First Subject-to deal buy and hold then sold

[Jesse Stephenson]

I am just about to complete the sale of my first Subject-to deal.  It wasn't a grand slam but when you consider the cash on cash returns it was pretty darn good I think..  Here are the details.  I got the seller who was an older gentleman that called me to sell his house as a Realtor (I'm a broker and property manager by day) to agree to sell me the house subject to his existing mortgage once we realized that he had little equity and realtor fees and time on market might eat up most of his equity and he just wanted to move out of state where his daughter lived.  

First off the house was a small 3/2 on a 1 acre lot worth about 92,000 when we did this deal in Feb of 2013. He owed about 84,000 on a 30 year mortgage with about 25 years or so left on it at 6.375% but really low taxes since he is a Senior his taxes were only $450 a year! So his PITI was $675 a month.

I offered him $1,000 for moving expenses and to take over the mortgage with a promise to have it paid off within 5 years and he signed a deed giving me title to the house.  I bought a house for 1,000 bucks!! with 8k in equity!  OH and I didn't even mention that he threw in the riding lawn mower and a shed full of power tools worth probably 1,000 bucks or more..

I had a renter in the house the day after he moved out for $875/month for the first year, then when they renewed the next year I raised the rent to $925 then after 10 months they moved out to another one of my rentals as they had a kid and needed a bigger house.  I had a new tenant in at $950 a month within 1 week of them moving out and they winded being late payers but always paid and then broke the lease after about 7 months but didnt do any real damage and left only owing me about half a months rent.  when they moved out I did some cap ex.spending about 3,000 on new carpet and new vinyl floors new kitchen counters and painting. After 5 weeks of vacancy while doing repairs I had a new tenant in at $975/month.  (so now I was cash flowing 300 a month before repairs and vacancy). 4 months in to new tenant I had to replace water heater at a cost of about 550.  Then two months later (Sept 1st 2016) they split up and broke the lease but they left the place clean, yard mowed, and paid sept rent even though they were out by Sept 5th.  

So I decided to test the market and try and sell the house since now I owed 75,000 on it versus the 84,000 when I took it over about 3 years ago.   I listed it for 98,000 and had 3 showings and one offer in 3 days on the market.  I am a broker so I didnt have to pay myself but I offered a 4% commission to buyers agents.  I accepted an offer of 96,000 which should close on Oct 12th.  

At closing I should get a check for around 11k give or take 1k.

In summary I bought a house subject to for 1,000 and immediately was getting 200 a month in cash flow, by the third year that was up to 300/month in cash flow, along the way I spent about 4,000 total in repairs and cap ex, but also got tax write offs for depreciation etc..and now I am getting a check for 11k three years later and the older gentleman's credit was helped by my on time payments and now he is debt free 3 years later..sounds like a win-win to me..

How did I do guys?  

FYI.  the only reason I sold was to clear the mortgage from his name and because it was in a iffy neighborhood that I dont expect to see any real appreciation in the long term...also the roof and hvac were over 12 years old..