Full Breakdown of a Real Estate Transaction - The Real Deal!
Updated: Apr 14
On the very first episode of my video series, the Real Deal with Pace Morby, I discuss a real cash flowing subject to deal.
I do a video walkthrough of the house that’s in the middle of renovation, which for this specific house, we’re future-proofing for the next 20 years of technology.
Check it out below:
To give an idea of how this came out, this particular house came as part of a wholesale referral from our good friend Doug Hopkins.
Doug told us that this particular seller was trying to get out of the house, had already put a down payment on their next house, but were having trouble trying to sell this house.
The big challenge for the seller was that there was no equity in the home, or at least very little over the eleven years they had lived in it.
Homes that have no equity are usually seen as dead deals or dead leads for wholesalers, but they aren’t.
In this case, the seller owed $370,000 on a house that was worth $390,000; if they had sold on retail, the seller would have actually owed $10,000 after closing costs, commissions, etc.
We were able to pay the seller $5,000 and took over the mortgage. Why was this a good deal for us?
Because with the renovations we did on the house, we could rent it for $2,950 a month. Even with the all in cost or debt service involved, we would still have a monthly cash flow of $600.
Future Proofing a Subject 2 Mortgage
I mentioned earlier that we future-proofed this house to cover at least twenty years of technology.
So how did we do that?
Starting with the basics, we cancelled a lot of areas and objects to make a really simple and clean environment.
We removed the large dining and living room areas first.
In their place, we made a his and hers office area at the front of the house.
Even if someone didn’t use an office, it could still be used as a dining area.
We removed the tub from the master bedroom and made it a bigger shower, while turning the previous shower into a closet.
We even made sure to replace the piping so that any renters or tenants won’t have issues for a good 30 years.
Now onto the future-proofing. What the heck is future-proofing?
Future-proofing means anticipating the future and putting items or objects in place in order to minimize the effects or shocks from new technology.
For this house, we put in Cat-6 cabling everywhere. There’s Cat-6 in the office and even in the closet of the master bedroom.
Even the security system is hard-wired with Cat-6. Why? Why not just use wi-fi?
Wi-fi is great, but it can also get bogged down when you have a lot of devices connected to it, especially security cameras.
We made sure that for cell phones, smart phones, or tablets, those would be the only items that you would really need to connect to wi-fi.
In the master bedroom, we created a tech closet where you could store any gaming consoles, so you can just play without the need for tables to hide the consoles.
In the garage, we not only installed more lights, so the area has better lighting, we also installed two Tesla chargers so the home is set up for the eventual move to electric cars.
Outside of being a new smart home, the house will also run more efficiently, with LED lights and a tankless water heater.
This was just one way I was able to get a subject to deal, which was using a referral from a wholesaler I knew.
I do many of these walkthroughs on The Real Deal, so check out the channel and make sure you subscribe to get more.
If you want to learn more about these subject to deals, subject 2 mortgage, seller finance, or other real estate investing methods, join us as a Subto student.