FHA Assumable + 2nd mortgage or other options to sell

[Leah Pasco]

Hi BP community!

We have a property that has a great FHA loan interest rate, loan of 270k left. This is currently a buy and hold. We were thinking of selling because we've almost maxed out upgrades to the house (new HVAC, roof, appliances, resurfaced pool, etc) but, there would be about an 150k difference from the FHA assumable loan to market value.

We would want to invest some of the profits to buy another rental property to add value to it. Tax 1031 exchange looks like it has a lot of timeframe restrictions which doesn't sound as beneficial in our position. We have lived in the property for 2 out of the 5 years prior and are interested in the capital gains tax exemption.

Our renters wanted to know how it would work to buy our property. I am a real estate agent and new investor, I am always learning! I read on BP that FHA can be assumable and I confirmed with the mortgage company that the property is FHA assumable.

I understand they will need to apply for the FHA assumable loan. The purpose would be to pass down the better interest rate as a benefit to the buyers.

How does one find the 2nd mortgage lending? Would they need to get 2 down payments? (and how likely is a lender likely to consider this?)

I've heard that Owner's can carry a 2nd mortgage but, I'm not sure how that would work? I am guessing we would need a lawyer involved to hammer out the details to become the lender. We are open but, need to figure out how to do this the right way.

I understand some investors can look at Subject To in this situation. From what I understand Subject To means - When taking on an existing mortgage from the seller, the loan stays in the Seller's name while the deed to the property transfers to the Lendee/new owner. The payments are now the lendee's responsibility. However, if for some reason the lendee defaults and no longer make the payments, the seller would be liable and have the risk. I am guessing we would need a lawyer involved to pan out the details, as well, making this a less desirable option.

Are there other options to make this work for both parties?

I truly appreciate your help and advice as we grow in our real estate investment journey!