“Subject to” real estate investing, also known as “subject to financing” or “subject to mortgage,” involves buying a property with the existing mortgage in place and becoming the new owner “subject to” the existing mortgage. This means that the investor takes on the responsibility of making the mortgage payments, but does not actually assume the mortgage itself. This type of investment can be attractive to investors because it allows them to purchase a property without having to go through the process of applying for a new mortgage or using their own cash to pay off the existing mortgage.

How Does “Subject To” Investing Work?

In a “subject to” real estate transaction, the investor and the seller agree on a purchase price for the property. The investor then assumes the responsibility of making the mortgage payments, but does not actually take on the mortgage or pay off the balance. Instead, the mortgage remains in the seller’s name, and the investor becomes the new owner of the property.

There are a few key considerations to keep in mind when considering a “subject to” real estate investment:

• Credit: Because the mortgage remains in the seller’s name, the investor’s credit score is not typically a factor in the transaction. This can be attractive to investors who may not have a strong credit score or who may not want to go through the process of applying for a new mortgage.
• Closing costs: In a “subject to” transaction, the closing costs are typically lower than in a traditional real estate transaction because the investor is not taking out a new mortgage.
• Risk: While “subject to” investing can be a good option for some investors, it does come with some risks. If the seller defaults on the mortgage or the property goes into foreclosure, the investor could lose their investment. It’s important to do thorough due diligence and carefully evaluate the risks before proceeding with a “subject to” investment.

Advantages of “Subject To” Investing

There are several potential advantages to “subject to” real estate investing, including:

• No need for a mortgage: Because the investor is not taking on the mortgage, they do not need to go through the process of applying for a new mortgage or using their own cash to pay off the existing mortgage. This can be a particularly attractive option for investors who may not qualify for a mortgage due to their credit score or income.
• Lower closing costs: As mentioned above, closing costs are typically lower in a “subject to” transaction because the investor is not taking out a new mortgage.
• Ability to leverage equity: If the property has equity, the investor can potentially leverage that equity to make additional investments or to fund other business ventures.

Disadvantages of “Subject To” Investing

While “subject to” investing can be a good option for some investors, it’s important to be aware of the potential disadvantages as well:

• Risk of default: As mentioned above, if the seller defaults on the mortgage or the property goes into foreclosure, the investor could lose their investment. It’s important to carefully evaluate the risks and do thorough due diligence before proceeding with a “subject to” investment.
• Limited control: Because the mortgage remains in the seller’s name, the investor may have limited control over the property. For example, they may not be able to make changes to the property or refinance the mortgage without the seller’s consent.
• Potential for legal issues: In some cases, “subject to” investing may be considered mortgage fraud, particularly if the investor is not disclosing to the lender that they

Strategies for Successful “Subject To” Investing

If you’re considering “subject to” real estate investing, there are a few key strategies that can help increase your chances of success:

• Do thorough due diligence: It’s crucial to do thorough due diligence on the property and the seller before proceeding with a “subject to” investment. This includes reviewing the property’s condition, checking for any liens or other encumbrances on the property, and verifying that the seller is current on their mortgage payments.
• Negotiate the terms: It’s important to negotiate the terms of the “subject to” agreement with the seller, including the purchase price, the terms of the mortgage, and any contingencies that may be in place. It may also be helpful to seek the advice of a real estate attorney to ensure that the agreement is fair and in your best interests.
• Be prepared for unexpected expenses: Owning a property comes with a certain amount of risk, and it’s important to be prepared for unexpected expenses, such as repairs or maintenance. Setting aside a budget for these types of expenses can help protect your investment and increase your chances of success.
• Consider partnering with a mentor or experienced investor: If you’re new to real estate investing, partnering with a mentor or experienced investor can be a valuable resource. They can provide guidance and support as you navigate the process of “subject to” investing and help increase your chances of success.

Alternative Strategies for Real Estate Investing

“Subject to” investing is just one option for getting involved in real estate investing. There are many other strategies that investors can use, including:

• Traditional mortgage: In a traditional mortgage, the investor applies for a mortgage and uses their own cash or financing to pay off the existing mortgage on the property. This can be a good option for investors who have strong credit and are able to qualify for a mortgage.
• Lease options: In a lease option, the investor rents the property and has the option to purchase it at a later date. This can be a good option for investors who are not ready to commit to a purchase but want to get a feel for the property and the local real estate market.
• Wholesaling: In real estate wholesaling, the investor finds a property, negotiates a purchase price, and then assigns the contract to another investor. The investor is typically paid a fee for their efforts, and does not actually take ownership of the property.
• Fix and flip: In a fix and flip, the investor purchases a property, makes any necessary repairs or renovations, and then resells the property for a profit. This can be a good option for investors who are comfortable with renovations and have the skills and resources to complete them.

No matter which strategy you choose, it’s important to do thorough research and due diligence to increase your chances of success in real estate investing.

Conclusion On Subject To Investing

Real estate investing can be a lucrative and rewarding venture, but it’s important to understand the various strategies and risks involved. “Subject to” investing is just one option for getting involved in real estate, and it can be a good option for some investors, particularly those who are not able to qualify for a traditional mortgage. However, it’s important to be aware of the risks and to do thorough due diligence before proceeding with a “subject to” investment. By carefully evaluating your options and choosing the strategy that is right for you, you can increase your chances of success in real estate investing.