How to Acquire Property With No Money

Buy a house “subject to” an existing mortgage!

To explain this concept further, we must understand that ownership of a property comprises two important elements: the title and financing. The title is the document that grants and transfers ownership of the property to the new owner. This is separate from any financing that may exist to secure the property, ie. the mortgage or the deed of trust. In some cases, for example, when a property is bought with cash outright, there may be no existing financing.

Subject To” is a unique strategy that capitalizes on the distinction between the title and the financing. Subject To means that the seller transfers the property title to the buyer while the existing loan stays in the seller’s name. The buyer, who is now the new owner of the property, then makes payments directly to the bank on behalf of the seller. The new owner maintains full control of the property and is entitled to all tax deductions and benefits, even though the existing loan remains in the seller’s name.

 

Benefits of Subject To for the Buyer

1. There is no limit to the number of properties you can acquire subject to.
2. You are able to utilize all the tax deductions and benefits from the property.
3. The cost of financing is usually less expensive than hard money options and may not require your personal money or credit.
4. You are now able to rent the property, flip the property, or even sell it on terms to someone else and profit from it.

Benefits of Subject To for the Seller

1. Purchasing their property subject to can prevent a foreclosure from appearing on their credit.
2. Their credit may improve as you make the monthly mortgage payments on their behalf.
3. If the buyer ever stops making payments, the seller can get their house back with all its equity.
4. The seller can get cash in their pockets quickly, as these kinds of sales can be expedited compared to traditional retail property sale.
5. There is no need for the seller to spend time and resources renovating the property to bring it to full market value.

The subject to investing strategy is a valuable tool that can enable investors to successfully acquire a property and execute the transaction when conventional models of financing are not feasible or accessible. This strategy involves careful negotiation and understanding of the issues behind the seller’s situation and requires careful documentation and communication with the seller and the seller’s lender. The subject to strategy can be one of the most creative and profitable strategies in your investing arsenal.