the sellers named as additionally insured. I also give my insurance company the mortgage information so they can send a bill to the mortgage company for the insurance premium.
If I sell on a wrap, I get the buyers named as additionally insured on the insurance policy if insurance is escrowed in their payment (and it should be)
I have a couple of questions about the advice you gave Jackie.
First, does the POA from the sellers give you the ability to sign the insurance check if there is ever a claim on the property or does it specify just in the cancellation of the previous seller’s policy? i.e. five years in on the wrap and there is a hail damage roof claim, can you and the buyer’s sign for the reimbursement check?
Second, if you sell the Sub2 property on a “wrap around” is this a mortgage or deed of trust (depending on the state)? If so, if the buyer’s default do you have to go through a foreclosure process? What do you give the Seller’s when you take over the Sub 2?
Third, insurance question, do you insure for “replacement value” or “actual cash value” if you sell the Sub 2 property on a wraparound?
Please let me know if there is a book or coaching call or something where I can learn the finer details to this as I feel it is a great way to buy “pretty homes” with little to no money down. I’m leaning towards using them as rentals rather than selling ONLY because of the insurance and legal issues that I can’t seem to get my head around. I prefer to create notes and not have tenants. What’s your opinion?
Thanks for your help. You always give great advice. Much appreciated!
My first step right now is learn how to write up a land trust. Got to get these properties out of our LLC name!
Darcy Tafoya
Darcy
The POA pertains to anything do do with the property for as long as you are involved with it.
If the wrap buyers get a warranty deed, then yes, you would need to foreclose if they default.
Most insurance companies will insure for replacement value ( which is a subjective figure).
In the Premium Member section, we have a LOT of training about buying and seller with seller financing (including subject-2 and subject-2 wraps).
Thanks Jackie,
I like your comment of replacement value being a subjective number….I agree.
Everything you answered makes sense to me. I appreciate your input. I will continue to keep
listening and learning from the premium member’s area.
Just wondering, at this point in your life and with your experience, do you have a preference?
Sub 2, Master Leasing, or something else?Just curious what you’ve found that seems to work well for you.
Thanks!
Darcy
Well, my life is a lot different from most. I live in Panama (central america). I love love love cash flow but I don’t want to leave a big mess for my adult children to deal with if anything were to happen to me. So, in Panama, I prefer Master Leasing. I get the cash flow without adding too many more properties to my estate.
However in Panama, there are no estate taxes, no property taxes and insurance is about 90% cheaper so I do acquire some properties but primarily I’m gobbling up houses and land all around my house so I control the neighborhood and the land all around me. This way, everything I own is close and not spread all over the country.
Plus, in Panama, I have a tour company to run too. I only work at that 7 days a month but it does take up some time.
In Panama, there is no direct mail because there is no mail delivery to your house. All the deals I do are from referrals, I don’t do any marketing. Because of my tour company, people contacting me every month with properties to sell or lease.
If I lived in Texas still, I’d be buying subject-to and with seller financing and doing Highest Bidder Sales every month. and throwing in a wholesale deal every once in awhile and maybe a Magic Bus 4 times a year.
If I lived in Texas still, I’d be buying subject-to and with seller financing and doing Highest Bidder Sales every month. and throwing in a wholesale deal every once in awhile and maybe a Magic Bus 4 times a year.
That would be the most ideal situation, Jackie. I am constantly looking for tired landlords with portfolios for a Magic Bus tour. Working on a brochure for nursing homes too,as per your suggestion, to give to the nursing home marketing person, and/or, manager, to show the benefits to them for referring prospective NH residents my way.
Ayesha
For a Magic bus, the ideal situation is to find a landlord who has several houses you can sell on one Magic Bus. But sometimes you need to get 1 from one landlord, 2 from another, 3 from someone else, etc. to assemble enough houses to sell on a Magic Bus. You can even tell the sellers that as soon as you have 4 more houses you can do a Magic Bus and ask if they know anyone else who needs to sell fast.
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