"subject to" deal, yay or nay - Posted by Troy

Posted by Troy on May 12, 1999 at 09:28:00:

Thanks for the reply. I’m not looking to take this property to hold and rent for negative cash flow. My exit would be to l/o to a buyer who maintains the property or, as David suggested and probably a better exit, sell on a land contract. Also, the seller can make up one of the pymts of $750 and the end buyer will come in w/ option consideration or dn. payment money to offset my out of pocket, so I won’t be coming out of pocket for $4500. Also, I can structure the offer so that I don’t make up the arrears until I have an end buyer (and use THEIR cash).


“subject to” deal, yay or nay - Posted by Troy

Posted by Troy on May 11, 1999 at 22:36:03:

Anybody w/ experience taking property subject to existing financing, please help. I got a call from a guy who has fallen behind on his VA mortgage pymts and just wants debt relief. I have spoken to him about the DOS clause and showed him the disclosure (CYA) form he will have to sign in order to do the deal and he’s ready to deal. Couple of problems, he’s 3 pymts behind at $750 per mo. and will be 4 come June 1. He says he can make up one payment on the first of June, but the bank will not accept just one pymt, they want at least two. Here are the rest of the numbers:

FMV: $69900
balance of Va loan: $58500
arrears: $3000
repairs: $1500

The house will rent for $750, maybe $800 on a l/o.
I had wanted to take the prop “subject to” and l/o to a new buyer. You can see there is minimal cash flow here, the guy is getting ate up w/ high taxes - $1500/yr in property taxes which is out of line for my area, taxes should be more like $1200. And his insurance is $1133/yr. which should be more like $450 to insure just the structure. And his VA loan is @ 9.375%. Those are the three factors for the high payments, the interest rate can’t be helped, the taxes are next to hopeless. (They could be protested, but that will take time and likely do little good), so what about the insurance? And, would you even do the deal given the arrears and low cash flow?
I may be able to raise the price slightly for a L/O, but I doubt I can get more on the monthly. Any suggestions appreciated.

Thanks creo,

Troy aka Aquanaut

Low Cash flow? - Posted by Sean

Posted by Sean on May 12, 1999 at 08:43:29:

How about non-existant! If your payments are going to be $750 and you can rent it for $750 you’ll still have to contend with vacancy and maintenance costs. That will come right out of your pocket.

Unless you’re picking up substantial equity by buying it I wouldn’t even consider coming $4500 out of pocket to gain a negative cash flow.

Re: “subject to” deal, yay or nay - Posted by David Alexander

Posted by David Alexander on May 11, 1999 at 23:49:30:

Not alot of profit there but I’d do it for the cash flow. I’m guessing the PI is about 520 or so. You should be able to get 5k down pretty easy if you sell with Owner Financing(Contract for Deed). If FMV is 69k, sell it for 74k. You’ll wrap the property at 69k at about 11% interest and pass on the TI payments to the buyer. I would sell As Is. Only 1500 work needed it can be too bad. I would probably qualify my buyer a little better than normal so that I could see that I had some chance of getting at what small profit there is. Should cash flow about a 100 bucks a month. I don’t know about your area but, here in Dallas it would be gone in less than 5 days.

David Alexander