Need Subject To Help
Can someone provide me the basic high level steps in a subject to deal? (What situations does it work best? How is the property acquired? etc.). I have heard different things from different people, and I am a lilttle confused.
Thanks. Any info is appreciated.
Hi jar99,
Subject to (S2, Sub2) the existing mortgage: is a way to take title to a property, without assumption and leaving the loan in your motivated seller’s name. You become responsible for the payments and can either keep the house as your residence, rent it out, or resell.
When you keep for your own residence you just pay the monthly mortgage payment and live in the house.
When you rent it out you charge a rental amount above the mortgage payment, tax and insurance costs (PITI), then any extra ($100-$300 a month, depends upon market) is yours to keep as positive “cash flow” or passive income.
When you resell, my preferred exit, you collect a down payment, whatever the market will bear, the monthly mortgage payment from your new buyer is set up similar to the above rental amount, and a back end profit when your buyer refinances.
HTH
John (LV)
Thanks John. This helps.
Hey John, thanks for the above post. It's very helpful. I'm really new to this so forgive my naive question but I don't quite understand the "back end" profit when the buyer refinances. How does this make you money.
You can private message me if you'd like with the answer.
theodd,
Your back end profit is the difference between the sales price of the house to your new buyer and the payoff of the underlying mortgage.
For a simplified example, your resale price was $110,000 and your underlying mortgage balance is $100,000 then the difference of $10,000 is your back end profit and goes into your pocket.
This again, this is only one of the profit centers we get with our sub to deals.
Best of luck
John (LV)