When a Sub-To Isn’t Really a Sub-To®
A Tyler, Texas Case Study
Written by Jai Thompson
I manage a private equity platform deploying $13,000,000–$18,000,000 per quarter across multiple real estate asset classes. Our model is asset-based, escrow-directed, and execution-driven, allowing us to close in 23 days or less with certainty and clean title flow.
We acquire and operate across:
Luxury estates
Single-family residential portfolios
Multifamily communities
Hospitality and hotels
Mixed-use properties
RV parks and mobile home communities
Golf resorts and destination assets
Specialized housing and income portfolios
Capital is structured. Operators are paid. Reserves are built in.
All disbursements are controlled through escrow.
We deploy with discipline, transparency, and speed—while tithing back to the communities we serve.
1. WHAT THE FACEBOOK POST IS ACTUALLY OFFERING
Property Overview
Location: Tyler, Texas 75701
Configuration: 6 bedrooms, 2 bathrooms
Historic home, fully furnished
Mid-term rental operation
Upstairs mini-kitchen + downstairs full kitchen
Claimed appraisal (without furniture): $350,000
Debt (So-Called “Sub-To” Component)
Existing loan balance: $242,000
Interest rate: 7.25%
Monthly PITI payment: $2,213
Cash Requirement
Required cash to seller at entry: $60,000
⚠️ This is the red flag.
2. WHY THIS IS NOT A TRUE SUB-TO
A true subject-to structure typically involves:
Taking over existing payments
Minimal cash to seller
Cash limited to arrears, moving costs, or a small equity trickle
This deal is effectively saying:
“Take my 7.25% loan AND give me $60,000.”
That is not a clean sub-to.
That is a seller equity buy-out wrapped in sub-to language.
3. SIMPLE BASIS MATH (CHECKED TWICE)
Starting Numbers
Claimed value: $350,000
Existing debt: $242,000
Cash to seller: $60,000
Effective Buyer Basis
Debt assumed: $242,000
Cash paid: $60,000
Total effective basis: $302,000
Percentage of Value
$302,000 ÷ $350,000 = 86% of value
There is:
No discount
No equity cushion
No margin for error
This is retail pricing with creative risk.
4. INCOME ASSUMPTIONS (CONSERVATIVE, NOT HYPE)
The post avoids income numbers, so we run reality.
Room-by-Room Mid-Term Model
Total rooms: 6
Conservative rent per room: $900/month
Gross potential rent
6 × $900 = $5,400/month
Vacancy Adjustment
Current occupancy disclosed: 50%
Stabilized assumption (generous): 80%
Collected gross
$5,400 × 0.80 = $4,320/month
5. REAL-WORLD EXPENSES (NO FANTASY)
PITI: $2,213
Utilities, internet, lawn, supplies: $600
Cleaning, turnovers, admin: $400
Maintenance reserve: $200
Total monthly expenses
$2,213 + $600 + $400 + $200 = $3,413
6. NOI + INSTITUTIONAL METRICS
Net Operating Income
$4,320 − $3,413 = $907/month
Annual NOI: $10,884
DSCR (Debt Service Coverage Ratio)
Annual debt service:
$2,213 × 12 = $26,556
DSCR calculation:
$10,884 ÷ $26,556 = 0.41
❌ Fails DSCR badly
Institutional minimum is typically 1.20+
Yield (Cash-on-Cash Reality Check)
Cash invested: $60,000
Annual NOI: $10,884
Yield ≈ 18%
But this ignores:
Vacancy volatility
Rate risk at 7.25%
Zero refinance upside
High management intensity
This is active labor income, not passive yield.
7. REFINANCE SCENARIO (WHY IT DOES NOT SAVE THE DEAL)
Assume optimistic refinance terms:
New LTV: 70%
Appraised value: $350,000
Max refi loan
$350,000 × 0.70 = $245,000
But existing debt is:
$242,000
Result
Gross cash-out before costs: $3,000
After refi costs:
$0 cash-out
No meaningful rate relief
No capital recovery
Buyer remains locked into a high-touch asset
8. THE CORE LESSON FOR ZIA®, ELIANA®, AND PARTNERS
Not every deal labeled “creative” is structured.
Not every “turnkey” property is low risk.
And not every “sub-to” protects the buyer.
Structure is not language.
Structure is math.
The income must:
Carry the debt
Clear DSCR thresholds
Support refinance reality
Cash should be deployed to scale portfolios, not to plug thin deals.
That is how we protect:
Capital
Operators
Legacy
CONTACT
Mr. Jai Thompson
📞 Call or Text: 980-353-2408
Structure over sacrifice. Stewardship over struggle. Every deal builds legacy.