Need help with SubTo Deal

[Jesus Nieto]

My son is working on his first SubTo real estate deal in Crawfordville, Florida, and I'm hoping to find someone in this community who can offer him some guidance and support.

He's eager to learn and navigate this process successfully, but could really benefit from the expertise of someone with experience in SubTo transactions. Any advice or assistance with Subto would be greatly appreciated.

If you're willing to share your knowledge or connect with my son to offer some mentorship, please reply to this.

[Scott Trench]

The best thing this community can do is encourage your son to run far away from a subject to deal. The guru your son is learning this technique from is likely not telling your son that the deal will almost certainly encourage your son to get an "off-market" deal from a "wholesaler" who is unlikely to properly disclose the details of the property or encourage an inspection. 

The deal will involve complicated paperwork. 

The deal will leave the seller at your sons mercy for decades (the life of the loan). Your son is responsible for making payments on time or ruining this seller's credit. 

Your son is likely paying more than the property is worth, by definition, as the seller would almost certainly prefer a similar offer that was not subject to. 

AND, your son will be at the mercy of the SELLER and dependent on the SELLER's good choices for the life of the loan. Many Naive subject-to first timers think that as long as they make the payments, life is good. Tell me - someone selling their home to your son, Subject-To - is this a person who has made good life choices? Is this a person who is, from here, going to turn their life around from the desperate situation that they find themselves in right now, such that they are willing to take a Subject-To deal? Are they going to start paying down that credit card debt, turn over a new leaf, and avoid bankruptcy for the next decade? 

Do you want your son to bet the financial outcome of his 20s on this seller's ability to make good choices? Because, WHEN this seller declares bankruptcy, be it 3 years, 5 years, or 7 years down the road, you can bet this note will be called. Your son will be forced to sell or refi, and I bet you that this deal can't handle that situation. 

As others have said, the best thing your son can do is run far from this deal, buckle down, save his pennies (he probably already is doing this), house-hack, and improve a property with sweat, hard work, developing a DIY skillset, and self-managing tenants. 

If he must attempt to get the low interest rates of 2021 on this deal, I suggest that he instead look for assumable loans. These are very different than Subject-To, as the loan actually transfers to your son's name, and off the seller's name. I am not sure, but I imagine that you could also help out and lend your credit to this type of purchase. 

This tool (no affiliation with BiggerPockets) can help your son find properties with assumable loans.