Should I sell Subject To?

[Scott McWilliams]

I have a single-family property that hasn't appreciated much in the time that I have owned it, but through my value-add activities I have driven the rents up considerably. I split the property and now it is a 3/2 and a 1/1. Rents have gone from $800 to $1700 in a couple of years. Unfortunately the neighborhood isn't great (not bad, just very mixed) so it hasn't appreciated more than about $5000. So I can't do a cash-out refi to recoup equity.

I found an investor that would buy it at much more than retail value because the rents are so high. Typically in this neighborhood a 4/2 (which is what this property was before I did my value-add) rents for $800-900. Mine is basically doubling the income so the investor sees the value and is willing to pay for it, but they want to do a seller-financing deal. I have a mortgage on the property and don't have the funds to pay it off, so I would have to sell "subject to" in order to get the price that they have offered. 

I know that "subject to" is typically used for distressed sellers. I am not distressed, I would be using this to get a great price for the property. Am I a fool for considering this? Anything I should be looking out for? Any chance I would end up with a mortgage to pay and no property to back it up?

[Account Closed]

Originally posted by @Scott McWilliams:

I have a single-family property that hasn't appreciated much in the time that I have owned it, but through my value-add activities I have driven the rents up considerably. I split the property and now it is a 3/2 and a 1/1. Rents have gone from $800 to $1700 in a couple of years. Unfortunately the neighborhood isn't great (not bad, just very mixed) so it hasn't appreciated more than about $5000. So I can't do a cash-out refi to recoup equity.

I found an investor that would buy it at much more than retail value because the rents are so high. Typically in this neighborhood a 4/2 (which is what this property was before I did my value-add) rents for $800-900. Mine is basically doubling the income so the investor sees the value and is willing to pay for it, but they want to do a seller-financing deal. I have a mortgage on the property and don't have the funds to pay it off, so I would have to sell "subject to" in order to get the price that they have offered. 

I know that "subject to" is typically used for distressed sellers. I am not distressed, I would be using this to get a great price for the property. Am I a fool for considering this? Anything I should be looking out for? Any chance I would end up with a mortgage to pay and no property to back it up?

 If you do A Sub To you can't foreclose if he stops making payments, that's a big problem. Also, you no longer own the property.

Do a Wrap instead. Find an attorney who can create a note & deed for the amount you are selling. The buyer pays you, you can foreclose if he stops paying, you continue making your payment to the bank as normal.