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What Does a Typical Subject-To Deal Look Like?

In real estate investing, “subject-to” deals can seem complex, especially for beginners. Today, we’ll break down what a typical subject-to deal looks like, focusing on the common scenarios investors encounter. We’ll also share some strategies and practices that can help simplify the process. Let’s get started.

Understanding the Marketing Core

Before diving into subject-to deals, it’s important to understand the basics. What are we looking for? One useful tool is a graphic that helps visualize various strategies:

  1. Retail Fix and Flip: Use this strategy when LTV (Loan-to-Value) or acquisition cost plus rehab is 0-75%.
  2. Wholesale: Ideal for properties contracted at around 77%, allowing quick turnover.
  3. Buy and Hold: Suitable for properties between 75-82% LTV.
  4. Owner Financing: Best for properties valued from 82-105% of their worth.

Next, let’s explore why subject-to works well, especially in a down market.

Why Subject-To Shines in a Down Market

Subject-to deals thrive when the market is down. Here’s why:

  • Increased Acquisitions: Many homeowners need to sell quickly when property values drop, creating more opportunities for subject-to buyers.
  • Better Selling Prospects: In a down market, banks tighten lending regulations, increasing the number of potential buyers who need owner financing.

How to Structure Subject-To Deals

Step-by-Step Process

  1. Contracting the Seller: Use state-promulgated forms and addendums for a clear agreement.
  2. Marketing for Buyers:
    • Bandit Signs: Place these in strategic locations.
    • Craigslist: A valuable tool for finding buyers quickly.
  3. Using a Residential Mortgage Loan Originator (RMLO):
    • Ensure compliance with Dodd-Frank regulations.
    • Gather and verify buyer information to secure a valid mortgage.
  4. Closing the Deal:
    • Notify the seller once a buyer is approved.
    • Close with the seller in the morning and the buyer in the afternoon.

Best Practices for Success

Home Types and Neighborhoods

The sweet spot for subject-to deals are homes in the 80-250k range in median-priced neighborhoods—not war zones or high-end areas. This range ensures a broad buyer base while avoiding areas with significant issues.

Never Invest In a Home You Don’t Own

  • Avoid improvements on properties still under contract. Sellers might back out, leaving you out of pocket.
  • If necessary, use front funding to cover rehabs and ensure the house sells quickly.

Finding Capital Partners

Networking is key. Many people have cash in IRAs or self-directed IRAs but lack the market know-how. Partnering with these investors can provide the funds needed for purchasing and rehabbing properties.

Typical Numbers in Subject-To Deals

Subject-to properties often fall into these categories:

  1. Behind on Payments: Usually $6,000-$12,000.
  2. Rehab Needs:
    • Minimal: $5k-$7k for basic fixes.
    • Full: Around $30k for complete overhauls.
  3. Buyer Profile:
    • Self-employed individuals.
    • Those with an Individual Taxpayer ID Number (ITIN).
    • Handymen or small business owners often fit this buyer profile.


Subject-to deals can be a highly effective strategy for real estate investors, especially in a down market. By understanding the typical structure, identifying the right types of properties and neighborhoods, and leveraging strategic marketing and financing techniques, investors can navigate these deals successfully.

Always ensure compliance with legal regulations and partner with knowledgeable investors to mitigate risks and maximize returns. With the right approach and best practices, subject-to deals offer a viable pathway to grow your real estate portfolio even during challenging market conditions.

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