Common Mistakes Real Estate Investors Make With Subject-to Deals

In this episode of the Creative Real Estate Mastery Podcast, powered by Sub2Empire, we’re diving into “Common Mistakes Real Estate Investors Make With Subject-To Deals.” Hosted by creative finance experts Jeff Coffman and Ken Rossics, this episode is packed with insights into the most frequent errors investors make when handling subject-to transactions.

Whether you’re new to subject-to deals or looking to fine-tune your strategy, understanding these pitfalls can save you time, money, and stress.

What Are Subject-To Deals? Subject-to financing allows an investor to acquire a property while keeping the existing mortgage in place, making it a popular choice for those who want to invest without the hassle of securing new financing. But while subject-to deals offer unique benefits, they can also be complex and challenging. Knowing where investors commonly go wrong is the first step to mastering this strategy.

Common Mistakes to Avoid in Subject-To Deals:

Ignoring the Due-on-Sale Clause: One of the most common mistakes investors make is underestimating the risk of the due-on-sale clause. Most mortgages have this clause, which allows lenders to demand full repayment if they find out about the change in ownership. Jeff and Ken explain how to manage this risk and the strategies that can help keep lenders at bay.

Not Vetting the Seller Properly: A thorough understanding of the seller’s financial situation is crucial in subject-to deals. Investors often fail to investigate the seller's background, leading to complications like liens, unpaid taxes, or bankruptcy filings that can disrupt the deal. Poorly Structuring the Contract: Many investors overlook the importance of a properly drafted contract. This mistake can lead to legal issues down the road, especially if the terms of the subject-to agreement are unclear or ambiguous. Learn how to structure contracts to protect yourself and ensure smooth transactions.

Failing to Maintain Insurance Properly: Insurance can be tricky in subject-to deals. Many investors make the mistake of failing to update the insurance policy or incorrectly listing the insured parties, leading to coverage gaps and potential liability issues. Jeff and Ken break down the right way to handle insurance for subject-to properties.

Not Planning for an Exit Strategy: Successful investors always plan their exit strategy upfront, yet this is often overlooked by those new to subject-to deals. Jeff and Ken discuss how to plan for different exit scenarios, whether you plan to sell, refinance, or rent out the property.

By understanding these common mistakes, you’ll be better prepared to navigate the complexities of subject-to deals and turn them into profitable investments. Jeff and Ken share their expert tips, real-world experiences, and best practices for avoiding these pitfalls and ensuring your deals run smoothly.

💥 Want to learn more about creative finance and real estate investing? Visit Sub2Empire’s website for more resources, and check out the Sub2Empire Creative Deal Partners program to gain in-depth knowledge on subject-to deals and other creative financing techniques. Learn from the best and take your real estate investing to the next level!

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