The Subject To Strategy – Lesson 11

And here’s another real estate investing strategy that is more complicated and has a slightly higher risk level than being a straight Real Estate Bird Dog.  I mention it here so that you will be aware of it. Down the road, after you gain more experience, you may be able to use it.

Subject To investing works when the homeowner has a lot of equity in the house, but wants to get rid of it.

Subject to –

“Subject To” investing – or it’s shortened version of “Sub-2” investing. That’s just real estate “lingo” – it’s verbal short-hand for referring to a specific technique used to buy property “subject to the existing mortgage”. And what that really means is that all of the terms and conditions of the original mortgage on the property will stay in place, including remaining in the seller’s name…all you’re going to do is make the payments for them while respecting the original terms and conditions of that mortgage as it were your own.

When you purchase a property ‘Subject To’ the existing loan stays in your seller’s name. In other words, the seller leaves his current loan on his property in place and makes it available for you and then your buyers’ use. You become the owner of the property when the seller signs the Deed and transfers the title of the property to you.

Using this strategy you can get involved in real estate investing with little cash or credit is by purchasing a property from a seller subject to the existing financing. You don’t have to actually assume legal responsibility for the existing financing, but you are purchasing from the seller and are acknowledging the existence of the current financing.

You usually give the seller of the property at least token money for their equity. When you sell the property you can offer No Qualifying financing to your buyers.

Because you are selling to Non Qualifying buyers you should get $6K to $12K down on houses worth $100K to $150K. Remember you are the owner so you can even advertise Owner Financing.

If the owner’s lender finds out that equitable title of the property has passed to you, there is an outside chance (albeit very, very slim) that the lender could call the note and require payment in full for the loan.  However, if the payment checks are coming that’s all they really care about. They’re just happy to get their money; they really don’t care how the loan gets paid as long as it gets paid.

Filed under: Real Estate Bird Dog Training

Like this post? Subscribe to my RSS feed and get loads more!