taking over house payments

What is a "SUBJECT TO" real estate deal? a.k.a Taking over house payments and getting the deed.

What is a "SUBJECT TO" real estate deal? a.k.a Taking over house payments and getting the deed.

Hey gang, this is mike with MyRealEstateDojo and I want to explain to you today what a “SUBJECT TO” deal is. I know I’ve done tons of videos explaining how to find motivated sellers, how to find “SUBJECT TO” deals, what is the paperwork you have to use. But I realized that I’ve never done an actual video where i zoom out and help you explain what a “SUBJECT TO” deal is so let me go ahead and define what a “SUBJECT TO” deal is. 



Discover How To Taking over house payments and getting the deed.

“SUBJECT TO” deal is a creative financing where you’re able to step in to sell their shoes and take over their house payments and not get a loan and not to use your own credit okay let me put it another way and “SUBJECT TO” strategy is a creative financing, basically an owner financing, when I say owner financing, is a variety of different types of owner financing, and “SUBJECT TO” is one type of owner financing, ok. So again, a “SUBJECT TO” is a strategy where you buy a real estate with or without your own money without your own credit and all you do is step into the seller’s shoes and take over the payments of the existing loan or the existing mortgage now when I say that many people have many different kind of questions like “hey it’s subject to legal” “why would a seller want to sell their home SUBJECT TO?” “where do you find SUBJECT TO deals?” okay and “what type of deals can you get by SUBJECT TO?” and I’m going to go run through all this stuff and explain this stuff to you guys okay.


The very first thing that I hear all the time “is SUBJECT TO legal?” okay. Right now, today is i believe the 27th I’m heading to a title company; I’m going to be closing on the “SUBJECT TO” deal. Just about two weeks ago i did another deal and if the “SUBJECT TO” was Illegal; the title company would not be giving me the cash. Let me tell you about the title companies guys, and you guys understand this, is that when you want to go to closing in, when you want to get the money from the lender, the title company you know micromanages you and makes sure all the I’s and the T’s are correct. About six months ago, I have a subject to closing and my license was expired so the title company wouldn’t give me the property or getting amount money because my title and my license was expired, I had to go renew my license. So what does that mean to you in a “SUBJECT TO” deal? If it’s “SUBJECT TO” strategy was Illegal then the title company will not give my money. 


Now here’s another thing i want to show you, this is called a HUD-1. This is a deal that I’ve just done by a couple of weeks ago and if you look at a HUD-1 line 203 and then line 5 verse 3, it says buying property “SUBJECT TO”. I don’t know if you guys can see this, but let me look for right here in line 203, there we go right there, and line 503 says buying property subject to desist mortgage, and this is my HUD-1 that I got a couple of weeks ago where you know I made sixty-two thousand dollars and I’ll do a quick video about this and fully explain where I made sixty-two thousand dollars selling a “SUBJECT TO” property okay and that’s some equity cash shot only that does not include the monthly cash flow that I got from this property, from all the years, that I’ve had it for. 


So to answer your question number one, Is “SUBJECT TO” legitimate? Is it legal? 

Well, I just showed you a HUD-1 of a property that I’ve done “SUBJECT TO”  and I’ve done many other deals be looking to my YouTube channel, if you look into my Facebook, you get to see that I’ve done many deals “SUBJECT TO” okay. So to answer your question, is “SUBJECT TO” legal? I’m not an attorney but from the title companies that I’ve closed all these deals from, it looks like it’s very legal. It actually says it on a HUD-1 buying property such a queue line two or three or five or three depends if you’re looking at the buyers or the sellers section so if it was Illegal it wouldn’t be on a hard one guys.


Now the next question I hear all the time is, “Why would a seller would want to sell their home SUBJECT TO?” “Why would a seller just take over their payments?” “Why would a seller just forgo their social security number to you and their existing wrong to you? And say “hey you know what I’ll just let you just takeover my payment” so I want to sell it do that okay. That’s a really really good question and I first when I first got into the business I’ll have the same exact question as you had why would a seller give me their property and give me their social security number and allow me to make payments on them and I couldn’t understand it okay and as time went by I learned what is called a motivated seller okay.


Now let me define what a motivated seller is. A motivated seller is somebody that must sell their home and it’s divided into two categories you have motivated sellers that are financially in trouble which means that for example they lost their job or there was a death in the family or they got a pay cut okay they’re financially motivated which means that they don’t have the money to take care of that debt service anymore which, what does that mean?, they don’t have the money anymore to make the monthly payment on that mortgage anymore and that’s what I call category number one of motivated sellers where they’re financially motivated. 


