Understanding Subject To Real Estate Investing - Part 2

We are here in part two of a walkthrough, a subject to walkthrough, and I'm going to break down what subject to is and the process of subject to, Hey Alex, come over here real quick. So check this out guys. In part one, I broke down this entire wall. Check this out. Alex, was this helpful for you to see this whole? Yeah. Unhelpful. Amazing. Cool. So now let's go through the process of subject to. Okay. So you understand where you kind of got hung up in the first video. You were like, wait, hold on. So the seller stays on the mortgage, but you become the owner. I'm going to show you how that's possible. Okay. So when you buy a house, you just bought a house back in August, right? That's when baby was born, January. January. Okay. So damn, like three months. Okay. So there are two things that you have that are documents on this property. Okay. One of them is called your debt. Okay. Who's your debt with? SLS. The people who hold my mortgage. Perfect. SLS. Okay. So SLS, what's your payment on that? $2419. And your interest rate is 4.99? Correct. Okay. You got in before it got into the fives. Good job. Okay. So you have a debt. Okay. I'm going to put this in here as a debt. Now, let me ask you a question. Have you ever gone to the gas station or grocery store and use a credit card? Right. Yeah. Okay. So when you go to the grocery store and you use a credit card, that's not your money, right? Correct. Okay. So you check out at the grocery store. You get the bag of groceries. Are those your groceries or the credit card company's groceries because you use their money? I would consider them mine. How? Because I apply for amount of money from the credit card people. Okay. So you apply, they give you your money, much like your mortgage, right? Right. But how do we know that you're the owner? I don't know. Can I say it? How do we know you're the owner? You got a receipt that says you bought them. Okay. Like a deed? There you go, bro. Look at you, dog. Okay. This other document right here is called a deed. Okay. These documents are sole and separate. They are away from each other. They are not related in any regard. Okay. So same thing with a credit card debt. A credit card bill, you just bought those groceries with, you got that bill online, you go pay it. That's this right here. That's this document and that agreement. Okay. Now they of course tie it to your name, right? It's tied to your name. The deed is also tied to your name, right? Now the process of subject two is I come to you, okay? I come over to you and I go, hey Alex, this is Pace. I go, hey bro, I see that you're moving out of town, but you just bought this house in January three or four months ago and if you try to sell this house today, do you have any equity? No. How much equity do you have right now? Negative $15,000. Negative $15,000, right? Are you excited about selling that house with a real estate agent right now? Not at all. Okay. So I come to you and I go, hey, why don't you just let me take over your 2419, okay? And let's go to a title company and the title company will take your name off the deed and they will add my name, put my name on the deed and they will take that and record it or file it at the County Recorder's office. And I, if that document gets transferred into the County Recorder's office and it has my name on it, I am now the new owner of the property. It's literally that simple. Do you know how much that costs? You won't even believe it. $17. $17 just to put your name on a piece of paper and get a home that's yours now. That's crazy. Right. So now if the deed goes into my name, I get full ownership, okay? I get all the tax benefits. If I have, if the property goes up in value, who gets all the appreciation? You. Right. Because I'm the owner, right? So I get all the appreciation. I'm also responsible for taxes and liabilities. Like I'm, I've got all the ownership, right? So how do I make that payment? What does that actually look like? Am I walking down to SLS and making the payment? No. It's all online, I'm assuming. So the renter's making a payment to you and then you're just making the payment now? Yep. Great question. Damn. Good question. So here's what happens. Get this out of here, by the way. Go away. Okay. So you leave, right? You go live wherever you're going and you're no longer tied to the property. Right. Okay, cool. I'm out of the picture. So what I do is I take this house that I now own and I put a tenant inside of here and this tenant lives in here and this, so let's say the tenant pays me $2,900 a month. That $2,900 goes into my bank account, okay? And then I hire a servicing company, okay? Servicing company takes the money out of my account for your 2419 and then the servicing company pays the 2419 directly into the bank. And so what kind of fee are they taking from you? They take a $7 fee. Every month, seven bucks. By the way, how many servicing companies do you think there are in the United States? Over 100,000. Yeah? Oh yeah, this is very common. Somebody is servicing your company, even this is happening, like even when you make your payment, somebody's servicing that. There's always a servicer, okay? So pretty simple. $2,000,000. Yeah, it's like, wait, hold on, all you did was pay $17 to take the deed out of my name and put it in your name? That literally is as basic as it gets. Now to complicate it, you understand that process? Right, we're good there. To complicate it, we don't do that that often. What we do is we interject a title company. And we pay that title company like $5,000 to do this one transaction. That $17 transaction, we pay somebody to do that for us, $5,000. Why? Great question. Because multiple reasons why. A, we want to make sure it's done legally, which it is, we just want to make sure. B, we want insurance. So a large portion of that $5,000 is actually an insurance policy. So when you buy- What are they insuring? Great question. They're insuring that you were the rightful owner and they are insuring that they transferred it to the new rightful owner. And so nobody else can come and claim. This happens all the time. There's fraud in mortgages all the time. So they protect against all that fraud and all that kind of stuff. And we're buying insurance. That's what title companies do. A title company is nothing but an insurance company. Interesting, huh? Yeah. Okay. So we want to know it was done legally. We want insurance. And then C, it really makes people comfortable. If I came and knocked on your door and I said, Hey Alex, you want to sell your house to me? I'm just going to walk down this one document. I'm going to go to the recounting recorder's office. You would think that's sketchy, right? But if I say I'm going through a title company, you immediately go, Oh, that sounds legit. Even though they're literally doing the same thing I could do myself. Right. So why are they a whole whopping five grand more? Because there's an insurance policy in there that's like 3000 of that. They charge usually like $800 to do the paperwork out of that five grand. But the actual insurance policy is the majority of it. And they got employees to pay. Yep. They got employees to pay. Okay. So that was a lot of information. But do you understand how subject two works now? You simplified it pretty well. Subject two is actually way more simple than when you bought your house the first time you had appraisers, you had a lender involved. How many, how many times did you have to talk to your lender when you got this loan? It was actually a quick close. We got in there in three weeks. But they still were like social security number, check pay stubs, all that stuff. Right? Yeah. Frequent emails here and there. Okay. How many times in a subject two transaction do I have to do that? Never. Zero. So I could do this transaction in one day when this transaction, a fast close is three weeks. So why? Like, cause people always talk about like giving their, their homes to like family members and then they don't want to do that because of all the taxes. So couldn't you just subject two to your family member and then there would be no taxes for them? Or how does that? You have to structure it properly. But yeah. At the end of the day is yes, you can, you can, it's very possible, but you have to use a trust to do that. That's another video. Okay. So guys, that's, that's the process of subject two. If you want to see the breakdown of this house in a previous video what we'll do is we'll pop it up on the screen, put it in the description. We just gave you the process of subject two and there's a house that we're standing in right now, which is why it looks so weird that we're about to do part three of this video, which is a real deal. Here's the house. Here's what we're doing with it. Here's how I'm going to make and generate $6,300 a month in income on a property that would normally only rent for $2,100. How are we doing that? Well, we're doing that with PadSplit. We'll give you guys a couple of freebies down below. We'll give you a training from my wife on how to find expired listings. We'll give you a training on a PadSplit so you guys can understand that exit strategy. And then we'll give these boys Instagram names to you so you guys can find some private money lenders, maybe somebody to sell a deal to. And then we'll see you in part three later.