Help needed on L/O to Subject To - Posted by Rich

Posted by Lori Samson on July 10, 2001 at 21:57:19:

I have been asked why only 50 but I can tell you that anyone who holds more then 50 at a time is nuts! They have to have a full staff and so on. We decided a few years ago that we could only maintain 50 or under at a time and stay married, sane, and a legal citizen! Our numbers are down right now ( usaully after Spring)and we are in the buying mode again but when we get to 50 we hold until some start closing again. It tends to cycle that way. You will kick into the locating mode and then after you start dealing with 4-6 in a month you kick into the “Get-um-sold” mode! Then you take a vacation off all those option fees and then they start closing again and you gear towards all the closings. We have tried to get it propetually in motion and we always seem to fall back into this cycle.

50 is only because we ARE still married and we ARE still somewhat sane!


Help needed on L/O to Subject To - Posted by Rich

Posted by Rich on July 09, 2001 at 15:36:07:

Hello Gang,

I’m looking for some advice / direction on my first L/O deal that was put together back in 1998. This was long before I had any idea what I was doing. You could say “I knew just enough to be dangerous”.

Structure of the deal:
L/O 3 bedroom 2 bath condo for $97,000,
Term: 3 years, Down payment: $0, Rent credit: $200/month,
Monthly cash flow: $75

The issue:
I had arranged with the seller a 30 day window before the first payment was due. I received close to 100 calls for people wanting to RENT, but not buy. My 30 days was down to 2 and no prospect of a tenent buyer. In my haste to do my first deal, I placed a well qualified TENENT. The tenent has been great, however, he has no interest in buying the place as I knew going into the deal. He did say he wanted to stay another year and will be relocating out of state at that time.

My option EXPIRES in a couple of months and the seller isn’t to excited about extending the option, especially at a cost of $200/month. At the end my option, the purchase price will be $89,800. The remaining loan balance on the sellers note is about $84,000. The place will appraise for 115K - 120K right now and values continue to rise. I don’t want to leave $25,000 - $30,000 sitting on the table.

My thoughts are as follows:
Take title subject to and continue to rent to my current tenent for another year. At that time, sell the condo for $120,000 on a wrap around land contract, $4000 down, create a 2.5 percent interest spread (current interest is 6.75%), and a balloon payment due in 3 years. This would provide $304/month cash flow and a $21,000 payday at the end of the 3 year term.

The seller stated he wants his remaining equity. He didn’t say when he wanted it though. I was thinking $1500 - $2000 at the time of the sell and the remainder from the down payment when I sell.

I appreciate any advice that you may have.


Re: Help needed on L/O to Subject To - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on July 10, 2001 at 21:08:26:


The refinancing should be your very last alternative, if it’s available to you. Not only because it’ll be in your name, but because there’s no way in the world you’ll be able to get 6.75% fixed rate on your investor loan. You are looking at about 2% increase in costs of money and it’ll distort your cash flow picture instantly.

I’d usually try to work with the seller and come up with terms for his equity and take over pmts subject-to. I’d start with “everything later”, when buyer refinances, perhaps put another 3-5 years balloon. If that doesn’t fly, I’d try small monthly pmts for equity (no interest), next higher mo. pmts for equity (no interest), then pmts with interest, then part now (1/2) and part later (see option 1), then part now and pmts, etc.

You got the point. There may be many option here for you, so you won’t have to go an borrow money at higher rate.

Re: I have one similar - Posted by Lori Samson

Posted by Lori Samson on July 10, 2001 at 11:42:59:

I am in the middle of one almost the same and I am just going to refinance it. It will even allow me to pull some money out at closing.I’ve had it several years and it appreciated really nice. Too nice to loose!

If you have been making payments on time and have credit that’s ok, then just refi it and continue renting it until your tenant leaves and then sell it, rent it, or lease option it. Keep your equity! The seller doesn’t care if you are the buyer or your tenant is the buyer, they just want the house sold and want to spend their equity! You may have to convert all the numbers to a sales contract. We usually have to do a sales contract or a contract for deed at the time of closing due to leanders not wanting to see the lease option agreement. Find you a GOOD mortgage broker to help you. Ed Garcia can help you on this one!


Re: Help needed on L/O to Subject To - Posted by Rich

Posted by Rich on July 10, 2001 at 23:29:57:

Thanks Alex, I really appreciate the input.


Re: I have one similar - Posted by Rich

Posted by Rich on July 10, 2001 at 12:25:11:


Thanks for the input. I really appreciate it. I’m trying to keep it out of my name though.

Have a great day.Thanks again


Re: I understand but - Posted by Lori Samson

Posted by Lori Samson on July 10, 2001 at 12:56:33:

If you have that much equity why would you leave it on the table? The name to investing is “make money and keep as much as possible out of your name”. I too don’t want things in my name. I have under 50 that are sandwiche lease optioned and some that I bought and are lease optioned out. Aquiring wealth is usually doing business what some diversity. Most people don’t make all their money from the exact same source!


Re: I understand but - Posted by Rich

Posted by Rich on July 10, 2001 at 14:39:26:


I understand what you are saying and I fully agree with you. I have no intention of leaving the equity on the table. I was just looking for an alternative to refinancing. That’s why I mentioned going the “Subject To” route. I guess I’m making this one more difficult than the others.

50 L/O? Your awesome!

Thank you Lori,