Subject To Strategy??

3 Replies

Good Morning Everyone,

I am a newbie in the real estate world, first time posting in these forums, and I have a few quick questions.

My wife and I own 1 rental property, and have lately been positioning ourselves to flip houses. We reached out to some "off market" leads and we were contacted by a gentleman wanting to sell his home. He currently has a family member renting, however the tenant is doing nothing in terms of maintenance or repair. The home itself is in decent conditions with minor repairs needed and a good cleaning. The seller lives almost 20 hours away and just want the house gone. He owes roughly $160K split into 2 mortgages and wants $165-$170K so that he can pay off his loans and walk away with some cash. The tenant is leaving in a couple weeks and the seller has no way of making his July mortgage payment.

My wife and I are very interested in this deal and the opportunity to start our business, the problem is we don't have the $170k cash to pay this man. Even a down payment for a loan would be hard for us when we factor in cost of repairs. So my question is: Would a subject to strategy work in this situation? I could give him his $5,000 up front then take over payments on the mortgage and all utilities? Would we close with him and then close with the retail buyer when all repairs are made, or is it just one closing at the end of everything? I know these may be dumb questions but I really want to do everything I can to ensure a successful deal. Also, what would you recommend is the best way to pay for the repairs if cash is tight?

Thank You all so much for your help. These Bigger Pockets Forums have really opened my eyes to the power of Real Estate and have created such a hunger for action!

Keep up the great work!


None of your questions are dumb. The subject to is a definite option. You can also do a wrap (wrap another loan around the original). In both instances you'd have to do two closings. The only way out of this would be to do a lease option, make the repairs, and do a double closing. I wouldn't recommend this. Though BP is opposed to this, you can use 0% APR credit cards to pay for the repairs. Or borrow from friends and family. Or take a HELOC on your home.

OK Awesome!

I'll be looking into these options today. We just got the home under contract but the seller needs his money by the 26th so that he can close on another home, so we're really under the gun here. Kinda stressful for our first deal but super exciting at the same time.

Thank you for your help Frankie!


The problem is that he will not be able to get another loan if this one is still in his name. Ask all the questions so that you are not prohibiting him from getting another house with this loan. If you are not well funded, I would just sell retail and have your buyers get a new loan. Get this guy's loan paid off as quick as possible.

If you really want to keep the loan in place long term, you better have some options for refinancing ready to go if anything happens with the loan. AND/OR you need to have a trust in place to keep the bank at bay. 

Nobody tells you, but you need to have a power of attorney, release of information authorization and if you hold long term you should place the property in a trust. Let the seller establish the trust and then transfer the beneficial interest of the trust to you and then to the buyer.

This is definitely not a beginner system for buying properties. Too many things can go wrong.