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- [00:00]
A
Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no bs, and no sales pitches. I'm David Green, and I've been doing this for over 10 years. I've seen the ups, the downs, and everything in between. This is the show where we pull back the curtain and show it to you too. So if you want to build wealth through real estate or you just love learning about it, you found your home. What's going on? Real Talk Real Estate. We are back with another episode of Mortgage Monday. I'm David Green. He's Christian Bachelor. And together we are the Mighty Morphin Power Rangers. Just kidding. We are the one brokerage, the one brokerage that's got every loan you could ever possibly need. Before we get into today's show, quick commercial for everybody. We're looking to purchase an insurance company that does homeowners insurance. Christian, I'll let you kind of explain a little bit more about what we're looking to buy, but if you have one, you're worried about this economy, you don't want to be servicing it anymore. We'd love to hear from you.
- [00:53]
B
Yeah, I was about to do a little Power Rangers thing, too. You got me all excited.
- [00:57]
A
I think that's Dragon Ball Z.
- [00:59]
B
Is that Dragon Ball Z?
- [01:00]
A
I think that was Power Rangers.
- [01:02]
B
I'm gonna get slammed. Slammed in the comments.
- [01:05]
A
Yeah. The thing where they go like that and they connect.
- [01:07]
B
Yeah. Is that Dragon Ball Z?
- [01:09]
A
No homo.
- [01:10]
B
Those are both my two. My two childhood moments. No.
- [01:14]
A
Yeah.
- [01:14]
B
But one brokerage is looking to expand back into insurance offerings. We're currently in talks to include that in our product suite. Those of you who have been following us since the good old days know that I used to be an insurance. Used to. I've owned a couple of my own agencies, but we are primarily looking for a nationwide one. So one with one of the big aggregators isa goose head, you know, one of those guys. If you are an insurance agent, maybe, you know, looking to retire, get out, cash in on your book, we're looking to purchase an existing one and then obviously expand our services to our clients that want. That want insurance, as well as the mortgage offerings that we provide. So if you happen to be an insurance agent, own a book, looking to even potentially partner, be somebody who wants to help us grow it. Obviously, a lot of our. Our episodes go towards hiring loan officers, but we're expanding, so looking to pick up insurance. If any of you guys are somebody or know somebody, we'd love to talk camp promising to be a good fit but would would love to at least start the conversation if somebody does have something that they think would be of
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A
interest, where can people send the information or connect with you?
- [02:16]
B
Just to me Christiane Brokerage.com my email address is the best place. It'll be in the in the the description of the video as well. Just shoot me an email, tell me if you know somebody or got something yourself and we'll reach out and be in touch.
- [02:29]
A
And if you're shy or you can't remember how to spell Christian, that's okay. Go to davidgreen24.com use the chat option. You can get a hold of me and I will get you in touch. We're also hiring loan officers and marketers. So if you're somebody who has a really good skill set for marketing, if you are really good with email correspondence, CRM campaigns, podcast production, social media reels not you can do it, but you're good at it. We'd also like to talk to you, so reach out. Today's show is on one of Christian's least favorite topics and I'm hoping we get a little bit of spicy Chris. That's what I'm looking for here. A little bit of the mortgage Sriracha, if you will. It is on one of the topics that he be it's I don't want to put it man, you got to be in your bonnet over sub two Florida man. He's back in the news wins back home in rare subject to mortgage case offering hope and a warning to others. We're going to be talking about that hope and we're going to be talking about that warning today out of Bay County, Florida.
- [03:34]
B
Everybody knows we usually do not read articles and David usually does not prep me with what the content of today is. I thought he was cooking up something so that that makes a lot of sense.
- [03:44]
A
Dave yeah, it's too hard when people know what they're going to be talking about because they read it first to sound authentic. I can always tell when someone's reacting to a video they watch three times. So we purposely don't do that, which means we can sometimes sound dumb, but we'd rather look dumb than give you a bad podcast. After months of warnings from the news for Jax, I team about risky subject to mortgage deals, a Bay county homeowner has successfully reversed one in court, a rare outcome that attorneys say could offer a path forward for others in similar situations. Jonathan Presley said he turned a subject to deal in 2025 after stress. Sorry he turned to a subject to deal in 2025 after struggling to sell his Panama City home for months. I believe Panama City is one of the worst markets in the entire country. Possibly the number one oversaturated market. Very difficult to sell. That's kind of a sub to breeding ground. And you know, actually, before we go further into this, Chris, do you mind sharing what the phrase subject to means and where it comes from for anyone listening that isn't familiar?
