Thoughts on using "Subject To" transaction to rehab a house.

[Jonathan Morris]

Does anyone have thoughts on using a "Subject To" existing financing in order to rehab a property and then sell it. I have started reading a lot about "Subject To" and want to know if anyone has thoughts or experience with this. I am in the education phase right now and would like to know more. So far the forums have been a great resource. I would like to rehab houses but want other options besides a conventional loan or hard money. Thanks.

[Matt Devincenzo]

Originally posted by Jonathan Morris:

I pretty much only see lease options on the forum from a property acquired by subject to, not rehab and sell retail.

This should not be a problem. When you go to sell retail the buyer's lender will request a payoff and when the deal closes they should just send a check to the current lender for the amount owed. It isn't really any different than what would happen in a LO arrangement when the tenant exercised their option and purchased. The reason some do the sub2 with LO is it a technique to make a deal happen on a property that you can't get the price low enough for a retail flip.

That being said like Mike said you need to be prepared to take out the original financing within 30 days at all times. It's unethical to place a prior seller in a position like that and not be ready to protect them in the event that the loan was called.