But there’s another category, category number two are emotionally motivated. They’re not having a financial hardship, but they’re emotionally motivated a great example is myself I just had a, you know, family dispute. My brother betrayed me and I wasn’t financially motivated but I was psychologically motivated and I ended up selling all my properties that a tremendous discount because I just want to get out of here okay and so I always said that the best deals or the ones are emotionally motivated because the guys are emotionally motivated they have money but just I want to deal with the problem anymore let me give you some examples of what emotionally whatever individual may look like. Number one, somebody has been in that house let’s say, i live in Florida, my parents live in Dallas and my parents died and they give me their house, I don’t want to drive from Florida all the way back to Dallas to go into my parents’ house, take off the trash, take off all the good stuff, and so I don’t want to deal with that so what I could do is just sell that a deep discount that somebody is willing to take care of that problem for me. Another emotional motivated situation might be that I’ve been married. I have money, my ex-wife has money but we decide to just split apart and we don’t want to deal with this house anymore because were emotionally motivated. 


So coming back to the story why would seller sell you their property and allow you just to take over their monthly payments it’s because they’re motivated sellers out there and motivated sellers are divided into two categories financially motivated and emotionally motivated and both of these people will give you great great deals if this sixty cents on a dollar type of deal or they will just let you take over their house payments in one sense okay. 


So now we talked about what is the “SUBJECT TO”, we talked about is it legal when I just showed you a HUD-1 where you know it says subject to running 203 and 503, and we also talked about why the hell with a seller sell you and me a property and let me just take over the house payments is because of emotional motivation or financial motivation. Now motivated sellers are in all markets it doesn’t matter if the market is hot like today they’re motivated sellers, why people lose their jobs every day, people have death everyday, people have divorces every day. So motivated sellers will be in the market and they will be in a down market okay. Now when the market is crashed like the 2007 fourth quarter 2008 2009, there were way more motivated sellers out there than they are today and I’m not going to argue, or disagree that but remember this, it doesn’t matter what the skies look like, there’s always going to be motivated sellers in the world because a financial problem or psychological problem, okay.


So my next question is how you do find motivated sellers and that’s a really really good question. I’ve actually done a video where i showed you 42 ways to find more different sellers for free or almost for free so let me hit that one more time. I have a video on my YouTube channel where I showed you 42 ways to find motivated sellers for free or almost free and I showed you exactly what I’ve done to find motivated sellers like this one right. I spent just a couple of grand, lots of property rented it for like I don’t have to pay work in front of me maybe like four years or seven years I babysitted. I deal with all the headaches of renting it out doing eviction, but end of the day, you can see that I net cashed out sixty-two thousand dollars plus, okay, off one fucking deal and if you look back in on YouTube channel, you’ll see that every deal that I sold “SUBJECT TO” I made a hundred thousand dollars per each property in over four to seven years spam i bought the property in the crash and i sold in the bubble so again the proof is in the pudding there’s a hard one.


I know there’s a lot of guys out there to say they made all this money but and I want to show you the HUD-1s you can see my head one where I cashed out sixty two thousand dollar plus off this deal. I’m heading to the title company right now it’s twelve o’clock and I’m going to be closing another subject to deal alright, the next question i hear all the time is, well, Mike, “what type of deals cannot buy a SUBJECT TO?” and that’s a really really good question for some reason, many people think that you could only buy “SUBJECT TO” at this foreclosure. I get the people are going to foreclosure and that’s bullshit there’s all kinds of deals you can buy “SUBJECT TO” it doesn’t have to be a pre-foreclosure to get a substitute. I already explained motivated sellers will wound you their property for not long as you learn how to negotiate structure a deal and market and talk to sellers. 


