Subject-To Deals Using Private Money

5 Replies

Hi Everyone,

I'm reaching out to the Bigger Pockets crowd because I would like to do some subject-to deals using private investors, however, I'm not sure how I would structure the deal. I've been working leads for lease-options and subject-to's and I've noticed a lot of them are lost because the sellers want some money up front. Normally we pursue motivated sellers and do a zero down, however, in hopes of increasing my volume, I wanted to be able to move on the deals where the sellers are willing to work on terms but also want some money upfront. There's enough money on the back end to be able to pay a good ROI and I know some investors who would be willing to invest. The issue I'm having is that I'm unsure how to structure it so their principal would be secured against the property. Have any of you ever heard of someone doing this and do you have any insight as to how the deal would be set up?

Let me know if you need any clarification or have questions for me.



It's better to talk about an example

Are you talking sub 2 and a note?

I show 3 things to sellers 

1. Selling with an agent paying 10 per cent costs to sell

2. Renting with a property manager dealing with possible risks of damage and eviction

3. Selling on terms with a lease option, wrap or sub2 with and without a note


@Mark Brogan thanks for tagging Brian

@Brian Gibbons

Yes, I am talking sub 2 and taking a note. For an example, lets do 500k purchase price with 5% down and 3% closing costs & tax. I'd want to do zero money out of my pocket so the 5% down and 3% closing cost would be financed by my private lender. My pitch to the lender is that the principal is secured against the property, however, I don't know how that would look.

500k Purchase

25k down

15k closing

Total Borrowed: 35,000

Would the 35 borrowed be recorded against the deed in a second position behind the original mortgage? Or would I include the 35 borrowed in my note between the seller and I? Or would I just use a contract between the lender and I stating that they are to be paid out when I sell the property X years later. 

Why you start LLC or SCorp and have an operating agreement or shares agreement that spells out who owns what

Have a JV Agreement that spells out who does what

@Tim Mangold

Well, when you say it like that, it sounds pretty simple doesn't it. 

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