Our First Sub-To Deal - Looking for Insight

[Kevin Rufty]

Hello, BP Community,

We are eyeing our first sub-to deal and have some questions we're hoping you can answer. Here's some info about the unit:

- 2bdrm, 2.5bath townhome, built in 2021. High appreciation area, was listed as the hottest zip code in 2022 in our area and tons of new development coming in the next months.

- Sellers are asking $340k and owe $290k on the mortgage (30yr fixed @ 3.1%), so not a lot of equity in the deal. PITI of $1580+$200/mo HOA.

- Rents in the neighborhood are around $2100-$2200 for comparable properties.

Here are our questions:

- We'll take over existing loan payments - but how should we structure the equity payout for the seller? If we structure it to be paid over 5 years, we'll have negative cash flow on the property. Is it outlandish to structure the equity payments over 15 or 30 years? Or maybe a 5-year ballon w/ interest-only payments?

Thank you for any info/insight you can provide!