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B
Yeah, I'm going to do a pretty deep breakdown on it now that I know what we're talking about. This episode.
- [04:58]
A
Just want to wait till the end or do you want to just give a quick understanding?
- [05:02]
B
Subject to basically means you're acquiring. You're acquiring a property, but not in the standard way. If. If a seller finds themselves in some situation like it sounds like Jonathan here did. I don't know his story yet, but we'll see. And you're having a hard time selling your house. A lot of wholesalers, gurus, a lot of people nowadays will reach out to you and offer to buy your house. Subject too. There's a lot of misconceptions about this part of the industry, but the general idea is I'm buying it subject to your mortgage, which basically means give me the login to pay your mortgage and I promise to pay it for. That's basically what they're saying, right? You're not actually assuming the loan. Most loans aren't consumable and we'll talk about the ones that are technically assumable, but they're literally just getting your login and paying your loan. Now, some people are going to bring up what happens but due on sale clause. What happens if you put the house on a trust? What happens if you sell an LLC to the bar? We can talk about all that. The general idea of just what a subject to is to lay the foundation here is you're buying the rights to somebody's house but not clearing the debt that they put on it. You're taking over their debt. And it's specifically popular right now. Subject to was never popular before COVID It's specifically popular right now because you can buy a house with a 2 1/2% interest rate because you can assume the loan that somebody got during COVID That's the only reason why all these gurus and all these wholesalers, all these people think they're onto something. It's because it's only recent in really the last five to six years. Nobody did this before, and if they did, it was very Fringe, very rare scenarios. But it's surged in popularity definitely the
- [06:39]
A
last five or six years now. Can you explain what an assumable loan is versus assuming something subject to.
- [06:46]
B
Yeah, super good question. So. So officially and legally, assumable loan is typically what's known as a government loan, which is FHA and va. Okay. FHA loan is, you know, the standard loan product, three and a half percent down, the one we all know and love. And the VA loan is the veteran loan, the one that's monitored by the Veterans Affairs. Right. Or Veteran Administration. Those loans are actually assumable, which what that means is when I go to buy a VA home or an FHA home, I can reach out to the lender who's currently servicing that mortgage and say I want to qualify to take over that debt. What people don't understand is an assumption is a process. You still have to qualify, which means the bank can underwrite you and offer to transition that loan to you instead of the veteran or the FHA borrower that was on there prior. But there's still a qualification. Wholesalers and sub2 guys don't like that because you have to qualify and none of them do.
- [07:43]
A
So an assumable mortgage means you're moving the mortgage from the person who had it originated for them to a completely new person. It is given the blessing by the lender. You just take over the terms they had, but your name's on that mortgage. Now, a subject to deal means I'm buying the project, the property, subject to the existing financing, but we're not going to tell the lender about it. And I promise I'm going to make the payments for the seller. The problem is if the buyer stops making the payments for the seller, the seller's credit and the seller's name is still at risk, Correct?
- [08:18]
B
Exactly right. And we'll get into what that means, but yes, that's exactly right.
- [08:23]
A
So Mr. Presley said, in a perfect world, I'm not going to be paying two different mortgages and everything will be all right. Instead, he said the company that bought his home, BG Ventures, well, they put them right on blast. Took the deed, but failed to make the agreed upon payments, leaving him responsible for the mortgage on a property that he no longer controlled. All right, Christian, let's say that I buy a property from you, subject to the deed is now in my name. It's recorded in my name. As far as everyone's concerned, I own that property. I have control over that property. I can change the paint color if I want. If you go in that house, at that point, you're trespassing in my property. But you still have the mortgage in your name. If I stop making the payments on that house, but I keep collecting the rent, is there anything that you can do as recourse in this situation?
