{"id":23597,"date":"2011-09-25T07:53:24","date_gmt":"2011-09-25T13:53:24","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=23597"},"modified":"2024-06-12T01:26:23","modified_gmt":"2024-06-12T07:26:23","slug":"2011-09-25-3-different-ways-to-close-a-subject-to-deal","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2011-09-25-3-different-ways-to-close-a-subject-to-deal","title":{"rendered":"3 Different Ways to Close a Subject-To Deal"},"content":{"rendered":"

The beauty of subject-to\u2019s is that there are many ways to make money from this type of deal. Best of all, if you do things right you aren\u2019t putting a penny down of your own money \u2013 you\u2019re simply taking over somebody\u2019s mortgage.<\/p>\n

How to Make Money with Subject-To Deals<\/h3>\n

Wholesaling a Subject-to<\/strong>
\nFirst, you can wholesale the property subject-to. In other words, instead of closing the deal yourself and taking over the loan, you can wholesale the deal to another investor who will take over the loan. One of the best ways to wholesale a subject-to deal is to retail buyers. This is because they don\u2019t need the numbers that investors do and they\u2019re just happy to be able to own a home without putting a lot of money down. When wholesaling a sub-2 in today\u2019s economy you can expect to make $5,000-$10,000 per deal.<\/p>\n

Lease Optioning a Subject-To<\/strong>
\nThe second way to make money is by buying the house subject-to and selling it on a lease option<\/a> to a tenant\/buyer. You might take over a loan for $200,000 and give your tenant the option to buy it at $240,000. This means you\u2019ll make a nice $40,000 spread when the house sells. Also, in addition to the big payday, you should try to get a monthly cash flow of $200 a month and you\u2019ll get about $5,000 upfront in option money from your tenants.<\/p>\n

Getting a house subject-to and selling it on a lease option is one of my favorite ways to do deals. You just have to make sure to screen the tenants very thoroughly so you know they\u2019ll be able to qualify to buy the house down the line. If you don\u2019t do this, you\u2019re tenants might never exercise their option and you\u2019ll never get the big $40,000 payday.<\/p>\n

Holding the Subject-To Deal as a Rental Property<\/strong>
\nThe third way to make money is by holding onto the property as a long term rental. For example, when you take over a property subject-to, you might tell the owner that you\u2019ll have the loan out of his name within 10 years. So, for 10 years you get cash flow, you (hopefully) have an in increase the amount of equity and the entire time the loan is in somebody else\u2019s name. When the 10 years is up you can refinance or you can sell the house.<\/p>\n

My Suggested Path<\/strong>
\nIf I were you, I would plan on holding several properties for the long term and if you have enough cash from other deals, I would ideally pay them off so you can own them free and clear. If you don\u2019t have enough cash then just refinance them and continue to live off cash flow.<\/p>\n

As you can see, with every subject-to deal you come across you need to have an exit plan. Will you do a \u201ccash now\u201d strategy and wholesale the property? Will you take the middle approach and do a lease option and make around $40,000 when all is done? Or, will you plan for the long term and hopefully create a portfolio of houses that you never, ever sell?<\/p>\n

It\u2019s all up to you, plan wisely.<\/p>\n","protected":false},"excerpt":{"rendered":"

The beauty of subject-to\u2019s is that there are many ways to make money from this type of deal. Best of all, if you do things right you aren\u2019t putting a […]<\/p>\n","protected":false},"author":136,"featured_media":170081,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[190,1554,1670,1130,2457],"class_list":["post-23597","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners","tag-landlord","tag-lease-option","tag-rentals","tag-subject-to","tag-wholesaling"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/23597","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/136"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=23597"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/23597\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/170081"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=23597"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=23597"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=23597"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}