Types of "Subject-to" Real Estate Investments

by Ryan Mandigo 10/06/2020

Image by Nattanan Kanchanaprat from Pixabay

If you're looking for "subject-to" real estate, you know it can be a good investment. This kind of real estate is purchased "subject-to" the existing mortgage. So the buyer owns the property, but the mortgage stays in the seller's name. Payments are made by the buyer, but it's not necessary for that buyer to obtain a loan, pay all the fees associated with that, and use their own credit to buy a house. It can be an excellent deal for an investor and for a seller who's facing foreclosure or other types of problems. Here's what you need to know about the different kinds of "subject-to"  real estate.

"Subject-To" an Existing Mortgage 

The most common type of "subject-to" real estate has that designation because it's "subject-to" the current seller's existing mortgage. If you want to buy this kind of property, you won't need to get a mortgage of your own. Instead, the seller will deed you the property and you'll continue to make their mortgage payments. This can help you get properties fast and keep you from worrying about things like whether your credit is good. Not all investors like these kinds of properties, but they can be good choices when they're handled correctly.

"Subject-To" Other Types of Liens 

Even though they aren't as common, it's also possible to buy "subject-to" properties that don't have a traditional mortgage on them. These properties might have some other reason that they aren't free and clear, such as tax or contractor liens. If payments are being made on these things and you don't want to pay them off to buy the property, you can offer to buy from the seller "subject-to" those liens. Just make sure you know what you're really committing to, all the liens on the property and how much they're for, in total.

Who Would Typically Choose the Kind of Investment?

Both single-family and multi-family properties can be purchased "subject-to" existing mortgages and other types of loans or liens. When it comes to these kinds of investments, most investors who choose them are familiar with investing already. That's because there's risk involved, and brand-new investors might not protect themselves against these risks as well as they should.

Still, investors who are careful and want to get started in the market can do well with these kinds of properties because they don't have to use a lot of their own money or qualify for mortgages. Then can simply purchase properties, and that can mean a much bigger portfolio much faster than they would have thought possible. If you're looking for a way to build a big real estate portfolio quickly, buying "subject-to" properties can be one of the ways to do that.

About the Author
Author

Ryan Mandigo

Ryan Mandigo is an award-winning professional broker associate with Omni Real Estate. Originally a native of New Hampshire, his love of real estate began 30+ years ago while swinging a hammer on a framing crew. He has always had a strong passion for helping people, whether it be assisting a couple in purchasing their first home, finding a home that fits a growing family's needs, or downsizing for those with an empty nest. He strives to build strong personal and professional relationships with being a true believer in the power of positive thinking and always willing to lend a helping hand.

He is also a co-founder and board member of the Swing Fore the Kids organization. A local charity that is 100% nonprofit and their sole purpose is to help needy children and young adults within Horry County communities. He finds great satisfaction and pleasure in seeing how working hard for a great cause and raising funds can help others in need. He is also on the Board of Directors for the Waccamaw Youth Center in Conway, where their mission is to provide at-risk youth "A Place To Call Home"

When he is not working, he enjoys music, working around the home, spending time with family and friends, turning wrenches on vintage vehicles, getting some wind therapy on the Harley or chilling with their dogs.

Some quotes he lives by - "Do what you like and like what you do" - "You have to be odd to be number one" - "Dreams don't work unless you do" And one of his favorites. "Positive and enthusiastic thinking in all you do"