Subject-to Real Estate Investing With No Cash
In one of the hallmark investing methods I teach, subject-to investing, you can close deals with little risk and none of your own money or credit. It is a common misconception about real estate investing that you need cash to get started.
When I started in real estate investing, I had no cash to my name. I had no credit. My credit wasn’t just bad, it was nonexistent. I pushed forward and developed a system to invest in real estate with little risk and no cash or credit.
What is A Subject-to Real Estate Investment
This type of investment is buying a home subject-to the existing loan held by the seller. Using the subject-to investment method can be very lucrative without using your own cash. This method works well if you have poor or no credit.
The process usually goes like this:
- The homeowner qualifies for a mortgage through a lender.
- For whatever reason, the homeowner becomes a motivated seller. Maybe they can’t afford the monthly payments, or need to move in a hurry.
- You step in and offer to take over the payments.
- In return they are out from under the loan they can’t afford, and you get the benefits of holding the deed to the property.
By leveraging the seller’s credit, by keeping their loan in place, you do not need to qualify for a loan. Nor do you have to buy the property with your own credit. You agree to take over the payments, and you get the deed to the property. The loan stays in the seller’s name.
Sometimes a seller will want a minimal down payment to help them move. This small amount of cash is something you can find a way to come up. The financial benefits of holding the deed to the home are worth it.
The Benefits of Ownership in a Subject-to Deal
Helping a seller get out from under a property they can’t afford or want provides the following benefits:
- The seller’s original interest rate, which is lower than the rate that a bank offers to real estate investors
- Potential tax advantages by buying low and selling high if home prices rise
- The benefit of paying down the equity on the loan if you have a renter in the property
- Profiting from appreciation if the market prices rise
When you are able to get deals using a subject-to method, you will be able to build wealth quickly. There is no other way to grow your investment portfolio as quickly. You might be wondering why a seller would agree to a subject-to deal. There are several reasons and you can learn more here.
For example, when wholesaling a property you only get the wholesaling fee. You don’t get cash flow, someone else paying down the equity on your loan or the potential of appreciation or the tax advantages.
Learning how to close a subject-to-deal is something you must master if you want to build financial freedom. If you are just starting out on your real estate investor journey, I invite you to download my unlimited funding kit.