First time Inverstor buying Subject-To

[Edwin D]

Hello Everyone!

I plan on buying a house “Subject-To†in Coppell, TX

GIVEN:
1. Loan Balance $162K
2.I nterest Rate: 7.5% (Flat 30 Year Term)
3. ARV, CMA Report $165K-190K
4. Built 1979
5.$1707/Month Payment (includes PITI + PMI) (money in Escrow)
6. Neighboring area houses for Lease ($1200-1500 a month)
7. Needs about $10K
a. Paint
b. Carpet
c. Some Electrical
d. Foundation
8. Behind 2 months’ rent (about $3,500 needed to get loan up to date)

Reasons why I would consider this deal
1 First investment deal
2. Want to learn
3. Be able to get the $8K tax credit (first time home buyer)
4. Get additional tax cut because of being in a higher tax bracket, due to my business

Reasons why I Don’t want to do this deal
1. Monthly payment to the lender is higher than the market value
2. About 3% equity in the house after repairs


Exit strategy will be to offer owner financing and to do a wrap-around loan

Not planning to make a lot of money on this transaction, wanting to get my feet wet and learn

Please provide any advice that you may have.

Thanks for your time.

Edwin D
[LINKS, PHONE, AND AD REMOVED]

[Jon Holdman]

What's the upside here? I'm not seeing it.

You're going to buy for $162K and it needs $10K in work. ARV is $165-190K. That's a huge range for the ARV. You list your occupation as an agent, so you should be able to get it much closer than that.

Given a range, I'll always use the worst number. So, you're going to be into this for $172 (plus costs) and its worth $165K. And you're stuck with a 7.5% loan, which is high even for an investor loan, and very high for an OO loan.

Even if its worth $190K, you're into it at 91% of ARV. Sorry, that's an awful deal.

For a flip, and using $165K as the ARV, this is worth $105K. That's 70% of $165K ($115.5K) less the repairs.

As a rental, its truly awful. Read in the Rental property forum about the "50% rule". If it leases for $1200 (again, a huge range, way to large to use for your calculations), you'll have $600 NOI. The P&I payment is $1150 for a new, 30 year, 7.5% loan. Might be a bit higher if this has been paid down for a while. So, you're losing at least $550 a month as a rental.

Put the pen down and step away from the contract. From what others here have posted, you can do much, much better in Dallas.

Now, if you're buying this for your primary residence, and just love it, go for it. But don't fool yourself into thinking this has any investment potential.