Many real estate investors these days are finding properties where the owner keeps the home in their name. The investor just takes over making payments. This is known as a Subject To deal. It is a great plan because it keeps the investor from having to get a loan for the value of the property. However, many times the payments they are making on the Subject To deal can be so high that it prevents the investor from making any money.
Today, many of the properties that are available for subject to deals were purchased around 2008 when prices were inflated and the loan amounts were incredibly high. So first you must determine what you plan on doing with the property if you take ownership of it one day. If you are going to use it as a rental, it must pay for itself. Doing the math is vital to see if you will make any profit or not.
You must consider:
- Repair costs
- Cash upfront if wanted by the seller
- Property manager fees
- Homeowner insurance
- Homeowner taxes
- Money for upkeep
- The time between renters when no money will be coming in
When it comes to subject to deals, math matters. If you want more tips on how to become a better real estate investor, sign up on www.larryharbolt.com to receive more information.