Potential Deal...Need Help!!!
Hi all,
A deal recently came my way and here is the scenario:
3bd/2.5 ba townhouse
$72K - current loan balance @ 6.8%; $571 piti
$79K - appraisal value
-not much equity
-homeowner is very motivated...she's been paying on two mortgages for over a year now...she had property listed with realtor and no success....Homeowner wants "out" and not looking for any profit.
-repairs: interior paint and cental a/c.
What is the best approach to this deal w/no equity?
I plan on looking at this property this weekend.
Thank you!
Can the house be rented? At what monthly rent?
Take sub2, start making her payments for her, rent it out for positive cash flow and sit and wait.
Hi Commercialking,
Yes the property can be rented...she actually had it rented out which is now vacant.
I was thinking of doing the sub2, however, with me being new REI and very little cash, I'm actually looking for tenants now who would be able to put $1000-$1500 down ($500 to cover referral fee to another investor who pass the lead to me) and rent it out for about $675-$750.
What do you think?
btw, thank you sooo much for your advice.
Lastly, I'm still new...I somewhat understand the theory on subj2's...
Is there a specific contract I would need to use? If so, how can I get a copy?
Does an attorney need to close on a subj2?
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Quote:
On 2004-06-04 17:43, commercialking wrote:
Can the house be rented? At what monthly rent?
Take sub2, start making her payments for her, rent it out for positive cash flow and sit and wait.
[ Edited by RE_DreamMaker on Date 06/04/2004 ][ Edited by RE_DreamMaker on Date 06/04/2004 ]
I just thought about another potential issue w/Subj2 in this potential deal.
Prayerful this will not happen, but what if at some point the homeowner files bankruptcy....Will this effect the deal that I will have with the "Townhouse" down the road?
How can I protect myself of this possibility early in the game?
Thanks again you guys for all your help!
There are formulas for figuring out what your NOI would be on this property. Then you will be able to see if this property will be self-supporting. The little equity in it self does not mean that it is not a sweet deal for you. I recommend checking the NOI to see if this property would provide you with a positive cash flow immediately. GOOD LUCK!
before taking subject to, find someone in your area who knows what they are doing. once you take property subject to that is it, you are on the hook for the payments and you cannot miss them the seller is trusting you. the deal is a standard deal for subject to and if you can take it and float is you got appreciation on your side. good luck.
I am not sure what sub2 is exactly can someone give a 2 sentence explanation?
But it seems since the owner is already paying 1 year mortgage that you can save her from another year by having her pay some money to take it over. Lets say she would have to pay 6K over the next 12 months and it might not sell you suggest taking over the payments but she will pay you the equivalent of 5K over the next 3 years. That way you can structure the rental knowing that you have positive cashflow coming from elsewhere. If you can't get tennat to put up lot of upfront cash then price it into rental an extra $25/month to pay your bird dog.
To incentivize tennant staying tell them if the sign a longer term lease you will throw in an item, like if they stay for 3 years they get to keep a tv/dvd and sign them to a 3 year lease. Remember to stay flexible.