Possible First Deal Sub 2.....HELP!!!
I may have my first deal that is subject 2 existing financing. I have learned that the owners just want out. They have pretty much no equity ($5k at most). They are wanting $163,000 and their original loan docs state $150,602 on 1st loan and $9,240 on 2nd loan (both loans originated on same day, not sure why this is) and grand total is $159,842. I am advised their interest rate is 8.1% with payments totalling $1325.75. They were 3 months behind and mortgage company agreed to add that to the end of the loan. The area is comping out between $163,000 to $169,000. By the way, there are similar homes in this same neighborhood with pools that sold in 02/04 for $190,000 and $198,000, this property has no pool. Has anyone done this in Arizona and knows what exact documents I need to get this deal?
My only out of pocket at this time is $500 referral fee + holding fees until I can find a tenant/buyer.
Here is the challenge: one of the owners has what I estimate to be about $70,000 in medical liens. How does this play out in my acquiring this home. Would I become liable for these liens? One of the amts, about $64,000 appears to have been created before they moved to this residence. This actual debt I am not exactly sure is theirs, I would have to ask the homeowners. There is also a homeowners association lien on the property of about $300 (12% annual interest) from 2002 and there is no lien release recorded.
Any suggestions and/or advise?[ Edited by db103098 on Date 04/28/2004 ]
When you buy the house you get all the liens that come with that home. Getting a title search (ca-$250) is the best bet. If all those liens are not on the house, and the resale values are in the 190's-I'd jump on it. I wouldn't worry about the $300, it's not going to make or brak you, but the 70K lien would. If the lien was on the house when they moved their, there may be a big problem. See if it was put on there when they move in, and if not, see what type of deed they have. If the lien was on there when they moved in, and they have a warranty deed-they have to go back on the people they bought it from and work it out with the courts.
If that is the case, and this is your first deal, just let it go.
If you could make up to 40K on this deal (which you may be able to do, but I really don't know), you may want to pay for a title search. But either way if you take the house or not, you still have to shell out the $250.
Don't believe the homeowners. Especially if there're really despirate.
It's a risk.
Best of luck
this medical lien if it is a judgement lien then you can avoid it. through bankruptcy, because there is more owed on the property then its worth. so the medical lien could be discharged for the current owners and avoided for purposes in selling the home free clear of any liens subject to of course the 1st and 2nd mortgage. consult a bankruptcy attorney they will tell you that you can do that just as long as the numbers you are giving us are correct.
OK, I heard back from my contact. It appears that the $70K lien does not belong to these homeowners. There is another person in the Phx area with the same name (not really uncommon). There are 2 other liens on the property that are related to an auto accident that is being handled thru an attorney and the homeowners state that they should not be appearing against them this way as those doctors were to wait for settlement. They are in the process of contacting their attorney on that. The only thing left to contend with is the $300 HOA lien and the homeowners state that they will be getting that paid.
Now, if all of this is all true (and the title search proves this also), is this a good deal? I am excited because this is my first deal and do not want to screw myself royally. I am going to view the property tomorrow.
Would you guys do this as subject to or just take it over on trust deed?[ Edited by db103098 on Date 04/29/2004 ]
Any comments or suggestions?
Quote:
On 2004-04-29 01:22, db103098 wrote:
OK, I heard back from my contact. It appears that the $70K lien does not belong to these homeowners. There is another person in the Phx area with the same name (not really uncommon). There are 2 other liens on the property that are related to an auto accident that is being handled thru an attorney and the homeowners state that they should not be appearing against them this way as those doctors were to wait for settlement. They are in the process of contacting their attorney on that. The only thing left to contend with is the $300 HOA lien and the homeowners state that they will be getting that paid.
Now, if all of this is all true (and the title search proves this also), is this a good deal? I am excited because this is my first deal and do not want to screw myself royally. I am going to view the property tomorrow.
Would you guys do this as subject to or just take it over on trust deed?
<font size=-1>[ Edited by db103098 on Date 04/29/2004 ]</font>
Do a title search, figure what is attached and what isn't.
After you know what you have on your hands, then go from there. but it appears you have a good deal on your hands.
Don't worry yourself with the what if's. Find out what the facts are and then go from there.
OK, I'm missing it, I don't see the "good deal" here. It's worth 163 to 169, it's costing you 159 plus.
What are the plans for it? You will lose money trying to flip, holding costs etc would be way more than the profit. Will it cashflow as a rental? Will it cash flow if you refi at a good rate? What's the cost to add a pool to get the price up, is that cost effective?