- [09:18]
B
It's a good question, and really my answer is it depends on how the purchase contract is written. Some wholesalers now are kind of caught with their pants down, so they're writing in deed in lieu of foreclosure overrides that basically say I immediately forfeit the house back to you if 60 days of late payments are missed. Unless something like that is written. No, you don't really have a whole lot of justification to go back to the buyer of your home that you have no right of anymore and get him to pay your mortgage. Right. You're still responsible, full recourse, full obligation to that conventional Fanny Freddy Fhava, whatever is loan that you had on that property, you're still responsible for paying that 100%.
- [09:58]
A
Explain what you mean by full recourse.
- [10:00]
B
That means there's a personal guarantee for you to pay it. That's 99% of loans in America come with a recourse or what's known as a personal guarantee, which means you and your David Green. The individual is responsible for making that payment. And if he doesn't, we're going to shred his credit to pieces. Right. That's what lenders do. And you don't make your payment, they post you late, they potentially put you in a foreclosure, they start, you know, default proceedings. All the stuff that happens that the horror stories when you don't make payments. Right. That's what would happen. And if you've transferred the the title and ownership of the property, you owe the entirety of the responsibility of the debt with no benefit of the equity in the property. So good luck explaining that to your lender. And we'll get into ways that wholesalers have gotten creative. And I know I'm going to get the sub two community in here. That's fine. I'd love to talk to you, but we'll talk about all the creative ways that you think you've solved this problem. And I'll tell you how you have it, but we'll get to that.
- [10:59]
A
All right. I told you we were going to get spicy, Christian. And now the story itself is about to get a little more Tapatio Spice is is coming up. This is not something you hear about very often with foreclosure looming. Presley said the stakes Were especially high. A default could have jeopardized his military security clearance and his career. So for those that don't know, when you're in the military, when you're in law enforcement, your debt is actually a part of your clearance. The military, let's like say you work for the CIA, the FBI, even I had to go through this when I was in law enforcement. The they look at who you owe money to and how much you owe. And the fear is, if you owe too much money in debt, you can be bought. Some cartel member could be like, hey, here's $150,000. You're going to do what we say. And if you're deep in debt and you need help, you'll be compromised if he has a foreclosure on his record. I don't know what the military's logic is, but it's probably something similar to that. We may take away your security clearance because you can't be trusted. We don't know who you're vulnerable to. I had to fight back and try to see if I could at least get my deed back, he said. Presley hired attorney Josh James of Dunlap and shipman, who said the case presented an unusual legal challenge. I knew immediately Jonathan was in a bad spot, james said. James filed a civil complaint alleging fraudulent inducement and failure to perform the contract. He also challenged a second mortgage placed on the property the same day the deed transferred. Christian, do you have any speculation as to what this second mortgage might have been after a subject to deed transfer?
- [12:35]
B
Yeah, 1000%. The sub 2 buyer didn't have any money, so he needed to finance the remainder of the equity that he had to pay out this guy because he probably promised him that he would make it up to him on terms over x period of time because he didn't have a down payment. That's what happened 1,000%.
- [12:49]
A
So he could have borrowed the money from the seller himself. He could have borrowed the money from another source. But basically he borrows the money for the portion of the sale that would be a down payment in this case. So now the lender themselves, the first lender, they don't even know what's going on. They're in first position. He goes and takes another lien, which has to be in second position, has to be subjugated to the first one, which, like you just said, means this seller probably had no money at all. No skin in the game. They've watched some bigger pockets videos or they've watched some YouTube videos on what sub2 looks like, and they put it in the category of this is what you do when you got no money. Okay. This is kind of a pet peeve of mine. When I was first educating people on real estate, I was pretty big into the whole. First you make money, then you save money, then you invest money. You don't skip the making and the saving and go right to the investing. Real estate is not for people that don't have money. Too many things can go wrong. You got to kind of earn the right to buy property by being disciplined with saving and disciplined with making it. Well, wholesaling was what everyone said, hey, you got no credit, you got no money, you got no skills. You could be a wholesaler, and what do you know? Wholesaling is where the majority of the dirt bags in the industry ended up. It doesn't mean every wholesaler is bad, but the majority of them ended up being bad because that's where the people with no skills went. Sub 2 has kind of filled that gap in a lot of ways. Doesn't mean every sub 2 buyer is unscrupulous. But the odds of the person buying your house who has no money, who's borrowing the money they're supposed to give you as a down payment, being able to make your payments when they couldn't even save money to buy a house, it rings bells for me.
