Plenty of investing gurus are teaching about ‘Subject To’ deals these days, but they’re not all painting an accurate picture. Some are giving the impression that just because you buy property ‘Subject To’, you’re going to become rich because you’ve got the title, but there is more to it than that.
While building wealth is possible, getting rich in a short time is not necessarily the case. You still have to look at each scenario and run the numbers. Not every deal is a good deal and if you don’t take time to do your homework and crunch numbers effectively, you’re apt to find yourself making a bad deal, losing money.
There may be some confusion out there when it comes to ‘Subject To’ deals, so let me clarify today a little bit about what they are and what they aren’t.
What is the “Subject To” method?
When a buyer (usually an investor) finds a house and wants to purchase it ‘Subject To’, it means they will purchase the property ‘Subject To’ the existing financing on the home. This means that the seller will title the deed to the buyer, but keep the existing mortgage loan in his or her name. The buyer will then take over payments on that existing mortgage.
Why would a seller give you his/her home?
This kind of purchase may sound too good to be true. Why would someone essentially give you the title to their home? Keep financing in his/her name? Well, there are plenty of reasons I’ve run into over the years.
Motivated sellers are quite receptive to selling “Subject To’ because they’ve got some sort of pain pressure points going on in their lives. Maybe they are looking at divorce square in the eye and they’ve got to sell their home ASAP. They can’t wait for a realtor to sell it, so they sell it ‘Subject To’ so they can be free from it and avoid foreclosure. There are also those who have issues like job loss, foreclosure, death of spouse, illness, and so on. The point is that there are always highly motivated sellers out there looking for a deal such as ‘Subject To’.
‘Subject To’ is a great way to build portfolio
If you’re seeking to build your investment portfolio, ‘Subject To’ is a great way to do so, because you don’t take out loans when you secure a deal. With the loans staying in the sellers’ names, you don’t have to qualify and you’re not limited when it comes to how many homes you purchase. Of course, you always want to exercise caution and discipline with any type of investing.
What ‘Subject To’ deals are NOT
Buying properties ‘Subject To’ is not a get-rich quick scheme. Sure, you can make large amounts of money if you choose good deals, but it’s not like waving a magic wand to become rich overnight. As with any profitable business, you must set goals, create strategies, and put in the effort.
Of course, you always want to work smarter, not necessarily harder, so I advise my students to learn as much as they can about property investing – ‘Subject To’ deals included. I also encourage everyone to have mentors or coaches that they can learn from, attend workshops, and network with others in the field.
Also, ‘Subject To’ deals do not give you permission to take advantage of those who are down and out by walking away if the deal doesn’t go the way you want. When you enter a contract with a seller, you’re making a commitment to honor that deal. His or her credit is in your hands, so-to-speak, so always walk with integrity and act responsibly as you hold up your end of the deal.
‘Subject To’ deals are a great way to expand your portfolio and continue building wealth. It may sound confusing at first, but I assure you that you’ll become an expert in no time. I’ve walked many students through their first couple of deals and have watched them take off on their own with confidence AND a strategic plan for building wealth.