The only way I see it as a deal is if you want to live in it and love the house, even then you are paying near market for it and get stuck with an 8.1 loan to boot. I would still pass unless I could refi quickly to get a decent rate.
Maybe my reading comprehension skills are taking a vacation and I'm missing something.
My exit strategy was to lease option the property with 5% down and $200 premium on the mortgage payment. I would also add 6% x 2 (24 mo lease) to the current fmv for the tenant/buyer and this would be another $19,560 in my pocket if he/she buys the property.
There is a lot of retail going on around this area including a brand new football stadium, a new hockey arena, schools, and a large medical center. I think the appreciation will be pretty good if the tenant/buyer never buys the property.
My personal opinion would be to not add a pool, especially for a l/o PLUS city ordinances requires pool fencing which is an added expense.
My credit is not good enuf to re-fi out the loan to a better rate. Knowing the area is growing AND the city is really banking on this football stadium, hockey arena and new retail stuff. All of this is within a mile if this house. The appreciation will help alot. Am I too hopeful?
Quote:
On 2004-04-29 15:10, mykle wrote:
OK, I'm missing it, I don't see the "good deal" here. It's worth 163 to 169, it's costing you 159 plus.
What are the plans for it? You will lose money trying to flip, holding costs etc would be way more than the profit. Will it cashflow as a rental? Will it cash flow if you refi at a good rate? What's the cost to add a pool to get the price up, is that cost effective?
The only way I see it as a deal is if you want to live in it and love the house, even then you are paying near market for it and get stuck with an 8.1 loan to boot. I would still pass unless I could refi quickly to get a decent rate.
Maybe my reading comprehension skills are taking a vacation and I'm missing something.
[ Edited by db103098 on Date 04/29/2004 ]
Personally I never count on appreciation to make a bad deal good. I have reason to believe my area will show some serious appreciation, it will be wonderful if it happens, but I haven't changed my approach to buying.
That being said, if your deal will cash flow the 200 per month and you can get into it for next to nothing out of pocket all signals look green to me. I guess I get tunnel vision based on my own experiences, I see full market value paid coupled with a bad interest rate and think no way does that cash flow, in my area it wouldn't, obviously that isn't true of everywhere. I will say, I don't understand why it isn't true. If I could pay full market price and still make money...too easy, everyone should be buying, thus driving prices up. Looking at your numbers, financed at a decent rate that house would cash flow 425 a month even if it is 100% financed. Standard 20% down and it's cash flowing over $600. Why aren't investors buying every house that hits the market?
I will be calling a local property rental company tomorrow to see what the current rentals are in that area. I have to trust that someone is willing to l/o the property at $1530/mo. I agree, if the interest rate is lower, my profit is better. Believe me, I wish that I could re-fi at this point. I need the down payment to pay off debt as we speak. Hopefully, I can get more deals to improve my financial situation and then I will have more options available to me on all of my future deals. Thanks for your input.
Are you experienced in sub2s?
Quote:
On 2004-04-30 00:27, mykle wrote:
Personally I never count on appreciation to make a bad deal good. I have reason to believe my area will show some serious appreciation, it will be wonderful if it happens, but I haven't changed my approach to buying.
That being said, if your deal will cash flow the 200 per month and you can get into it for next to nothing out of pocket all signals look green to me. I guess I get tunnel vision based on my own experiences, I see full market value paid coupled with a bad interest rate and think no way does that cash flow, in my area it wouldn't, obviously that isn't true of everywhere. I will say, I don't understand why it isn't true. If I could pay full market price and still make money...too easy, everyone should be buying, thus driving prices up. Looking at your numbers, financed at a decent rate that house would cash flow 425 a month even if it is 100% financed. Standard 20% down and it's cash flowing over $600. Why aren't investors buying every house that hits the market?
I have no sub2 experience. I'm not a flipper, I buy and hold and prefer the rehabs, 1 a year is all I want, I can find that through more traditional channels. I am shooting for 4 to 5 this year though, and closed on my second last week. I owed myself one though, no purchases last year due to being in Iraq.
I had a friend once when I was in highschool, he said his bank account was like a little kid, it just kept growing and growing. It was funny, and had that seed of truth to it that it has stuck with me all these years. Once started down the road you will see yours grow and grow too. It's like that little kid, it's hard to stop them from growing unless you abuse them.
Regards,
Mykle
What type of deed do you guys get the homeowner to sign for your sub2 deals?
How do you take into consideration that there are 2 outstanding medical liens when you are having them deed their house over to you? The homeowner states that her case is settling soon and those liens will be paid off when that happens.
Thanks everyone.