Would you do this Sub-2 Deal? - Posted by Brian_wa

import · November 20, 2005, 11:37am

Posted by Brian_wa on November 20, 2005 at 15:28:35:

A straight purchase won’t work for me because I’d need to get a much more attractive deal and with his loan amount, he can’t offer me anything attractive enough to warrant an outright purchase. His option is to list it and probably will end up with about 20k net in his pocket within about 2 months. Or he could go with me.

I do know that there are gurus out there would advise their students to take deals like this because of the good term. However, I don’t want to lose any sleep over something like this but also don’t want to walk away from a perfectly good deal as well.

I just need some ideas to know whether this would work or not.

Brian

import · November 20, 2005, 11:37am

Would you do this Sub-2 Deal? - Posted by Brian_wa

Posted by Brian_wa on November 20, 2005 at 12:37:29:

Seller contacted me concerning his house. I could take it sub-2. Here are the numbers:

SFR: 3bd/1ba in nice condition
Market value: 209k to 215k
Loan amount: 172k
Wants: 20k to walk away

Normally I wouldn’t consider this but seller has an option arm loan where is minimum monthly payment is only $749 PITI. I can do a lease/option with 6k down and at least $1300.00 per month in rental payment (I’ve done l/o before). I could also do owner financing and get even better cashflow but I wouldn’t know how to do it off hand.

Let say that seller is adamant about getting his 20k and I have the capital available, do you think that this would be something worth pursuing considering the cashflow involved?

Houses in this area appreciates at least 7% a year but then I can’t count on that. However, if I were to do an l/o or owner-financing, I’d price it around 229k and would probably get a bite or two.

What do you think?

Brian

import · November 20, 2005, 4:59pm

Re: Would you do this Sub-2 Deal? - Posted by RebelRealtor_Nj

Posted by RebelRealtor_Nj on November 20, 2005 at 17:59:48:

Does he definately need that 20 now?

You can always give him a second with some cash and take the whole thing over and owner finance it.

What are the terms of the existing loan?

I can run some numbers for you in order to see what kind of cash flow/interest rate you can get on an owner finance deal.

One way to do it.

Myself personally, I wouldn’t be putting 20 into it, but that’s me.

There is a backend spread there, but in my experience, that gets eaten up quickly once the dust settles.

Lemee know

import · November 20, 2005, 3:13pm

Re: Would you do this Sub-2 Deal? - Posted by Greg

Posted by Greg on November 20, 2005 at 16:13:42:

If it was me -

I would buy it outright.

I would offer 185k Split closing cost.

I would do a 5-7K pre-hab, paint, carpets, etc.

Then sell at retail for $225.

Split the closing costs with new buyer.

You could still make a decent profit.

Just my 2ct.

I personally like to sell and be done with it and move on, I’m not big on doing L/O etc.

Good luck my friend.

import · November 20, 2005, 12:17pm

Re: Would you do this Sub-2 Deal? - Posted by LeasePurchase

Posted by LeasePurchase on November 20, 2005 at 13:17:45:

I would think that this is a No-Brainer.

If the Seller wants 20k upfront then you can either give it to them or have them refinance and pull out 20k. Tell them you will pay their closing costs and take over payments. Tell them you’ll give them $5000 more or $197,000 if they refinance vs. you having to come up with 20k yourself.

Another thing, the closing costs can be built right into the loan so you have very little if any out of pocket, maybe just an appraisal fee.

This still leaves you plenty of profit and cash flow.

Of course I wouldn’t do this outside of a Trust.

import · November 20, 2005, 12:54pm

Re: Would you do this Sub-2 Deal? - Posted by Brian_wa

Posted by Brian_wa on November 20, 2005 at 13:54:57:

This option arm has a pre-payment penalty so I really can’t ask him to refi.

Brian

import · November 20, 2005, 2:19pm

Re: Would you do this Sub-2 Deal? - Posted by LeasePurchase

Posted by LeasePurchase on November 20, 2005 at 15:19:10:

Yea, forgot about that. Find out if it’s a Hard or Soft pre-pay.

Soft - No Pre-Pay for a Sale (of course someone will have to purchase it.
Hard - Pre-Pay for Sale or Refinance

If it is really worth $209+, why don’t you just purchase it at $192k and then LO yourself? I’ll bet you can get a better price for a straight purchase.