Subject to deal, go or no go?

[Yu L.]

I found a subject to deal, the total PITI is around $3000, market rent is around $2800 on the conservative end, $3000 being optimistic.

There are 2 loans on the mortgage (I found these info. Through title co., not from seller)

1st loan - recorded date: May 2005, loan amount $650k, 30 yrs adjustable rate;max. rate 12.6%, current rate – unknown, adjust every 6 months.

2nd loan - recorded date: March 2006, loan amount $77k, 20 yr loan, assume HELOC

According to the seller: total mortgage payment $2200, insurance $100, property tax $700

(However, I did the calculation, the payment on the 1st loan should be at least $3500, assume at 5%, seller will provide more information on the loans later on; my take is if it is adjustable rate loan, forget it; she told me that it is a fixed rate loan though; for this discussion, assume the total PITI is $3000)

According to the seller, the total mortgage owed is $680k.Today’s market price is around $620k, during the last peak, it was around $720.When it peak this time, I expect it to be higher than $720k (based on the information from the nearby market, some area has already gone higher than the last peak)

Seller is willing to sell it subject to.The roof needs to be replaced and probably some sewer problem which costs $7k to fix at most.So the out of pocket $ to buy is < $20k for now and it won’t case flow for the first few years, assume rent go up after that, it will.

My plan is to find a money partner to put up the money to fix the roof and the sewer problem and hold on to it for at least 10 years and wait for the equity to build up, should have at least $300k equity or more in 10 years and sell at that time.(equity partner will pay for all repair and also all the PITI if the property is vacant, assume the vacancy rate is 1 month a year, in 10 years, it will be $30k, plus the remodel cost of before selling, money partner will bring in < $100k.)Of course I will be managing the rental during this time and split the profit with the partner.

Is this a good deal or not?