• Pace Morby

Buying a House Subject To From a Real Seller Conversation

Creative finance in real estate is one of the greatest ways to build up real estate assets.


A lot of people think they need cash or credit or a company or licenses in order to buy houses, but you actually don’t.


I did a 26 hour live event where I went from 3am on a Sunday morning all the way until 5am on the following day, Monday.


And in those 26 hours, I called sellers for six hours straight.



One of my favorite calls that I did was with Olaf the snowman.


No, not the snowman, just the man. I bought his house subject to with no money out of my pocket and he doesn’t ask me what my credit is.


He doesn’t ask me about my bank balance.


This guy literally is just willing to give his house away to me for free. It’s magic, right?


No.


It’s called creative finance.


Buying Subject To Homes Using Creative Financing Solutions


A little background here - Olaf had a house down in Florida that he was renting out, but he lives in Cincinnati so he’s never actually seen the house more than twice since owning it.


He actually has eight houses in Cincinnati and his job as a division president means he has a lot of time on his hands.


And he was open to discussing how creative financing could help him in this situation.


The mortgage payment on the house was $1,444.98 and the estimated payoff was about $182,713.00.


Despite having a tenant in the home paying $1100 a month in rent, he was actually losing money every month.


Olaf had been doing this for eleven years…eleven years! And in all that time, he had already lost about $50 grand on this house.


How Does Creative Financing Work in Sub2


As I explained to Olaf in our call, the only people that make money in this situation are the banks because it’s a property that is losing money.


So why are we trying to make the banks more money?


Large bank building

We’re not. So my thought is - and this is how creative financing solutions work - why don’t I just take over payments?


I tell Olaf that I will pay closing costs and I would keep making payments for a couple of years until I can refinance.


Either way, the loan would still be in Olaf’s name, not mine. But I would be the new owner of the property, I own it. I deal with:


  • Property taxes

  • Insurance

  • Maintenance

  • Tenants


For Olaf, while his name is on the loan, I would make those payments and I help him improve his credit with those monthly, on-time payments.


And down the line, either two years or two thousand years, I would sell the property and that’s when Olaf’s name would get off the loan.


So how would we do that?


3 Ways a Seller Can Get Their Name Off a Loan


There’s actually three ways a seller’s name can get off a loan:

  1. We sell the house

  2. We refinance the house

  3. We pay off the loan

And here’s the deal - Olaf was losing money on this house, that he never saw, and was in a state he didn’t even live in.


He had never made money on it and he never depreciated the asset, he had no tax liability on the deal because he lost money along the way and wasn’t making any money on the house.


Here’s where people will often get confused - a deed is not the same as a mortgage.


When I got the deed, I took over the house and Olaf got his losses for selling; why?


Because he’s already sold it.


I sent Olaf some paperwork to him and his accountant to see how we go about doing this, we worked out an agreement on what he liked, what he didn’t like, and made sure that his current tenant was not only aware of what was going on, but had enough time to find another place to live.


This is how we provide value.


In the end, not only were we able to help Olaf, we made sure to help out his tenant and made sure she was able to find another place to live.


This opportunity, and many of the others we do, helps out a lot of people, not just the seller.


If you want to see this call in action, check out the video below:


Just to recap - I bought Olaf’s house, with no money out of my pocket and no questions asked about licenses or bank balances or credit.


That’s the beautiful thing about subject to seller finance agreements, which I teach at subto.com.


If this was helpful to you, make sure to like, subscribe, and share the video and check out the other videos on my channel.


And if you want to learn how you can start doing creative finance, subject to, and seller finance, then come join us at subto.com.


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