Not everyone realizes that you do not need money in order to buy a house. Yes, you read this right. You do NOT need money on hand in order to buy real estate. And, here’s why: because subject to real estate fills that gap for you!
I’ve been doing this for years now and I have helped so many ladies to do the same. So I’m going to break it down real simple for you. Ready? Let’s go.
How to Save Money with Subject To Real Estate!
Ever since I got started investing in real estate with creative financing, I realized that I could buy houses without any money changing hands. I know that this is a huge jump of thinking for most people today, but it truly exists and is possible. More than possible, actually!
For years I have bought houses without any money. In fact, the only money I spent was on the attorneys who wrote up the contracts. This kind of real estate deal is called subject to real estate. You can look it up to get more info, but I’m going to give you a quick overview of it so that you can get started with it fast!
If you’ve been reading my blog for a while, you know I love working with houses that offer owner-financing options. For properties like that, the house is already fully owned and paid for entirely by the seller. We call that “free and clear” real estate.
However, when it comes to subject to real estate, this is not the case. When I make a deal like this I am basically saying, “I am buying this house subject to the mortgage staying in [the seller’s] name.” So, the mortgage does not transfer to my name, nor do I assume the mortgage.
Everything remains in the name of the seller, but I pay the mortgage for them.
Instead, when I do subject to real estate, I get a land contract which says that I own the property and can control it. I also get a promissory note that basically says “I am going to make these payments.” I can pay either the seller, who will then pay the bank, or I can pay directly to the bank so the seller is not involved.
Personally, when I do subject to real estate contracts, I pay directly to the bank. Not that I don’t trust my sellers, but who’s to say what they’ll do if they get an extra $500 or $1000+ dollars a month? So, I make the payments straight to the bank.
So, subject to real estate is a great option to buy houses when you have very little money.
Now, there is a little money that you will likely need to spend, though. Like I said, there are a few attorney fees to make a solid contract. Otherwise, you may have to do a little tidy-up work in the house, depending on its condition.
One subject to property I had was called “the cat house” because it stunk. Cats had just made that thing their home and it smelled that way. So, I needed to put a little bit of money into buying industrial-sized baking soda containers and scent sprays, which I spread all over the carpet and flooring to try to absorb some of the smell. I also opened windows and got some fans going to help air things out.
But, other than that, it cost me next to nothing. No money changed hands, so no earnest money or anything like that. I did not need to have a hard credit check or get a loan with the bank. Heck, I didn’t even find private money. I just used the bit of money I already had to tie up some loose ends and that was that.
The owner of the house had his wife pass away just a few years prior. He eventually got remarried and then had this cat house that he still owed money on. So, our agreement gave me 8 years to pay off the house. Now, at the purchase price I got for it, my monthly payments will naturally pay that all of within the 8 years. So, I will mark up the house and sell it for a little bit more and let their payments cash it out in 8 years.
This is the beauty of subject to real estate. Simple, fast, and effective investing without the middle men!
In case you are confused, this is not wholesaling. I have never done wholesaling and I have no interest in doing it, but it is a super effective way to buy a house. This is long-term investment type money.
So, no, you do NOT have to put up a ton of money when buying a house. Subject to real estate contracts are an excellent option for those who still have a mortgage and need someone to come along and pay it for them.
Is that person you?! ABSOLUTELY! Now, get out there and do some subject to deals