Christian OsgoodCEO, Multifamily Strategy · CEO at Multifamily Strategy

Think About This Before Using Subject To 🤔

30 Oct 2023 · 0 min

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Real estate investors using subject-to deals face a hidden risk: if market rates rise, lenders can call the loan due, forcing you to refinance at much higher rates and wiping out your advantage. A 3% loan could jump to 8% overnight.

Why we never use subject-to. Think about this. You're the bank. Right now you have a note at 3%. The person that you are lending to has sold the property. Previously, you didn't have a problem because rates went from 5% to 3%. You don't really need that money back, but now it's at 8%. If you call that note due, you can take a 3% debt and replace it at 8%. Think about that before you use a subject-to clause on your real estate transaction.

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