Execute a 'Subject To' on a multi-million dollar purchase?

Does anyone know if you can purchase a muilt-family subject to? I’m talking about multi-families over 100 units, with a multi-million dollar note on them. For example, lets say the owner of a very large multi-family is in a pre-forclosure.

it sounds like you may be looking for a hard money loan using the ARV

He didn’t say anything about hard money, he is asking about sub2. I’m going to move this to the Sub2 forum to allow the Sub2 experts to handle this question. To me it seems like the dollar amount and type of building is irrelevant and it should be like any other Sub2 but I’ll let the experts way in on it.

There doesn’t seem to be anything functionally that would make it impossible to take a large property/loan using “subject to,” BUT I’m thinking there are a few forces working against you here…

  1. Financial troubles aside, someone who owns a 100-plus unit building may understand enough to be less than interested in a deal where they deed the property to you but still remain liable for the note.

  2. I have to think that the lender for a property of this size is paying a little more attention to the note than one of the tens of millions of mortgages out there on SFHs. You need to be prepared for what happens if the loan gets called. Are you really prepared to refinance or otherwise exit?

My guess is that you’ve thought these through, but the answer to your original question, at least in my mind, is that there is nothing different about a “subject to” deal just based on size. Someone deeds you a property and they don’t pay off the loan. That’s it.

Btw, what’s the exit strategy on this? Get the building turned around and refi, resell it without changes, turn it around and resell, etc?

Rich in CT, thanks for moving me to the correct forum. I wasn’t sure where to post.

Paul Broni- Yes, I’ve thought of the scenarios you presented, and there may be enough upside in the deal to refinance what’s owed to the lender if they do call the note. A note of this scale however, my investment team would probobly try to negotiate the lender’s acceptance of a subject-to purchase. They’ve already started forclosure proceedings. If the balance to cure the note were paid suddenly, I’m sure the lender would look into what was going on. So like you said, to pull this off, they would have to get the lender’s acceptance for subject-to or be prepared for a ‘due on sale’ clause enforcement upon purchasing it subject to. As far as the seller is concerned, they seem willing to accept subject-to to get out of the situation. That’s their primary objective.

Rich in CT - There are two exit strategies really. Reposition through lease up and then sell, or refi and keep for cash flow. I’m still doing more research on the deal. But basically the quickest aquisition strategy would be subject-to. Although a short-sale may result in a bigger discount.


 I haven't done a commercial deal yet, but have every intention of going this route.  My general understanding at this point is that commercial loans may actually be easier (to some degree)  to directly assume than on a SFR.  Again, very new to commercial, but if you were going to check into that, might be good to have your ducks in a row and possibly have looked into a reputable, experienced property management co that would be a part of your plan upon assuming the loan?  If I'm off base, I am sure someone will let me know.

Just to clarify, if you’re going to work with the lender to assume the loan, then you’re not doing a sub2 deal, so the pros/cons of sub2 don’t apply.

I believe that it would be better to try to do a formal assumption, as you run the very high risk of getting the loan called due if not.