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by Donna Robinson
Subject-to as it is commonly called, can be an excellent way to create a win-win real estate transaction for a buyer and seller. Buyers can buy without qualifying for a new loan, and sellers may …


The author has permitted the reprinting and redistribution of this article.


If you are a real estate investor, taking over a property subject-to the existing mortgage, you want to be sure that your exit strategy will work with this existing mortgage. The seller will be depending on the buyer to make the deal work. It is very important for an investor buyer to do their due diligence to insure a profitable deal.


If you agree to buy a property subject-to an existing payment of $925 per month, and hold it for rental, be sure the rent will be higher than the payment and expenses. This sounds like a no-brainer, but sometimes people get so caught up in the idea of buying property without having to qualify, that they forget to make sure that the numbers make sense.


If you are paying $925, but the property will only rent for $875, that ain’t such a great deal is it? Just because you can buy a property “subject-to” does not mean you should. Make sure the numbers work for the exit strategy you intend to use. If you are going to fix and resell, you should check sales data in the neighborhood be sure you can sell for an amount that is higher than the payoff on the existing loan.


Don’t forget to include all of your anticipated expenses. Those may include closing costs like attorney fees, doc fees, insurance, title search, etc. You’ll get your closing costs estimate from the closing attorneys office.


Your offer price plus all repairs and expenses should not exceed 80% of what you know the property is currently worth. (Note I did not say what you “think” the property is worth) You must double check and be absolutely as sure as you can be. In today’s market, with high foreclosures and lots of inventory, buyers have a much better chance of getting a super price on the property, but if the seller owes more than the house is currently worth, buying subject-to does not make sense. You have to get the market value right, or you may not be able to complete your exit strategy.


Buying subject-to the existing mortgage can be a great way to invest in real estate, or buy your own home, even when you don’t have good credit. Buyers should make sure that the existing mortgage numbers are affordable and that the income will cover the payments. This will help insure that the subject-to transaction will work out well for everyone involved.


Donna Robinson is a licensed agent, real estate investor and real estate consultant, located in metro Atlanta, GA. She is a respected authority on the subject of real estate investing and property evaluation. Get Donna’s free newsletter for real estate investors at

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