"subject to" on a BRRRR property with construction loan

10 Replies

Hey everyone, i am wondering if any one has done this or has any thoughts on this situation. 

I have an opportunity to take over a rehab loan, subject to, that is about half way done. Seller wants out for financial reasons. There are some funds that still can be drawn to finish up the rehab. From my end, it is a decent deal. Anything i should look out for or do?

Also, trying to wrap my head around how i would trust seller to pay the mortgage if i send him the money every month. I know i could make the payment too though. Trying to avoid issues with lender. 


You can use a Title company to dole out the funds you pay to make sure the loan gets paid.  There are several articles about Subject to loans on the forum.  There are people way more knowledgeable than me on this.  Good luck.

@Ryan Deasy why don't you just purchase it as is and pay the mortgage yourself?  Then you can set up your own financing, finish the project, and either sell it or rent it out.

I would not want a partner, or to leave him in control of making mortgage payments. 

I'm guessing this involves a HML? If so, they will be much more likely to pull the trigger on a Due On Sale clause. I'd only do it with the lender on board.

@Ryan Deasy When you say rehab loan, what do you mean? Is it hard money?

If you buy it subject to, just make payments directly to the lender. Get a limited power of attorney that authorizes you to communicate with the lender and take the remaining draws.

@Justin Hammond  thanks. yes correct hard money. I have considered that, i just figured this would certainly alarm the lender and yield a greater chance of them calling the loan due. any thoughts?

@Wayne Brooks thank you. i am curious. Why do you think an HML would be more apt to pull the trigger than a regular conventional bank?

@Michael Thompson thank you. have you done this with an HML? if so, what was your experience?

@Matthew Irish-Jones thank you. i could do that. i was just trying to avoid going through that process, paying points, and all the other costs associated.

@Rick Imby thank you. i didn't know that was possible. i will have to ask my attorney about this. 

@Ryan Deasy yeah if it’s a hard money lender you definitely want them on board with it. But don’t be afraid to ask them. As someone who frequently lends hard money, I have no problem with another investor stepping in the shoes of the original borrower if I feel they can get the job done. Most lenders aren’t going to call it due and take the property, it’s typically not their business model.

I would think you could to this through a title company as Rick said. Usually with subject to's you pay the mortgage yourself even though it stays in the seller's name.