Building Wealth Through Subject-to Deals

With effort and focus, building wealth through subject-to deals allows anyone to invest with little money and less liabilities. Ownership of a property provides more financial freedom than other investment methods where you sell or flip real estate right away. The wealth building benefits of investments where you do not use your own money or credit is the best way to grow your wealth with little liabilities.

To gain ownership of an investment property, I prefer to use the subject-to method. In a deal that is ‘subject-to’ the original loan, you become the owner on the deed, but the loan stays in the name of the seller. You get ownership of the property and take over payments on the mortgage. 

The 5 Elements of Wealth

The only way to benefit from the 5 wealth building elements is if you have ownership in a property. By owning a property you have an advantage for building wealth over time, and not just one quick payday. 

1. Buy Low and Sell High

When you hold on to ownership of a real estate investment, you have the potential to buy low and sell high. This means you can buy low and wait for the property to gain value, and then sell for a profit building wealth through capital gains.

2. Cash Flow 

By holding onto your investment property you can rent it out, bringing in a monthly income. Depending on the rental market, you can make the loan payment from a subject-to-deal and also bring in a profit each month increasing your cash flow.

3. Equity Pay Down

As you make payments on the property, you are gaining equity, which means you are gaining money! The benefit with a subject-to transaction is that someone else is making the payments and you gain the benefit of increased equity.

4. Appreciation

In reality, the appreciation rate fluctuates, but let’s assume an average appreciation rate of 5% per year. This means that 5% of your entire portfolio will come back to you each year in appreciation. So, if your real estate investment portfolio is $1 million, that is $50,000 per year just in appreciation. 

5. Depreciation

When you own an investment property, you often get to deduct depreciation on your income taxes. The IRS calculates the depreciation of a rental property over 27.5 years using the cost basis of the building structure. Sometimes, the deductions can be so great you can get a major tax break. 

Again, all five wealth building strategies can all be done by gaining ownership through a subject-to-deal that doesn’t impact your credit in any way.

The Bottom Line

The only way to benefit from all five wealth building is if you have ownership of a property. When you fix and flip, you only get the immediate financial benefit of potentially buying low and selling high. You don’t see the other four components of wealth building. 

I don’t know about you, but I prefer to do the work once and get paid five times. The only way to do this is if you have ownership of a property. You can accomplish this without having a lot of cash or using your credit by learning the Niche2Wealth method that I have developed while making millions as a real estate investor.