Subject-To Investing for Your Real Estate Portfolio

When it comes to building your real estate portfolios, subject-to transactions are a great way to start building without major financial outlay. In fact, many people who are afraid of mutual funds and the market in general at this time are putting their money into real estate instead because they can actually acquire one or more valuable properties at very low prices, sometimes for less per month than they were putting into their other retirement plans.

Please note, I am not recommending that you take money out of your retirement plan without proper legal and financial advice. I am a real estate investor, and I know what is working for my colleagues and for me. However, a lot of your success in real estate can depend on how long you are planning to stay in the market, and you need to work with someone familiar with your specific situation if you are planning to retire on real estate someday.

That being said, let’s get back to subject-to investing for your real estate portfolio. There are several ways to go about it:

1.    You can buy properties with sellers who are so eager to get out that they require little or no down payment this is ideal because it enables you to start investing immediately without a large outlay first. However, it can limit the number of properties you can take on because you will be making additional mortgage payments that may not be adjusted for current market values. Find a good mortgage, and you are all set. But, depending on your situation, you may only be able to take on a few additional properties.

2.    You can buy properties that have already “been through the mill” once many investors jumped in eagerly in severely distressed markets and grabbed houses for pennies on the dollar. They were able to finance these deals, and may be making payments under 100 dollars a month for the properties in some cases. However, many of these investors were not able to flip the houses as they originally anticipated, and a lot of them are in serious straits themselves now. Buying these properties subject-to will enable you to take on a lot more properties for a lot less, but you do need to factor in that you should plan on owning those properties (possibly even at a loss) while the housing market in that area recovers.

With any subject-to transaction, unless you already have a made-of-steel buyer lined up, you must make sure that you will be able to make the mortgage payments for the foreseeable future. Otherwise you are jeopardizing your seller’s credit when you presented yourself as a solution to their credit and debt problems.

Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit www.CoachingByPeter.com.