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by Jason Hanson

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


I’ve said it a million times and I’m going to say it again. This is a subject-to market, and if you aren’t using this method you’re probably throwing away hundreds of thousands of dollars in profits. Now, I want to show you the four ways that you can making money from Subject-To’s:


1. “Traditional” Subject-to
2. “They Pay You” Subject-to
3. “Guaranteed Money” Subject-to
4. “Wholesaling” Subject-to


Alright. Let’s first begin with the way that most of you are familiar with, the traditional subject-to. This is when you get a call from a motivated seller, and all they want you to do is simply take over their payments. They don’t want any money, or anything else. So, if you get a call from a seller who owes $200,000 on the house, you’re just taking over the payments on the $200,000 and the sellers will walk away (of course you will do your due diligence and make sure the property will cash flow, check the payment amounts, interest, rates, etc).


Next, is the “They Pay You” Subject-To. We all know that you will not purchase a property subject-to and take on negative cash flow. If the payments are $1,500 a month and market rent is $1,000, then most people are smart enough not to go negative $500 a month. Of course I say most people, because there are a lot of idiots out there who will take on negative cash flow. Anyway, let’s pretend you got a call from a seller and he wanted you to take over payments of $2,000 a month. You did your due diligence and you learn that market rent is $1,800 a month. You also know that you want to get $200 a month in positive cash flow from every property that you buy. This means that your payment should be no more than $1,600 a month (because you will rent it out for the market rent of $1,800 and get your $200 in cash flow). Well, first off, when most investors get a lead like this they immediately toss it in the trash can and don’t let their “creative juices” flow. However, being that you’re smart (you’re reading this aren’t you!) you know that there’s a way to make the above deal work. So, what you do is call the seller and let them know that you can take over their mortgage payments; however, because your company doesn’t take on negative cash flow, he will have to write you a check for $400 a month. Yes, you read that correctly, you can create your own cash flow and have a seller write you a check for any amount you desire.


Now, you’re probably wondering about the risks of the “They Pay You” Subject-To right? The risk is, that they won’t pay you the amount of money they owe you every month, which is why you only do this type of subject-to on straight rentals (you will not do this on properties you sell via lease option). The absolute worst case scenario is that the seller doesn’t send you the $400 check every month and all you will do is simply let the property get foreclosed on… the way, this is why the correct paperwork is so crucial. My subject-to contract states in very clear language that if the sellers don’t make the payments to me then I will let the property go into foreclosure and their credit will be ruined. I bet you’re probably wondering if this has ever happened to me, I know you are!


Well, one time I did this type of deal on a property in Baltimore, MD. To make the property cash flow the sellers had to write me a check for $300 every month. One month the money didn’t come and I called the sellers. I spoke to the wife, who was a real BI%$#^ and she basically told me that she didn’t feel like making the payments anymore. Then, I spoke to the husband who started making excuses about how his wife got in a car accident and some other B.S. So, the sellers tried to call my bluff, but I immediately stopped making the mortgage payments. A few months went buy and the sellers got a foreclosure notice in the mail and wouldn’t you know, the sellers made up the payments so that the property didn’t go into foreclosure. Remember, that’s only happened to me once and the sellers ended up paying. This is the way I see it: With this type of deal I’m purchasing no money down and its risk free. Because, I will make $200 a month in cash flow and if for some reason I have to let the property go, at least I made $200 a month for several months (plus, most people care about their credit and don’t want it damaged).


The above technique works, but you have to believe it yourself. When I was doing the consulting day with a new investor, we were making calls on leads we had. One of the leads was a potential subject-to and we figured out that in order to make the deal work, the owner would have to write this investor a check for $600 every month. We called the seller on the phone, I “pitched” the idea to him and he was interested (I actually recorded this call on video, so go to YouTube and type in “Jason Hanson Real Estate Investing” to watch it). Now, to be realistic the majority of the time you pitch this idea the owner will say no, however, we know this business is simply a numbers game.


So, when the phone call was done I remember looking at this new investor and he seemed astonished that this would work……Remember the name of the game is “creative” real estate investing. The game is also finding motivated sellers and if you don’t ask someone if they will write you a check for $600 a month, then you’ll never find out if they will actually do it, plus, all they can do is say no. By the way, in the interest of full disclosure the above deal did not close where this investor was going to get the $600 check every month. But, he did learn a very lucrative lesson that you can ask people to write you a check to make a deal work, and if they’re really motivated they will say yes.


We’re rockin’ and rollin’ onto the third type of subject-to, the “Guaranteed Money” Subject-to. Here’s how this works: Sometimes you’re going to get a call from a seller who wants you to take over their monthly payments, however, they have a lot of equity and they want some cash at the closing. Since you know we don’t do that, here’s how we solve the problem of the seller who wants cash. Once again, let’s create a scenario: You get a call from a seller who wants you to take over their payment, but they have $80,000 in equity and they want half. They want their $40,000 at closing, which of course you know we would never do (that would be the worst “no money” down deal in the world). When you have someone who wants cash, you will go into your script of “Mr. Seller, we will be able to give you your $40,000 within five years. This is because our company specializes in helping people with less than perfect credit……(you know the rest of the script so I’m not typing it, and if you don’t, go to YouTube and watch the videos). Anyway, once the seller agrees to receive their $40,000 in five years, you will simply give them a note that states within five years you owe them $40,000. As you can see, you created another no-money down subject-to and did not have to come out of pocket at all. (Because when your tenant buyer buys the property and cashes you out, you will have $80,000. You keep your half and give the other half to the seller).


Lastly, there is wholesaling subject-to. This is where you play the middle man as you do with regular wholesaling. You have a seller who wants someone to take over their payments. For one reason or another you don’t want to own the house, so you find a retail buyer to take over the payments. You will run ads in the paper that say “Desperate Seller, Take Over My Payments, $10,000 moves you in!” The $10,000 will be your wholesaling fee and the buyer will take over the seller’s payments. The biggest risk with wholesaling subject-to is lack of proper paperwork. You MUST have paperwork which states you’re just a middleman and that you have no control over whether the third party that you wholesale to will make the monthly mortgage payments. Of course, you also tell the seller that you’re wholesaling the property and you cannot make any guarantees.


Wow, that’s a lot of typing and one long article. This is the type of article that I would make copies of and keep near your desk when you’re evaluating properties so that money isn’t slipping through the cracks. Also, go back to your old leads and see if you can make any potential subject-to deals out of them. And now you should make a lot more money this year, because you’re now armed with 4 more money making strategies!


Jason R. Hanson is the founder of National Real Estate Investor Month, author of “How to Build a Real Estate Empire” and mentor to students all across America. To get a FREE copy of Jason’s Special Report “The Insider’s Guide To Buying Your First Investment Property in 83 Days or Less!” visit or call 800-865-1702.


For more articles on real estate investor training, visit my website at Also visit for great real estate investor tools.

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