Buying Property: "Subject To"

Buying Property: "Subject To"

I would like to take a moment to talk about one of the least talked about ways to purchase Real Estate, and also one of the BEST ways to purchase Real Estate, Buying Property "Subject To" first lets understand what it means.

"SUBJECT TO": Buying RE "Subject To" Simply stated: Your buying or taking control of a property "Subject To" the existing financing(mortgage or deed of trust) remaining in place in the sellers name.

Lets say that you recieved a call from a MOTIVATED seller, Mr.Seller he basically tells you that he MUST sell his house due to relocation from his job, and he has no time to list it with a realtor. Mr.Seller also tells you (through asking your probing questions) that he owe's about $100,000 on his mortgage, his payments are about $900.00 per month, including principal, interest, and taxes. Even though you are only just beginning Real Estate Investing, you know the estimated market value of Mr.Sellers home is about $130,000. hhhhmmmm, you smell a potential deal.

You rush over to Mr.Sellers home. It dosent matter in the least that you are just a novice real estate investor. After all, he needs to sell now. Your now sitting at his uuummm, kitchen table. Here is what you say. "Mr.Seller, i can take over your mortgage payments. I will start making them and continue making them every month until i get the house SOLD. This could take one month, or it could take years....theirs just no way to know for sure." "The ONLY promise that i can make is that i will make the mortgage payments no matter what. The mortgage will remain in your name the entire time, however long it takes. We can begin as soon as your ready to move."

Now obviously Mr.Seller asks if you can give him some of his equity in the form of CASH to help him with moving. After going back and fourth a couple of times, Mr.Seller and you agree on $3,000, which you will pay to Mr.Seller the day he moves out.

So, what do you have? You have a house with an estimated value of $130,000 that you will wind up paying about $103,000 for when all is said and done. You also have a payment of $900.00 per month. Since you don't have much CASH left, there's something you must do right MUST start MARKETING for a Buyer.

So, you place an AD in your local newspaper, and put a few signs up in Mr.Seller's neighborhood: "LEASE TO OWN-Bad Credit O.K." That should get your phone ringing. After screening out a few Bad apples, you find a young couple with good jobs and strong income who went through a BRIEF period of financial trouble a year or two ago.

You offer to LEASE them the home with a 12 month OPTION TO BUY it. Their monthly payment will be around $1,200, and the purchase price will be $135,000. They will also give you a NON-REFUNDABLE OPTION FEE of $5,000. You have a monthly POSITIVE CASH FLOW of $300.00- the difference between the $900.00 you are paying Mr.Seller's mortgage company and the $1,200.00 the young couple is paying you. You have also put $2,000.00 CASH into your pocket right now- the difference between the $3,000.00 CASH you gave Mr.Seller and the $5,000.00 CASH the young couple gave you. When the young couple exercises their OPTION TO BUY, you will also pocket $32,000.00 CHA-CHING!

During the next 12 months while the young couple is LEASING the home from you, you will make contacts with potential lenders on their behalf. You should do EVERYTHING in your power to help them qualify for a mortgage so they can exercise their OPTION, when the time comes, YOUR HERO, SULLY.




I fund this information very helpful for me .Thank you .

Subject to's in FL

To all those interested in Subject to deals in FL, be aware that there are insurance issues with subject tos in the state of FL. As Fellow DGer Gary Ceriani ( DG name GCeriani) discovered, no insurance company will give property or mortgage insurance to a homeowner whose name is not on the mortgage. Your taking over someone's mortgage payments does not protect you from the home owner! Be very careful and check, double check then triple check your deals and policies to make sure you don't get the short end of the stick.

Hope this helps...

Andy Sager
DG's AndyS
CFIC and IE member


Andy Sager
DG's AndyS
CFIC & IE member
2013, 2014, 2015 & 2016 EDGE Alumni Laughing out loud

asking for some tips for this deal!

Hello all how are you doing? I have one deal going on with FSBO, he is own the 3/1 no mortgage on it. Want to sell it for $74000 then give $8000 whoever buy it as rent for a year. the FMV of the area it's about $66000 which it will be the asking price (74000 - 8000 = 66000) Which he want to rent it for 12 months for $500 (plus the 8000 already paid). Which mean if I took out mortgage for it, payment will be around $500 -600. what do you all think of this deal? it's no equity in if going for $74000 but I don't need any money to purchase, and no cash flow. LOL how to handle this


Be happy and go healthy ^_^

Ling and/or Dustin

Need Help DG fam

Found some potential property that we would like to purchase.FSBO,a little over 4.5 acres with MH on property.Owner owes less than 10k an due to health reasons have moved out.Property has been vacant over a 1yr.Owner is asking 28.5k willing to negotiate.How would I proceed in purchasing property?,And relieving owner of property?Need help awesome property can't let slip by.Did walk-thru today,and everything checked out ok besides few minor issues nothing major.Just need direction to move in.Thank you all for any helpful info. This is our 1st deal that we would like to own for ourselves.Have others in the making for profit.Thank you DG Fam....