- [14:31]
B
Recipe for disaster.
- [14:32]
A
Yes, that's a more straightforward way to say it. A key turning point came when neither the buyer nor a private lender responded to the lawsuit. A court clerk entered a default, preventing them from disputing the claims. James then moved for summary judgment. Summary judgment is a legal term basically like, we don't want to take this all the way to trial. We believe our case is so solid that if you just look at it, you can make a decision right now. It doesn't need to waste everyone's time arguing. The facts were undisputed and no trial was needed. A judge agreed, restoring the property to Presley. Of course, that's easy, because the other side didn't even respond. So there was no counter argument to be made. The outcome allowed Presley to regain ownership of his home, though not without financial loss. He was paying two mortgages for nearly a year to prevent the foreclosure, which means he sold the house to this guy sub to BG Ventures. Then he moved on to and bought another house to live in. So he had to make his mortgage payment, but he also had to make the payment for the house he sold to BG Ventures, because they stopped making it because he didn't want the foreclosure on his record. These are the dangers that Everybody in the sub2 community repeatedly says, you don't have to worry about it. We got all these fancy things in place. I never really learned them, but we got all these protections in place, which in this case didn't sound like they were very protective. We ultimately won, but he's not back in the shoes that he was before. James said there's still thousands of dollars that Jonathan is never going to get back. John James called the case a clear warning about subject to investment deals. If you're in the stage where you're in the process of selling your property and you receive an offer like the one that Jonathan received, I would recommend against doing a subject to transaction. I know it's difficult, especially right now. It's very much a buyer's market. At least in Bay county, Panama city, where we are, I think the average house is sitting on the market for over a hundred days. And so it can be enticing to just get it done and quit having to make those mortgage payments. But there's tremendous risk in selling their property. Subject to mortgage. All right, Christian, what are your thoughts after hearing this?
- [16:40]
B
Oh, do I have a lot of thoughts. I'm gonna give you the pitch of sub 2. I'm gonna do this in a weird way, and then I'm gonna break down every pitch. Say you're the seller. You'll get an offer. You have a property that's on the market for 90, 120 days. Those are the properties that these people target. They're having a hard time getting traction with buyers. Maybe it needs some repairs, maybe you owe too much on it, whatever the case is. But you have a spicy interest rate. You got a 2 to 3% interest rate. So that's what the sub two people want. They want to take over that low interest rate. They'll come in and they'll offer you exactly what you want. They'll offer you the purchase price. Sometimes in a lot of cases, they offer you over the purchase price, and they purchase what's called on terms. What that means is you be the bank for whatever they're missing. So let me give you a classic example. Let's say it's a $500,000 home, and the seller currently owes 400, 000 on it. Okay? So typically, if you were to have to buy that, you'd have to come up with the hundred thousand dollar difference. Very normal. That's the down payment, right? Sub 2 People typically don't have the down payment that's just. And I may get a comment in the comments. I know there is a sub.
- [17:53]
A
There's always an exception.
