Subject To Real Estate Investing: A Win-Win-Win Deal
As a real estate investor you should be familiar with alternative nontraditional financing methods. Every property owner you meet will be in a different situation and have different motives for selling. When you are able to choose from a variety of financing options then you can tailor the purchase to each situation increasing your profits and reducing your risk.
“Subject to” is an excellent option when the seller is highly motivated to move their home as quickly as possible. Subject to means that you purchase a property subject to the existing financing. Ownership of the property is transferred to you but you don’t assume the existing loan. Rather you just take over the payment book and start making the loan payments yourself each month. Once you have control of the property you can rehab it flip the house for a profit or find a tenant.
Why would a seller even consider this arrangement? There are many reasons. The seller is almost always in a situation where they want to sell the house quickly. They have a problem that needs a fast solution. It may be due to a relocation for work an impending foreclosure or they may have even inherited another house.
The most common concern sellers have is whether you’ll make the payments as promised. You should have no trouble gaining the seller’s trust if you’re confident about what you’re doing and fully accept that you are responsible for keeping up the payments.
Subjectto real estate investing is not without risk. You should be aware that many home mortgages include a “due on sale” DOS clause. This means the lender has the right to call in the loan that is demand payment of the balance in full upon transfer of the title.
Most experts think that in today’s economic climate lenders are unlikely to exercise the due on sale option especially if the loan payments are made regularly on time and without interruption. However this is a contingency you need to consider. If the lender exercises the DOS clause you’ll need to arrange for your own financing or find a joint venture partner who has the cash to cover the balance.
Subjectto investment deals can be completed quickly because there’s no need for qualifying with a lender. And with no closing costs a subject to agreement is less expensive than a traditional sale. Once you understand the mechanics of subject to you’ll find it to be one of the easiest and least complicated financing arrangements you can put together.
Although some may question the ethics or legality of the arrangement subjectto is a legal and ethical way to purchase property. In most cases you’ll be helping sellers out of a tight spot providing rescue in their time of need. Everyone gets what they want in subject tothe seller gets rid of the property the lender keeps receiving their payments with interest and you stand a good chance of making a tidy profit.
About the writer: Raj Aloke is an experienced real estate agent and writer of the same. He feels Real estate is one of the best investing strategies.To contact raj.alokegmail.com and to know more on real estate investmentreal estate investing resources please visit http://www.realestateinvestingresources.net.
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