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Investing Using “Subject-To”

Updated: Mar 31, 2022

Claiming The Tax Benefits

One great real estate investing strategy which requires no credit and sometimes little or no money is to take over the property “Subject-To” the existing loan.  This basically means the seller is willing (for one any number of reasons) to deed you their house if you agree to make the payments on their loan.

There are many sellers out there who are facing foreclosure and are willing to deed you their house if you will save them from being foreclosed on.  This way, the seller’s credit is saved, which may mean a lot to them.  In other cases, the seller may not care about their credit, but they’ll still deed you the house if you’re willing to give them some moving money.  The situations are pretty much endless and these types of deals are being done on a daily basis across the country.

No Credit Required

When you take a property “Subject-To” the mortgage, you are not formally assuming the loan; therefore, you won’t be using your credit to do the deal.  Furthermore, your name does not appear on any of the bank’s documents and you’re not personally liable to the bank for payments on a note you took over “Subject-To”.

Little Or No Money Required

The only money you will need would be for making up any past due payments the seller didn’t make.  You may also agree to give the seller some moving money as part of the deal.  From then on, the only other money you should need would be for any repairs and of course the monthly payments on the seller’s loan.

Very Little Closing Costs

The only closing costs you will have are for recording the deed.  We’ll cover how to draw up your own quit claim deed in the Agreements Module and there is no need to have a formal closing at a title company.  You can simply have the deed notarized and then go down to your court house and have it recorded.  In addition to paying a recording fee on the deed, some states may require you to pay a transfer tax.

When taking over a property, it would be in your best interest to at least have the title checked, which could cost you a couple hundred dollars.  You can get title insurance on a property you took “Subject To”, but you may find a few title companies that won