So what type of deals can you buy with a “SUBJECT TO”? Guys, you could do what I do, I’m a buy-and-hold guy I buy “SUBJECT TO” and I rent them out for years, several years where the market goes up I cash up, you can do fix and flips.  So many guys out there spend money marketing and they don’t have the money to purchase the property so they go to a hard money lender pain eighteen percent. Eighteen percent interest rate given to them. Three to six points etc., well you could buy property “SUBJECT TO” and do a fix and flip and the recession. I whole sold a couple of properties that are “SUBJECT TO” because I’m not a fix and flip. I hate managing crews, I hate you know getting my hands dirty, I’m a computer guy okay so what I did is I got a deal. it was a great deal, was like 50 cent 60 cents on the dollar I negotiated with the seller for him to just let me take over the monthly payments and then I just wholesale that deal to another investor that was a fix and flip so to answer your questions, what type of deals can you deal with “SUBJECT TO”? You could do land lording, you could do fix and flips, you can do whole selling, okay many people don’t understand that you can wholesale “SUBJECT TO” what that means is you mark it, you find a motivated seller you negotiate you put the deal on the contract and you just assign your contract to another investor that’s willing to buy and hold, do a fix and flip depends on the property and then negotiation. So many people don’t understand the wholesale “SUBJECT TOs” and I’m here to tell you, you can make good money whole selling “SUBJECT Toss”, you can buy “SUBJECT TO” fix them flip okay. 


The other thing you can do with “SUBJECT TO” is what’s called owner financing, is where you’re becoming like the Federal Reserve where you’re creating money out of nothing okay and the way that works is that for example i buy a house “SUBJECT TO” from the seller I turn around and I sell it to end retail buyer that can get a loan, who can get a loan, okay. Many people to have their own businesses can get along because for whatever reasons the banking institution mafia that have different criteria or people that are self-employed or people that don’t have good credit but they have shitload of money. So what you can do is for example buy property “SUBJECT TO” wrap it around an owner finance, somebody that can get a loan and you could make three types of profit zones you could give the down payment you get the monthly cash flow and you get the end profits okay. How did that work? I have tons of videos. I explained to you guys how to structure it you’ll to get three properties owns from a “SUBJECT TO” do. 


So to summarize it up you can do “SUBJECT TO” for a fix on flips, you can do “SUBJECT TO” for whole selling, you “SUBJECT TO” for being a landlord, you could do such excuse for owner financing. So subject two is a very very very powerful tool strategy that you can buy houses with none of your own money and without your own credit and that’s so very very important because whenever you go to get a bank listed from a bank in America, to buy a house what the bankers do is two things. 


Number one thing they do, is they have you sign what’s called void deed of trust where you place the property back to the bank in case you default so what that means is if we default you don’t make the payments of the bank. The banks that are coming foreclose on you. So that’s the first thing they do they make you sign what’s called void deed of trust. The second thing they do is they make you sign a promissory note which basically says that if you default, not only is that Bank going to come take your clatter or the property, but they’re going to come after you personally. They’re going to come after your credit, they’re going to come and see you for the deficiency etc. okay so whenever you go to a bank of America and you get a loan or mortgage to buy your property, you’re basically hanging yourself two ways you’re giving the other choice and you’re also going to be pledging your social security on a personal note that says you guaranteed to make the payment. 


Where when you buy a property “SUBJECT TO” you could negotiate like the way I teach my students to get a non-recourse loan and a non-recourse loan says “hey mister seller, I’m going to buy your property I’m going to take over the payment but if I default I’m willing to let you take my collateral, in this case, the house only but I’m not allowing you to come after me personally I’m not allowing you to come ruin my credit personally because I’m not going to sign  a promissory note so it’s very very powerful strategy to buy real estate because a when somebody runs your credit card, your desk to income ratio or your credit, when they run your credit, your desk to income ratio, it’s clear you don’t have any debt associated with you. Where if we go buy a house traditionally get a loan from us a bed when somebody runs your credit they’re going to see that you have that loan associated to your desk to income ratio, the strategy, what I teach you,  how to buy properties with no non-recourse loan. When somebody runs your credit they’re not going to be able to see the debt to income ratio because you’re not taking on that debt okay, which is a very very very very powerful powerful way to buy properties. 


So guys now explain to you what is “SUBJECT TO” is simply put “SUBJECT TO” the owner financing strategy where you buy properties without using your own money. What are using your own credit and all you do is you step into the seller’s shoes and you just take over them up the monthly payment or you just take over the existing mortgage. I also talked about if it is Illegal and I just showed you on a HUD-1 which is a government agency paperwork if you want to say that where it says line 203 inline 503 buying existing loan taking subject to so if it was Illegal it wouldn’t be on the HUD-1 then. I also answered the question why would a seller sell their home “SUBJECT TO” and because they’re motivated and there are two types of motivation. We have financial motivation and then we have emotional, psychological motivation and I’ve as I already explained the best deals are in the psychological motivation just like I was a couple of months ago okay. 


