Lending on Subto deals
I don't lend on subject-to deals. Here's why.
Someone sent me one in Texas two weeks ago. Total price $285K. Loan balance $279K. That's $6K in equity before closing costs and transaction fees.
Six thousand dollars standing between me and a loss if anything goes wrong.
Foreclosure runs roughly $3,500. That's more than half the equity gone before carrying costs even start. At 0.5% per month that's another $1,425 every month the property sits with no income coming in.
The numbers run out before the recovery process even gets started.
Sub-to deals are built around low entry, not strong equity positions. Those are two very different things. I need a real cushion between the loan amount and the property value. On most sub-to deals that cushion doesn't exist.
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Lending on Subto deals
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