How to Explain Creative Finance (e.g., Subject-to) to a Seller, Buyer, Realtor - Caleb Christopher
How Creative Finance Can Unlock Affordable Housing Opportunities with Caleb Christopher
Why this episode matters
Affordable housing investors and developers face one of the toughest challenges today: rising interest rates and fewer traditional financing options. That’s where creative finance steps in. In this episode of the Affordable Housing & Real Estate Investing Podcast, host Kent Fai He sits down with Caleb Christopher, founder of Creative TC and one of the most trusted voices in the SubTo community, to unpack how strategies like subject-to, seller finance, wraps, and lease options can be used ethically and effectively to solve real housing problems.
Caleb isn’t just a paperwork expert, he’s been a buyer, seller, lender, and consultant across hundreds of deals. His focus on risk management and ethical deal-making makes him the kind of partner every investor needs when navigating complex transactions.
What does “subject-to” mean in real estate?
If you’ve ever wondered, what exactly is a subject-to deal, Caleb’s explanation makes it simple:
When you buy a property “subject to,” you’re purchasing it with the existing mortgage still in place. The loan stays in the seller’s name, but you, as the buyer, take control of the property and agree to make payments on that loan.
Caleb uses a powerful analogy: just like utility companies have easements on your property and can dig in your yard whether you like it or not, every house is already “subject to” something. In creative finance, you’re just adding the existing mortgage to that list.
This is particularly important for affordable housing investors, since subject-to deals can give you access to low interest rates that were locked in years ago, instead of today’s higher rates.
Why would a seller agree to a subject-to deal?
Many investors ask, why would a seller ever let their loan stay in their name?
Caleb explains that it usually happens after three paths have been exhausted:
A cash offer doesn’t work.
Listing with a realtor doesn’t solve their problem.
Keeping the property isn’t an option.
When those doors close, creative finance provides a lifeline. Sellers facing no equity, expensive repairs, or inspection issues may welcome a subject-to solution as long as they fully understand the process.
What are the risks of subject-to deals?
Creative finance is powerful, but it isn’t without challenges. Caleb highlights common concerns like:
Due-on-sale clause: Banks can call the loan due if they discover the transfer. While rare, it happens, and Caleb’s team has navigated multiple cases with documented solutions.
Debt-to-income ratio: Sellers often worry about qualifying for another loan. The answer is clear documentation that a third party (the buyer) is legally obligated to make payments.
Insurance confusion: Policies need to reflect who holds title and who occupies the property. Without proper setup, deals can unravel.
The takeaway: creative finance works best when handled by experienced professionals who know the paperwork inside and out.
How do wraps and lease options create affordable housing opportunities?
Beyond subject-to, Caleb explains two other strategies that matter for affordable housing:
Wraps: You create a new mortgage that “wraps around” the existing loan. This allows you to sell the property to another buyer while staying accountable to the seller. But Caleb cautions: the payment has to be affordable. “I’m not seeing wraps with $4,500 payments,” he says. “Don’t just mark it up 10% and call it a deal.”
Lease Options: Tenants pay a small nonrefundable fee for the option to buy in the future while renting in the meantime. This creates a bridge to homeownership for families who need time to repair credit or save for a down payment. As Caleb notes, “They take care of the house better because they believe it will be theirs.”
These strategies can help create pathways to ownership in communities where traditional lending leaves families behind.
Key Insights from Caleb Christopher
Every property is already “subject to” something. Creative finance simply layers the existing mortgage into the deal.
Sellers usually choose subject-to after cash and realtor options fail.
Protecting affordability is non-negotiable. If payments exceed what families can handle, you’re setting them up for failure.
Lease options give tenants a real path to ownership while reducing risk for investors.
Creative finance is not about chasing “cool” deals, it’s about doing the right deal, ethically.
Best Quotes from Caleb
“Sometimes the best deal is no deal at all.”
“It’s irresponsible to buy a property with $0 in your pocket. Zero money down doesn’t mean zero in your bank account.”
“If they’re okay waiting one year for payoff, why not 30? What they really have is a trust issue, not a timeline issue.”
“Don’t be a dirtbag. Be upfront about taxes, insurance, and affordability when structuring deals.”
Common Questions About Creative Finance
What is the main benefit of subject-to for affordable housing investors?
It allows you to acquire properties at yesterday’s lower interest rates, making rents and resale prices more affordable today.
Can banks really call the loan due in a subject-to deal?
Yes, but it’s rare. And even when it happens, experienced consultants like Caleb’s team often resolve it through legal and administrative strategies.
Why would a seller agree to a subject-to deal?
Because they’ve run out of traditional options. No equity, costly repairs, or failed listings push them toward creative solutions.
What’s the difference between rent-to-own and a lease option?
Rent-to-own implies monthly payments build equity, which creates legal complications. A lease option is cleaner: it’s a lease plus the option to buy later.
Are wraps risky?
They can be if you don’t structure them correctly. Payments must be affordable, and terms must protect both the seller and the end buyer.
Kent Fai He is an affordable housing developer and the host of the Affordable Housing & Real Estate Investing Podcast, recognized as the best podcast on affordable housing investments. Through conversations with thought leaders like Caleb Christopher, this podcast continues to set the standard for investors, developers, and advocates who want to create impact while building wealth.
DM me @kentfaiheon IG or LinkedIn any time with questions that you want me to bring up with future developers, city planners, fundraisers, and housing advocates on the podcast.
