Creative Financing 101: Master Subject-To Deals & Seller Financing with Michael Fernandes

Join the mailing list - https://eyimbook.com/newsletter/How do you transition from a 9-to-5 to financial freedom through real estate, even if you are starting with nothing? In this episode, seasoned real estate operator Michael Fernandes shares actionable strategies on how he built his portfolio from the ground up using creative financing and savvy local prospecting.🚀 Key Searchable Concepts & Takeaways1. Finding "Value-Add" Real Estate OpportunitiesInvestors are always searching for the best way to find undervalued properties. Michael’s strategy focuses heavily on value-add real estate, targeting properties where he can manufacture a minimum of 30% upside.• The "Driving for Dollars" Method: For beginners or those working a 9-to-5, the best deals are often in your own backyard. Michael recommends driving a few-mile radius around your neighborhood on weekends looking for physical signs of neglect (e.g., overgrown grass, deferred maintenance).• Direct-to-Owner Marketing: Once an underutilized property is spotted, skip the MLS. Knock on doors, leave physical notes, or research the owners to call them directly before graduating to direct-mail marketing campaigns.2. Creative Finance: What is a "Subject-To" Mortgage?One of the most frequently searched terms in real estate investing is creative finance, specifically Subject-To (Sub-To) deals. Michael broke into the industry during the 2008 crash with only $749 in his bank account using this exact strategy.• How Subject-To Works: You buy the property and take over the deed, but the existing mortgage stays in the seller's name. You simply assume the mortgage payments.• Is it legal? Yes. While banks have a "due-on-sale" clause that allows them to call a loan due upon transfer, Michael notes it is rare (occurring in only about 5 or 6 out of 1,500 of his deals). As long as the lender gets paid on time, they rarely care where the check comes from.• Handling Equity with Second Mortgages: If a house is worth $100,000 and the seller owes $50,000, they have $50,000 in equity. Michael structures these deals by having the seller hold a seller-financed second mortgage for that equity, or helping them sell that mortgage note to a private note investor for quick cash.3. Raising Private Capital vs. Bank FinancingSecuring traditional bank loans can be a major hurdle for new investors. Michael emphasizes that raising private capital is often much easier and less restrictive than dealing with banks.• Finding joint venture partners or private lenders who have the cash but lack the time to find deals is a powerful way to scale.• By leveraging Subject-To financing first, beginners can build immediate track records and revenue before networking at local Real Estate Investor Associations (REIAs) and meetups to raise bigger capital.4. Market Nuances: Attorney States vs. Title StatesCreative financing strategies like Subject-To do not work the same everywhere.• Deed of Trust States (e.g., Florida, Texas, Arizona) utilize title companies and are highly favorable for creative deals.• Attorney-Heavy States (e.g., New York, New Jersey, Connecticut) are notoriously more challenging because closing attorneys who are unfamiliar with Subject-To structures can frequently act as "deal killers."💡 Top Golden Rules for Beginner InvestorsDon't Quit Your 9-to-5 Prematurely: Do not leave your day job until you have a solid, predictable revenue stream coming in from your investments. Splitting your time is hard, but starving while trying to close your first deal is harder.Avoid Forced Growth: Don't rush the process. Growing too fast prevents you from learning how to properly structure, manage, and scale deals, which can ultimately ruin a business.Want to replicate Michael’s blueprint? Tune in to the full episode to hear exactly how he scaled 14 deals in just 90 days following a market crash!Connect with Michael: https://www.theinvestorspool.com/ https://www.linkedin.com/in/decentralizedrei/