Sub2 Questions

Comments(8)

• 
  stormblade30th July, 2003

  maha,
  
  Seems to me the first thing you should do in the case you have laid out here is to figure out what it is that you want out of the deal.
  
  Decide what makes it a good or bad deal and then put the numbers and other factors in a checklist, then determine if the deal is worth doing.
  
  After you decide whether it is worth it - then decide what you want to get out of it. Make a plan for what you want to do with this house in three months, six months and a year from now.
  
  Should you do the deal then I would recommend at least a credit check on the current owner/soon to be renter. Make sure that you are not buying yourself a big fat can of worms that you will have to fix sooner than you thought (unless you have personally known the renter and know where their financials are headed and it looks good).
  
  Just my two cents.
  
  Stormy

• 
  zarathros30th July, 2003

  Ok there's a few problems here.... about 7.5K worth of problems to be exact.
  
  Just running those numbers I was able to knock his equity down to 3.75K from 20K
  
  So even if you were to go with the 3.75K it's not going to cover what he owes.
  
  Lets see here what else... I don't know why he was so far behind in the first place but if he couldn't afford $800 a month for almost 10 months how will he be able to afford it when you knock the price up a hundred or more a month?
  
  From the looks of it he's looking for a way to hang onto his house (can't blame him for that) but at your expense.
  
  this is what I see happening... you make the offer of 3.75K and the deal is going to fall apart right there.
  
  On the other hand lets say you're a really nice guy who has alot of extra money sitting around collecting dust (will you be my best friend if this is the case?).
  And you pay the 7.5K and offer the 3.75K
  
  That's over 12K you just put out... where are you going to make your money selling it back to him???
  
  If you knock the monthly payment up to $1000 a month that's only $2400 in two years.
  
  Whats he going to put down for a down payment???? Seeing as you just gave him 12K I guess he can give you the 3.75K back so add that to the 2.4K and you're only in the hole for 1.35K but I'll lay odds that he wont be able to make the monthly payment.
  
  
  I'd walk from this one.
  
  It'd probably be a nice deal if the guy wasn't behind 7.5K and if he didn't want to rent the house.
  
  Buy the house for the 3.75K (still a little high but that's ok) find a buyer and have them put 10K down on it (6.25K profit right there.
  
  adjust the interest and knock up the monthly payment for make $200+ a month (another 2.4K profit) in 2 years
  
  Sell the house for the $125K-$135K in two years (another 20-30K profit)
  
  total profits $36.64K
  
  
  
  Quote:
  On 2003-07-29 23:05, maha_s7 wrote:
  The deal I am considering is as follows:
  Market Value = 125K
  Loan balance = 105K
  Arrears to make loan current = 7.5K
  Monthly Payments = $800
  The seller is not able to come up with 7.5K. He is willing to do Sub2, but wants to rent the house back from me. He also wants an Option to Buy.
  1. What are the ramifications of renting/Selling an Option for purchase to him? He loves the house, has worked on it himself and thinks he can improve his financial situation within a year or two.

• 
  sophiebear31st July, 2003

  Don't rent or lease it back to him!!! He is already behind 7.5k. If he can't pay the banks what makes you think he can pay you?

• 
  tmratl31st July, 2003

  Is the seller in foreclosure, or just behind? I would be very careful about getting him out of foreclosure and then renting it back to him. I've been warned by other investors that this can be construed as fraud, and you should always make sure the seller leaves the house after you close.
  
  Keep in mind, that's what I've heard from others, and that's in Georgia, but it would give me enough pause to check with a real estate attorney to be sure it's okay. If anyone has a different opinion on renting back to a foreclosed seller, please share! I'd like to confirm that this is true.

• 
  sire31st July, 2003

  I would be very leary about lease back. Other than the legal factor, we NEVER do a lease back for the common sense reason. Why will they pay you if they won't pay the people they signed the original agreement. How are going to get your 7.5k back, are going to profit any on the monthly and how are you going to get him financed on a house when he has a loan on another property, that was going into forclosure. Oh wait these are one in the same.
  This maybe a red flag for a lender. It's not a refi for the owner because there name is not on the title. It is a purchase. this will be fun to explain to the title company.
  
  Here is our "company policy"
  We can not lease back to you do to legal factors. Is this going to be a problem or would you still like for us to help?" null

• 
  maha_s71st August, 2003

  Sire:
  
  Can you help me understand the legal issue involved here? Why is it illegal to take a "subject to" and then lease it back to the original owner ?

• 
  sire1st August, 2003

  Here is your catch. If you do not structure the deal just right your wrong. It's called a sale leaseback.
  Check the link
  ****Must Reach Senior Investor status before posting URL's***
  It is a fun and quite fullfilling game, just use some common sense. (not saying you don't have any)
  Best to you,
  Sire
  Well try looking on legalwiz for an artical called
  can foreclosure investing be criminal[ Edited by sire on Date 08/01/2003 ]

• 
  GWmson1st August, 2003

  Legalitys aside, this is a pandoras box.
  
  Face it, the guy didn't pay the bank when they were holding his house, his credit and his equity over his head, what do you think would compel him to pay you?
  
  Too much money for that much equity, I agree with the other guy. offer 3.7k and rent him a uhaul. I personally wouldnt consider anything else.
  good luck,
  G