Posted over 6 years ago


The definition of “subject to” investing is a method of purchasing properties while leaving the sellerʼs loan in place. In essence, it allows you to not have to get new financing for the property - you are buying the property that is “subject to” the existing debt. Now, I am going to walk you through the benefits of becoming a “subject to” real estate investor and give you the opportunity of choosing this win-win investment strategy.

The beauty of “subject to” investing is that you are not assuming the mortgage. All you are taking on is making payments on behalf of the original seller. This scenario provides the buyer with no personal liability/little risk. There might be times or situations when seller of that homeʼs loan is called due. A typical question that ensues after such an occurrence is what would happen to the lender if they called that loan due? Usually, if a lender has taken back a property either by foreclosing or calling a note due, they are penalized by the government for having a non-performing loan. Here comes in the no personal liability to the buyer (you): upon sale of the property “subject to” existing mortgage by owner, the buyer will be making the payments on the mortgage or suffer a loss of property by foreclosure. The benefit to you the buyer is the foreclosure is not going to affect your credit record as you were not legally obligated to make the payments on that existing loan. The sellerʼs credit record will be adversely marred. You are not legally obliged to make the payments, but I am sure your overriding moral conscious is what will keep you in check.


  • Find a motivated seller.
  • Pick a fixed rate loan on the property as adjustable rate mortgages tend to easily increase your monthly payments which means less cash flow for you.
  • Choose a low fixed rate.
  • You have the option to choose a seller who has a lot vs. little equity on the property - either way the deal will work successfully.


    The buyer is the helping the seller get out of situations where they are in over their head such as time and debt relief. For instance, some possibilities of change in oneʼs life is that they are being transferred because of their job, getting divorced, buying another home or just plain old financially strapped. That means, you can buy right away. This will give the seller instant debt relief and free them of their dire situation. Another scenario is that the seller may not have good credit and is unable to purchase home

through standard methods. Buyer is gaining financially while at the same time assisting people in need by providing them with instant relief.


The following strategies enable you to make money when buying a subject to: getting paid to buy from seller; ensuring there is a non-refundable consideration option from the tenant or buyer; spreading the lease and mortgage payment that you receive; earning a back end profit because you are acquiring the difference between what you paid for the home and what you sell it for; and lastly depreciation and interest deductions amount to tax benefits.

I hope I have given you a taste of few of the benefits. Overall, my belief is that the purchase of a “subject to” home is a speedy, low risk and highly rewarding investment opportunity. It requires little money to begin buying as well as instant ownership and not being legally bound/saddled with loans in your name which are in my opinion some of the great perks. In addition, one does not have to qualify for financing plus you have the luxury of saving on time and closing cost. Lastly, you are able to leverage someone elseʼs credit - it does not get any better than that. My counsel to you is to jump in and start experiencing the financial rewards and freedom today.

Comments (5)

  1. How does the insurance work after the close? Which party is obligated to keep up the insurance.  You would be paying for it, could you not change the policy say to a higher delectable?

  2. @Moshe H. yes due on sale is a real risk however I've personally never heard of it happening in my experience. Sellers willing to do a Sub2 usually are in a tight situation. They are behind on payments and can't afford to fix the home up and sell it on the market. Or they have little to no equity in the property. An investor can come in and give them cash now and take over their payments so they can avoid foreclosure. 

  3. Why would someone sell subject to, when there is a very real risk that the mortgage lender will call the mortgage due (as they have a right to do whenever the deed is transferred) & foreclose on the property, destroying seller's credit?

  4. @Bob Mastroianni Yes, you have a closing and the title goes in your name except the mortgage. In regards to taxes it would be best to speak with a CPA and one that actually owns real estate. Here's one example I just experienced. My father in law inherited a home and assumed the mortgage in to his name. However he didn't want the property so my wife and I took it over. We quit claimed the property in to our LLC and left the mortgage with my in laws name. At tax time he claimed the mortgage interest and I claimed the the straight line depreciation and expenses. 

    Also in regards to the insurance policy keep it the mortgage holders name and add yourself to the policy. 

    Thanks for reading my blog. 

  5. Nice article. This something I have looked into a few time & feel like I'm hearing different answers from different people. When you buy the property as "Subject To" do you have an actual closing? Does the title transfer to you, etc? I gather that there is a settlement & everything transfers into your name except the mortgage, is that correct? And you really piqued my interest when you mentioned tax deductions & depreciation, which tax deductions etc would you be able to claim? I would think that since the mortgage is still in the seller's name (previous owner) and the tax forms would come in the their name that they would be able to still claim the mortgage interest as a tax benefit, am I wrong?

    Thanks for your help & thanks for writing this article, as you can see it's something that I've thought a lot about but am nervous to pull the trigger on this type of purchase.