Peter V

One of the things that my clients most often ask me is very simple: “How do I spot a good long-term real estate investment?” While my answer often varies depending on the individual client’s personal situation, there are some things that nearly always indicate a good investment property. Since we have devoted a great deal of time to what does not make a good long-term investment property, now we will spend some time exploring what does generally indicate the potential for good long-term investment.

As you are watching the real estate market “crumble” and the deals multiply exponentially, you may be thinking to yourself (and any economist would agree with you) “A bad economy is a great time to spend money.” All political issues and platforms aside, for real estate investors this is nothing short of the bare, honest truth. When the market sinks, the deals come out and a buyer with cash has his or her choice of the lot.

A subject-to transaction is a real estate deal in which the buyer purchases the property subject to the existing mortgage. This means that they assume the current payments at the current interest rates and their payments, present and future, are subject to the terms of the loan. This is an extremely useful and valuable tool to have in your real estate investing arsenal, particularly in the current market when traditional lender-financing is hard to come by.

As we’ve already discussed, part of successful long-term real estate investing is having an effective way to get out of the investment – preferably while generating wealth at the same time. Sometimes, however, you need to get out of a long-term real estate investment fast, which can create trouble for a real estate investor who only planned for a calm, prolonged exit that could happen at their leisure.

As the economy continues to be unpredictable and many experts aggressively disagree on how the state of the real estate market will trend in 2010 and beyond, there is one thing that everyone can agree on: Long-term real estate investing is the only guarantee.

There is a simple question that you must ask every owner of a property who is considering selling it subject-to. It should be the first question out of your mouth, because the answer to this question will determine whether or not the deal can ultimately be closed.

A lot of my colleagues have been saying recently that the time for subject-to investing is over. As an investor who has done countless subject-to deals in all sorts of markets and economies, I find that viewpoint disconcerting to say the least.

In the past, subject-to transactions were the height of “creative” real estate investing and innovative real estate financing. After all, most of the people who were interested in buying properties did so in more conventional ways, by applying for a loan and then buying based on what the loan and their savings for a down payment indicated that they could afford.

If you have done one or more subject-to transactions, then the hard facts of the matter are that you have likely done one or more more subject-to transactions than your real estate attorney. Of course, there are exceptions and some real estate attorneys specialize in subject-to deals, but the majority of them have never actually closed this type of creative financing deal.

In real estate investing, you always have to watch your back. It is just a simple fact of life. Even if everyone involved in a deal loves, trusts and has “history” with each other, you still much make sure that you are all legally protected not just for the security of the immediate deal, but for your security in the future.