I do not know the answer to the last question so I will leave that to the pro’s.
To the other questions: Assuming your comp figures are right lets play a little:
You are taking over $64,200 and they are behind $1,653 so that is $65,853. Ask them “Where would you like the $2,500 to come from, comps are $68,000! I would have to sell Your House for You and come out of MY pocket to do that. Does that sound fair?”
When they say no explain that you are saving their credit, their house, and the repairs that are needed will be taken care of by you!
If they don’t like that they are not motivated. Now the real question comes in:
Do they know the comps are really $80k? If so then is that a deal for you? I don’t like coming out of pocket that much though.
I wanted to run this by all you seasoned investors to see if you could help me structure this any better. Usually when dealing with subject-to I am looking for the seller to pay at least two months payments after they vacate. However this deal is much different because the sellers are in arrears 3 months and are looking for $2500 dollars moving money. However there is at least 15-20K in equity that they are unaware of. They said house is worth $68,000 when comps are showing $75-$80K. Here are the components:
1st = $61,500 @ 7.25% Conventional
2nd = $ 2,700 Down payment assistance program through HUD
Total taken over Subject ? to = $64,200
Total payment $550.00 PITI
Comps = $75,000 - $80,000
Buyer wants payoff & $2500.00 moving money
Arrears total = $1653
Repairs = $2500
3 month holding until L/O = $1653
Utilities 3 months = $400
Total out of pocket expense = $ 8706.00 ( way to high )
Exit Strategy: L/O / Sell out right
With lease/option I can achieve a $200.00 month cash flow and at least a $20,000 back-end profit.
Questions:
How can I structure this one so that the out-of pocket ( risk ) is not so high. The sellers are broke and wont go for taking nothing. I suppose I could offer them $500.00 and see what they say. Even if I get them to take 500.00 I am still looking at $6700 out of pocket. Veterans: WHAT WOULD YOU DO WITH THIS DEAL? Has anyone ever dealt with this type of 2nd mortgage. Are there any implications I need to know about when taking the second over subject ? to. Thanks in advance.
If I really wanted the home I would agree to do a little up front leaseing of local storage units and a few days truck rental to help him move. If your able perhaps a bit of sweat equity to help them move. Sign a waiver and don’t take responsibility if anything gets broken. Or give him a couple hundred to hire some of his family/friends.
This would allow him to move quickly and have a couple months to completely move out of the storage units.
Sometimes time is just as important as money. If he sticks around then he is stuck with future bills. It would be smarter for him to make the move and only have those minimal expenses facing him.
Next find a local contractor to take monthy payments from the rental income and/or rent under a “handy man special”…
Lastly finance the amount that he currently owes into the deal to include the utility cost…
JR
BBA in Finance and Real Estate, KY Broker, partial MBA…