Now next point, I explained to you how to find motivated sellers so you can find “SUBJECT TO” deals and I have like I said on my YouTube channel have it 42 ways to find motivated sellers for free or almost for free and I tell you exactly what I’ve done to find motivated sellers but I’ll give you two of my favourite ways to find subject to deals. The number one way is working the expired MLS leads again. That’s a gold mine to me; it’s like fishing in a barrel. You’re working people that try to sell their home that couldn’t and they’re probably motivated okay. Many people tell you to work the foreclosure list. I don’t work in foreclosure list, it’s just many people, there are too many dicks, there’s too many fishermen fishing at the same pond. I don’t work the foreclosure list there’s not enough time I usually have to fork over so many months in their rears to cure the loan. I don’t like to do that I like to catch them before during behind I like to catch them where they try to sell their home traditionally they couldn’t and I come in there and I save them so my favourite way to find “SUBJECT TO” deals is to market to expired MLSs. 


My second best way to find motivated sellers to buy property subject to is driving for dollars and I like to drive in subdivisions like if you’re from in a Dallas fort worth area for example Frisco, it’s a great area for “SUBJECT TO”  deals because you have all these builders building homes they have the phase one they build these homes and then I go to Phase two and then they build face tune ago phase three well while when they finished phase one and they go to phase two if a home seller wants to sell their home it’s going to be very impossible for them to sell their home because they’re competing with the builders. So phase one gets done and builds, let’s go to Phase two and then people in the sellers in the face don’t want to sell that property and they can have extremely hard time because you’re competing with the builders. 


What do I mean by that? The builders provide 10 year warranties; they provide a new paint, new floors they’re providing all these concessions to get the buyer in, where the seller now is selling a home at the home they have lived in different years. It doesn’t have the new paint and carpet smell, it doesn’t have the warranty, the foundation, all the stuff that you get with a new builder, so when it’s 1am when a seller tried to sell at home in a new sub division they’re going to be in an extremely extremely difficult situation because they’re competing with the builders and then they’re also competing with other people in that sub division. And what I realized is that in the new areas where you have these cookie cutter homes there’s a lot of great “SUBJECT TO”  deals if you just drive for dollars, you and do bandit signs, okay you drive for dollars you do bandit signs so my two best ways to find subject to deals is work the expires and drive and do bandit signs and cookie cutter areas where there the home builders are still in that area in there finishing phase 2 phase 3 phase 4, because the people in phase 1 and phase2 they may want to sell it they may have gotten motivated and when they try to list their home they’re competing with home builders that they’re providing warranties and all these great things that the seller cannot do and what happens is that usually that sellers probably lived in that home for a couple of years they haven’t built enough equity and they’re going to be in a situation where you use a great “SUBJECT TO”.


Let me add this other thing, before I get off, is that many people think that you could only buy “SUBJECT TO” if the house has no equity or marginal equity or negative equity. So again, many people think you could only get a “SUBJECT TO” if the house has no equity or marginal equity or little equity and i would say that’s kind of like fifty percent true, the other fifty percent is not, because I bet a lot of people did not buy homes from sellers that willing to give me fifty percent off the asking price or fifty percent with the fair market values and they’re willing to give it to me “SUBJECT TO”.


So as I explained earlier, if you’re dealing with motivated sellers that are actually motivated then you may not be able to get highly equity home, this way you might only be able to find “SUBJECT TO”  deals that have marginal equities, ten, fifteen, twenty percent or to have no equity or they have negative equity okay. However, if you deal with emotionally motivated sellers you’re going to be able to find motivated sellers to have significant equity I just don’t want to deal with the situation no more maybe the brother betrayed them like me, maybe they got into a divorce maybe there was a definite family maybe their wife died, they don’t want to deal with that shin o more, they’re willing to just give it to you at a deep discount and if you’re smart enough to negotiate well you don’t have to bring the cash you just take over the existing loan. It’s a very very very powerful way to make a lot of money in America, that’s why I say Americans; the grass is so green here.


That’s pretty much it, guys oh I love “SUBJECT TOs”. I had my master’s degree in “SUBJECT TO” there’s many different types of deals out there and different types of investor. There are investors out there that buy HUDs, there’s investors that buy Oreos, There’s investors that buy tax liens, my specialty the only thing I do is “SUBJECT TO”  deals dude, because this is such a great way to put no money down or just a couple of thousand dollars down on the property, get the deed into your name and then put renters in there, let the renters pay off that fucking debt while you’re getting all the depreciation, while you’re getting all the interest right.

Leave a comment

Please note, comments need to be approved before they are published.