The Advantages Of Using An Existing Loan To Make A Profit
Investing in real estate with little to no risk and without your own money is possible, and it is the best way to create lasting wealth. One method to do this is called buying a property ‘subject-to’ the existing loan. It is a part of the Unlimited Funding strategies that I teach to my students and is one way that I have been able to become a multi-millionaire real estate investor.
Buying a property ‘subject-to’ means that you are leveraging the homeowners existing loan on the property. They have already applied and been approved for the loan, which means when you take it over you do not need to use your own credit. That brings me to advantage one of this investing method: there is no need to use your credit to secure a loan.
Because the loan has already been originated and guaranteed by the seller, the loans will probably have a much lower interest rate than investor rates. Even if you did have cash for a down payment, you would never be able to get a better interest rate (which doesn’t matter with my methods—I teach how to invest without using your money, but it is a good thing to note). This is advantage number two and three: by taking over the loan, you will benefit from the lower interest rates, and you do not need cash for a down payment.
As we have established, you will leave the loan in the seller’s name and taking over the payments. By leaving the loan in their name you are reducing any risk, which is advantage number four: by using other people’s credit you aren’t taking any risk.
Lastly, and advantage number five of subject-to investing is that there will never be a shortage of deals. When you use my Unlimited Funding methods, you are looking for motivated buyers who are either going through a financial hardship, a relocation, or a major life change. These buyers usually want to get out of their home and get out quickly. If they decide to sell using the typical methods, they will face many additional costs, and it can take a long time to close.
Let’s recap. Here are the benefits of subject-to deals:
- You don’t need to use your credit
- The Loan will have lower interest rates than you could secure as an investor
- You don’t personally guarantee the loan which means no risk
- No cash is needed for a down payment
- The supply is unlimited