- [17:54]
B
Of course I know there's somebody out there that has a down payment. So somebody's gonna say, I have money. Okay, I, I get you, big dog. But the majority of sub 2 and wholesale investors do not have money. That's why they're subtuing and wholesaling and they'll come in and they'll pitch, hey, we're gonna buy this. How they used to do it is you're just gonna sign over the deed. I have a title company. We can't use a normal one because normal title companies won't do it. That should probably be red flag number one, I would think, right? Number two, don't tell your lender. Your lender can't know we're doing this. Number three, you'll use my title company and they're going to transfer the title and ownership into my name and you're just going to give me the login to your mortgage and I'm going to continue paying it. What do we do about the extra 100,000? Well, it sounds like what happened with Jonathan here, they said, oh, why don't you just lend us $100,000 and we'll pay you, you know, two grand a month until we pay you off. So now the borrower has that second position loan to Jonathan and the first mortgage that was Jonathan's the problem. Mortgages have what's called a due on sale clause. Now, I know there's a lot of people who are going to have an immediate counter to this, but I'm going to go through all of them, at least that I've heard. The due on sale clause specifically states if you sell the property, the mortgage is due. That's literally what a due on sale clause means. That's why the words are due on sale. In the event the lender finds that you sold the house, they will call your mortgage due. And the problem with this is that typically the sub 2 or the wholesaler who facilitated sub 2 can't redo the mortgage because they don't qualify. So you end up in this route where you have a maturity default. What that means is that you're not able to pay off the mortgage and the lender is demanding it and they would start foreclosure proceedings similar to what happened here. But the challenge is that loan is still in the seller's name. Now, I've heard a couple of challenges. The first one, if you give me that mortgage and you pay the mortgage for 12 months as the buyer. So the buyer is now paying my mortgage for 12 months. Okay. That can be removed from my obligations in the future if I wanted to go buy a new house. And this is a misinterpretation of a standard conventional guideline. Let me give you an example. Let's say I'm a recent college graduate and I buy a house with my mom. My mom qualified, but I'm making the mortgage payments. That's my house. I just didn't have enough credit worthiness or experience to qualify. The rule specifies if two people qualify on a house together and the other person, one of them makes the payments completely for 12 full months without the help of the other person. So without the help of my mom, in my case, my mom does not get to have, have to get hit with that debt in the future when she tries to go qualify. So the way wholesalers have interpreted this as, I can take your mortgage, pay it for 12 months, and then you can go buy a house without impact. That's not true because you're missing the most important factor. You have to be on the mortgage.
- [21:00]
A
In the beginning.
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B
Yeah, in the beginning, my mom bought the house with me.
- [21:03]
A
So you were like co signers on this deal. Exactly. And it's a way that, it's a kind of a way that, hey, bring a co signer in, get some momentum, then your co signer can leave and not be on the hook. Which means co signers are more likely to do this if they don't have to bear that debt for 30 years.
- [21:18]
B
That's exactly right. And that's why the guideline is written. Now. Wholesalers have twisted that and said, if I pay your mortgage for 12 months, it gets admitted from your debt. And the lenders won't care. That is inherently objectively not true. And if anybody thinks differently, I will print out the Fannie Mae guidelines for you and I will email them directly to your inbox. If you leave a comment on this video, I will put them right at the top of your inbox and prove to everybody they're wrong. This is the biggest objection that I've heard into subject to it does not happen, that debt will be on the subject, on the seller's record forever until it is paid off or refinanced. Okay, so that's number one. Number two, when this started to become news and it started to get out there that, oh, this 12 month thing doesn't hit, they needed a backup. So they said, why don't we Transfer the loan into a trust or an LLC and I'll just sell that trust to you. So the title now isn't changing. And people have used land trust, they've used revocable trust, they've used single member LLCs where now the title of the property is in a trust. But we're just going to change who owns the trust. So now the lender, you're getting one step away from concealing it with the lender. Now the lender doesn't see a title transfers because it goes from seller into seller's trust. And now behind the scenes I'm going to give my trust to buyers and Jonathan in this case or DB Homes, whoever it was, right now DB Home says perfect, I purchased your trust, now I'm paying the trust mortgage. Well, that mortgage is not belonging to the trust. That mortgage is still the borrowers. That's the part that people forget. So that still doesn't get rid of the non recourse. Now that does make it a little bit more likely that your lender a little bit more unlikely that the lender will find out because there's not a title transfer really.
