Subject-to

[Account Closed]

Hi I'm a newbe in the investment side of real estate. So I have a seller wanting to make a deal for their home via subject-to. Needs no repairs. Comps put the house at $158,000. She ows $96,000 but wants $100,000 for the deal. Her monthly mortgage payments are $640 & $240. She already has tenants in the property that pay $1300 per month. What do you guy think about this deal. It would be my first subject-to and really wnat your guys feedback on this one. I'm a little nervous about this one. 

[Dion DePaoli]

Subject To threads never cease to add some humor to the world.  Robert if you are looking into Subject To investing and you do not know what the arch nemesis, the Lex Luther to your Superman, is then you need to pause here and do some more research.  

Due on Sale (DOS) is a clause in most mortgages or deeds of trust which states any transfer of interest in the real property in whole or in part gives an option to the Mortgagee to accelerate the entire balance of the loan and call it due. There are many threads here on DOS. Search for them and read.

A crucial piece of information seems to be missing, what is your intention with this property?  Are you trying to keep this property or flip this property?

Another important piece of the puzzle that warrants mention is that it seems the property has two separate loans attached to it.  You mention payments with an "s" and have two of them.  It sounds like they have a collective balance of $96k.  It may be of value to understand those balances on their own.  

Let's talk about the two big elephants in the room.  This owner who is operating an investment property wants to walk away from her cash flowing property and leave $58k on the table and only take $4k?  

That sounds a bit suspicious.  That is a ton of cash to ignore.  Additionally, I get the impression she is the one pushing the Subject To idea and not the OP for some reason.  This warrants more information as with a property that cash flows and has equity it would be more logical to simply purchase the property in a normal manner with no Subject To structure.  Is there a defect in the property that prevents financing or is a barrier to it?

In creating a Sub2 structure here you would want to create an obligation around the existing debt not outside of it, if you are the Seller. So you would have to have a note which includes the $96k. The $4k is perhaps simply a down payment. I would not suggest financing the $4k nor does it seem like that is what the Seller would want.

I suppose before we get too far into any Sub2 we should give the OP a chance to fill in the missing gaps of information.  What's the deal with so much capital on the table?  How firm is your comp?  Is the property finance-able?  Are you trying to hold or flip?

Do you have money and or credit to actually pay the two loans off if they are called due?