Subject To Real Estate Investing

Last week, while preparing to speak at our real estate investor group meeting, I was glancing through the Millionaire Real Estate Investor book by Gary Keller and I came across a page that I did not recall reading when I read the book previously. The page was discussing a motivated seller that could no longer afford to keep his properties and how an investor came in and “agreed to take over the properties and assume responsibility for their debt and payments by using a simple quitclaim deed.”

It is easy to miss what just happened there. Did you catch it? Instead of the investor going out and getting a new loan on the property, the investor and seller agreed to have the investor start making payments on the existing loans on the properties.

The investor did not need to go out and get a new loan on the property. She just paid on the existing loans until she sold the properties. The seller was not foreclosed on because he could not make the payments because the investors was making the payments.

There was equity in the properties so the investor was able to resell the properties, make a profit and, in the end, shared some of the profit with the original seller. So, overall it truly was a win-win deal for all involved.

For those investors that have been exposed to this form of creative finance, it is often referred to as buying houses “subject to” the existing financing. In times like these where loans–especially investors loans–are much harder to structure, it can make creative financing like “subject to”, lease options and owner financing much more attractive.

Over the next series of articles, I will be discussing some of the frequently asked questions regarding investing in properties “subject to” the existing financing (link is for our Real Estate Investor Bronze Members).

Until my next post,

James

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