Subject 2 - How would you handle.... - Posted by J. Christopher

Posted by Brent_IL on September 13, 2003 at 19:27:18:

You say the sellers want to sell subject-to. Was that after you planted the idea in their minds? I’m always suspicious when sellers start throwing around real estate terms like subject-to, so I start exploring the depth of their knowledge. I get to wondering if I?m the pigeon.

$2,000 to $5,000 per property isn?t too bad if the fix-up and resale costs are very modest. Some of that can be recovered from the deposits of a tenant or R/B. You are using cash to buy an equity multiple. That is a very sound investment approach.

I?d go for both of them.

Subject 2 - How would you handle… - Posted by J. Christopher

Posted by J. Christopher on September 13, 2003 at 16:49:41:

Hello all,

I spoke with 2 Sellers who want to sell their house Subject 2. Both houses have loans that are 70-80% below value. Mortgage payments are below what the rental market calls for so there is some cash flow. They are both in good neighborhoods so it should be no problem filling them with T/B’ers and they are in good condition.

However, both Sellers need a few thousand ($2,000-$5,000) so they can move to their next residences.

How would you handle this? Would you do these deals?

Sincerely,

J. Christopher

Re: Subject 2 - How would you handle… - Posted by Ron M (WA)

Posted by Ron M (WA) on September 14, 2003 at 14:13:48:

$2k - $5k is a pretty wide range. Can the sellers get a 2nd against the property for their cash. If so, maybe you can assume the liability for those loans also. Another possibility would be if they can get a cash advance from a credit card and you can assume that payment. Try to keep it toward the $2,000 amount and if they need additional equity that you are willing to give them, have them accept it on a promissory note due when your T/B cashes you out. (If they are really motivated, you should be able to get the property without paying much more than the $2,000.) If you create this for a fixed amount, then you shouldn’t have to pay any interest on the balance due. This is an interest free loan from the seller.

Ron M

Re: Subject 2 - Correction!! - Posted by J. Christopher

Posted by J. Christopher on September 13, 2003 at 17:17:20:

Sorry, folks. What I meant is:

House # 1: Mortgage balance: $72,000. Value: $97,000
House #2: Mortgage balance: $65,000. Value $82,000

J. Christopher

Re: It depends on - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on September 13, 2003 at 17:03:32:

what you think your post means.

70-80% below value, as I read it means that the mortgages are for 20-30% of the value of the houses. In that case the $3-5,000 would be the total equity. If that is the case write a check.

I contend that you might have meant that the mortgages are for 70-80% of the value of the properties (not below the value). If this is the case I would ask, who’s opinion of value are we talking about? There can often be quite a difference in what you think something is worth and what I think it is worth.

If the value is real the answer is the same, write a check and take deed, subject to the mortgage. Due dilligence is always important, make sure the title is clean, etc.

If you do not have the cash you may want to consider a partner who does have the cash, and split the profits with him.