In this YouTube Q&A, real‑estate educator Chris Prefontaine answers a support question about structuring a subject‑to (sub‑2) transaction when the seller’s mortgage carries a high interest rate, the property has little or no equity, and rent comparables don’t cover the monthly payment. He stresses evaluating each deal holistically using his “3 paydays” framework, which looks at the total cash flow across three distinct profit events. He suggests removing property tax from the advertised rent to make the payment appear more attractive, then educating the buyer to re‑add taxes later. If the numbers still don’t work, he proposes having the seller subsidize the property for a limited period to stop cash‑flow bleeding. He also outlines how to generate additional paydays by layering rent‑to‑own, seller‑financing, or wrap‑around loans, creating a “payday 4” spread. Throughout, he promotes community resources – the weekly Wicked Smart Sit Down, the High‑Six Mastermind calls, and the QLS Home Study Program – and provides URLs for free books, strategy calls, and course enrollment. The video ends with a reminder to bring questions to the community and a call‑to‑action to join the QLS program.
Chapters
Welcome to another Q&A Thursday. Guys, this question that we got in support, I thought it was worthy of putting on the YouTube Q&A section here because it is definitely— it came about because of the times we're in right now. Here's the question. Is it possible to structure a potential sub-to deal with a seller who has a high interest rate mortgage? I got like 3 of these this week. We do call critiques and a couple of the calls, like one gentleman 6 months ago bought the house, 7% mortgage, and one of the members of my private President's Club was talking to him. And again, we critique live calls. So I'm hearing this literally before I film. And he has little to no equity, none in his case, and the rent comps don't support the monthly payment. So is it possible to do a deal here? Okay, there's no wrong answer here, but I will tell you that you've got a few things here. High interest rates causing the payment to go up, right? And there's no equity. So you can't like say, well, I'll give you a little less on the back end and the rent comps don't support it. So what do you do? Well, I would encourage you to do a few things. Number one, you've got to look at every deal we do holistically because the 3 paydays are super powerful. They run between $35,000, $45,000 up to $350,000. So sometimes there's a negative payday 2 or a breakeven. But the other 2 paydays are so strong, you go, okay, it's fine. For example, Rick Gabbiati, one of our coaches, had a deal where he had— I think it was either break-even or a $100 loss, but his all 3 paydays was $116,000. So number one, look at the deal holistically will help you do that. If you haven't come to our Wicked Smart Sit Down— every Thursday we do it— and brought one of your deals like this, and we can rip it apart and show you the different ways of doing it, then you're missing out. We had a High Six Mastermind call in my private groups again yesterday, and one of the gentlemen who was structuring a sub-to came to the came to the mastermind and said, "Can we do this live?" He said, "Sure, get the whiteboard out online with my iPad," and we did it. And his biggest aha was, "Wow, didn't know how many ways you could do that." Okay, so let's be careful with that. Secondly, what if the mortgage payment PITI principal interest taxes insurance had a pretty big tax amount in there? Like in the state of Connecticut, I'm just picking that. Taxes are pretty high. So what we do when we market— this is a whole other seminar and this is a whole other module in our QLS course under the buyer mod— but what we do is remove the tax payment and make the rent more attractive. And then when the buyer comes in, we add the taxes back in because we're educating the buyer, just like when they go buy a home and they sit down with the mortgage broker. Well, here's your principal and interest, but hey, you got to budget for your taxes and insurance and so It's the same concept. And all I've done a few videos, if you're in our community, and if you're not, you should be, frankly, I'm biased, because all I've done a few videos explain this to your buyers, right? So you have the whole, all 3 paydays looking at it holistically. You then have the ability to extract the taxes to get that payment down. Third, if you still can't do it, you go, no matter what I do, the market's not going to support this. Then you could have the seller subsidize the property for probably 2 years or so. Now we say, why would the seller subsidize the property? Think about it. This lead that I heard one of our members talk to was— it's a break-even at best. Let's say he has to subsidize it $200. I'll make that up in order for him to have closure because he moved out of this property 6 months ago. Uh, sorry, bought it 6 months ago, moved out just now. So the mortgage payment is $3,000 a month PITI. Okay. Let's draw a little bit of a scenario here. He's gonna go in the hole $3,000 a month, let's say for the next 120 days, even if he listed with a realtor and they got it done eventually, right? But that's getting tough now. So he's down $12,000. Instead, we go, hey, we'll buy this property sub-2, we'll stop the bleeding. You're gonna have to subsidize this $200 a month. So I, I can get 3 years out of that probably. 'Cause that's $2,400 a month times 3 years is what? $4,800, $5,800, $6,800, $7,200. $7,200 is better than $12,000 with potential to go even higher, right? Or you have them subsidize it for 2 years or 1 year, doesn't matter. The point is once you get your buyer and then you collect a deposit, you'll then be able to offload them from the subsidy. So those are just some ways, they're not all-inclusive, that you could Grab a sub-2 property from a seller with a high interest rate, with rent comps that don't support it, and with no equity. Not sure where to get started? Go to smartrealestatecoach.com/getgoing for free books, strategy calls, and a whole bunch more. We're gonna help you get going the wicked smart way. We've been after this for over a decade doing exactly that. I hope that helps you in some shape, form, or fashion to understand not just that answer, but how broad scope it is in the creative world and how many different ways you can structure it. Let me add this and then we'll wrap up. What if you, instead of doing a rent-to-own, you finance the buyer? Or you did a rent-to-own and then financed the buyer, and now you're creating another payday, essentially a payday 4, by doing a wrap and creating a spread there in either the interest rate or the payment? It's endless, uh, opportunities, guys. Again, reminder, bring your questions to the Wicked Smart Sit Down. Always better to email them to support ahead of time. I mentioned, and I'm going to look at my notes here. I mentioned the QLS Home Study Course being assumptive, but I'd like to make sure you guys all get it. If you don't have it now, it's been out since 2016. It's had four updates. Four. I don't know too many educators that do that because frankly, it's grueling to have the team go through that that many times. Four times in the last eight years. Go to smartrealestatecoach.com/QLSYouTube. Smartrealestatecoach.com/QLSYouTube. And, uh, goodness sakes, get your butt into the QLS Home Study Program. You will have that for life. You will get any updates we do. You'll have all our contracts and checklists. It's invaluable. smartrealestatecoach.com/qlsyoutube. Make it a great week. We'll see you next week on the next Q&A Thursday.
