Subject To plus Owner Finance Deal in Marietta, GA

[Tom Townsend]

Investment Info:

Single-family residence other investment.

Purchase price: $185,000
Cash invested: $29,900

Subject to + Owner Finance FIX and FLIP.

What made you interested in investing in this type of deal?

Great area with high demand for SFR. Appreciation is strong.

How did you find this deal and how did you negotiate it?

We are agents and this was referred to us from someone in our database.

How did you finance this deal?

We bought subject to the existing loan with a balance of $73,000 at a rate of 3.25, 30 year fixed. The owner was willing to owner finance an additional $70,000 at an interest only rate of 7% annual, we negotiated a 6% commission and $1,500 toward closing on the deal as well. We paid the balance in cash. 

How did you add value to the deal?

It was important to the seller to sell for $185,000. We explained that we could do that, as long as they were open to talking about the terms, which they were. We negotiated the subject to, plus owner financing, sales commission, and contribution to closing costs by explaining that by structuring it this way, our costs were lower which in turn allowed us to meet their goal of selling for $185K, and netting them more money.

What was the outcome?

Closed and flipping to an institutional buyer after minor clean-up only and a holding period of 2 months for $240,000.  Net income on deal is 66K (11K in commission on purchase and 55K at sale) for 2 month holding period and total cash layout of $31K.

Lessons learned? Challenges?

After we were under contract, the sellers reviewed with a friend that was "helping" with finances. The friend raised a number of red flags in which took some time for us all to come together and explain to the friend how it all works, that what we are doing is legal and ends up helping the seller. Always ask "Is there anemone else that will, or needs to be, involved with this decision?"

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

We are agents and appraisers.