subject to real estate deal from entry to exit plan

[Yangchen Dolkar]

Hi! BP friends,

I'm located in New York, Queens area. I'm first time home buyer. I met with a seller who is willing to do 'subject to' to sell his 1.7 million 4 family house but we both don't exactly know how does it work. he has around 600k on loan and because it was his 1031 exchanged house, he's gonna be paying a lot in tax. 

My question is when I take over his loan of 600k, how can we work with 1.1 million? 

and when he files tax, how he gets taxed? 

If someone can give me entry and exit plan for this deal, i will highly appreciate. I'm sure theres so many things I may not be aware of for subject to deals. any informations you experienced people give me. I thank you in advance.

[Don Konipol]

Quote from @Yangchen Dolkar:

Hi! BP friends,

I'm located in New York, Queens area. I'm first time home buyer. I met with a seller who is willing to do 'subject to' to sell his 1.7 million 4 family house but we both don't exactly know how does it work. he has around 600k on loan and because it was his 1031 exchanged house, he's gonna be paying a lot in tax. 

My question is when I take over his loan of 600k, how can we work with 1.1 million? 

and when he files tax, how he gets taxed? 

If someone can give me entry and exit plan for this deal, i will highly appreciate. I'm sure theres so many things I may not be aware of for subject to deals. any informations you experienced people give me. I thank you in advance.

This is not a good candidate for a “subject to “ deal.  Too much equity.  No one is going to make a second loan on a property where the first loan can be called for due on sale violation.  The only way to make this work is if seller is willing to carry the majority of his equity in a seller financed second lien or a wrap around note.  And the buyer investor better have the where with all to come up with the balance of the subject to note should the note be called, to be safe.