Subject To | Real Estate Investing For Beginners
Summary
TLDRThe video script explains the concept of 'subject to' as a strategy for acquiring control over a property without the need to formally assume the loan or provide proof of funds. It is described as taking over someone else's existing debt while transferring the property's deed into the buyer's name, though the mortgage remains in the seller's name. The narrator uses an analogy comparing this process to buying groceries with a credit card to simplify the concept. Essentially, 'subject to' allows for property ownership transfer while the financial obligations remain tied to the original owner's name, enabling investments without traditional loan qualifications.
Takeaways
- 😊 Subject-to is a strategy for acquiring control of a property without taking over the existing mortgage
- 👍🏻 With subject-to, you take ownership by transferring the deed but the mortgage stays in the seller's name
- 🏠 It's like using someone else's credit card to buy groceries - you own the groceries but didn't take out the credit card
- 🤝 The buyer makes payments to the seller, who continues paying the mortgage with the bank
- 📜 The only thing that matters is that your name is on the deed, like having the receipt for the groceries
- 🚀 Subject-to works for all kinds of assets, not just houses - it's a way to take over something without formal debt assumption
- 🙌 You don't need to qualify for a loan, show financials, or formally assume the debt to buy subject-to
- 💡 It allows investors to access real estate deals without traditional financing contingencies
- 💰 The strategy lets investors get control of assets without large upfront cash outlays
- 📈 Once you control the asset, you can profit from appreciation, rentals, fixer-uppers etc
Q & A
What is a subject-to transaction?
-A subject-to transaction is a strategy for acquiring control of a property without having to qualify for a new loan, assume the seller's existing loan, or show proof of funds. The buyer takes over the seller's existing mortgage debt and property ownership by having the deed transferred to their name, with the mortgage remaining in the seller's name.
How is a subject-to transaction similar to using a credit card?
-With a credit card, you are borrowing someone else's money to buy something, but you still retain ownership of the purchase. Similarly, in a subject-to home purchase, you take over the seller's mortgage debt to acquire the home, but the deed/ownership is transferred to you.
Why would someone want to do a subject-to transaction?
-It allows quicker and easier acquisition of investment properties since you don't have to qualify for financing. It's a way to build a rental portfolio without needing a down payment or proof of income/funds for each property.
What risks are involved with a subject-to transaction?
-The main risk is that if the seller stops making payments on the underlying mortgage that you took over, it could lead to foreclosure and you losing the property. You also have less control without being on the actual loan.
What happens if the seller defaults on the mortgage I took over?
-You would likely lose the property to foreclosure. This is the main risk, so it's critical to choose a financially stable seller and property when doing a subject-to purchase.
Do I need to make payments on the mortgage I take over?
-Yes, you or the seller need to continue making the mortgage payments to avoid default and foreclosure. Often buyers will make payments to the seller each month.
Can I get a mortgage on a property I acquired via subject-to later on?
-In some cases yes, through a cash-out refinance you may be able to qualify for your own financing and pay off the seller's mortgage that you originally took over.
What documents transfer in a subject-to transaction?
-The grant deed transfers to convey property ownership, while the promissory note and deed of trust stay in the seller's name to keep the mortgage in their name.
Are there other creative financing strategies like subject-to?
-Yes, other common strategies include lease-option contracts, seller financing, wraps, and land trusts. Subject-to tends to be one of the simplest and most straightforward methods.
What are the main benefits of a subject-to transaction?
-Speed and ease of acquisition, no loan qualification needed, and the ability to build an investment portfolio without large down payments or cash reserves.
Outlines
😊 What is a subject-to real estate transaction?
A subject-to transaction is a strategy to acquire a property without having to qualify, assume the loan, or prove financial ability. The buyer takes over the seller's existing mortgage debt and ownership by transferring the deed into their name, but the mortgage stays in the seller's name. It's like using someone else's credit card to buy groceries - you own the groceries even though you used the credit card company's money.
😃 Examples of buying houses using the subject-to strategy
The person explaining has used the subject-to strategy many times with a partner to acquire various investment properties like a triplex, a 4 bed 4 bath house, a 6 bed 6 bath house, and Airbnbs without having to qualify or assume the loans. It's like someone shopping for a barbecue, using their credit card, and then someone paying them to take over their credit card payment and the groceries - getting the food for their own use or to resell at a profit.
Mindmap
Keywords
💡subject to
💡deed
💡ownership
💡qualify
💡assume
💡credit
💡payment
💡transfer
💡name
💡borrow
Highlights
Subject-to is a strategy to acquire control of a property without having to qualify, assume the loan, or show proof of funds.
In a subject-to transaction, the buyer takes over the seller's existing mortgage and debt while transferring ownership to themselves.
The mortgage stays in the seller's name, while the property deed transfers to the buyer - similar to using someone else's credit card.
The property deed is like a receipt - it shows legal ownership, just like a grocery store receipt shows you own the groceries.
Subject-to allows buying property without qualifying, assuming debt, or showing proof of funds - just taking over payments.
We've bought houses, triplexes and Airbnbs using subject-to - taking over someone else's mortgage payments.
When you buy with debt, the debt holder doesn't own the asset - same with houses and mortgages.
Someone could take over your car or credit card payments and acquire those assets from you.
Subject-to works for buying almost anything by taking over someone else's loan payments.
Only the property deed determines legal ownership - not the mortgage details.
Many people falsely believe you must qualify, assume, or show proof of funds to buy a property.
Subject-to has allowed us to acquire amazing real estate investments across the country.
We've taken over payments on liens, air conditioning, cars - endless possibilities with subject-to.
The mortgage lender doesn't care who makes the payments, only that payments are made.
The key is getting your name on the property deed, while payments go to an existing mortgage.
