Subject To Real Estate Allows You To Buy Property With No Credit No Cash
Subject To real estate deals are one of the best ways to acquire real estate without worrying about financing and credit issues
. Though not the most common form of real estate transactions, subject to is one of my favorite real estate deals.Here is how subject to deals work:
Subject to deals allow you to acquire properties by leaving the sellers existing mortgage in place. As an investor, you purchase the property subject to the existing loan or loans. The owner deeds the property to you and you agree to make mortgage payments. The owners name is still on the loan and they are liable for payments.
As an investor, you get all of the gain and very little risk. Where else can you purchase your dream home and many others without ever worrying about your credit, using virtually no cash, and closing in a matter of days?
Still, there are some advantages and disadvantages to this method:
Advantages
Speed. Subject to deals close fast! Traditionally, buying a home takes anywhere from 15 to 60 days to close on a mortgage. With a subject to transaction, you are only limited by the amount of time it takes you to find a motivated seller.
No money down. This is one of the greatest values of subject to deals. In some cases, sellers will pay YOU to purchase their home at closing.
Credit does not matter. Subject to allows you to get the property you want regardless of credit. If you have the income, your credit will not stop you from acquiring investment properties. If the previous owner had a good interest rate, their rate would typically be lower than the rate you would get as a new homeowner. Their loan is based on their house as a primary residence.
Take over existing payments. You can find great deals from motivated sellers who secured homes with low interest rates and low payments. Once you get the home under contract through closing, you can get the tenants to take over the current mortgage, along with a bit more income for positive cash flow.
Assign or not to assign. You can either purchase the home and become a landlord or wholesale (option the property to an investor) for quick cash. You keep the cash with no strings attached or ownership in the property.
There are also disadvantages to subject to real estate.
Disadvantages
Integrity, Honesty and Ethics. The seller must trust that you will pay their mortgage and buy their house.
Avoid ARMS or negative amortization loans. They are bad news because you will always owe more on your home than what it is worth. You did not get into the real estate investing business to be upside down on your properties.
The bank could call the note. Though rare, a subject to transaction could force the bank to demand immediate payoff of the loan. The bank has the legal right to do this because selling a home with a subject to is often contrary to the mortgage terms.
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