Nyasia Casey drained nearly all her savings to acquire her first property in 2021: a $105,000 single-family home in Baltimore.
It ended up being a smart investment — she’s profiting $1,100 a month from the rental, which Business Insider verified by looking at a copy of her monthly mortgage statement and a rent agreement with the Housing Authority of Baltimore City — but it wasn’t necessarily replicable.
The process made her realize: “I don’t want to spend my money on properties anymore. It’s not really scalable using your own money.”
Casey, who rents in New York City but invests in Baltimore, started looking into creative financing strategies that would allow her to expand her real-estate portfolio without fronting tens of thousands of dollars.
Using ‘subject-to’ financing to bypass a down payment and inherit a low interest rate
While researching creative financing, Casey learned more and more about “subject-to loans,” when the buyer takes over the existing financing. With this type of financing, the buyer doesn’t actually assume the mortgage — it remains in the seller’s name with the same terms — but makes mortgage payments on behalf of the seller.
“You pay their mortgage, which is still in their name, and you get the deed to the property so you can control it,” Casey explained. “You can refinance it, you can rent it, you can do anything with the property.”
Everything is negotiable with subject-to deals; the buyer and seller just have to agree on the terms. This was a major advantage for Casey, who didn’t have much cash on hand when she was looking to buy her second property.
The property she was interested in acquiring was another single-family in Baltimore. After doing some research, she learned that it was a rental — and was costing the owner.
Using software like PopStream, “I could see what he had been renting it for, and I could see what his mortgage was,” explained Casey. “I knew he had been losing money every single month since he bought the property.”
She met with the seller to propose a subject-to deal. She was upfront about her situation.
“I just said, ‘Listen, I don’t have any money, and you are clearly trying to get out of this house. The rates are really high, so this property wouldn’t cash flow if I bought it, but if you want out of it, I could take it off your hands,'” she recalled. “‘Help me help you’ is essentially the way I framed it.”
Courtesy of Nyasia Casey
Her framing worked. While the seller was originally skeptical, having never done a subject-to deal, he agreed to proceed if Casey found an attorney to help write up the agreement. They decided on a purchase price and no down payment. Casey would go through a private money lender to pay closing costs and do a light renovation, and she would refinance out of the loan after one year, as long as interest rates went down.
The year has passed, and rates have not dropped, she noted: “So he’s not received any money yet. For his comfort, I put in $6,600, or around three months’ worth of mortgage, in escrow because, of course, a seller’s biggest concern is that you’ll stop paying the mortgage.”
That way, he can take that money from the escrow if she misses a mortgage payment.
“It’s been a little over a year, not one payment has been missed, and he has no issues,” she added.
Another benefit of subject-to for the buyer, especially in a high-interest-rate environment, is that they could inherit a low interest rate. In Casey’s case, she inherited the seller’s 4.5% rate when rates were hovering around 8%, she said.
There are benefits for the seller, too. It’s all situational and about “finding people who have pain points,” said Casey, who documents her investing journey on YouTube.
Take someone who bought at the top of the market and their property value has decreased, but a life event is prompting them to move. Say they bought a home for $300,000 in 2021 that’s now worth $275,000.
“If you go to put that on the market, you’ve got to pay agent fees, closing costs, all of those fees. Plus, you have to bring maybe $30,000 to the table just to get out of that mortgage,” she explained. An investor like her could happily take it off the sellers’ hands. “I don’t necessarily care about the purchase price; I care about your interest rate. I care about not having to put down a down payment. So I could buy your house for the 300, but I get the advantage of having your 3% rate instead of an 8% rate, and I get the benefit of not having to go out and look for a bank loan and someone running my credit.”