subject to

12 Replies

i know very little about subject to". but i am wondering if this is worth pursuing. fyi i dont have much money. so how much money do i need ?

so i have a guy who really wants to get rid of his house because it is going underwater. he said he as 85k on his mortgage but comps run at 65k

hes been hanging onto it but owes more on mortage than house is worth

hes sole owner

2 bed

1.5 bath

900 sq ft

private septic

public water

no liens

Lot: 4,792 sqft

Single Family

Built in 1945

Heating: Forced air

Last sold: Sep 2005 for $105,000

i dont know what to do from here but i will figure it out. is doing a subject to risky? do i need a lot of money? any other advice

A subject to is not worth it if the property is underwater. You're basically inheriting $20,000 of disequity. So you can't resell it and I highly doubt a property that upside down would cash flow.

For this to be a good deal I think the seller would have to bring money to the table. $20k for you to buy it at retail and hopefully make it cashflow. I don't see the point of buying it at market value let along above market.

Best of luck!

Originally posted by @Derek LeBlanc:
@Andrew Syrios

okay. maybe underwater isnt the correct term. if he isnt behind on any payments is this still not a good option?

Underwater is the correct term, it just means that the mortgage on the house is more than the value of the property. A subject to generally only works if there is equity in the property, regardless of whether the owner is behind on his mortgage or not.

Originally posted by @Derek LeBlanc:
@Andrew Syrios

okay thank you. typically much equity for an example? if there is enough equity in the house why wouldnt i just wholesale it or flip it?

It always varies, but the main reason to do subject to's is that it allows you to hold or lease option a property without putting a bunch of money into it. Or if you want to flip it and it needs some work, you can subject to it and save a lot of money by not getting a hard money loan or not have to put down a down payment with a bank loan (if you can even get one on a fixer as an investor). That way you can save money on your holding costs and thereby make more profit on a flip.

Originally posted by @Derek LeBlanc:
and last question. thanks for your help @Andrew Syrios

@Troy Best

is there anything i can do for this guy? or shuold i call him back and tell him he is screwed

Do you know a realtor who specializes in short sales? If so, recommend the owner contacts him and maybe send along an offer so the agent can start negotiating with the bank immediately (and maybe, just maybe you can get a good deal).

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