DEAL OR NO DEAL?

Question

Hey BP community:

Any feedback would be appreciated.

3/3 bedroom duplex

Nothing down

Subject to existing 82,000 first loan (monthly payment 1,150 including taxes and insurance)

estimated repairs: 10,000

ARV: 95,000

Also, does anyone know of a loan serving company that does Subject tos?

Thanks

Jose

Curt Smith · Answer

call trustfci.com where I service my owner financed mortgages.

A cheaper way is to just make sure both the seller / buyer have username/password to the bank/mortgage website.

Another tactic I've heard in a sub-to discussion:  open a bank account at the bank where the mortgage is or any bank.  Have the mortgage auto debit from that bank account.  Show that you are depositing 3 payments into the account ahead of time.  Both parties have the web access to the mortgage and the bank account.

Jose Flores · Answer

Thanks guys

Appreciate the feedback.  FCI wants the bank to complete the loan serving paperwork, which requires them to approve the transaction.  I think I'm going to go with Curts' suggestion to just open an account at his bank.

Thanks to everyone

Curt Smith · Answer

No one helped you with deal or no-deal.  The deal or not depends on:

- is rent at least $1400 for this property.  If you don't have sufficient cash flow you'll be out of pocket for the new HVAC unit that breaks in 6 mo, etc.

I feel it's ok to fix up to ARV and be break even price wise.  But cash flow is key to your safety.

Is the seller ok with the loan being in their name up to 3 years for a rent to own buyer to eventually get a loan and cash you out?  With you pocketing the difference between the new appraised value (higher hopefully) and amortization pay down of the mortgage in 1-3 yrs.

You'll get back some or all of your rehab from the rent to own buyer's option money, in the $5k to $10k range.  I wouldn't take a buyer with less than $5k for the non-refundable option fee.

BTW you can test advertise in craigslist to test demand before you actually buy.  This is what smart business folks do to test a new geography or business model.

Another pre-requisite for rent to own to work well is that this house has to be in a good school district and nice neighborhood.  If both are marginal it will be tough to get top families with lots of cash for the option fee.

The above gives many reasons / metrics for you to nix this deal or move forward.  Don't be in a rush to do any deal to do any deal.  Only do good deals.  NO is a great business decision.  :)

Steve Babiak · Answer

@Damon Armstrong

The buyer pays the servicer, the servicer makes the payment to the seller's lender.

Damon Armstrong · Answer

@Steve Babiak

So the current lender is verifying the buyer of the home to is qualified to take over payments? Or is the lender of the buyer paying off the current loan, and expecting the buyer to continue those same payments to them?

Steve Babiak · Answer

@Damon Armstrong - the loan servicing company is probably intended for peace of mind for the seller, that the payments will be made via this third party loan servicer.  @Jose Flores can correct me if I guessed wrong.

Damon Armstrong · Answer

I am a little confused. If you are looking at purchasing it subject-to, why do you need a loan? I thought subject-to was simply taking over the payments. So why would you need a loan to take over payments? Unless you are using the loan for the repairs? But that would have nothing with the actual subject to transaction, it's just borrowing money for repairs that you will pay back...can someone fill me in on why a loan is needed here?

DEAL OR NO DEAL?

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