Creative Financing Attorney for Real Estate Investors

Subject-To Acquisitions →

In a subject-to deal, the buyer takes ownership of the property by deed while the seller's existing mortgage stays in place. The buyer makes the mortgage payments, but the loan remains in the seller's name until it is paid off or refinanced. This lets investors acquire properties with little or no money down and, in a rising-rate environment, inherit a locked-in rate that no new loan can match.

What I Draft for Every Sub-To Deal

The document stack is the difference between a deal that holds up and one that falls apart. For every subject-to transaction, I prepare the sub-to addendum to the purchase contract, the seller acknowledgement and disclosure package (so the seller cannot later claim they did not understand the deal), insurance and loan authorization forms, a durable power of attorney for mortgage and insurance administration, a land trust agreement with the buyer as beneficiary, an LLC resolution authorizing the acquisition, the assignment of beneficial interest into a property-name LLC, and a no-further-encumbrances covenant from the seller.

Why the Document Stack Matters

I have seen investors close sub-to deals on a handshake with a quit claim deed and nothing else. Six months later the seller claims they did not understand the transaction, or the insurance lapses because nobody transferred the policy, or a judgment creditor files a lien against the seller and it attaches to the property. The document stack prevents all of this. The seller disclosures are signed and notarized. The authorizations are in place before closing. The land trust obscures the transfer from the lender. Every piece has a purpose.

Wrap-Around Mortgages →

A wrap mortgage creates a new loan that wraps around the existing mortgage. The buyer makes payments to the seller at a higher interest rate; the seller continues paying the underlying note at the original rate. The difference is the yield spread, and it is the seller's profit margin on the financing.

When Wraps Make Sense

Wraps are most useful when the seller wants ongoing income from the property (not just a lump-sum sale), when the buyer cannot qualify for conventional financing, or when both parties want to avoid the friction and cost of a traditional lender. They are common in investor-to-investor transactions and increasingly popular in halal finance, where interest-bearing conventional loans are not an option.

TILA and RESPA Compliance

A wrap mortgage is a loan origination. That means Truth in Lending Act disclosures, RESPA compliance, and a properly recorded mortgage instrument. I draft the promissory note, the wrap mortgage agreement, the TILA disclosure package, and the RESPA estimate. The note and mortgage get recorded. This is not optional. Investors who skip the compliance paperwork are originating unregistered loans, and the legal exposure on that is severe.

Seller Finance & Loan Origination →

When the seller owns the property free and clear, or when an investor wants to be the bank, I originate the loan from scratch. This is private lending with full documentation: a short-form promissory note, a recorded mortgage, a UCC-1 financing statement securing the personal property, a personal guarantee from the borrower, a business purpose affidavit (to confirm the loan is not subject to consumer lending regulations), and closing instructions for the title company.

What Sets This Apart

Most attorneys can draft a promissory note. Very few can originate a complete loan package with mortgage recording, UCC filing, and proper compliance documentation. I have originated loans on properties across Cook County, DuPage County, Will County, and into Indiana. The documentation is modeled on institutional lending packages but adapted for private transactions where the parties need flexibility that a bank would never allow.

Land Trusts for Real Estate →

An Illinois land trust puts title to real property in the name of a trustee (typically a title company or an LLC) while the actual owner, the beneficiary, remains private. The beneficiary controls the property through a trust agreement and a power of direction. The property records show the trustee's name, not the investor's.

Why Every Sub-To Deal Needs a Land Trust

In my practice, a subject-to deal without a land trust is a no-go. The land trust serves two functions. First, it provides a layer of privacy: the deed records show the trust, not the investor, which reduces the likelihood that the lender notices the ownership change and triggers the due-on-sale clause. Second, under Illinois law (765 ILCS 405), transfers into a land trust where the beneficiary remains the same are treated as non-triggering events under most due-on-sale provisions. This is not absolute protection, but it is the best available mitigation.

Land Trust + LLC Structure

The typical structure is: property held in land trust, beneficial interest assigned to a single-purpose LLC, LLC owned by the investor. This gives you privacy (land trust), liability protection (LLC), and operational flexibility (the LLC can be sold, restructured, or brought into a holding company without touching the title).

Lease Options →

A lease option gives a tenant the right (but not the obligation) to purchase the property at a predetermined price within a specified time frame. The tenant pays rent plus an option premium, and a portion of the rent may be credited toward the purchase price if the option is exercised.

As an Exit Strategy

For investors who acquire properties subject-to or through seller financing, lease options are one of the primary exit strategies. You control the property, install a tenant-buyer who maintains it and pays above-market rent, and if they exercise the option, you sell at a price you locked in years earlier. If they do not exercise, you keep the option premium and the rent credits, and you relist or find another tenant-buyer.

The Legal Work

A lease option is two documents: a residential lease and a separate option agreement. They must be separate instruments under Illinois law, or you risk the tenant arguing that the combined document created an equitable interest in the property (which changes their rights significantly). I draft both documents, structure the option premium, define the credit allocation, and include the protections you need if the tenant-buyer defaults or fails to exercise.

Due-on-Sale Clause: The Risk Everyone Asks About →

Every creative finance conversation starts with the same question: will the bank call the loan due? The honest answer is that the risk is real but manageable. I have closed 40+ subject-to and wrap deals, and the due-on-sale clause has not been triggered on any of them. That does not mean it cannot happen. It means that with proper structuring, the probability is low.

What the Clause Actually Says

The due-on-sale clause gives the lender the right to demand full repayment of the loan when ownership of the property is transferred without the lender's consent. It is a right, not an obligation. Lenders exercise it when they have a financial incentive to do so (the existing rate is below market and they want the loan off their books) or when the transfer creates a credit risk they did not underwrite for.

How We Mitigate It

Land trust structuring is the first line of defense. Keeping the mortgage current is the second. Maintaining the insurance policy without a lapse is the third. Beyond that, we look at the specific mortgage language. If the note says "Fannie Mae/Freddie Mac Standard IL Mortgage" at the bottom left, the Garn-St. Germain exceptions apply and certain transfers (into a land trust where the borrower remains a beneficiary, for example) are statutorily protected. If the note is a portfolio loan or a non-QM product, the analysis is different.

Pricing

Half due at signing. Half due at closing. If the deal falls through, the signing payment is the minimum fee.