Why Are There So Many Bad Subject To Deals Lately? Because the Math Ain’t Mathing.

Lately my feeds have been overflowing with “amazing Subject To (subto) deals,” “hybrid creative offers,” and “STR (short-term rental) goldmines.” And every single one of them claims to make six figures a year.

Every. Single. One.

Yet somehow…
the seller can’t wait to get rid of it.

You’d think if a property was truly making $120k–$130k a year in revenue, these owners would be hanging onto it like a kid gripping their last Mickey bar at Disney. But that’s not what’s happening. Everyone is trying to bail out, and they’re using creative finance as the sugar coating to disguise what’s really going on underneath.

Let’s talk about it.

Because the math on these deals?
It isn’t mathing.

Revenue Isn’t Profit…Yet Too Many Act Like It Is

Just because a property grosses $120k doesn’t mean it profits anything close to that. But the way these deals are pitched, you’d think the entire $120k magically falls into your pocket, tax-free, maintenance-free, stress-free.

The truth is extremely different.

Most rookie investors…and frankly, far too many sellers… confuse revenue with profit. They look at the top-line numbers and assume everything below that is “no big deal.” But if you’ve ever operated an STR (short-term rental) in a coastal market, you know the expenses will eat you alive if you aren’t careful.

Here’s what people conveniently forget every time they push these deals:

✔ Management typically takes 20–30%
✔ Cleanings, linens, and restocking are monthly (sometimes weekly) expenses
✔ Heated pools equal utility bills that can shock even seasoned operators
✔ Coastal humidity destroys furniture, electronics, artwork, and anything made of wood
✔ Airbnb/VRBO (Vacation Rental By Owner) fees add up fast
✔ Insurance in Florida is like a bad punchline… you laugh to keep from crying
✔ Property taxes increase, especially in markets that have surged in valuation
✔ Guests aren’t gentle… furniture has a lifespan measured in months, not years

By the time all of that is paid for, that “$120k STR” might only net $30k–$45k in real-world, after-expense investor terms.

And that’s on a good year.

Throw in a hurricane scare, a slow shoulder season, or a surprise $8,000 HVAC replacement, and you can watch that net number evaporate before your eyes.

Let’s Do the Math These Sellers Don’t Want You to Do

Take this recent “Investor Special” I saw floating around:

• Property price: $950,000
  • Existing loan: $591,850 at 3.99%
  • PITI (principal, interest, taxes, insurance): $3,652.29/month
  • Seller carry back (seller financing): $993.74/month
  • Total monthly: $4,646.03
  • Annual debt service: $55,752.36

Now let’s talk net.

If the property brings in roughly $120k a year in revenue, you first subtract:

• 20–30% management
  • Utilities (coastal pool homes are not cheap)
  • Repairs and maintenance
  • Furnishings and replacements
  • STR platform fees
  • Insurance
  • Taxes
  • Cleaning and linen turnover
  • Pest control (non-negotiable in the South)
  • Licensing fees
  • Landscaping and pool service (weekly, not monthly)

Once you strip out all that, the “amazing” $120k property is now realistically netting (if you’re a disciplined operator):

$35k–$45k

But the debt service ALONE requires…

$55,752 just to break even

See the problem?

Unless the property nets MORE than $56k every year after expenses… which this one does not …the buyer is operating at a loss from day one. Not a temporary loss. A permanent one.

This isn’t a cash-flow play.
It’s a charity donation with a beach view.

Why Sellers Are Leaning on Creative Finance Right Now

It’s simple:

The STR boom is tapering.
Expenses are up.
Insurance is brutal.
Competition has exploded.
And the market is correcting.

People who bought at the top…or expanded too fast…are now desperately trying to unload properties without taking massive losses.

Enter Subject To (subto).

Enter hybrid.
Enter seller finance.
Enter “low interest rate takeover.”

Creative finance is the new glitter.
It makes the mess look sparkly long enough to attract someone who hasn’t learned to see through the shine.

But here’s the skinny…

Creative finance doesn’t fix a bad deal.
A sub-4% rate doesn’t fix a bad deal.
A beach location doesn’t fix a bad deal.
A revenue screenshot doesn’t fix a bad deal.

If the NOI (net operating income) doesn’t beat the debt…

It’s not a deal… it’s a donation.

And you’d be the donor.

So How SHOULD a Subject To Work?

A real subto deal should do two things:

1. Lower Your Cost of Capital… Not Raise It

The entire point of taking over someone’s existing mortgage is the advantage of inheriting a better payment structure.

A good Subject To (subto):

✔ Lowers your monthly debt
✔ Gives you breathing room
✔ Increases your cash flow
✔ Buys you time to stabilize the property

If the payments are so high that your NOI can’t outrun them, it’s not a Subject To win… it’s a trap.

2. Increase Profit, Not Emotion

Real estate investing isn’t about “but it’s near the beach!”
or
“it comes with golf carts!”
or
“look at the pretty furnishings!”

A real investor cares about one thing:

Profit.

• Your NOI must exceed your debt
  • Your cash-on-cash must make sense
  • Your worst-case scenario can’t bankrupt you
  • And your upside must outweigh your risk

That’s it.
Creative financing is a tool… not a magic trick.

When a Subject To works, it’s because the numbers work.
When it doesn’t, it’s because someone is trying to dump a problem on the next person.

A real Subject To deal should build wealth, not bury you in expenses.
It should create cash flow, not drain it.
And it should make the investor money… not just bail out the seller.

Because at the end of the day:
real estate is a profit business, not a pity party.

If you’d like to learn more about Subject To (subto deals), investing in real estate, or how to create multi-generational wealth the right way… not the hype-laced nonsense circulating online … highly recommend you follow my buddy Jeff Watson at www.watsoninvested.com.

And while you’re there, do yourself a favor and grab his book:

“Boaz On Business: Building Multi-Generational Wealth During Chaotic Times”

It’s one of the smartest, clearest, most actionable guides on building wealth that actually lasts… through market swings, storms, recessions, and everything in between.

If you’re serious about building real legacy wealth, start there.