- [22:59]
A
However,
- [23:02]
B
these are public records. You can find out who these owners are, you can find out if a deed was prepared, you can find out these things. If the lender finds out, you find yourself in the same boat. Number two, the mortgage is still recourse to the seller. We still have all the challenges that we just posed with. It'll never fall off their credit. The they're still impacted if you miss a payment. So the seller still gets screwed here. Number three, if they ever really wanted to make a legal claim, they could produce the originating documents of the trust and the seller could have some real fight with you on who owns the trust. Now obviously if a transfer was legitimate and done by a legit title company and structured by a legit attorney, part of that should have been the transfer of assets of the trust as well as, and that would classify as the sale of trust assets which would trigger the due on sale clause. So your whole argument would fall apart at the end of the day because it would have still been a transfer of the assets and reset the due on sale clause. Now I've heard another objection. Oh well, if they find you, if it's just you, or if they find your trust and they call your note due, what's the way to fix it? And I kid you not, I have had face to face arguments up to people, they've said just sell it back to the seller. So David, If I was teaching you how to invest, and if my answer to your problems was just pretend like it never happened and sell it back to the seller, would you think I'm giving you good advice? Probably not. Like, hey, let's go buy a car, drive around, and if something ever goes wrong, just sell it back to the dealership and they'll buy it for what you bought it for. Like, no, they won't. What if the seller says, I don't want to buy it back?
- [24:41]
A
Yeah, right.
- [24:42]
B
That's not how this works. So I've heard every possibility, like with land trusts and LLCs and all these things. The moral of the story at the end of the day, guys, is if you're doing something where the first piece of advice you get is make sure you don't tell your bank. Make sure you use a title company that is a little shady. You can only use mine. Make sure you don't tell anybody about this, and I'll just, like, get your login to your mortgage and pay it for you. And just trust me, bro. Like, I think hopefully most people hearing me say this really break it down. Mortgage mutts get excited about this. I think you guys can kind of get my point that if those are the leading motivating factors of this advising strat of this investing strategy, it's probably bad news. It's probably bad news. There is a reason why the mortgage industry is so heavily regulated. There's a reason why you sign a bunch of documents. Any of you who have bought a house, you know, you sign 40 times when you buy a house, all those papers mean something. And one of them is, if I sell this house, I'll pay off the mortgage that's there. Right? So just be careful, guys. Just like this lawsuit happened, I've heard countless other horror stories of people who have come to us trying to fix their subject to deals. It breaks my heart each time because they honestly believed that these pe a person on bigger pockets or a person with a big following, or a person who speaks really well and gives good advice, is honestly out for their best interest. And it's. It's tricky. While everything has a place and there's a way to do things right, there's a way to do subject to right. You can assume an FHA or a VA loan. That's legal, you can do that, but you have to qualify, and the bank has to agree to it. Yeah, nobody does that. Right? So just be careful, guys. Moral of the story is there's a thousand investing strategies and there are 999 wrong ways to do something. That's really what it breaks down to. Right. And if you're getting advice that starts with lie, lie, lie, lie, lie and make sure you don't tell the truth, there's probably something up. That's my advice.
- [26:44]
A
If you're the seller in a case like this and you give away the title, but you see, oh, they didn't make the payment, what recourse do you have outside of a case like this where the buyer doesn't show up to court and the judge gives you back title to your property? Like, is it. Do you just have to. You could either make the payments or you can get foreclosed on. If the buyer still has the title, you can't sell it, you can't take it back and get the rent payments. Like, how does this even play out? Do you have any options if you're in that situation other than hoping a judge rules in your favor?
- [27:26]
B
Yeah, I mean, I, I don't think it's 100 win rate. You know, I think. Is there a scenario that could be cooked up with a very carefully worded contract where the buyer, this sub 2 person would have some legal protections because of the way they drafted their contract? I'm sure there is. And you know, these wholesalers who have escalated their abilities now to include trust and LLCs because they've seen how they were doing things wrong, I'm sure they're refining their strategies and getting more and more and more and more protection from them and less and less and less protection from the seller. That's how these things work. Right. They're getting better conmen. That's what they're doing. You know, I don't know if you actually go to court, the ramification would be what, you know, probably ends up who's have. Who's has the best attorney, you know, who can read through the letter of the contract the best and who can make the claim that good faith was intended. But, you know, it's a court case. Do you guys want to end up in a court case because you bought a home? I don't, you know, and I especially don't want to end up a court case with some guru who's got, you know, $10 million because he's got, you know, 8,000 students pay him four grand a month. Right.
