The Complete Guide to Subject-To (Sub2) Deals

Introduction

Subject-to deals are one of the most powerful and often misunderstood strategies in creative real estate investing. If you have ever asked, “What is a subject-to deal?” or “How do I buy a property without getting a new loan?” this guide is for you.

We are breaking down everything you need to know about subject-to investing, including what it means, how it works, how to find these deals, and how to manage them properly using tools like REsimpli.

What Is a Subject-To Deal in Real Estate?

A subject-to-deal means you buy a property subject to the existing mortgage. The seller leaves their loan in place, and you begin making the payments on their behalf, without formally assuming the loan or applying for a new one.

In a subject-to deal:

• The loan stays in the seller’s name
  
• The deed transfers to you, the buyer
  
• You make payments to the lender directly or through a servicing company
  

It is a way to control real estate without needing to qualify for a traditional loan or put a large amount of money down.

Why Would a Seller Agree to a Subject-To?

Motivated sellers say yes to subject-to deals when:

• They are facing foreclosure and want to avoid credit damage
  
• They cannot afford payments and need a quick exit
  
• Their home has little to no equity
  
• They are relocating, going through divorce, or settling an estate
  

For the seller, it is often better than foreclosure, a short sale, or leaving the home vacant.

Why Investors Like Subject-To Deals

Subject-to deals offer benefits that other strategies do not:

1. No credit check
You are not applying for the mortgage, so your credit score is not a factor

2. Little to no money down
Some deals only require catching up on missed payments and covering closing costs

3. Fast closings
No lender underwriting means you can move quickly and help distressed sellers faster

4. Cash flow potential
If the loan is at a low interest rate and monthly payments are manageable, you can rent or resell the property with strong margins

How to Structure a Subject-To Deal

Step 1: Verify the Loan Details

Ask for:

• Mortgage statement
  
• Loan balance
  
• Interest rate
  
• Monthly payment amount
  
• Escrow details for taxes and insurance
  

Use this to determine whether the numbers work for a cash flow or resale strategy.

Step 2: Use a Purchase Agreement with Subject-To Language

You will need a contract that clearly states the buyer is taking over payments but not assuming the loan. Work with a real estate attorney to draft this, or use a subject-to-contract template.

Step 3: Close with a Title Company

The title company will:

• Transfer the deed
  
• Leave the mortgage in the seller’s name
  
• Record the new deed with the county
  

You may also sign:

• A disclosure document acknowledging the risk
  
• A servicing agreement if using a third-party payment processor
  

Step 4: Set Up Payments

To stay compliant and protect both parties:

• Use a servicing company to collect payments and pay the lender
  
• Ensure taxes and insurance are kept current
  
• Monitor the loan to avoid missed payments
  

Risks of Subject-To Deals

Subject-to investing can be highly effective, but it is not risk-free.

Due on sale clause
Most mortgages contain this clause. Technically, the lender can call the loan due if the deed transfers, although this is rare if payments stay current.

Seller credit is still at risk
If the buyer misses payments, the seller’s credit can be damaged.

Insurance confusion
The new buyer must make sure the insurance policy reflects the ownership change while protecting the lender’s interest.

Ethical and legal missteps
Failing to disclose everything to the seller or using improper contracts can lead to lawsuits.

When to Use Subject-To as a Strategy

Subject-to works best in:

• Pre-foreclosure situations
  
• Low equity homes that cannot be wholesaled
  
• Properties with low-interest mortgages
  
• Slower markets where traditional cash buyers are harder to find
  

It is not ideal for high-equity sellers who want a lump sum or for homes needing major repairs unless you are willing to invest cash.

Tracking Subject-To Deals Inside REsimpli

Subject-to deals often require ongoing contact with sellers, tenants, or buyers in wraparound situations. REsimpli helps you manage all of it in one place.

You can:

• Create a custom pipeline stage for “Sub2 Under Management.”
  
• Track monthly payments and servicing contacts in lead notes
  
• Automate follow-up with tenant buyers using drip sequences
  
• Upload scanned agreements and loan documents into the lead profile
  
• Use task reminders for insurance renewals or escrow reviews

Conclusion

Subject-to investing gives real estate professionals a creative way to help sellers and build wealth without needing cash or credit. But it requires clarity, legal protection, and great lead management.

Whether you are helping a seller avoid foreclosure or picking up a rental with built-in financing, REsimpli gives you the tools to keep every moving piece organized.