We closed a subject to deal a week ago and made just under 20k on it. It was a win-win– The sellers got rid of a mortgage debt and a house that had repairs bigger than they could afford. They were freed up for an interstate move. I got to use my carpentry skills to earn sweat equity and make a profit!
We took over a loan with a balance of roughly 203k and a payment of $1042 a month. Within 2 months we had it fully renovated, on the market, and sold and closed! (It sold in 4 days!)
The biggest repair was a poorly built chimney enclosure that resulted in water damage to trim and siding. Neglected gutters that were clogged caused some fascia damage too.
There was a punch list of small items, inside and out. The repairs, if you were to pay retail, made it so that the sellers could not fix up the house and also pay off their mortgage, and pay an agent too, without coming out of pocket. This is why subject to worked for them. We took the debt and repairs off their hands.
I did the project solo. It took about a month to repair and paint. I hired out trash hauling, yardwork, and pressure washing. And I paid professional house cleaners. Our gross check at closing was $23,788. Our net after materials, mortgage and utilities, agent commission and subcontractors was 19k and change.
How did we sell it? We put it on the MLS with a flat fee company offering 3% to buyer’s agents.
This is one exit strategy for sub2. A sub2 light flip. We could’ve also rented it out, or sold it via owner financing.
If you wonder why anyone would go for a subject to deal– It can be a great option for sellers who need to make a move and can’t pay two mortgages. I’ve also helped people who were in foreclosure, taking over the mortgage and paying the arrears. This protected their credit and removed a debt from their ledger.