Hey everyone. I've been slowly trying to familiarize myself with real estate, but since I've not been in a position to invest I haven't made a concentrated effort on it. Within the next 3-5 I expect a significant income boost from my primary career, and would like to use that extra income for investing into RE.
That aside, I am acquainted with a successful real estate entrepreneur who has asked me to use my good credit - and VA loan - to buy a property that currently has a good tenant in it. I have not yet seen the property. He says that he has too many loans against him and his business to get any more. Some of my digital forensics on him show no issues through the BBB for his present or past businesses, and he has been vouched for by another trusted acquaintance.
He described the transaction as a "subject-to" wherein I would purchase the property and he would then immediately "purchase" it from me and give me an immediate lump sum that is about 33% of the difference between the value of the property and the purchase price.
However, as I understand it, the loan is still my responsibility yet he is obligate to make the payments and reap the rewards of the cash flow from the tenant. The property is bound in a trust that says if he ever stops paying, then the property is mine (though I assume that means he forfeits all his investment and I must take over payments).
This will also keep my VA loan barred from my access until the loan is repaid, I believe. I have been trying to educate myself on this transaction but am not finding much. Lots of sites refer to subject-to transactions, but not this specific version. He states it is very common in RE, and I believe him. The closest I could find was this thread, though it doesn't really fit the parameters and is from the opposite perspective:
http://forum.mrmoneymustache.com/real-estate-and-landlording/mortgaged-property-ownership-transfer-is-it-possible/msg296455/#msg296455So while I continue to research, can you all please provide some insight? I don't get "angry dog" feelings from this guy, but this deal sounds a little complicated and is kind of overwhelming for me to understand. My risk would be having a property that, if he described it properly, has a good tenant (that could leave any time) and that is decently valuable. If I did somehow regain the property, I would likely attempt to immediately sell. I am also aware of the "due on sale" issue, and he apprised me of that; I also read that here on the forums and it seems like a very small risk.