On The Market

206: The Hidden Risks of “Subject To” Real Estate w/Eddie Speed

Apr 8, 2024

Real estate expert Eddie Speed discusses the hidden risks of 'subject to' real estate transactions, emphasizing the importance of understanding the potential downsides of this strategy. He explains how 'subject to' works, the risks involved, the difference between subject to and assumable loans, and who should and shouldn't use this strategy. Eddie warns inexperienced investors about the dangers of being cavalier with subject to deals and highlights the one clause that could derail an entire transaction.

32:00

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Eddie Speed

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Quick takeaways

Subject to real estate involves leveraging low-interest rate mortgages without assuming the loan, but triggering the due-on-sale clause can lead to immediate loan repayment.

Subject to deals operate in a legal gray area, requiring investors to navigate carefully to avoid breaching contracts and seek legal counsel for minimizing risks.

Deep dives

Overview of Subject Two Strategy in Real Estate Investing

Subject two strategy in real estate investing involves taking title to a property subject to the existing mortgage without assuming it. This method allows investors to leverage low-interest rate mortgages without qualifying or assuming the loan. However, the main risk revolves around the due-on-sale clause, where triggering this clause could lead to the lender calling the loan due immediately. Investors need to be market-savvy and financially prepared to handle any potential risks that may arise.

Exploring Risks and Workarounds in Real Estate Deals

02:04

Exploring Scenarios Triggering Servicer Investigations in 'Subject To' Real Estate Deals

04:31

Understanding Subject To in Creative Finance

01:53

Introduction

4min

Exploring Risks and Benefits of 'Subject To' Real Estate Deals

6min

Navigating Risks in Real Estate Transactions

9min

Navigating the Risks of Real Estate Transactions with 'Subject To' Agreements

5min

Navigating State Laws in Foreclosure Processes

5min

Navigating Ethical and Legal Risks in Real Estate Investing

5min

For the past few years, “subject to” real estate has been all the rage. Everyone is talking about how they scored a great real estate deal by taking over a seller’s rock-bottom interest rate mortgage payment. You see it all over social media, “I got this house for zero dollars down with a three percent mortgage rate!” And while this may seem too good to be true, the practice of subject to real estate isn’t illegal, but some of its huge risks could ruin an inexperienced real estate investor.

So, who do we have on to talk about subject to? Eddie Speed! Eddie is a creative financing master who’s been in the real estate note investing business for over forty years. Eddie has been around the block more than most and has seen the good and bad sides of subject to real estate. It’s become alarming to Eddie how many inexperienced investors are using this strategy without knowing the risks, putting their wealth and, more importantly, sellers in danger by being far too cavalier about the massive downsides of getting this real estate strategy wrong.

Eddie walks through exactly how subject to works, the one clause that could blow up your entire deal, what will trigger it, the difference between subject to and assumable loans, who should be using subject to, and who DEFINITELY shouldn’t. Even if you’ve done a subject to deal before, you’d better stick around for this one, because you may have gotten it wrong.

In This Episode We Cover:

Subject to explained and whether this “no money down” strategy is worth the risk

Subject to real estate vs. assumable mortgages and why these are NOT the same strategy

The “due on sale” clause that could ruin your entire deal (and what triggers it)

A workaround to the “due on sale” clause that most investors get WRONG

Who should be investing in subject to real estate (and why it’s probably NOT you)

Often overlooked state laws that could put you in hot water if you’ve done a subject to deal

And So Much More!

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