"SUBJECT TO"

[Paul Ostler]

Hello all! I am new here, so please bear with me. My wife and I own one rental home, and our current home, but would like to acquire more homes through "subject to" deals. I understand the basics, I take over the home, make the payments, the home is deeded to me and the loan stays in sellers name. But, I don't know what steps to take from there. If I find a home with a willing seller, who do I need to report this to? Does anyone in the city need to know? Do I get an actual deed? Like I said, I'm a newbie. any advice? I already plan on contacting a lawyer and getting a contract to be ahead of the game if I find a deal, but what do I do after the paper is signed? Any advice would be appreciated.

Thanks!

[Matt Moger]

@Erin Elam

Ultimately you have to continue some sort of relationship with the seller. On the over payments question. In the beginning, it is best to have the seller call the bank & change their address to your address with their name still in place. At least this way, an escrow overage would come to you & the 1098’s at the end of the year come straight to you, but they still have to endorse that check 😐

I have had the seller file the interest on their taxes & keep an overage check. It’s not common, but it is part of the risk.

This strategy is phenomenal for shorter term projects like flips. We predominantly hold everything we buy; however we did flip one this summer using Subject To. In this scenario, the seller was under water & she paid us quite a bit at closing & we were able to renovate & sell with a realtor.

As far as using Sub2 to pay full price? That is never something that we have done. The longer your hand stays in the pot with these, the more volatile they become. We have paid a seller some of their equity up front & the rest on a promissory note when we refinanced.

Most of the time this is only an option when the seller is in a very tight spot, If there are time pressures or money pressures.

Since our goal is long term hold, we want to see how quickly we can lump several together in a portfolio loan, we recently put 4 Subject To’s together into our own loan & squared everything away removing the previous owner from any attachment to the property. Which ultimately lessened our risk & made raving fans out of those sellers.

I hope this helps a little.

Matt