Subject To with a Contractor Lien

[Mitch MacDonald]

Hey Everyone, 

This weekend I met with a potential seller and after discussing his situation it seems as if the best course of action would be to purchase the property subject to the existing debts on the property. 

He is $60k in debt on the house.

$40k is on the mortgage- $375/month

$16k is owed to a contractor - $250/month

He also has $4k in back taxes.  

The house needs about $10k in work to be ready to rent, and it would rent for around $950/month.

The spread between payments and potential rental income seems borderline good enough to pull the trigger, if we can get him to settle for a fairly low payment up front.  His son is living there without a lease and not paying anything, so he needs some cash to get him moved somewhere else.  We discussed something around $5,000.   

This would be my first subject to deal and I'm concerned about the fact that there is not just a mortgage, but a contractor lien and back taxes owed. 

 Also, the spread between rental income and the payments just doesn't seem to give the deal enough upside.  Accounting for expenses, it would cash flow around $100/month.  I'm looking into other options as an exit strategy, like just flipping it. Comps are around $90,000 on the low end, all the way up to $125,000  

I had a good conversation with a bigger player in the area who purchases houses subject to and then owner finances them to buyers without the credit to get a conventional loan.  I'll be talking with him later this week to see if he has any interest in purchasing the deal or partnering on it.  

I know there's a lot here but I'm curious to see what y'all think of this deal. Would you buy it?  Has anyone ever purchased a home subject to both a mortgage and contractor liens?

Any and all input is appreciated

-Mitch