SUBJECT TO SALE WITH SELLER RECEIVING EQUITY VIA MONTHLY PAYMENTS

[Ulric Lloyd]

How would a subject-to purchase be structured to include the seller receiving some of the equity as passive monthly income. Please name all documents such as purchase agreements with the needed clauses protecting the buyer from seller remorse/reprisals, addendums including those providing full transparency, notes/ second liens etc.

[Curt Smith]

Hi Eric, Sub to closings the way I like to close them has 10 docs, tersely, 2 POAs, Affidavid of trust, Seller Affidavid loan is not being paid off etc etc.  For a zero equity scenario OR the seller is walking from any equity.

There is no scenario for seller remorse, the warrantee deed has changed hands, the seller has signed an affidavid acknowledging the loan is not being paid of etc etc.

You can add any number of typical ways to pay equity to this deal;

- cash at closing paid from buyer to seller

- cash + 2nd lien where the seller is the lender.  Terms are up to you.   $25k to be paid $500/mo untill paid off. or ??

- OR if this is a flip which some sub-to's are, then the mortgate and note the seller offers;   $25k to be paid upon sale, no monthly payments until sale.  This allows for you to rehab and sell the house paying the equity or profit split at closing.

But if you plan on fixing and renting this house (forever as I do) then the seller needs monthly payments.  The legal tactics are symple.  The seller gets a mortgage (2nd security deed) and a note.  The problem is what monthly P&I (if there is interest offered) payments that you can afford to pay given what the house would rent for.

The structure is simple and std practice.

The challenge is what TOTAL monthly payment makes sense for you as a buyer re your risk and cash flow?

Typical is that a seller who's willing to sell leaving the mortgage in place is highly motivated and is willing to walk from their equity.  So these deals typically close with zero going to the seller as monthly payments.

OBTW:  calc sellers equity can solve this problem.  IE there is little if any equity:

$ARV (comps) - $rehab cost to bring up to sellable std - $flippers profit - $hardmoney cost - $holding cost - $cost of selling (10%). This work sheet often leave no or negative equity. Now,,, This is not slight of hand fakery. This math is a fair calc of what the true equity is. Do this calc sitting in front of the seller, have them use their own phone's calculator...