Need Advise on Subject-To Deal Structure (or any other ideas)

[Sean Williams]

I have seller with the following situation:

$240,000 single family house

$165,000 balance due on mortgage ($159k balance + $6k in past due pmts)

$950/month (PITI) is the current mortgage payment @ 3.875%

$1,400/month Market Rent

If the seller listed the property, they would walk away with roughly $60k after commissions. However, they are willing to sell fast at $220k and take payments on their equity. Any ideas for the best deal structure?

My thoughts were:
-Purchase at $220,000 with subject-to financing
-Pay the $6k to get mortgage current, then take over the existing mortgage/payments
-Give seller 2nd lien position and pay them $500/month (100% go to principle balance on 2nd lien)

This essentially becomes a break-even (or small loss) situation on monthly cash flow, but I own the property with $0 money down and get the benefits of depreciation. If interest rates goes down, I can either refinance to get seller whole or sell for a small profit.

Any other deal structure ideas?

[Ontwon Smith]

It's workable; by not paying the seller $500/mo. Preferably, 2nd note payable upon resale. **(You have to hit the "pain" points-FORECLOSURE IS COMING! He can end up with Nothing! **Stress the debt relief he's getting by you making the monthly pmt. **Stress your *"Credit Improvement Plan" by making up the arrearage and continuing the payment stream. That makes the SELLER LOOK GOOD to the bank!). Offer 5yr balloon to seller but 3 yr balloon to your buyer, By the way, if you wrap, the arrearage would come out of the new buyer's deposit. You bump the sales price 10% since you're offering owner financing and get a 10% down payment. (if not more). You can also set up a lease-purchase with your end buyer for 12-24 months. Don't forget to try to discount that 2nd when it close to paying seller off. In fact, add "Right of first refusal" in the mortgage language.. You'll be Fine with this one!