Subject To Real Estate

What is a Subject To Real Estate?

Have you ever wondered how savvy investors are able to purchase so many properties in a short period of time? Do you wonder what lender they are using to obtain these properties?

I am here to reveal to you a little known secret. They are not using any lenders! What did you say? No lenders? Yes, the key to success as a real estate investor, do not use a lender.

Do the words “Subject To” mean anything to you? What about “Owner Financing”? These are profit centers. There are few differences between the two methods. The primary difference is whom you make the monthly payment to.

Let me begin with Subject To Real Estate. What this means is purchasing property subject to the existing mortgage. The concept is simple. You find a motivated seller.

Now this does not mean the seller is financially distressed. It can mean one of many things such as relocation, divorce, slow market, marriage, loss of interest, inheritance, or desire to upsize or downsize. Whatever the motivation, they can all be of benefit to you the investor.

Once you have identified their motivation, you offer to close on the sale of their property quickly. Or in some cases, you tell them you can close “on the date of your choice”. This puts you out in front of any other potential buyer.

When you can accommodate the seller on their time line, you have just created an ally. They now want to work with you to make this sale happen. You create what is affectionately known as a “WIN/WIN.

The next step in a subject to real estate transaction is to sign a purchase and sale agreement that indicates that the seller is willing to sell “Subject To”. The contract must be signed by all parties and then submitted to your real estate closing attorney.

You want them to run a title search and give their opinion. This will tell you if there is more than one mortgage. When buying subject to real estate, you are buying subject to all encumbrances. This includes, but is not limited to all mortgages, tax leans, and mechanics leans. This is why it is important to have the title searched.

Once this is completed you are ok to close at will! You have just purchased your first home without having to obtain a new mortgage. You now begin making the monthly mortgage directly to the existing mortgage company.

This is the key difference between owner financing and subject to real estate. With owner financing you send the monthly payment to the seller, and hope they send the payment on to the lender.

If they don’t, you wind up with the home being foreclosed on. This is not the most ideal situation and I am not an advocate of owner financing versus subject to real estate.

Can you imagine how this would increase your ability to purchase unlimited amounts of real estate? In this roller coaster ride of the mortgage, you need to educate yourself in these topics. They can boost your income and net worth exponentially!

Subject To - The Good, The Bad, and The Ugly

The “Subject To" or Sub2 method is my personal favorite way of buying property. It is fast, simple, and for me, relatively easy to negotiate with my seller. Is it without risk?

NO! There are hundreds of teachers, gurus and mentors out there selling courses that try to sell this method as “Risk Free!” “No Cash or Credit needed!” This is simply not the case . It is a fantastic method of acquiring real estate but it must be done responsibly and with the proper education.

Get Them to Give You the Deed

This is my area of expertise and as I see it, a great way to build a portfolio for long term cash flow. Think about it, who gets better rates on a mortgage than a homeowner?

As I write this, a homeowner with good credit can get a fixed-rate mortgage for about 5 ½% interest! Imagine having your rental portfolio full of those babies "subject to"! We can show you how!

Maybe you are not into the rental scene (me either) but still want long-term cash flow without the management headaches. My exit strategy on most of my deals is to sell them with owner financing.

Imagine taking over a property with an actual value of 85k for the balance of 70k. Your house has an interest rate of 6% and a monthly payment of $420. You sell for the actual market value of 85k with 8k down and finance the balance of $77k @ 10%. The buyer’s payment to you will be $675 per month. You get 8k in cash up front and $250 per month for the next 30 years.

How many of those do you need to give up the day job???

Who is William Tingle and "Subject To" program?

In June 1999, I was a District Manager for a national restaurant chain. I knew absolutely nothing about real estate, could not tell a deed from a mortgage. What I DID know was that I was tired of working 80+ hours a week and never seeing my family.

One night while out of town for work, staying in a motel room, I was up at 2 am. There on the television was Carleton Sheets. I had probably watched that infomercial 1000 times over the past 10 years but something made me order the program that night.

In the week that followed, while waiting for the course, I was all over the internet, learning all I could about “Creative Real Estate”. I found several websites and met many other investors who seemed to think differently from most of the other people I knew.

These guys spoke of things like “cash flow”, "subject to real estate", and “return on investment”. This stuff was all Greek to me.

My course arrived a week later and armed with the knowledge in that book, I was off and running! I bought 2 houses that first month, both with bank loans. Even though I had little cash, I was fortunate to have great credit.

During this time, I was hearing more and more about this other method of buying property. You just take over payments, the seller deeds you the property while they stay on the loan or take it subject to the loan. Who in the heck would do that, I thought? Not long after, I would find out.

I had a young fellow call me who had just bought a new home 8 months before. He and his wife were divorcing and neither could afford the home on their own. I drove out, we walked through the house (it was beautiful) and I said, “If I could take over your payments until I could sell it, would that work for you?” He said, “What do I sign?” I almost fell off my chair!

I took over payments on that house and sold it with owner financing. I got $13k down and collected cash flow for over 2 years. They refinanced this past summer and I got another 9k. All totaled, I made over $26k on that house.

Since then, I have taken subject to real estate, over 200 houses much the same way. I have since added rehabbing, flipping and Lease/Options to my toolbox but subject to real estate is far and away my favorite; no down payment, no money down, and no credit needed.

Five months after I bought that first sub2 house, I left my full time job for good. Being a full-time investor lets me enjoy life like never before and I thank God every day for making sure I was awake that morning at 2AM to see Carleton Sheets.

Where Will You Be in 5 Years?

My goals are set for the next several years. Are yours? Where do you see yourself in five years? Can you picture being there? Are you willing to work hard enough to achieve those goals?

These are the questions you should ask before jumping into any venture. If you want it bad enough you'll take the necessary steps and have the commitment to stay the course no matter what.

Welcome to our website. If you want to learn more about real estate investing, you have come to the right place. Read the articles, ask questions and share your knowledge.

There are a lot of sites out there and a lot of “mentors” teaching methods of acquiring property. Remember, if you have a question about subject to real estate or any investment strategy make sure you ask an investor who knows!

Good luck!

William Tingle

Return from Subject To Real Estate back to Great Marketing Guide Home Page