Subject to, but small loan - what to do?

[James Park]

Hi all,

I've purchased properties subject to, and I understand how it works.

I am currently looking at a deal where the sales price is $290K and there is an existing loan for $150K. The loan is fixed at 3% over 30 years and has about 27 years left. Obviously an awesome loan to take over and the seller is fully willing to let me do so.

Problem is the $140K shortfall.

I can either:

1) Come in with the $140K cash - obviously don't want do this

2) Find a loan for the $140K. But what private lender is going to want to come in second, and what bank is going to do it knowing there's a first with someone else's name on the loan?

3) If I can find a private money lender to do a 2nd mortgage, they will need a high interest rate. Probably at least 10% if not 12% or more.  I guess this isn't the worst thing, since the low rate on the first mortgage would offset much of the higher rate on the 2nd.

4) Refinance the entire property at whatever I can get - 7% or so.

I'm just wondering if there is a solution where I can really take advantage of the low rate on the first, offer the property out to buyers with a wrap loan and drive up the asking price because it has built in financing with a fantastic rate.

Any ideas shoot them over!!

And Thanks in Advance!

[Jay Hinrichs]

Quote from @James Park:

Quote from @Jay Hinrichs:

Quote from @Account Closed:

Quote from @James Park:

Hi all,

I've purchased properties subject to, and I understand how it works.

I am currently looking at a deal where the sales price is $290K and there is an existing loan for $150K. The loan is fixed at 3% over 30 years and has about 27 years left. Obviously an awesome loan to take over and the seller is fully willing to let me do so.

Problem is the $140K shortfall.

I can either:

1) Come in with the $140K cash - obviously don't want do this

2) Find a loan for the $140K. But what private lender is going to want to come in second, and what bank is going to do it knowing there's a first with someone else's name on the loan?

3) If I can find a private money lender to do a 2nd mortgage, they will need a high interest rate. Probably at least 10% if not 12% or more.  I guess this isn't the worst thing, since the low rate on the first mortgage would offset much of the higher rate on the 2nd.

4) Refinance the entire property at whatever I can get - 7% or so.

I'm just wondering if there is a solution where I can really take advantage of the low rate on the first, offer the property out to buyers with a wrap loan and drive up the asking price because it has built in financing with a fantastic rate.

Any ideas shoot them over!!

And Thanks in Advance!

That's a very common problem in this market. The technique to attempt, is an owner carryback on the equity as a 2nd. We teach this in our training.

Better yet and probably and easier sell.. is to have the seller wrap their own first and let them make some delta.. Plus if your end buyer fails on the 3rd loan they can foreclose easier. 

 Good idea, but the seller isn't sophisticated enough to do their own wrap. And getting them to understand how to do it would complicate things too much. And lastly, no need to give away delta if the seller isn't asking for it :)

I am working on getting them to seller carry a portion of the leftover balance. But he still needs $90K in order to pay his credit card balances off. So that part is nonnegotiable. And that's the biggest part to this dilemma. Only thing I can think of is to find a private lender who wants to do a long-term loan with a decent rate AND be in 3rd position. Not easy to do.

you find a long term low interest 3rd mortgage you let us know LOL.. From my perspective that would only be your grandparents because your parents would not do it.