Subject-To Loans: What They Are And Aren’t

There’s a lot of information out there regarding ‘Subject-To’ loans, but not all of that information is going to be useful for you. Some of it isn’t giving you the whole picture and some of it is simply hype. It’s important that you learn about these types of real estate investment deals from those that have ample experience working with them.

Some of these real estate investing folks will promise you riches in just a short amount of time using ‘Subject-To’ deals. Granted, you can make some excellent money in this investing niche, but it doesn’t always happen overnight without effort. The reality is that ‘Subject-To’ investing takes time, effort, and patience to reach your financial goals.

Let me clarify some information today regarding what Subject-To deals are and what they’re not.

What Does ‘Subject-To’ Mean?

There are various ways to purchase real estate in creative ways. Purchasing an investment via ‘Subject-To’ means that you’re buying a home “Subject-To” the existing loan. This means that the seller keeps the loan in their name and you commit to making continued payments on that loan. In return, the seller signs over the deed to the home to the buyer, essentially signing over ownership to the buyer. So, the seller gets a quick and easy, and the buyer gets a good deal on an investment property that they may or may not sell down the road.

A ‘Subject-To’ Really Is A Great Deal

You may wonder why a seller would sell their home at a discounted rate and keep the loan in their name. Well, most of the time it’s because they have an urgent need to move or the selling process is causing stress. They’re usually experiencing some sort of “pain pressure” and need to offload their home quickly.

They may have lost their job and can’t afford payments anymore. They may be going through a divorce or experiencing some sort of illness. Or, they may need to relocate in a hurry.  Regardless of the reason, they need a quick sell and don’t really want to list the home with a realtor because it could sit on the market for months and they’d have to pay realtor fees.

This is why they’d be interested in a professional real estate investor coming in and offering them a good deal for the home and be able to close with a week or so. It might help them from heading into foreclosure and tarnishing their credit. It may help them is many different ways depending on their situation. The biggest thing I’ve learned is that you cannot predict what motivates anyone to sell at a discount, there are many different reasons so just because you wouldn’t, doesn’t mean they won’t.

A ‘Subject-To’ Deal Is Wise

As real estate investors, we want to build a great portfolio. When you use the ‘Subject-to’ strategy, you’re not tying up your money to secure the deal. You don’t have to go from lender to lender to try to qualify. You’re building your portfolio in a way that serves you very well.

A ‘Subject-To’ Is NOT A Get Rich Quick Scheme

You can certainly build wealth using the ‘Subject-to’ strategy, but it’s not necessarily a get rich quick scheme. You’ll want to learn as much as you can about this strategy and use it wisely. As with any business, you’ll have to put forth the effort, creating goals, action plans, and learning as you go. Usually, if it sounds too good to be true, it usually is.

A ‘Subject-to’ Is NOT Illegal

Some people may think that by the seller keeping their name on the bank loan that it’s illegal. This is not true. The sales contract that you have signed is a legal and binding contract. You as the investor are providing a service to the seller, and it’s a win-win for both. My students buy ‘Subject-to’ deals all around the country with title companies and attorneys and it is absolutely legal. If someone tells you it is illegal, the best way to respond is to ask them for the specific state law that prohibits it.

If you’re not that familiar with ‘Subject-to’ deals yet, keep learning. Using them is a great way to add investments to your portfolio and add wealth to your life. As you progress toward financial freedom, using ‘Subject-to’ deals is a sure way to help you get there.