Sub 2 Real Estate Deals - Are They Worth The Risk?

A Sub-2 real estate deal involves a seller deeding the property to a buyer while keeping the existing mortgage in place

. The buyer does not formally assume the loan, they just start making the payments while the loan is still in the seller's name. There are many variations on "subject to" deals and as many ways to close a deal as there are investors doing it. We will cover all the steps needed right here.

Obtaining a property "Subject To" the existing loan isn't really as hard as it may seem so long as you know what you're doing. If you know the principles behind the deal and can clearly explain it and its benefits to the seller, you can buy more properties at a faster rate than a traditional investor would be able to by getting new loans on each purchase.

The typical sub2 deal involves having a seller deed the property to you while leaving the existing mortgage in place. There is no "formal" assumption of the loan, you just start making the payments. There are many variations to this type of deal and as many ways to "take one down" as there are investors doing it. We will cover it all right here.

Jalem Grome of Funding Your Rehab.com says "the sub2 method is my personal favorite way of buying property. It is fast, simple, and for me, relatively easy to negotiate with my seller."

Is it without risk? NO!

There are hundreds of teachers, gurus and mentors out there selling courses that try to sell this method as "Risk Free!" "No Cash or Credit needed!" This is simply not the case. It is a fantastic method of acquiring real estate but it must be done responsibly and with the proper education.

Homeowners that are typically behind on payments, individuals that are going through foreclosure or may have little to no equity in the home are among the most frequent motivated sellers which you will be interacting with and perfect for buying Sub-2

If your business is rooted in integrity then you will take the time to explain what you're doing, how the process of the deal works, and how it ultimately benefits them as well as you. They will ultimately benefit because you will be paying the mortgage in a timely manner which will help keep their credit intact and they could potentially stay in the house as you are making the payments.

There are times when the property owner becomes concerned about the process and the end result, it helps to explain to them that the potential risk of losing all of the equity in the house is enough of a motive to keep you from missing any mortgage payments. You can also include a clause in the contract stating that you agree to pay off the sellers loans within a predetermined amount of time.

by: Tyronne Jacques

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