Newbies First Wholesale Deal - What should I offer?

Question

Hi Guys,

Im a newbie and did some heavy advertising over the last few weeks and got some pretty decent leads.  One in particular seems like it's got potential to  work out.  I was going to make an offer tomorrow but want some opinions first.

Tampa, Florida, 4 bedroom, 2 1/2 bath, 2000 sq. ft. in a good family neighborhood currently being rented out.  House doesn't need any major work and is in really good shape.

Comps are all over the boards from $168,000 back in November to $215,000 in December - those 2 are the most recent around and house is closer to the 215k house that sold in November.  I know the neighborhood well and would put an ARV on it of $178,000.  Thinking like a homeowner, that's what I would list the house for.  It could probably fetch upwards of $205 in this current market or maybe even more but might sit for a while.  Current owner wants OUT.

Owner owes 110k and its currently being rented out to good paying tenants.  Rent is $1650 per month.  Mortgage is current, Im told no liens.

I'm looking to do an assignment deal, selling to flipper or landlord.

What would you offer?

Wes Eaves · Answer

@Phil B. Subject to is simply you buying the house subject to the seller's existing mortgage. You essentially pay his mortgage but it stays in his name.

What are the PITI payments for the existing mortgage?

I'm in Tampa too and happy to help. PM me to chat.

Brian L. · Answer

No repairs at all? Not even updates? Based on your ARV of $178k I would offer $124k - wholesale fee - repairs. Its pretty uncommon to find a property that needs nothing. I personally would see if this owner would walk if you pay the balance of the mortgage; you might have a solid deal if you could get it for the $110k that he owes the bank.

Phil B. · Answer

Hi Wes.  What would be the benefit to me of taking over the mortgage versus flipping the paper?  For the rent payments?  If that is the case, I'm really not interested in owning a property outright or rental income.

From my other job (I own an import company), my expertise lies in marketing.  I think I'll excel at finding deals and negotiating contracts but being a landlord....I'm not so sure.  I don't quite understand the benefit.

I'm not sure what their monthly nut is on the property.

James Moesch · Answer

I am new here and this is actually my first post. Phil, I would suggest either getting with one of these guys who say they're local and glean from their knowledge. To answer your question, the Bank would have to approve someone to ASSUME the mortgage. I am almost certain this is not an assumable mortgage. Subject to deals are easy to do. But they are easy to screw up too. The reason for this type of deal is the ability to control or own a home with little or no out of pocket expenses. Maybe there's a link or topic on here for subject to's and Land Trusts. Do some research. I will too! Good luck brother.

Phil B. · Answer

Wes, doesn't the sellers bank need to approve someone to take over a mortgage?  The mortgage company based it's loan on the current owners credit.  Do banks routinely allow someone else to just takeover a note?  I'm a little confused how this would work I guess.  What if my investor fails to pay the mortgage for whatever reason?  What if I fail to find an investor?  Then the original sellers credit gets jacked, right?  From the sound of the owners, they want nothing to do with the place once they're out.  I could be wrong and I could ask about that but I need to learn more about how it works or I'll sound like I have no clue what I'm doing.

Is the benefit to the investor time?  Is that it?  They won't have to get a hard money loan but could pay the note while waiting to get their own mortgage? Is that the reason behind it?

Phil B. · Answer

Brian the house was updated not too long ago.  If it were my personal residence, I could spend 5 or 6k to make it more to my taste of course but 3 or 4k gets it in salable condition, subject to inspection of course.

I was actually thinking of putting in an offer for 105 with wiggle room to 115k.  118k would be about my very top.

The thing about this place is the area is moving fast.  We got really hammered here during the bubble so prices were incredibly low.  This same house was 129k retail 4 or 5 years ago.  My gut's telling me the place could fetch upwards of 215k in this market.

Wes Eaves · Answer

@Phil B. You would probably have an easier time assigning this contract and getting a wholesale fee if it is subject to the existing mortgage rather than an all cash deal.  It would allow an investor to control a property for very little out of pocket.  That is appealing to a lot of investors!

Phil B. · Answer

Im really not sure.  I've only read about "subject to" deals and honestly, don't understand it very well - not well enough to do none at least.  You mean like a lease option to buy?

I've bought 3 personal homes for myself over the years as a primary residence.  That's about the extent of my real estate experience thus far.  I've been studying and reading everything I can for the last 6 or 7 months though.

Forrest B. · Answer

what would happen if you bought 'subject to'?  Just assuming the loan and putting a nominal (if any) amount of money down?

Phil B. · Answer

Its in the Carrollwood area - all families, very nice homes in the area as you are probably aware.  PM me for details.  I would go in with a lot more confidence if I knew I had a buyer on the other end all ready to go.

Newbies First Wholesale Deal - What should I offer?

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