...$o Re@lty....
..(so real thank you)..

C & C

You can see if the owner will do "owner financing" in the form of a wrap around mortgage.

I don't know how much his loan pmts are, but If it is financially feasible, possibly he could add an amount over and above what his monthly mortgage pmt is so that you are covering his pmt and paying him some of his equity each month?


PS You will probably get more attention on this post if you start your own thread.


"You're never too old to be what you were meant to be!"

"Shining Like a Star & Dancing on Sunshine"

"Shoot for the moon! Even if you fall short, you'll still land among the stars!"


if this is your first deal, why are you trying to buy for yourself? Why not try to do a l/o or wholesale so that you can build some capital ?

Good luck!



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"I believe in angels, the kind that heaven sends; I am surrounded by angels, but I call them friends" - Unknown

My journal:

What about a Land Trust?

Here's the deal:
Owner has a GMAC mortgage of $81K on the home. Homes in the area are in the $65-$85K range- although I'm sure I could get the high end of that. My strategy is a Buy&Hold until I can cash out, or a L/O with a Buyer/Tenant.
The seller's daughter was making mortgage payments while there, she got married and now the house is vacant. Payments are approximately $767.00 per month, not yet certain if PITI. Seller is "tired, old, frustrated, and just wants someone to take it over". (His quotes) Smiling
Still gathering info, but my mentor mentioned a Land Trust to avoid the DOS on the loan.
The area is quite good, and I can realistically get $900-$1000 in rent, but my margins are pretty small; about $150 cash flow per mth.
How would a Land Trust work, and based on the info I provided (still unconfirmed), what do you guys think about this deal?
My thought is to market it like crazy, pick up the extra bucks on the side until I can sell.
Btw- Hedge Funds have been gobbling up homes in this market (Charlotte, NC), inventory is down, and I'm banking on getting my asking price fairly quickly.
Any thoughts and/or advice would be greatly appreciated.




"If you STAY ready, then you ain't got to GET ready". -Will Smith-


I wouldn't worry about the due on sale clause. This is the prime environment for subject to.

Land trust

doesn't alleviate the DOSC. It just creates an additional layer of obscurity. Current conditions are favorable for "subject to" as banks really don't want to foreclose on performing loans. But always remember they have the right to do so. Structure your investing platform accordingly. For example: I you get a subject to home and then write a lease/option on it and the bank finds out and starts foreclosure proceedings; are you prepared to step up and buy the home so your lease/option tenant is protected? Are you prepared to refund the lease option fee since you can't perform? Are you going to disclose to your lease option tenant that you own the property in such a way that the home could be foreclosed upon? Think these things out before you start down this road. A fully research them. Don't take some guru's word for it because they won't be with you in court when you get sued. Just sayin'.


Always Looking to Acquire Houses | Always Looking to Amaze Investors

Don't hide it

Tell the bank what you are doing. If they choose not to exercise their option to call the loan due after about 3 months, they can't do it later. It's called acquisition by acquiescence. If they are on the fence about it, ask them if they will consider it if you offer them a $5000 principal pay down which you can get from your buyer or T/B. If you choose to hide it, you need to address the issues Bill mentioned above.

How do I approach the bank about the DOSC?

I'd much rather be open about the subject to, and have everyone on the same page- transparency makes me alot more comfortable in this business.
I know Dean had a chapter about this, but can someone give me the shortened version?
I believe his advice was to make a number of payments and THEN inform the bank that you'd done so?
What's to stop them from calling it due at that time? I know they wanna get paid, but the DOSC is there for a reason.
Thanks again for the great responses!



"If you STAY ready, then you ain't got to GET ready". -Will Smith-

Why would they want to take

Why would they want to take a property back in this market? Why would they want to call a loan at 5 or 6% to loan the money back out at 4% ? If the payor is having trouble making the payments and you step in and make the loan performing again, the bank wins. If there is equity, the bank is still protected. The Garn St Germaine Act enabled banks to call loans due in a rising interest rate environment. So if they had a loan at 4% and the market was at 6%, they could call the 4% loan due and write a new loan at 6%. We are in the opposite environment now. Don't be afraid of the bank. Have the seller sign an authorization to release information and pick up the phone and give the bank a call.

The Garn-St. Germaine Act.

Yes, I've been doing research and reading up on that as well as other factors.
So, I can see the logic, and also how to protect myself if I pull the trigger.

