Help with a subject to and a 3/1 arm - Posted by Michael
Posted by Michael on July 04, 2004 at 11:26:36:
Need some assistance analyzing this subject to.
Home is in a nice neighborhood, 5 bed/2 bath, 30 yrs old, 2 story 2,600 sf, 2 car garage and in good condition. I figure no more than $3500 repairs as the home is in very good condition. Has new roof, new appliances, and relatively new carpets.
Owner is current except for this month. They own several homes but have been unlucky in the rental market and are behind in one other home 2 months, currently vacant. This home is also vacant, and behind this month only.
Asking: $155,000 (current mortgage) 3/1 arm 5 5/8%
Tax assessed value: $162,700 (2004)
Monthly PITI: $1,174
Estimated repairs: $3,500
Market value: low to mid 170’s (this currently being confirmed with comps, owner had the home appraised 2 years ago in the high 170’s so I am shooting low)
Rent: Owner was renting at $1200 monthly to a family member (Currently confirming market rent)
Owner wants to move on. He is open to me a making the payments for him until I sell the home. Haven’t met face to face, just getting a feel over the phone.
The numbers look good, my concern is the 3/1 arm, with the home appraised 2 yrs ago so time is soon due. I am in a position to refi if I had to, but would like to avoid.
My exit strategy would be to lease option the home. The neighborhood is a desirable neighborhood to live in.
I realize that all the facts are not presented here, but I wanted to get the point of view of you more experienced investors, especially in regards to the mortgage.