Three exits, three different financing problems. Nothing below is a recommendation; which one fits depends on facts this page cannot see.
| Strategy | What you are doing | How it is financed | Where it goes wrong |
|---|---|---|---|
| Fix and flip | Buy, renovate, sell. You take construction and market risk and you pay the full cost of money for the whole hold. | Usually hard money or private money, interest-only, sized off loan-to-cost with an ARV cap. | The exit is a sale, so the carry cost is the clock. Use the hard-money calculator to see what an extra two months costs. |
| BRRRR (buy, rehab, rent, refinance, repeat) | Same first two steps, then you keep the property, place a tenant, and refinance out of the short-term loan into a long-term one. | Short-term money first, then a DSCR or conventional investor loan as the takeout. | The refinance is the whole thesis, and it is underwritten on the RENT, not on the purchase price. Run the DSCR calculator with the rent you can actually document before you buy. |
| Subject-to (taking title with the seller's loan left in place) | You take title; the seller's existing mortgage stays in the seller's name and on the seller's credit. | No new loan. That is the appeal and also the whole risk. | A due-on-sale clause is the lender's CONTRACTUAL right and it survives the transfer. Written disclosure to the seller first. See the block below. |
A due-on-sale clause is a CONTRACTUAL right of the lender, enforceable under the Garn-St Germain Act (12 U.S.C. 1701j-3) and 12 C.F.R. Part 591; taking title subject to an existing loan is not a crime. The exposure is (a) the lender may accelerate and foreclose, and (b) deception liability toward a seller who was not told. Therefore the seller MUST receive a written due-on-sale disclosure before signing.
So a subject-to closing in our pipeline carries this written disclosure to the seller, verbatim from the compliance matrix, before anything is signed:
SUBJECT-TO / DUE-ON-SALE DISCLOSURE TO SELLER
If this transaction is structured so that Buyer takes title while Seller's existing mortgage loan remains in place ('subject to' the existing financing), Seller must understand the following. Nearly every residential mortgage contains a DUE-ON-SALE clause. Under the Garn-St Germain Act, 12 U.S.C. 1701j-3, and 12 C.F.R. Part 591, that clause is enforceable when the property is transferred. This means Seller's lender MAY, at its option, declare the entire loan balance immediately due and MAY foreclose, even if Buyer makes every payment on time. The loan will remain in SELLER'S name and on SELLER'S credit report until it is paid off or refinanced. Late payments by Buyer would damage Seller's credit and could result in foreclosure against Seller. Nothing Buyer can do removes this risk. Seller should consult an attorney before agreeing to a subject-to transaction.Primary sources for the federal rule:
The per-state gate that decides whether we may act at all on a given lead class is on the assignments and state rules page.
Every figure on this page is computed from the numbers you type in. Nothing here is an appraisal, a loan offer, a rate quote, a tax opinion, or legal advice.
Entity: Elite AI Holdings LLC. Site index · Free vs. pro tools · Open data API · Correction / opt-out · Privacy · Terms · Do Not Sell / Privacy Request · Account.
← Elite AI Empire home