One final question:
A suggestion was made to simply hand the file (contracts, etc.) to a "3rd-Party servicing company", because they "speak the bank's language", and just have the two of them hash out the details. I can then wait for the go-ahead to start making payments.

This action would probably depend on cost, but it sounds like a fail safe move...just in case.
Thoughts and any suggestions on good companies to use?

Much thanks.



"If you STAY ready, then you ain't got to GET ready". -Will Smith-


Hmmmm... I'm a newbie and immediately went to how best to organize and plan to close a deal like this one. How do you keep up with your properties? What type of information is good to have when you have someone leasing a house that is owned by the original owner? Do you plan on doing multiple houses this way? Maybe use a property management company? Any other tidbits for this type of seller/buyer?

Make it a sweet day!


Debbie Fletcher
Certified NLP Master Practitioner
Professional Life Coach
(972) 816-0935

Well stated Sully nice move,

Well stated Sully nice move, Oh how about if the property is under water what can be done to still buy the property?




"With God All Things Are Possible Matt. 19:26"

"Give a Man a Dollar he's Rich For The Day, Teach a Man To Make a Dollar
He's Rich For Life" - T. Grant


Correct me if I'm wrong deeding means I will get the title turn over to buyers or I can have it since I will get my relatives to option to buy from me.Is there a easy form I can use that you can help dong this??Or I can use realtors hat work for me to do this??



Bernadette Manalo

Subject To

I have used this technique twice and here was the situation on both. The sellers were in preforeclosure, i agreed to catch up all payments get the property out of foreclosure and make all improvements sell then give them 10% of my profit it was a win win for all and now am about to take over another property using this same technique

Buying Property Subject To

I am new to real estate and I am ashamed to say that I never knew what "Subject To" really was until I read this forum. I have found out some interesting things such as a person or couple who have had some financial woes for a couple of years would actually be considered for a lease with option to buy, I was assumed you had to have good credit even with a lease to buy option. Now I know better this was helpful to me alot thank you sully.

Thank you Sully

I'm glad I Came Across This Post. So Many Great Ideas On This Post.

I'm about to jot this down and be using this.

Thanks for sharing:)


Miami Florida

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Subject to Clause

Three of the most common clauses on an offer to purchase are subject to financing, subject to inspection, and subject to sale:

Subject to financing clauses don’t offer much room for negotiation. Buyers can’t remove this subject clause during the offer/counteroffer process, unless perhaps they have a lot of equity, and don’t really need a mortgage, or require a relatively small and easy-to-get-fast mortgage. Remember, if the buyer didn’t need a mortgage, she likely wouldn’t have made the offer subject to financing in the first place.

Subject to inspection clauses are commonly included in a buyer’s offer to purchase a home. Since it should take no more than two or three days to arrange an inspection, this is an easy clause to negotiate. As with the financing clause, though, you can try to negotiate a shorter time period for the inspection’s completion to speed things up.

Subject to sale clauses can be negotiated with regard to the length of time you give your buyers to sell their current home. Any buyer who already owns a home probably can’t afford to carry the expense of two homes at once. Still, no matter how anxious you are to move, allow the buyer a decent amount of time to list and sell his home.

Usually four to six weeks is considered fair. Most sellers will include a “time” clause, so that if another suitable offer comes along during that time, the seller can activate that clause -- meaning that the buyers with the accepted offer have a set amount of time (often 24 to72 hours) to remove the subject to sale clause or drop out of the contract and let the competing offer proceed.shatch

Subject To is awesome

One of my partners has done over 50 Subject To deals and I just completed one of my first using this method. Study up on it and it can be very profitable for you. I nicknamed it "Reverse Wholesaling".


BRE #01956371

Subject to

Has anyone done a complete "subject to" deal in North Carolina recently?



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"You're never too old to be what you were meant to be!"

"Shining Like a Star & Dancing on Sunshine"

"Shoot for the moon! Even if you fall short, you'll still land among the stars!"

Buying a home is one of the

Buying a home is one of the biggest decisions people face during their lives. When you are ready to purchase, the best decision you can make is to choose a knowledgeable agent to help you find the home of your dreams.The first step is to decide what kind of property you would like to purchase.Once you have made the decision to buy, your agent will help you write up an offer to purchase. Once all parties have signed, this will become a written, enforceable contract.Buyers are required to arrange insurance on single family residential accommodations, and liability and contents insurance on strata-titled properties.

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This is great Sully!

This is great Sully!
thank you so much for your explanation of what "Subject To" is and the scenario you gave of how this works. I am just getting started...again, and looking forward to trying this method.


- think about what if? - and what is possible rather what is not Smiling
- Kevin

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Hello from Minneapolis, MN

Awesome words sully. Totally agree with you !!


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