Real Estate Investing
Whether you are a new or
experienced real estate investor you will probably find some fresh
ideas, tips and even some old-school stuff you didn't know
about here at the site.
Current Real Estate Investing Tips:
REAL ESTATE
INVESTING “SUBJECT TO”
There are lots of different strategies out there on how to purchase
investment property subject to the existing mortgage without
alarming the lender but make sure you NEVER LIE TO A LENDER. Many loans are
federally insured and lying to a lender is obviously subterfuge.
You should defiantly
consult with a good real estate attorney that has experience in
“subject to” title transfers.
The lender will usually have the right (but typically not the
obligation) to call-the-loan-due when the title (or beneficial
interest) is transferred.
All the risks and the
tricks-of-the-trade involved with purchasing a property subject to
the existing financing (sometimes called getting-the-deed) can seem
overwhelming to a new real estate investor, but the basic concept is
actually very simple.
You are going to taking over payments without formally assuming the
mortgage.
Probably the simplest way to understand a transfer of title subject
to the existing financing is to picture your own home. If you are
like most people you have a mortgage (or deed-of-trust). If you have
an up to date owner’s title insurance policy, you will see your
current mortgage listed as an exception along with some other common
exceptions: mineral rights, right-of-ways for utility companies,
restrictive covenants, etc. You own your home subject to the
mortgage (and other exceptions).
Note: We are only using title insurance in this example to make the
explanation easier to follow. But you own your property subject to
whatever is on public record, regardless of whether or not you have
title insurance.
Now let’s say you sell (deed) your property to someone for $10 (and other
good and valuable consideration) without paying off the mortgage.
They
record the deed. They own the property “subject to”. At
this point, the lender would probably have the right (but not
the obligation) to call-the-loan-due.
Don't let the concept of buying a property subject to become any
more complicated than that.
Most title companies will issue a title policy if you bring in the
deed after it has been recorded. The name of the insured party and
the vested title holder will show the new owner. Schedule B will
list the existing mortgage as an exception, just like the old policy
did if it was up to date. However,
kitchen-table-closings are not recommend.
Just because you can transfer the title by simply recording a deed,
this does not mean that is all of the paperwork you will need to be
a successful subject to real estate investor.
Ideally you will do a formal closing with a title company or
attorney that has experience in subject to title transfers and use a land trust to take title. You will also
need the seller to execute other documents so you can continue to
operate their note and mortgage.
You may have to do a little homework work to find a title company or
attorney in your area to do your subject to transactions. Someone at
your local Real Estate Investors Association (REIA) should be able
to help you find one.
Many of them do not feel comfortable performing the transaction.
Some of them simply do not understand why either party would want to
do this. Others are concerned about the perception that attorney
generals and district attorneys have of subject-to-deals, especially
if a seller later changes their mind and yells scam to the local
news.
Naturally there are lots of other issues and pitfalls with “subject
to” real estate investing: the due on sale clause (will the lender
call the loan due), how do you handle the property insurance, would
you ever want to formally assume the mortgage, etc.
SAMPLE RENTAL
AGREEMENT (abbreviated)
1) TERM:
Occupancy shall begin on _________________________ and end on
__________________________.
2) RENT: The rental amount is $__________________________________
per month and is due in advance before the first (1st) day of each
month. The tenant agrees to mail rent (check or money order) via the
United States Postal Service. Mailing with Return Receipt is
recommended.
3) SECURITY DEPOSIT: The landlord acknowledges the receipt of a
$____________________ security deposit. The tenant cannot use the
security deposit as last or any other month’s rent or to pay any
other charge of fee. The tenant agrees and understands that the
security deposit is intended for damages and other charges
discovered after the termination of tenancy and that all expenses
incurred by the tenant during the term of this rental agreement
shall be paid at the time of occurrence.
4) LATE FEE: Rent not postmarked on or before the fifth (5th) day of
the month shall be charged a $__________________ late fee. This fee
shall be in addition to any other charges, such as a returned check
fee.
The postmark by the US Postal Service shall take precedence
over any postmark by a private postal meter.
5) RETURNED CHECKS: A $____________________ returned check fee shall
be charged for each check rejected/dishonored by the financial
institution for any reason. Returned checks shall be considered
unpaid rent and shall be subject to a late fee, as well.
6) VEHICLE POLICY: The tenant agrees never to park or store a heavy
truck, motor home, camper, trailer or any sort of recreational
vehicle or the like on the Property and to properly park no more
than _______________ passenger vehicles at the Property. Vehicles on
blocks, nonoperational vehicles, and vehicles without a license
plate are not permitted on the Property and may be towed and stored
at the expense of the tenant. Vehicles parked on unpaved areas may
also be towed and stored at the tenant's expense.
