Finding subject to properties requires a strategic approach, combining online research with proactive networking and a keen understanding of the market. This guide will walk you through the process, answering common questions and offering expert tips to help you successfully acquire subject to properties.
What is a Subject To Property?
Before diving into the how-to, let's clarify what a subject to property is. In a subject to transaction, you take over the existing mortgage payments on a property without legally assuming the debt. The original owner retains ownership and liability for the mortgage, while you take on the responsibility of making the payments and benefit from the property's cash flow. This is different from a short sale or foreclosure, where you purchase the property free and clear. Understanding this crucial difference is essential for success.
Where to Find Subject To Properties
Finding these deals requires a multi-faceted approach:
1. Networking and Building Relationships:
- Real Estate Agents: While not all agents specialize in subject to deals, many are familiar with distressed properties. Develop relationships with agents who understand your strategy.
- Wholesalers: Wholesalers often have access to motivated sellers looking for creative solutions, including subject to deals.
- Hard Money Lenders: Lenders specializing in hard money loans frequently encounter situations where subject to arrangements could be beneficial to both buyer and seller.
- Attorneys: Real estate attorneys often work with clients facing financial hardship and may have insights into properties suitable for subject to transactions.
- Property Management Companies: These companies sometimes manage properties owned by individuals facing financial difficulty and might be open to exploring a subject to arrangement.
2. Online Resources:
- Multiple Listing Service (MLS): While not explicitly listing "subject to" properties, the MLS can reveal properties with potential – look for properties with distressed owners, high loan-to-value ratios, or those that have been on the market for a significant period. You'll need to do further due diligence to determine their suitability for a subject to arrangement.
- Websites and Forums: Online forums and websites dedicated to real estate investing often feature discussions and listings related to subject to properties.
- Direct Mail Marketing: Targeting specific neighborhoods with a high concentration of distressed properties using direct mail marketing can be effective. Your message should clearly articulate your interest in creative financing options.
- Online Property Databases: Explore online resources that provide comprehensive property data, allowing you to filter by criteria like loan-to-value ratio, late payments, or tax liens.
3. Driving for Dollars:
This time-tested method involves driving through neighborhoods, identifying properties that appear distressed (neglected landscaping, for sale signs, etc.), and researching their ownership and financial status.
Frequently Asked Questions (FAQs)
What are the risks of buying a subject to property?
Subject to purchases carry risks, including the possibility of the seller defaulting on the loan, leading to foreclosure. Thorough due diligence is crucial to mitigate these risks. You also need to understand the existing mortgage terms and any potential issues with the property.
How do I find motivated sellers?
Motivated sellers are often those facing foreclosure, financial hardship, or needing a quick sale. Look for properties that have been on the market for a while or show signs of neglect. Directly reaching out to homeowners in these situations is often effective.
What due diligence is necessary before purchasing a subject to property?
Thorough due diligence is paramount. You'll want to verify the property's title, the existing mortgage terms, the property's condition, and the seller's financial situation. Consult with real estate attorneys and professionals experienced in subject to transactions.
Is it legal to buy a subject to property?
Yes, buying subject to is legal in most jurisdictions, though state-specific regulations may vary. It's vital to consult with legal counsel to ensure compliance with all local laws and regulations.
How can I structure a subject to deal?
Structuring a subject to deal involves negotiating terms with the seller, including monthly payments, the length of the agreement, and the responsibility for property taxes and insurance. You'll need a solid understanding of real estate law and finance to properly structure this type of transaction.
Finding subject to properties demands patience, persistence, and a thorough understanding of the market. By combining these strategies and diligently performing due diligence, you can increase your chances of success in this specialized area of real estate investing. Remember to consult with qualified professionals throughout the process.
