What's better... - Posted by LeAnne-WA

Posted by LeAnne-WA on August 18, 2003 at 11:57:48:

2 questions…

Am I better off just keeping their existing loans indefinately?

IF I did get a new loan, would there be any advantage to just getting a loan for whatever the payoff on their loan is thus keeping the equity in the property?

Thanks!

LeAnne

What’s better… - Posted by LeAnne-WA

Posted by LeAnne-WA on August 15, 2003 at 17:46:50:

What’s better…

a land contract or subject to?

I have a deal I’m working on where the 2nd lienholder is going into foreclosure and the 1st isn’t, but might be soon.
The 2nd is 3 months behind and the 1st is 2 months behind.

The sellers are willing to just “walk away” as long as I can catch up the back payments - about $3,000 (includes both 1st and 2nd arrearages). I’m just wondering everyone’s take on doing a land contract or subject to. We are planning to buy it as our personal residence and will live in it for 2 to 3 years, then either refi and use it as a rental or just sell it.

Thanks.

LeAnne

Re: What’s better… - Posted by LeAnne-WA

Posted by LeAnne-WA on August 16, 2003 at 13:10:28:

It has been suggested that I buy the 2nd at a discount for about 10%. That would be about $3,400. It would make the 1st much more managable and I could leave it in place, either buying subject to or on a land contract.

I’m still thinking sub2 is better, but could somebody compare and explain the benefits of each b/c I’m having trouble with the big picture?

And then, what would be a good exit strategy when we sell it in the 3 or 4 years?

Thanks for everyone’s help! I truly appreciate the great feedback on this board.

LeAnne

$3K is real value, they’re not walking away. NTXT - Posted by Brent_il

Posted by Brent_il on August 15, 2003 at 20:54:32:

.

Re: What’s better… - Posted by Shawn J. Dostie

Posted by Shawn J. Dostie on August 15, 2003 at 19:47:03:

As a buyer it is better to get the deed and buy subject to.

Good Luck,
Shawn(OH)

Re: What’s better… - Posted by LeAnne-WA

Posted by LeAnne-WA on August 15, 2003 at 20:04:00:

Shawn-

That’s what I was thinking.

So, after I’ve found a seller willing to “give me the deed”, what do I do?

Is it best to go long-term or short-term? I mean, how soon should I get my own financing? I suppose that depends on my exit strategy, right? What type of exit strategy is best when I’ve taken ownership this way?

Thanks for all the help. I’m just beginning to research and learn this subject to stuff. I’d love to buy the course, but can’t afford to do that yet! So far, I’ve been doing assignments and flips. But I think there’s a real market in my area for sub to and want to learn enough about it to use it.

Thanks, again!

LeAnne

Re: What’s better… - Posted by Tom (MI)

Posted by Tom (MI) on August 15, 2003 at 20:15:43:

Why would you need new financing? You just keep making payments to the sellers lenders until the house sells. There is no need to get new financing on the property.

Tom

Re: What’s better… - Posted by LeAnne-WA

Posted by LeAnne-WA on August 16, 2003 at 17:07:46:

I’m thinking it might be better to get the loans out of the sellers name as soon as is possible. Or does that just defeat the whole purpose? I mean, really - what is going to be the best advantage over the course of the 3 or 4 years we’re planning to keep it??

Thanks!
LeAnne

Re: What’s better… - Posted by Brent_IL

Posted by Brent_IL on August 17, 2003 at 24:10:19:

There are costs involved in making a new loan. When your holding time is short, some appreciation has to be allocated to negate these costs. Subject-to takeovers are cheap, so more future appreciation goes to you.

An older loan will have a higher proportion of each payment going toward paying down principal. Interest deductions are lower, but when you sell, the loan reduction is real money.

Since no one knows what will happen in the next four years, if you need to sell, having a low loan on the house will give you the option of reducing your profit expectations to sell. If you put a new loan on the house, the higher LTV will limit the price at which you can sell the property without incurring negative cash flow.