Temp Subject To...to refi and get cash out?

[Stephanie Cabral]

Hey BPers...I'm looking at a multifamily in a C neighborhood where 

• the owner owes 75k 
• monthly PITI is $975 (at 5.85%) and she wants O-U-T.
• ARV is $135k-$145k and it needs about $14k to make it rentable and another $6k to make it in a good position to refi.
• Monthly rent for each unit is about $1200/mo with the possibility of finishing the attic, either as a 3rd unit or for more bedrooms...so minimally gross income is at $2400/mo.
• Maintenance is about $200/mo.

I'd like your thoughts on a subject to deal. My plan is a modification of BRRRR where I'm using a "subject to" to acquire, then renovate, then refi once it's stabilized. At that point, I should be able to pull out everything except I'll probably be out of pocket closing costs.

Alternatively, I could lease option the property and don't know if there's a strategic advantage to either, other than if I'm refinancing after a subject to, I can do a cash out refi but if I'm taking title after a lease option, then I'd have to put the 20% down.

So, a question - what are the closing costs associated with a subject to and what type of company offers the servicing of the mortgage so both the seller and I are protected in the transfer and repayment of the loan.

Does a property that I acquire subject to the seller's mortgage show up to my lenders when I'm looking to refi my other properties? Meaning, will that subject to mortgage affect my reserves requirements because a lease option does not.

And please any other thoughts on this deal would be helpful!

Thanks in advance,

Stephanie

[Jess Hewitt]

I would use an attorney to close if that is an option in your state, closing costs are minimal as no appraisals and other fees are required by a lender, I would take it over lease it and revisit in a year, I would scrub the repairs to what ever is needed to get it rented and then perform the other maintenance and upgrades over time.  Make money.  I would do this deal in a heartbeat.  I hire property managers to collect rent and remit to the mortgage company - I get them the authorization to speak with the mortgage company, as long as the lender gets their monthly check they are happy.  I keep my subject to's as long as I can, I do put a sale price on them and if someone hits my number then I am out and on to the next deal.  I list my subject to mortgages on my balance sheet but they are not reported to any credit bureaus.