Real Estate Deal Structures: Mastering “Subject To” Deals

The real estate market offers a myriad of opportunities for savvy investors, each with unique benefits and challenges. Among the diverse deal structures, “Subject To” deals stand out for their potential to provide investors with leverage and flexibility. This article explores the intricacies of Sub2 deals, guiding investors through the process, legal considerations, and strategic decision-making involved.

Understanding “Subject To” Deals

“Subject To” deals, commonly referred to as Sub2, are transactions where the buyer takes ownership of a property subject to the existing mortgage. This means the original mortgage remains in place, and the buyer assumes payment responsibility without formally taking over the loan. This section will define Sub2 deals, outline their key features, and discuss their advantages and potential risks.

Step-by-Step Process of real estate deal structure

• Initial Contact: Effective communication with sellers from the outset is crucial. We’ll cover the essential questions to ask during the initial call to gauge the suitability of a Sub2 deal.

• Evaluating the Property: This involves a detailed assessment of the property’s location, condition, and financials, including interest rates and equity. The goal is to determine the property’s potential fit within the investor’s strategy.

• Contracts and Legalities: Navigating the legal landscape of Sub2 deals requires specific contracts and a clear understanding of the implications. This section will discuss the necessary legal documentation and the role of title companies.

• Insurance and Taxes: Managing insurance and tax implications is a critical aspect of Sub2 deals. Investors need to understand how to handle these elements to protect their investment.

• Bank Negotiations: Strategies for dealing with banks regarding the existing mortgage are vital for the success of a Sub2 deal. This includes tips for obtaining information and ensuring compliance with the loan terms.

• Seller Negotiations: Negotiating with sellers is an art that can significantly impact the terms of a Sub2 deal. This section will provide techniques for effective negotiation, ensuring a win-win outcome.

Evaluating the Numbers and Property

Investors must conduct a thorough analysis of the financial and physical aspects of the property. This includes a deep dive into interest rates, cash flow potential, and equity, alongside a comprehensive evaluation of the property’s location, condition, and market demand.

Exit Strategies Based on Deal Structure

Choosing the right exit strategy is paramount for maximizing returns on a Sub2 deal. This section will explore various exit strategies, including retail flips, seller financing, renting, and lease options, outlining the scenarios in which each strategy is most effective.

Personal Investment Philosophy and Business Simplification

The article will conclude with insights into the author’s investment philosophy, emphasizing the importance of simplifying business operations to align with lifestyle goals and increase profitability. This personal perspective will highlight the selective approach to deal selection, focusing on properties that offer significant down payments, cash flow, and backend profits through seller financing.


The final section will recap the critical aspects of “Subject To” deals, underscoring their role in a diversified real estate investment portfolio. The article will emphasize the importance of due diligence, strategic planning, and alignment with personal investment goals to succeed in the dynamic real estate market.

For a comprehensive guide on structuring “Subject To” real estate deals to enhance your investment portfolio, visit real estate deal structure.