First Rental - Subject To

[Michael Moikeha]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $285,000
Cash invested: $10,000

6 bed/3 bath home. Purchase subject to the existing mortgage. The owners had $30k equity. We paid them $10k upfront, and the remaining through $5k payments at the first of every year, no interest. After 3 years, we refinanced and pulled $60k out, but were able to reduce our payments.

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

This was exciting as it was our first rental. It was also an opportunity to purchase subject to the existing mortgage. The couple was on a fixed income with a large home and yard that they could not care for. They had 2 adult children living at home and not helping out. We gave them market value, they got into a smaller place for just the two of them and they were extremely happy.

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

This deal came about by talking to everyone and anyone we new. It just so happened to be a nice couple who found out my business partner was looking for a home and they said, "Come buy my house!"

How did you finance this deal?

Subject to the existing mortgage (about $255k at 5.5%). $10k down and $20k owner carry, no interest, paid $5k a year at the first of every year.

How did you add value to the deal?

Fixed it up a little and put renters in it.

What was the outcome?

Since we bought it, from DAY ONE, it has had tenants in it with zero vacancy between turn overs. The day someone moves out, someone was moving in.

Lessons learned? Challenges?

The magic guru stuff can actually work out, but it isn't easy!

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

no