The #'s -- POSSIBLE 1st Sub To!! - Posted by LittleGuru

Posted by Brent_IL on September 24, 2003 at 01:00:26:


The #'s – POSSIBLE 1st Sub To!! - Posted by LittleGuru

Posted by LittleGuru on September 22, 2003 at 16:56:42:

I got a call today i’m still looking for my first deal i’m buying subject to sell l/0 or CFD. The guy sounds motivated he agreed to let me keep the loan in his name. He has a job offer out of state and won’t get it unless he sells. He wants the job i can tell.

Appraised 123k Original loan balance 110k 7.75% his break even price with a realtor is 117k. His payments are 1100 piti. He says houses rent for 850-950 across the street. Says his is newly remodeled.

I EVEN MENTIONED COMING OUT OF POCKET he asked me how much, he said he gets offers all day long but seems he doesn’t want to pay unless he has to but i know he will if i buy today and solve his problem.

I said i’ll call him back wednesday. It is listed with a realtor i said the only way i can buy the house is if you get your listing cancelled or list me as an exclusion. Is this worthy to do. How much should i make him pay me to buy the house? Thankyou for any response

Re: The #'s – POSSIBLE 1st Sub To!! - Posted by eric-fl

Posted by eric-fl on September 23, 2003 at 10:52:58:

I agree with Brent below, the only way this thing can work is to have the seller subsidize the rent. Otherwise, you’ll have a negative cash flow, even the seller can see that. Unless there is something weird here, like a 15-year note or something, you don’t really want to get into that situation. Particularly on your first deal.

Re: The #'s – POSSIBLE 1st Sub To!! - Posted by David Garcia

Posted by David Garcia on September 22, 2003 at 20:04:33:

Dont get too greedy now. If the home is not in arrears, and the balance is less than appraisal you can make something happen here.

One thing that I tell my sellers is that they pay 2 months after I take over the loan. I tell them that its my company policy. If you sell via CFD, you can up the price 10% & get a 5-10% downpayment.

DG advanced real estate investing

Re: The #'s – POSSIBLE 1st Sub To!! - Posted by Brian

Posted by Brian on September 22, 2003 at 18:53:15:

Why not L/O the house after you Sub 2 it. 5000 up front option condsideration add 200 to PITI for your 24 months rent sell price at slightly less than appraised value plus 2 years appreciation. Give the T/B a 5000 discount from the asking price if he pays every payment on time. If he cannot purchase after 24 months do it again…=O)

Re: The #'s – POSSIBLE 1st Sub To!! - Posted by Brent_IL

Posted by Brent_IL on September 22, 2003 at 18:07:23:

This is very, very tight. The seller is going to have to subsidize heavily. If you don’t have cash back-up it’s like betting the farm on a roll of the dice.

Getting a L/O’r to make a 1% payment, about 40% over rental rates, leaves you with about $100 a month to play with. If it takes 4 weeks after settlement to find a T/B, you’ve wiped out a years profit. You are expecting no major repairs.

I wouldn’t say anything else about the REALTOR®. If he can?t figure out what to do from what you?ve said, he will cause you problems down the line. Since you?re not giving him cash, the only way that I can see that he will pay you is if he doesn?t have to pay the REATOR® also. I?ve always had an easier time selling the concept of a decreasing subsidy to a seller instead of a lump sum, e.g., $300 a month for the first year. $200 second year, and $100 the third year. The idea is that rents are going up as a result of the property and management improvements that you are making. This reinforces the suggestion that the subject-to is a safe thing to do with you.

I guess it comes down to how much he really wants the out-of-state job and the degree of your risk-tolerance.

And if … - Posted by Sammy

Posted by Sammy on September 23, 2003 at 07:00:08:

“If he cannot purchase after 24 months do it again…=O)”

And if housing prices in his area go down 10-20% over the next 24 months, he’s screwed. VERY likely to happen by the way as interest rates start going up. All these newbies who bought into the sub2/LO hype are gonna be up the creek without a paddle if you ask me.

Re: The #'s – POSSIBLE 1st Sub To!! - Posted by Brent_IL

Posted by Brent_IL on September 23, 2003 at 23:14:51:

We use an unsecured note if they don’t have other property. A performance mortgage doesn’t do any good because you don’t owe them anything that you could withhold and they don’t have equity to lose. If he defaults with the unsecured note you can attach any seller assets. In this kind of post-sale participation with a low asset seller, I’d never option it to anyone until after the property was on a paying basis. If you rely upon the seller’s money, and it doesn’t come, you can give him back his house, but the optionee will sue you.

Re: The #'s – POSSIBLE 1st Sub To!! - Posted by Bandman

Posted by Bandman on September 23, 2003 at 20:37:59:

Brent - Do you have anything in particular you use to assure yourself they’ll pay?