How to Close a Subject-To Deal with No Money Down

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There’s really no excuse not to always do no-money down deals. For example, on BiggerPockets alone you have an incredible amount of resources to teach you how to never put money down on properties.

But one of the most confusing things for new investors is how to handle the no-money down situation when it comes to subject-to deals. I don’t know about you, but all of the time I come across a seller who’ll let me do a subject-to but they have a good amount of equity and they want some of it. In fact, I’ve heard stories about a seller wanting $20,000 to do a subject-to, since they had so much equity in their house, and the investor actually gave them the $20,000 by taking out a loan.

If you ever take out a loan to give cash to a seller, you’re nuts. We are creative real estate investors and we make the rules. When I’m dealing with a subject-to seller it is never an option for them to get cash from me and I let them know this upfront.

So how exactly do I handle a seller who wants $10,000 or $20,000 for the deal?

Well, not too long ago this happened to me and the seller wanted $20,000. He had a decent amount of equity in the house and when the negotiations were all done I had agreed to give him $10,000. However, I did not give him cash.

What I did is give him a promissory note that says in 5 years he will get his $10,000. I chose a 5 year time frame with this seller only because that’s what we agreed upon. If you can get a seller to give you 10 or 15 years go for it.

The beauty of this is that you never put down any cash. I’m a firm believer that cash is king and I always keep my cash as a safety measure. Sure, I could easily stroke a $10,000 check today to give to a seller, but I’d be a fool to do it. Because then I might be tempted to write another $10,000 check to the next seller I meet with, and before I knew it I would be out several hundred thousands dollars and broke. (I’ve seen this happen. I know investors who were members of the lucky sperm club and had their parents give them a ton of cash. They never learned how to do creative real estate and burned through the money quickly and are now stuck).

Also, just like all creative investing, this only works if you believe it will work.

I’ve told investors at REIA meetings about never putting money down and how I just give a note, and then when I sell the house down the line, I get my money and so does the seller. A lot of investors tell me they could never do it, or sellers in their area wouldn’t agree to it. Of course, you and I know that’s not true. They just lack the necessary confidence to dictate to a seller how they will do business with them.

Even if you’re rich and have a lot of money I would still make it your goal to never put money down on deals. It’s not necessary and one of the secrets of rich people, as you know, is to always use other people’s money.

Photo: LancerE

About Author

Jason R. Hanson is the founder of National Real Estate Investor Month and the author of “How to Build a Real Estate Empire”. Jason specializes in purchasing properties “subject-to” and has purchased millions of dollars worth of property using none of his own cash or credit.


  1. I agree with your comment about having the “confidence to dictate the deal”. That is so important! You are the one in control, and if the terms do not work for you, walk. There are a ton of others out there.

  2. Deshawn Jennings

    @Jason Hanson

    Hello I’m just reading this and I’m still not clear on how to structure the subject to deals. You mentioned that you gave a promissory note, “stating that the seller will get his $10,000 in 5 years”. How does this work?

    Will the $10,000 accrue interest during this time frame? So, if the seller’s home is worth $100,000 and the seller has $90,000 financing left of the property, you assumed the $90,000 and then paid the seller the difference in 5 years?

    Are you selling the home in 5 years or will you just be giving him the cash at that time? What is the benefit of waiting to pay him the $10,000 versus paying it then?

    How did you work around the issues with the bank possibly calling the loan due to the sale?

    Please clarify.


  3. Wilson Narvasa


    Thanks for the article! I do have a few questions regarding the structure of this deal so I can get a better picture of it.

    1. Did the seller have more than $10K equity in the property, but they just agreed to the $10K?

    2. How did you structure the note? Was the value of the note $10K regardless of if you paid paid the note early? Was there interest involved?

    Thanks again!

  4. Christopher Smith

    Good Morning,

    Im completely new to Real Estate investing. In fact I just bought my first live in home!! Yay me, but any way Im not sure on the verbage. What exactly does ‘Subject-To’ mean? So far I just understand that you promise to give them money down the line.


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