"Subject-to" Fix-n-Flip: is it possible?

Question

Hi BP Community! Question: Can you fix-n-flip a “subject-to” property or could you really only BRRRR a “subject-to”? Does the “due on sale” clause go into effect if the “subject-to” property is sold after rehabbing it?

Side question: does anyone have successful experiences completing “subject-to” deals with on-market listings & working with listing agents – especially in FL? Is the property owner responsible for the listing agent’s commission?

Account Closed · Answer

I wouldn't wholesale a subject-to deal to another investor. Too many things can go wrong and wind up in a law-suit.

David M. · Answer

@Ramona B.

You should be able to..  Why don't you think so?

You purchase subject-to, fix it up, then sell it.  Now that subject to mortgage is satisfied by the sale and you SHOULD have the remaining "profit" for yourself if the deal went well.  The due on sale clause is a moot point since the loan is paid off when you sold it after the rehab...

Remember, subject-to deals are pretty risky for the seller, and if not handled correctly, can present a problem for the buyer/investor.  These sorts of "creative/advanced" techniques only work in certain situations.

Good luck.

Account Closed · Answer

Yes, you can fix-n-flip a "subject-to" property. I've done that for over 25 years. If you sell the property that you bought using "Subject To", it gets paid off by the new buyer, in escrow, when you sell.

If you work with agents you pay their fees. It's pretty straight forward.

Your Bio says you work in the "foreclosure industry", Just curious how long foreclosures are taking in Orlando these days. I've heard it can take a year to get a foreclosure to complete in FL.

David M. · Answer

@Ramona B.

We should talk about it..

I think its tough..  sub-to is very risky for the seller.  I don't think a "regular" agent will advise for it.  So, its a tough sell.

I think getting a private lender involved and paid back is just making sure the deal works --- that's pretty simple.  There are other private equity lenders, but definitely need to find one that is willing to take a 2nd position lien.  Probably better to work with smaller/ private group since this is so involved.

seller financing could work if the outstanding principal of the existing loan is small enough to be paid off --- it has to be extinguished.  Also, the seller has not only to be willing to finance, but also ABLE to finance --- usually they need the money.  Like i said, these "creative" methods only work with a good amount of "ifs, ands, and buts."

Mona B. · Answer

Thanks for the feedback @David M.! I think where I get stuck is when I'm trying to understand how to subto on-market distressed leads. I've seen investors work with off-market deals, but I really think there's an opportunity to work with listing agents & stagnant properties on the market during the slow downturn we're experiencing here in FL. I'm also looking into whether to wholesale subto deals, or find equity partners or other partners experienced with subtos & rehabbing.

Financing the deal is another part were I get stuck. I'm trying to understand if it's possible to get funding from a lender like Patch Lending to fund the transaction & rehab, & how their loan is paid back in addition to the outstanding mortgage, while trying to make a profit...? Or could one negotiation seller financing?

"Subject-to" Fix-n-Flip: is it possible?

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