Stop Begging The Banks For An Investment Loan

There are two routes real estate investors go about creating their investment portfolio: Conventional and unconventional.  The conventional route is when you go to the bank lender, apply for a loan to purchase property and do all the necessary paperwork that goes along with it.  This brings your credit into the picture and most likely a good bit of your cash for a down payment.

Then, there are the unconventional routes to purchasing property, like ‘Subject-To’ deals. This is my favorite way to purchase real estate for several reasons – one being that I can bypass the banks and not have to ask for an investment loan.

‘Subject-To’ Is A Powerful Tool

Do you know what keeps many people from purchasing real estate as an investment? They think that they have to go to the bank to apply for an investment loan.  Now, some people have no problem doing that and maybe they’ll do that once or twice and then stop. They may have two homes with $400K worth of loans in their name.  They may not have the equity to get approved for another loan, so they just stop.

But they may not realize that there are unconventional ways to purchase real estate. There are creative ways to continue adding to their portfolio using no money down strategies like ‘Subject-To’ deals.

No Money Down Real Estate Investments

A ‘Subject-To’ deal is when a seller sells their home at a discounted price to a buyer “subject-to” the existing loan.  It’s the seller transferring ownership to the buyer by signing over the deed.  It’s the buyer not becoming personably reliable for that debt because the loan stays in the seller’s name.

For example, let’s say Mr. Seller is in the midst of getting divorced. His wife has moved out and he’s stuck with a huge mortgage payment that he cannot afford on his own anymore. He’s two payments behind and needs to get this house sold fast in order to get out from under the stress of the whole situation.

He doesn’t want to put the home on the market because he can’t afford to have it sit on the market for month after month. And, that 6% that goes to the real estate agent is a factor as well. So, this seller is a prime candidate for a real estate investor to approach him with a ‘Subject-To’ offer.

Let’s say Mr. Buyer comes in and has a discussion with Mr. Seller. Mr. Buyer finds out what the house is worth market value, how much is owed to the bank, and how low the seller is willing to go in terms of sale.  Mr. Seller is willing to let the house sell for 20% below market value in order to get out from under the whole thing fast.

So, seeing that this is a good deal, Mr. Buyer and  Mr. Seller agree to a ‘Subject-To’ deal, where Mr. Seller signs over the deed to Mr. Buyer.  The loan stays in the name of the seller, which means the buyer does not have to go to the bank to get their own loan.  The buyer will continue to make payments on that loan, and bring it up to date while arranging to get a tenant in there who is interested in a lease to buy option.

So, you see that this is a win-win situation for both the seller and the buyer.  The seller gets to off-load their home in a hurry, saving it from going into foreclosure.  The buyer gets a good deal on the home, gets ownership transferred into their name, and moves forward with a lease option purchase with an eager tenant.  

Subject-To deals are indeed powerful tools to have on your real estate investing toolbelt. There’s no need to beg lenders for an investment loan. If you’re interested in learning more, be sure to check out my book, How To Invest In Real Estate Without Banks, as it will help you learn how you can build passive income without using your own credit or cash.