How do you make money from a subject 2 deal?

6 Replies

@Drayden Morgan several ways actually; principal paydown, equity appreciation, future rent appreciation, tax savings, you control the property in an upswing market, etc. but from a big picture the advantage of a subject to is that you have near zero risk to control a large appreciating asset. Think about your IRA retirement account. Every month you put in say $300 out of your paycheck towards your retirement and it's invested in something (usually the stock market). You hope at the end of 30 years you have a nice retirement nest egg but the reality is you have no guarantee that the money you have invested will even be there or it could actually lose value or not appreciate at all. Unlikely but still possible right?

Buying property that doesn't cashflow well is really no different from a big picture right? If you had to put $300/month into a rental property every month because you just broke even would you be in great shape after 30 years? Of course! In fact you would arguably be in a hell of a lot better shape spending that $300/mo on a sub to property than on stocks when you factor what rents will be like in 30 years, the savings you achieved during that time frame, the fact that the property is now paid off completely, etc. To me it's a no brainer and I have dozens of subject to properties. 

Originally posted by @Robert Gilstrap :

@Drayden Morgan several ways actually; principal paydown, equity appreciation, future rent appreciation, tax savings, you control the property in an upswing market, etc. but from a big picture the advantage of a subject to is that you have near zero risk to control a large appreciating asset. Think about your IRA retirement account. Every month you put in say $300 out of your paycheck towards your retirement and it's invested in something (usually the stock market). You hope at the end of 30 years you have a nice retirement nest egg but the reality is you have no guarantee that the money you have invested will even be there or it could actually lose value or not appreciate at all. Unlikely but still possible right?

Buying property that doesn't cashflow well is really no different from a big picture right? If you had to put $300/month into a rental property every month because you just broke even would you be in great shape after 30 years? Of course! In fact you would arguably be in a hell of a lot better shape spending that $300/mo on a sub to property than on stocks when you factor what rents will be like in 30 years, the savings you achieved during that time frame, the fact that the property is now paid off completely, etc. To me it's a no brainer and I have dozens of subject to properties. 

 How easy has it been for you to acquire subject to properties? What is your opinion about the ability to recall the total amount of the loan that banks have as a clause on these mortgages? Is it a risk that should be considered or is it so low that it'd happen, you can trudge on confidently? 

Alot of properties make sense to use Sub2. But if you have to "plan" to have a exit if the bank demands their total amount owed, well it just doesn't seem like the type of things average people can afford so I wonder really what would happen.

Any advice? 

@Cristian Aviles-Morales   I buy several a year but honestly in a good economy that's much harder to do. When the next downturn comes (and I'm guessing within the next 18-24 months) then there will be plenty of people looking to do them. You've just got to be out there looking for motivation. Looks for the "D's"  of life:  Drugs, Death, Divorce, Disease, Disaster and Dumb Decisions. 

As far as risk of bank calling it due; yes I guess it's there but it just doesn't happen in all practical circumstances as long as the mortgage is being paid then there is no reason for a bank to care about it. 

@Cristian Aviles-Morales You NEVER pay the seller you always want to be 100% in control and pay the bank directly. Think about it; the guy who hands over his house to you because he can't make the payments for whatever reason and you want to trust him to pay the bank? If you find a deal and want the specifics on how to handle the transaction and day to day just call me and I'll walk you through it. Not hard at all once you understand it. 

Originally posted by @Drayden Morgan :
Can someone help me understand how do you make money from a subject to deal if the mortgage is already the same amount as the areas rental rates?

 A lot of good investments don't pay in cash every month. Have to have a longer horizon than Friday or the beginning of the month.

As Robert mentions, you control a large asset that is being paid off for you. Sometimes it has built in equity and it always saves you at least $4k in borrowing costs and the headache and time qualifying for a loan is.

Are you asking hypothetically or do you have a specific lead you're pursuing?

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