Sub2 Real Estate Investing

Real estate investing does not always have to go the conventional route. If you want to get started investing in real estate but don't have a lot of cash, you could think about a Sub2 deal.

Sub2 is real estate investing lingo for 'subject to'. It means you are just taking over the payments for the existing mortgage, and the seller will deed the property over to you. This way you are not taking out any formal financing, but you and the seller will have a written contract that the deal is subject to you taking over payments on the original mortgage. Since most banks do not issue assumeable mortgages anymore, this is a way of making it assumeable on your own. You can then agree to give the sellers a lump sum when you sell the property.

Why would someone want to let you have the house for taking over the loan? Well, there are many reasons why. It could be a divorce, and the parties are not speaking to each other. It could be a pre-foreclosure property, where the owners are unable to make payments anymore and need help fast. Or possibly a job transfer, and the owner is now carrying two mortgages. You are offering the owners a fast solution. It's not like them having to put the property on the market and wait until it sells. Some of these people don't have that kind of time. By you taking over payments, it is an immediate relief of payment burdens on the seller, and they will often be happy to wait a bit for the lump sum.

An example transaction would be this: A prospective seller calls you on the phone. Do most of your work here, to see how motivated they are. You don't want to waste time meeting them and looking at their property if they aren't truly motivated. See if they are willing to have you just take over the payments on the property and leave it in their name. Find out how much is owed on the property - keep in mind that sellers often forget things like back taxes or liens when talking to you!

Real Estate Investing

Credit: Henk L

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