My infamous message when explaining about real estate and how to make a dollar is that there are a million and one ways to wheel the deal. It can be a hair-pulling experience to try and familiarize yourself with the many different tactics that are involved in the industry. In this post we will discuss a technique utilized in creative real estate investing called getting a property “subject-to”. This method requires acquiring a home subject to the existing mortgage.
Many investors love this tactic because there is never any reason to include a bank in the process. No bank qualification is ever required, so your credit is what it is and a 400 doesn’t hinder you one little bit. If you’re like many, you may be wondering, how is this possible? Are better yet, is it even legal? I would just say to you that it is Definitely Possible and 110% Legal. This method is typically called owner financing or seller financing and has even been referenced as “seller carrying the note”. In this type of structure you get the deed to the house right away.
In subject 2 deals, you are finding an owner, who typically doesn’t have much, if not any equity in their home, but they are still motivated to sell. For whatever reason, they need immediate relief from their current situation and cannot afford to pay their mortgage payments too much longer. In some situations, they are even behind on payments and possibly up for foreclosure if something does not change quick, fast, and in a hurry!
With your promise to take over mortgage payments and or bring them current on their payments they are more than willing to sign the deed over into your name. This means that once each party signs off on the deed and it is recorded, you become the new property owner, however, the seller, remains on the deed. And yes inDeedy, THE SELLER is FULLY Responsible in the event that you fall behind or do not make the payments. In a desperate situation, that is the risk that many sellers are willing to take.
You have to remember that depending on the particulars of the situation the seller was already at risk of losing their home and killing their credit, so in most cases the outcome couldn’t get any worse. This is where we as real estate investors have to come through with our promises to take over payments on the properties that we commit to. Savvy investors; always have a “weasel-out” clause where they are able to “cut-loose” if they are unable to make future payments. That is what differentiates the classy investors with integrity from the ones lacking in character and morals.
In a subject-to deal with no equity there are tons of ways to make a positive monthly cash flow and remarkable BIG PAY DAY in future months to come.
Be sure to review my other blogs where I reveal these Real Estate Secrets the guru’s don’t want you to know!