Analyzing A Good "Subject To" Purchase - Taking Over Someone's Loan No Pre-Qualifying

[Ken M.]

There is a method of buying a house without qualifying at a bank. It's called "Subject to" because you are taking over the property "Subject To" the existing financing. There is a specific way to do these and you have to be in a position to make the monthly mortgage payment. The reasons people do these vary. It might be because you can buy the property below cost or maybe banks are not lending money to anyone right now or the house won't pass inspection to be able to borrow against. 

But, these are generally Not Fixers – Most sellers in this situation either:

1) Have to sell quickly or
2) Don’t have enough equity to cover real estate fees, closing costs and other fees or
3) Don’t want to or can’t afford to do repairs and or don’t want to have people traipsing around their house
4) Have bought another place and are carrying two mortgages or
5) Lost a job or have a medical emergency, etc or
6) Are in pre-foreclosure and have to do something quickly or
7) Are inherited with a mortgage and can’t make the payment or
8) Have a job transfer and need to sell quickly

So, we have the closing expenses and have to give some money to the seller, and start making payments on the loan. You need to be financially stable to do these and it's an effective way to add to your investing.

I allocate $25,000 per property. The money I give a seller comes out of the $25,000 investment.