Contractor 路 Garland, TX 路 Member since 2014 路 186 posts 路 9 votes
I've been doing some reading and learning today and got to wondering: If a seller doesn't go for a subject to deal, would a lease option or perhaps a lease-purchase be the next best thing in order to get the property for a rehab and flip? Please advise.
Investor 路 Sherman Oaks, CA 路 Member since 2008 路 6k+ posts 路 3k+ votes
11y
In Texas, I would never rehab unless I got the deed (sub2).
I like minor rehabs and JV w the seller.
Say $100K ARV and needs minor kitchen and bathrooms, everything else ok, eg roof, foundation, hvac, etc. Rehab costs $10K
WE BUY HOUSES offer .65 = $65K less $10K - holding costs $5K = $50K
That is a sh@t offer.
I say,
"Mr and Mrs Seller, I can bring my money in on the deal, we can partner, I get paid when the house sells. This will net you more money than the WE BUY HOUSES folks.
Why? The WE BUY HOUSES folks need to buy it, close, pay the costs to buy, and rehab it, pay the costs to hold, the costs to sell, and net a minimum amount of money."
Also, when you say "get on title" are you doing this via a quit claim deed or warranty deed?
Why do a JV with the seller? Could the strategy just be: sub2, rehab prop, do a wrap and then owner finance via lease option to a buyer?
Just trying to understand the process...
The reason why you want to JV with the seller is that the seller needs to be assured that you will pay him/her when you sell the property. Once you buy the house "subject to", you already own the house. You can literally walk away with all the profit when you sell but you have to be true to your word and not screw the seller up. His protection is the JV Agreement that you will pay him a portion of the profit plus his purchase price when you sell the property.
Another way to do this is JV with the Seller and then Seller deeds the house to an LLC that YOU and the seller owns. You put up the rehab money and once you sell the property, LLC members (you and the seller) distributes the profit accordingly.