Real Estate blog

“Subject To” Real Estate Investing

I have heard a lot lately about “Subject To” real estate investing. “Subject To” is when you purchase an investment property subject to existing financing. The seller keeps the current loan on the property in place and a separate agreement is signed to make it available to the investor and eventually the buyer’s use.

Here is an example. Jane Homeowner lives paycheck to paycheck. Jane receives a promotion from her company, but has move out of state and sell her home. With the real estate market in her area slowing down, she is concerned it may take longer to sell her home and she will run out of time because she only has 30 days to move. Her local realtor told her she would have to take a financial loss on the home because she has very little equity and the prices on ouses have gone down in her area. She decides to put a classified ad in the paper and online to sell her house.

Joe Investor sees the ad and calls Jane Homeowner to see her house. After touring her home, he offers her the asking price with these concessions:

The current mortage is kept in place for 2 years to allow more time for equity to build before allowing the house to be sold at a profitJane Smith will have her mortgage paid off from the sale, plus will retain 10% of whatever profit is made from the sale after the mortgage and expenses are paidJoe Investor will make the monthly payments on the mortgage after a “quick claim deed” is signed over to Joe by Jane.Joe Investor then rents out the property to cover the monthly mortgage.

Jane takes the offer and moves on with her life. The property is sold in 2 years for a $60,000 profit and Joe Investor sends Jane Homeowner a check for $6000 10% of the proceeds from the sale of the house.

Not all Subject To deals work out in this manner. You should always enlist the advice of a good real estate attorney when determining the legalities of making deals.

It is also very helpful to gain additional knowledge from a real estate investment professional who has successfully completed these transactions. Check out an online education course on Subject To Investing and have your questions answered by a pro. Go to Foreclosure.com for additional information.