January 29, 2024

Subject-to Deals in Real Estate: A Comprehensive Guide


Subject-to Real Estate: Unconventional Approach, Lucrative Potential

In the dynamic world of real estate, the art of acquiring properties often extends beyond traditional financing methods. Subject-to deals, a unique investment strategy, offer investors a path to acquire properties without the constraints of conventional mortgages. This guide delves into the intricacies of subject-to deals, empowering you to navigate this unconventional yet sometimes lucrative avenue of real estate investment.

What is a Subject-to Deal?

A subject-to deal is a real estate investment strategy where the buyer takes over the seller’s existing mortgage payments. The property is then deeded out of the sellers name and into the buyers name. This means that the buyer is responsible for making all of the mortgage payments, but the seller is still legally responsible for the loan.

How Does a Subject-to Deal Work?

To transact a subject-to deal, the buyer must first be a cash buyer. Then the buyer must find a seller who is willing to sell their property subject to the existing mortgage. Once the buyer has found a seller, they need to negotiate a contract with the seller. The contract should be structured in a way that allows the buyer to take over the seller’s existing mortgage payments.

Once the contract is in place, the buyer needs to close on the property. At closing, the buyer will sign a promissory note to the seller for the amount of the mortgage. The buyer will also need to provide the seller with a mortgage or deed of trust on the property.

What are the Benefits of Subject-to Deals?

There are a variety of advantages to incorporating subject-to deals into your real estate investment strategy, including:

  • Assuming an existing interest rate that may be much lower than current mortgage rates.
  • The ability to purchase properties without having to qualify for a traditional mortgage. This can be a great option for buyers with bad credit or who do not have a large down payment.
  • The ability to purchase properties that are not financeable by traditional lenders. This can be a great way to find deals on distressed properties.

What are the Risks of Subject-to Deals?

Understand the risks associated with subject-to deals and strategies to mitigate them effectively. Being aware of potential pitfalls is crucial to your success. Some of these risks include:

  • The risk of losing money: If the buyer does not make the mortgage payments, the sellers mortgage company can foreclose on the property. If made aware that the seller has sold the property, the seller’s mortgage company may also exercise the “Due on Sale” clause and call the mortgage immediately due.
  • The risk of legal problems: Subject-to deals are complex and can be difficult to structure correctly. It is important to consult with an experienced real estate attorney before doing a subject-to deal.

How to Get Started with Subject-to Deals

If you are interested in getting started with subject-to deals, there are a few things you need to do:

  • Educate yourself about subject-to deals. There are a number of resources available that can teach you about subject-to deals.
  • Find a mentor. A mentor can teach you the ins and outs of subject-to deals and help you avoid making common mistakes.
  • Find an experienced subject-to attorney to assist with subject-to nuances and document preparation.
  • Start networking with other investors. Networking with other investors is a great way to find deals and learn from other people’s experiences.

Real-Life Success Stories – A Conversation with Pace Morby

Empora connected with Pace Morby, host of A&E’s TV show Triple Digit Flip and an expert on the sub-to strategy, who spoke to the high impact potential subject-to deals have.

“Subject to is the way you can acquire anything, purchase anything, control anything, whether it’s a car, a business, apartment complex, a single-family home, an RV park.”

Pace also highlighted the accessibility of subject-to deals, as they don’t require traditional financing: “You can acquire that without money of your own, without a credit check, without credentials, without bank history, tax returns, none of those stuff.” Pace Morby himself has used subject-tos and other creative financing methods to purchase over 1,000 doors and build his nation-wide real estate business.

Conclusion: Subject-to deals – Your Path to Real Estate Success

Subject-to deals can be a great way for real estate investors to purchase properties without having to qualify for a traditional mortgage. However, it is important to understand the risks involved and to do your research before you get started. One of the best ways to get started with a subject-to deal is to work with a nationwide TC company, such as Creative TC. They will help guide you to close your deal efficiently. Working with a specialized title company can also be beneficial. Empora Title specializes in doing creative deals with investor clients. If you decide to explore subject-to deals, Empora is here to help you get your deal done.

Empora Title is built for real estate investors. We redesigned the title and closing process to create a digital-first experience that delivers the fastest, smoothest closings possible and simplifies the management of multiple deals.


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