- [28:33]
A
I guess maybe there could be something put into the purchase contract that says if a payment is missed, the, the seller has the right to take back title and pay back money. I suppose you could structure it in some way. But if you didn't, or even if that just doesn't hold up and the buyer goes, no, I don't think so, I disagree. We're not doing that. They stop making payments, you get the foreclosure, you get the late payment on your credit. There is no way to avoid the impact of that other than you make the payments instead of them.
- [29:03]
B
Yeah, and that's the downside. What Jonathan just said in the video, the article, excuse me, just said about Jonathan, he wasn't without financial hard because he got two late payments on his record. He was halfway through a foreclosure with his bank, he had to buy. And you think his bank had questions after that took place? Hey, Jonathan, what'd you do over here? You sold a loan, sold a home without telling us. Who is the title company you work with? Did they just like fraudulently not pay off your mortgage? What happened here? I'm sure the bank had questions, right? And then if he sold that and the wholesaler agreed to buy for more than it's worth, is it still worth that? So he had to get a house back that's now worth way less. I'm sure the guy who subject to it was, was short term renting it because that's what all the sub two guys do, they go, you know, sub two and then short term rent. Because that's how you make the most money with a property that you didn't have to pay anything for. Right. So it's probably, it probably got beat up. So he probably had a bunch of renovations, he probably had a bunch of, you know, people that are in and out of his house, you know, messing up the utilities and the fridge and the stove. So that.
- [30:03]
A
Yeah, because the buyer can, if let's say it's a short term rental or traditional rental, he can continue collecting the rent and not make the payment. Now here's another thing. Sorry to cut you off. Just to consider you're a person, your BG ventures, let's say hypothetically, you have no experience, you don't intend to be in the market for long, you're a dirtbag, you got no money. I buy a property from you subject to, with no intention of making the payments because I know you're vulnerable and you maybe say, hey guys, I got security clearance. I'm really nervous about this. I can't screw it up. This is the thing I notice in business that, that like inexperienced people make it all. Or often they share their cards hoping that this will cause the other side to take it easy on them. But if you're dealing with a shark and you just showed your cards, they just take your money.
- [30:53]
B
Yeah.
- [30:53]
A
So what happens is you go, hey, please, you can't screw this up. I'm really nervous. Oh, don't worry, sir. We're BG Ventures. We're going to take care of you. You close on the house immediately, you stop making payments. But you put it up for rent as a short term rental, you're making three grand a month as a short term rental. A year goes by, you just collected $36,000. You put no money into the deal at all. You don't fix anything that breaks whatsoever. The other person has to keep on making the payments. When you get sued, you. I don't even care. I've already done this to four other people. I'm not even going to show up. He can get the title back. I got four other ones that I'm managing and I'm collecting three grand a month on all of those. And it's the seller with 100% of the risk there. It's not shared between the two parties at all.
- [31:35]
B
And you, you walked away with 36,000 for the year in income, and you had to foreclose on a property that you didn't have the note on. Pretty good deal for you, right?
- [31:44]
A
Yeah. You do that four times a year, make $135,000. We're not a whole lot of work.
- [31:50]
B
100%. That's why I always laughed when I heard it. But I remember I challenged one of these sub two guys the same say, what happens if your note gets called? And he said, just sell it back to the seller. Like, his answer was just like, wipe your hands clean of it. I'm like, oh, that. That's it. Just. Just like that. Huh? So your answer to investing is if you get caught, stop investing.
- [32:09]
A
The seller didn't want it. That's why he sold it.
- [32:12]
B
Exactly.
- [32:12]
A
Okay, so if you're saying I'm just going to sell it back to him, it sort of implied the only reason he would buy it back is I'm holding foreclosure over his head like a gear guillotine. Yep. That's a bad person. Now, that doesn't mean that all sub2 people are bad people. But the structure of it is so heavily weighted in favor of the buyer that you're going to draw bad people. That's the point we're trying to make. Okay, so please don't flood our comments with, I know a sub 2 guy and he's really good and he doesn't and we don't do it that way. I know not everybody is bad and
- [32:47]
B
I will say that with my words as well because I have a reputation of despising sub to. I've met a lot of great sub 2 people. Yeah, a lot of people really well with who I honestly think are in the bet. Like they're working from a good moral compass. I think unfortunately there's really good salespeople industry and I think a lot of people are being misled and it bothers me. It rubs me the wrong way.
