Subject To | Real Estate Investing For Beginners

Summary

The 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

00:00

😊 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.

05:01

😃 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.

Keywords

💡subject to

"Subject to" is a real estate investment strategy where a buyer purchases a property without taking over the existing mortgage loan. They become the owner of the property, but the mortgage stays in the seller's name. This saves the buyer from having to qualify for a new loan. For example, the transcript mentions buying houses and triplexes with existing mortgages still under the sellers' names. This allows quicker and easier property acquisition.

💡deed

A property deed is a legal document that transfers ownership of real estate from the seller to the buyer. Even when buying a house "subject-to", the deed transfers to establish legal ownership. This is like getting a receipt for groceries - it proves who owns the items. The transcript gives the deed example to illustrate how "subject-to" home buyers take ownership without assuming mortgage loans.

💡ownership

A key aspect of real estate investing is establishing legal ownership of a property, despite not always making mortgage payments yourself. The transcript uses examples of buying groceries on credit cards and getting receipts to show ownership. This is analogous to buying houses "subject-to" where you control properties without assuming or paying down existing mortgages right away.

💡qualify

An advantage of "subject-to" home buying is avoiding stringent lender guidelines for qualifying for mortgages traditionally needed to purchase real estate. Since buyers don't take on loans, issues like income, credit rating, bank statements, etc. become less relevant. The strategy facilitates quicker property investments.

💡assume

Assuming a mortgage loan means taking legal responsibility for making the remaining payments. "Subject-to" avoids this, allowing investors to take ownership without the burden of mortgage assumptions. The transcript stresses how you take over houses while sellers still retain loan obligations.

💡credit

The script draws analogies between using credit cards to buy groceries and home sellers taking out mortgages - in both cases third parties front money while buyers/owners repay over time. This credit concept helps explain how "subject-to" home investors can control properties without direct loan obligations.

💡payment

"Subject-to" buyers become responsible for making ongoing mortgage payments, but loans legally remain under sellers' names. Just like grocery credit card payments, home loan payments shift to new property owners. But banks track obligations to original borrowers, not new buyer payments.

💡transfer

A key process in "subject-to" transactions is officially transferring property deeds and ownership from sellers to contractually agreed buyers. This parallels exchanging receipts and grocery carts discussed in the transcript. It distinguishes legal transfers of ownership from formally assuming mortgage loans.

💡name

The transcript repeatedly emphasizes that with "subject-to" home buying, only legal ownership changes hands from sellers to buyers. This means property deeds list new owners, but underlying mortgages continue having the sellers' names. Loan obligations remain with original borrowers even after transferring homes.

💡borrow

The video script draws comparisons between home mortgages and grocery credit cards - in both cases, third party lenders provide money upfront for repayments later. This borrower-lender relationship persists in "subject-to" deals, with buyers reimbursing sellers for ongoing mortgage payments tied to the homes changing ownership.

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