7) PETS: ________________________________________________. The
animals listed here (which are domestic pets or medically required
animals) shall be the only animals on or about the Property without
the prior written consent of the landlord. The tenant attests that
the animals listed here are safe. The tenant shall be responsible
for the animal, its behavior, and all damage done by the animal. The
landlord shall have the right to withdraw consent and demand removal
of any or all previously permitted animal or animals upon the first
complaint registered against such animal or animals or upon evidence
of injury or damage to person or property caused by such animal or
animals.
8) EVICTION: If the tenant is in breach of this agreement, the
landlord may start the eviction process at the earliest date allowed
by law.
9) TERMINATION: In addition to reasons declared by law and/or stated
elsewhere in this agreement, the landlord may terminate this
agreement under the following circumstances:
a) Any illegal activity at the Property.
b) Any harassment, threats or intimidation made by the tenant or at
the tenant’s direction toward the landlord or in the presence of the
landlord.
c) Any other extreme situation that a court could reasonably and
conscionably rule to be grounds for immediate termination.
10) APPLICATION: The tenant’s application (if any) is made a part of
and is attached to this agreement. The tenant warrants that the
facts stated in any application are true. If any facts in the
tenant’s application prove to be incorrect, the landlord shall have
the right to terminate this rental agreement and commence eviction
proceedings.
11) LANDLORD’S ACCESS: The landlord has the right to access the
Property (enter the residence) at reasonable hours for the purpose
of inspection or repair. The landlord shall give 48 hours’ notice,
except in the event of an emergency.
12) ALTERATIONS AND IMPROVEMENTS: Locks/deadbolts shall not be
changed or re-keyed and no alterations or improvements, including,
but not limited to, paint and wallpaper, shall be made to the
Property without the prior written consent of the landlord. All
alterations or improvements shall become part of the Property. If
the tenant makes any unauthorized alterations or improvements to the
property, at the sole discretion of the landlord, the tenant shall,
at the tenant’s sole cost, restore the Property to its original
condition.
13) TENANT’S OBLIGATIONS: The tenant’s obligations shall include,
but are not limited to:
a) Notifying the landlord of each anticipated absence from the
Property in excess of fourteen (14) days.
b) Keeping the yard mowed and watered, the shrubs neatly trimmed,
and the landscaping maintained.
c) Keeping the property as clean and safe as the conditions of the
Property permit.
d) Disposing from the Property all garbage, rubbish, and other waste
in a clean and safe manner.
e) Keeping all plumbing fixtures in the Property or used by the
tenant as clear as their condition permits.
f) Using in a reasonable manner all electrical, plumbing, sanitary,
heating, ventilating, air-conditioning, and other facilities and
appliances at the Property.
g) Not deliberately or negligently destroying, defacing, damaging,
impairing, or removing any part of the Property, or knowingly,
recklessly, or negligently permitting any person to do so.
h) Not acting or permitting other persons on the Property with the
tenant's consent in a manner that will disturb the neighbors'
peaceful enjoyment.
14) ADDITIONAL RULES AND REGULATIONS: The landlord, from time to
time, may adopt additional rules and/or regulations, provided that
they do not cause a substantial modification to the tenant's use of
the Property. The tenant agrees to comply with the lease and rules
and regulations that the landlord may adopt concerning the tenant’s
use and occupancy of the Property.
15) INSURANCE: Landlord shall only be required to keep insurance for
damage to the structures/buildings on the property. The tenant shall
be responsible for liability insurance and insuring his/her own
possessions/belongings.
16) CHANGE OF RENT PAYMENT ADDRESS: The landlord may direct the
tenant to, and the tenant shall, mail payments to a new address by
notifying the tenant in writing at the property address.
17) ADDITIONAL OCCUPANTS:
____________________________________________________________.
The tenant must notify the landlord in writing if any person not
named in this agreement will occupy the Property for any period
longer than five (5) days. In no event shall more than two (2)
persons per bedroom be allowed to occupy the Property.
18) ASSIGNMENT: The tenant may not assign or transfer the tenant’s
rights or obligations under this agreement or any interest herein.
19) SUBLETTING: The tenant may not sublet or re-rent the Property or
any part thereof.
20) ADDITIONAL TERMS:
IF THIS DOCUMENT IS NOT CLEAR TO ANY PARTY, SEEK COMPETENT LEGAL
ADVICE BEFORE SIGNING.
___________________________________________ _____________________________________________
___________________________________________ _____________________________________________ |
