What to Offer on a Subject-To

January 20, 2025 • Estimated Reading Time: 3 minutes

Calculating Cash to Offer

Determining the right amount of cash to offer the seller involves several factors:

  1. Equity in the Property: Assess the property's current market value versus the remaining mortgage balance. The difference is the seller's equity, which guides your cash offer.

  2. Seller's Motivation: Understand why the seller is opting for a subject-to deal. If they're eager to sell quickly, you might negotiate a lower cash offer.

  3. Repair Costs: Consider any necessary repairs or renovations. Deduct these costs from your cash offer to ensure profitability.

  4. Market Conditions: Analyze local real estate trends. In a buyer's market, you might offer less cash, while in a seller's market, you may need to offer more to secure the deal.

  5. Investment Goals: Align the cash offer with your investment strategy, ensuring it meets your financial objectives and risk tolerance.

In general, the subject-to offer should be at least what is owed on the property. And the offer should put more cash in the seller’s pocket than an all-cash offer.

Subject-to real estate purchases can be a powerful tool for investors, offering a pathway to property ownership with reduced financial barriers. By weighing the pros and cons and carefully calculating the cash offer, investors can make informed decisions that align with their goals. For a more complete discussion of subject-to purchases, click here.

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