Transcripts
um
subject to is a strategy one of multiple
strategy of acquiring
control of a property
okay it's a strategy to acquire control
of the property because just because i
bought something subject to doesn't mean
i actually have to own the property
which is interesting
okay
it is the process of buying a home
without having to qualify without having
to assume the loan
without having to show bank records tax
tax records proof of funds or anything
really
what you're doing in subject-to is you
are taking over somebody else's existing
debt and you are taking over the
property so what happens in a subject-to
transaction is
somebody owns a house
that house has a mortgage to wells fargo
you the buyer instead of paying off that
mortgage to wells fargo you simply
take ownership of the property by
transferring the deed or the the own the
certificate of ownership
into your name
but the mortgage always plays in the
seller's name
so the way i look at it is this cody do
you do you buy um things with a credit
card
yes
okay so what kind of credit card do you
have by the way
a max dog okay so cody's an amex guy i'm
an amex guy too i buy literally the
first card on my wallet right here is an
amex it's one of two things i carry on
my wallet it's an amex right so
everything is paid for with somebody
else's money
we agree with that right
so you go to the grocery store
cody let's say you go down to the
grocery store to
albertson's bashes smith's krogers
whatever it is wherever you are in the
country
and you buy
200 worth of groceries with your
american express
who owns those groceries
i do
you're telling me that even though you
use american express's money to buy
those groceries those groceries are not
owned by american express
correct
okay that's interesting okay so what
happens is you get a receipt right you
get the certificate of ownership or the
receipt of those groceries and you walk
out of that store and if the security
guard stopped you and said how do i know
you own those groceries what would you
show them
the receipt i received
okay but hold on but you still used
american express's money
yes okay so this is very similar to
buying a house
okay so what happens is when you go down
to a bank and you go i want to buy that
house over there
the bank loans the money to you to buy
the house
and weirdly the bank doesn't own that
house the bank loaned you the money
you have a debt just like you do to the
credit card company you make a minimum
payment or you can pay it all off in one
fail swoop if you decide to do so but
when you buy a house the receipt of that
house is called a deed or the
certificate of ownership is called a
deed okay in a grocery store it's called
a receipt with a house it's called a
deed but it's basically the same exact
thing it shows who has ownership
so cody let's say you walk outside of
that grocery store
yep
and i run up to you and i go bro i have
no time
i have to hurry and get back to this
party i have at my house i will pay you
for all of the groceries in your cart
plus twenty dollars
and you go
okay great so what what then happens is
i go well i'm not gonna pay 200 in cash
what i'll do is i'll just pay off your
american express next month
could we technically do that yeah why
not so i just subject to your groceries
so i didn't even have to become i didn't
have to even go through the store i
didn't have to pick out the things i
want i didn't have to wait through the
line i didn't have to do anything i
literally just took over your american
express payment and next month i'll make
your american express payment when the
money comes to me okay
so the way i told this story once is i
told the story of essentially let's say
cody you go
all right i'm gonna go out and i'm gonna
have a big barbecue i'm gonna buy hot
dogs i'm gonna buy buns i'm gonna buy
ketchup mustard all that kind of stuff
and you go to the store and you pay full
retail you use your american express you
walk out the store and you've got a
receipt that says you you spent 200 and
you have a grocery cart full of 200
worth of hot dogs yep
why would somebody come up to you
and pay you
what it was worth or maybe even a little
bit more than what it was worth
and uh what would they do with it why
would they why would they even be
willing to do that well think about it
this way what if i went to cody i said
hey i want all those hot dogs and i
could go out and i could stop start like
a hot dog stand and instead of me
you know paying cody 225 or 250 for a
bunch of hot dogs i could go out and
actually cook those hot dogs
sell them you know in front of a
ballpark or at a park or something like
that and i can make 500 600 or whatever
right yep yep it's the same thing with
housing so what cody and i have done so
many times countless times in fact we
just got a triplex in fayetteville north
carolina we got a
four bed four bath house in texas we've
got a six bed six bath house in florida
coming down the pipe we've got these
amazing airbnbs all over the country and
we've bought all of these houses
utilizing this same method
somebody else went out and got the the
mortgage somebody else went out and
borrowed the money in their name
and all cody and i are doing here is
asking them to transfer the ownership to
us
and we just make payments to their quote
unquote american express card so we
didn't have to qualify for the loan we
didn't have to assume or put our name
anywhere
literally
literally
took over somebody else's credit card
payment and just bought and took over
the groceries okay transferred the
receipt
so it's kind of the same thing if you've
ever been to costco cody i don't know if
you're old enough to care about costco
i would go to costco when i was a little
boy with my grandparents there you go so
when you get older you go you have like
18 kids and you need to buy like the
giant rolls of toilet paper
like 100 do you remember what happened
at costco that they took your
what do they do right before you walk
out the door
check your receipt they do a little
check uh a little check off on yours and
make sure that you are the owner you
paid for the groceries right yep yep
okay so when i'm walking out of the
grocery store out of costco do they ask
me who
i borrowed the money from do they ask me
what credit card i use do they ask me
whose credit card i use
no they're just like yo did you pay for
this or not that's exactly how it is in
subject to so what happens in subject to
is that
the only thing that matters to me
is is my name on the deed
right so many people are like that's not
possible that you can buy a house
without a loan without qualifying
without an assumption okay but you do it
with groceries and you do it with
basically anything you buy your credit
card with you're borrowing money
to get something
and the person you borrow the money from
doesn't own it and technically i could
go sell that or i could let somebody
take over my car payments i could let
somebody take over
um you know my groceries like we talked
about
we've taken over air conditioning
payments we've taken over our irs liens
we've taken over state and hoa liens man
there is so it's endless what you can do
with subject-to and it's not just houses
it's literally anything else
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