Closed a Subject 2 Deal in California, Here's the Contract I Used

[Tim G.]

Hey Folks, 

Recently closed a pretty awesome deal this July (Got a house for $30K cash in San Diego). I'd say truly the only barrier in my way was myself. The seller was fine with whatever I suggested and had clearly made up their mind I was the guy buying their house. At the last minute I proposed allowing me to take over his loan (subject 2) and the seller agreed. I didn't have a sub2 contract on me or really know what one would look like so I improvised and hand wrote some details for us both to feel like it was official. 

Here are the Financials.

Purchase Price - $286,000 ($30,000 in cash to seller, I take over mortgage balance of $255,000) The loan pays off in 26 years.

The payment is $1750 (piti) the place would likely rent at $2000-2200 if I keep the converted garage and minimal other cleanup work ($4-7k) 

If renovated (rehab + master addition $100k total) the house would currently sell for $530k but I'm not sure that's the best move due to taxes. 

Home Details

2/1 - 900 sqft house in East San Diego with a large lot. The house has a converted garage, overall its condition is good but filthy. It got a termite clearance without any work, but it was infested with rats and mice. The cleanup is going to be $4-7k to make it rental ready. 

The Neighborhood

This is about the only 2/1 on the block in a beautiful clean neighborhood, all other models were either larger new or have been added on. The long term play would be to do a master suite to max the size and price for the house.

*I could be wrong here but this is my current take on this* Since I don't need the income now and renting the house would allow me to classify the property as an investment. Giving me long term cap gains taxes and or the option to 1031 the place into some units out of state in a year. Since that's what I want anyway, why pay taxes on flip income if I can avoid it?

I thought BP would enjoy seeing a creative deal being taken down in Socal and get to see that the contract doesn't matter. If you have a seller who trusts you and is on board. The rest works itself out in escrow. 

The two things that really helped me here was that I'd decided I was done for the year, I'd made the money I thought was enough to keep me happy. So when this deal hit, I really didn't care if I got it or not the second was that I live simply enough that I don't need the money today so I can look at some fun alternatives.