The INFAMOUS SUB TO Discussion *Not for the Scared Investors*

[Tony Roberts]

Now that I have your attention DONT RUN NOW!  

So I heard about Sub To and I understood it. This makes so much sense!  It makes so much sense that....it isnt a popular topic on Bigger Pockets?  WTF?  Sure a few posts here and there but come on!

So here is the chance for the Sub To Gurus to regale (ITS A WORD I SWEAR) with their big brains.

So here is how I figure it goes.  Seller has a property worth $50K because this is Baltimore, ok?  Here is a creative option I came up with if I understand this whole thing correctly.

I can go in with an offer of $50k using owner financing.  Lets say he wants 10% Interest bringing the total to $55k and to offer another $5k up front to sweeten the deal.  (Am I doing this right?)  I finance the total amount of $55k for 10 years.  $55,000 / 120 months equals $458 monthly.  Great!  Now I just have to find a renter who can put down anything more than $5,000 to cover what I owe the seller in up front money.

Rent the property for $1000 monthly which is $542 cash flow.  After 120 months I've paid back the initial investment of $55,000 and also cleared $542 x 120 months = $65,040.  

Now I get there are concerns like vacancies, legal docs and the dreaded boogie man of the Mortgage being called due immediately.  BUT do I have the general structure right?  Please Sub To Gurus let me know if I am on the right path.  What am I missing?  Any other crucial things to consider?  

Is this thing on?  

[Ryan Freet]

A subject to deal would be you taking rights to the property but leaving the existing mortgage in place, or taking it "subject to" the existing mortgage. I'm definitely not an expert on the subject but I don't believe you would be able to obtain seller financing in a subject to deal. Using your numbers, I believe it would work more along the lines of the seller having a $50k mortgage on the property, you pay them $5k to "sweeten" the deal at which point they transfer title to you. You would then pay on the mortgage while it remains in their name. There are other points which are more thoroughly explained elsewhere on the forums but I believe this is the gist of it.

My experience to this point as been with homeowners which are several months behind on their mortgage and rather than paying the entire $5k to them, the deal would have required paying 6-8 months of their mortgage and bringing it current.