Subj 2 on 21 properties...16 on one loan? - Posted by Mike (IN)

Posted by Nate(DC) on March 06, 2002 at 09:26:44:


If you have the ability to refi once the properties are titled in your name, I say, do it sooner, rather than waiting until you are “forced” to.

Better to play it safe than to run into a time-sensitive situation where a failure to get everything done could result in large losses.


Subj 2 on 21 properties…16 on one loan? - Posted by Mike (IN)

Posted by Mike (IN) on March 05, 2002 at 18:57:17:

Looking at a subject to deal on 21 properties…16 of the properties are all on one, commercial type loan…one payment for all 16 single family homes.

Question 1; Any problem with doing a separate land trust for each property, and taking this subject to (on the 16 prop’s with one loan)? Anyone have any past experience doing one like this? Seems like it would be just like any other subject to except that you only would need to send ONE “notification to lender” form.

Question 2: The seller wants to keep 2 of these 16 homes for himself because they have been in the family. If I take over the whole loan for the 16, how do we carve out those 2? Have him refinance those 2?

Thanks for any input here!
Mike (IN)

Re: Subj 2 on 21 properties…16 on one loan? - Posted by JT-IN

Posted by JT-IN on March 06, 2002 at 07:06:11:


The best option would be to have the individual refi the two props that they want to keep, getting a partial release on the existing note, and a new mtg for them.

The seperate land trusts is OK, and would be simpler when/if you go to sell them, if you were doing subj 2 sales, by assigning beneficial interest. Now, if you are planning to do cash sales, this is where you will run amuck with this deal, and the lender.

Once you begin requesting the bank to provide a partial release for one of the props that you are selling, they will likely become aware of the fact that something has changed. They will/could refuse to provide a partial release, and then the only way you could sell them would be to refi all of them.

So, it depends greatly on your exit strategy here. Also, it depends on whether you could go to the bank and refi all of them yourself, if need-be. If you could not, then I would run away from this deal; don’t walk, run!

Why do I say that…? Here is why… The liability here could be horrific. Let’s say you sold several of them on subj 2, and then the bank calls due, (and I agree with David A. that there is a much higher probability of of due-on-sale probs with a comm’l loan), you now have yourself promised to the seller, and out on a big limb, and the same with some buyers. Let’s say that one or more of the buyers now have successful business’s up and running, and now the bank is calling the mtg due, because you bought all these and violated the DOS clause. You are a sitting duck for a multiple plaitiff lawsuit.

Well, I have just talked myself out of it, but I don’t know about you. The only way here, is out of a matter of convenience and cost, you keep the loan in place, but have the wear-with-all to refi, without question, would I proceed ahead with this deal.

Just the way that I view things…


Nope… - Posted by David Alexander

Posted by David Alexander on March 05, 2002 at 23:08:00:

Not in my opinion…

I’ve done a few deals subject to but never a commercial one…or one with a commercial loan And I dont think you should because the bank “WILL” probably call that one… Only if you negotiated with the bank some kind of clause…

Otherwise make him refi them all… out individually…

And by the way dont ever send a notification to the lender… unless you want to create some new headaches…

David Alexander

Re: Subj 2 on 21 properties…16 on one loan? - Posted by Mike (IN)

Posted by Mike (IN) on March 06, 2002 at 07:37:32:

Well, I have the ability to refinance. I now have a relationship with a small local banker and she will lend me 75% of the appraised value with about $600 in total closing costs, usually at around 6.25 on a 3-yr arm.

The current balance the seller owes averages out to be around $23k per home and the market values range from $35-$45k.

My exit strategy would be to sell all of the properties on a Lease/Option to Tenant/Buyers. They are all rented now, so I will have to either convert the current tenants to tenant/buyers or replace them at the end of their lease.

So, if I take these 16 prop’s subject 2, you think the problem would come when my tenant/buyers start to excersise their option?

But, with the ability to refinance if I’m forced to, would you do the deal?

Thanks JT-IN!

What I meant was… - Posted by JT-IN

Posted by JT-IN on March 06, 2002 at 23:22:40:


What I meant was, in the ability ot refi this note, it to be able to go to the bank, without the benefit of asset lending, and walk out with an amount equal to the payoff of this prop…

In other words, if you have to rely o a "Banker:, to agree with you as to what it is worth, then that is not a guarentee as to the ability to refy the loan.

I woud not trade 100K cash, for the incovenience of being in this spot… if I could not refy these loans w/o the property as collateral…

Just the way that I view things…



I am facing a similar situation… - Posted by Kevin_TX

Posted by Kevin_TX on March 06, 2002 at 10:53:13:

I own a small mobile home park and got financing on a commercial note…with the 6 mobiles encumbered on the note. I talked to the banker about selling the mobiles and she suggested I sell them on L/O. That sounds great, I said, but when they actually excersize their option…what then. Will the bank actually give me a release on those titles?
So here is what I am looking to do (does any one have any other advice?)
I am going to refi the loan so that in two years the value of the note will be well below the value of the property minus the mobiles…and get a release from the bank BEFORE HAND agreeing to a dollar amount of the loan value that they will release each mobile. I only have to make sure that it will be agreeable to the bank that it will be worth it to them in case they have to foreclose on me (they will want to cover their tail if they release equity and I somehow default on the note).
Every situation is different, but this is the only way I know how to do my own situation. When I get a signed and notarized release statement from the bank concerning my loan, is when I know I really have a deal.
P.S. I had no intention of selling the mobiles when I bought the place, but I do now…so plan for the future.