Have you heard the phrase “You make your money when you buy the property?” In this case, you’d be losing money the minute you take over her mortgage. You don’t say where you are located, but it doesn’t matter - no one should count on appreciation to bail herself out of a deal like this. What if you get a tenant who doesn’t perform & you end up making the mortgage payment for a month or two (or more)? Your minimal cash flow will be eaten up for ten months if you lose just one month’s rent.
The only way that this could possibly be a deal is if there’s a way to short sell the mortgage, in my opinion.
A friend called me about her house going into foreclosure. She’s willing to have me take it over subject to to keep the foreclosure from her credit. She’s paying almost $1400 per month note, has been behind for the past 2 years. Mortgage company tacked the delinquent payments on to the end of the note which makes this a big time upside down deal. The tax assessed value on the house is $145K. She says it’s worth $155K. She owes about $175K. Reasonable rents for this house is $1550/mo. Mortgage company is willing to cure the loan for $2000 and resume payments. Monthly mortgage includes taxes and insurance.
It’s negative equity and possible $150/mo cash flow (assuming no holding or maintenance costs).
All that I see here is a little cashflow, possible lease purchase. Anyone see anything else? Would you do this deal?
I’m with Ken. If you can’t get the bank to accept less (I know almost nothing about short sales) you’d probably just be buying this to have a property, not a good investment. Look at the upside (very small), then look at the downside (very big). I’m in Houston. There are deals like this EVERYWHERE. Lenders hate these deals, and my guess is investors who have gotten into these deals hate them even more.