So, I got a great question on my podcast hotline recently:

“Joe, why don’t you like subject-to deals?”

Well, the answer has to do with my very unfortunate experience with this strategy around the time of the real estate bust.

It was a rather painful time in my career actually. 🙁

I did about a dozen subject-tos from 2007-2009 and they all went bad. Every. Single. One.

But first, let’s go to school for a hot minute:

Subject-to is when you take over someone else’s mortgage. The investor takes the title to the property, but the existing loan stays in the name of the seller. In other words, “Subject-To” the existing financing. The investor now controls the property and makes the mortgage payments on the seller's existing mortgage.Typically homeowners who are behind on payments or are already in foreclosure are the most common motivated sellers for this strategy.

Okay, back to my story…

The strategy of a subject-to wasn’t really to blame for near demise back then—the terrible economy and collapse of the real estate industry was the biggest problem—but also, I made a lot of mistakes with this strategy…

I was counting on appreciation and higher appraisals… I was counting on my tenant-buyers to easily get financing… I thought $100-$200 per month of cash flow was enough (it wasn’t—I needed more to set aside for emergencies)… I was so desperate to make all the mortgage payments that I wasn’t prescreening well and had terrible tenants.

It was basically a cluster $@#% for me…

Which left a bad taste in my mouth for subject-tos. I even missed my own personal mortgage payments during this horrible time trying to make the deals I was tied up in work.

And getting out of all those bad deals wasn’t any fun either.

After that, I vowed never again to do any deals that had my name on the title or deed.

I don’t want ownership. Ever.

Now, having said that, I do think there’s a place for subject-tos—but in my opinion, they’re rare.

And, I definitely think there are lots of other creative strategies to control property.

Which is why I love lease options instead of subject-tos. You get control without ownership. And you can still make the same amount of money.

Plus, it’s sooo much easier to get out of a lease option than a subject-to.

As far as I’m concerned, scrap sub-tos and stick with lease options…

I love controlling everything and owning nothing. That’s the beauty of lease options. Perhaps you’ll give ‘em a go too.

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