- [33:08]
A
Same for wholesalers.
- [33:09]
B
No problem with a lot of sub to people.
- [33:11]
A
Same for wholesalers. They're not licensed, they're not regulated, nobody watches them. There's no punishment. They are not making any statements of material fact. There is no accountability. It is the wild west. They can do whatever they want. Okay, you're hooking up with a complete stranger at a bar. You don't know them at all, you don't know their name. You're never going to see them again. Does that mean every person that does that is irresponsible? No. Does that mean your odds of catching an STD are probably higher? Yeah. It's a bad idea. Don't do it. So please, let's just save all the whole. I know a good one. Yeah, there's plenty of good ones. What we're saying is anytime the the power structure is super skewed in one direction, it will draw people who love no accountability and who don't care. So you got to be extra careful as you walk into these scenarios. Now, I think we're going to see this ticking up because as you've noticed, it's really hard to sell a house in certain markets. Like Panama City I think is probably the worst market in the country. It had just the highest days on market, the least number of transactions. It was brutal over there. South Florida has been really bad after the big boom from COVID So you're gonna have people that are like, hey, we could take advantage of someone and and in make sure you guys subscribe to the channel because next week we're gonna share another story of a person that reached out to me a couple months ago with the Broken Bow, Oklahoma property, asking if I could manage it. And they had a subject to nightmare story similar to this one. We're not going to share any names, but we are going to share the details so that you guys can make sure you don't get caught off guard. Christian, I'll give you the last word and then we'll get you out of here?
- [34:41]
B
Squeezing in some mortgage advice here just to kind of round this out. I get a lot of questions. People who have sub two properties, so they're the buyer and then they come asking to refinance their mortgage. And I always lead off with the same response. Your mortgage? What do you mean refinance your mortgage? We basically have to structure this like a purchase, right? Which a lot of times that means you need to have a down payment. Oh, but I already gave my down payment when I bought it, Christian. Yeah, I know, but you didn't get a mortgage. All right? So it's not really true ownership. And a lot of lenders will think twice because they know you're into lying to lenders, which means you're going to be underwritten. Really, really scrutiny. Hey, high. Right? So that's, that's it. Obviously soft guys. If you guys want to give me a call, shoot me an email and really talk this through. And if you guys are true, devout sub2 believers, I still think you're great people. I got no problem with that. I'm happy to have one on one conversations. You can find me on Instagram @the1broker or shoot me an email Christianebrokers.com I'll give you my cell phone. We can, we can talk after hours, talk after a log off for the day and we, you can convince me that you're right. That's fine. I'll hear you out. But that's where you guys can find me. If you wanna, if you want to throw some, some verbal jabs here, back and forth.
- [35:54]
A
There we go. Thanks everybody for listening. You can find me@davidgreen24.com use the chat feature to get a hold of me. You can also follow me on instagram @david green24 and see some of the properties that I've been working on improving and trying to fight the good fight. This is a rough market, really. It's not really a rough housing market, it's rough economy. A lot of people are struggling to make ends meet right now. So if you're in an industry and you feel like, man, the writing's on the wall, I don't know how long I'm going to have this job. If you feel like you're just working your tail off and you're not getting anywhere and you want to be put in a situation where you can run your own business and build your own brand, we'd like to have you at the one brokerage. We would strongly advise you to consider maybe not switching careers right away. But don't wait until you lose your job before you work on the next one. If you see things are getting bad, get your license, get trained, get educated, do it at the same time you're doing your job and then you could do it on the side. And if worst case scenario happens and you get laid off, you've already got some momentum. You're not starting from scratch. We'd love to have you. We take our job very seriously. We have three to four sessions every week giving training to loan officers. A lot of people come join us that work at different brokerages just because they're not the training that they need. And maybe they have really good splits, but they don't close any deals. And so you get a whole bunch of nothing. It's not a good place to be in. So make sure you like this video. Leave us a comment, what you thought. Let us know if you'd like to work for us. Let us know if you need a loan. We'll see you guys next week on Mortgage Monday.