Wholesaling a subject to?

[Dennis Brody]

I have been getting leads that are super thin for a flip or a wholesale, but for a buy and hold they are not terrible.  I was wondering if there was a angle to sell a subject to deal.  Here is the scenario... The property is worth 130k and has a mortgage of 98k remaining, the monthly payment is 800.  The property will rent for around 1000 bucks.  The owner is willing to do a subject to.  The amount to catch up the mortgage and is about 8000 with attorneys fees.  There will only be minor repairs to be rentable maybe 2000.  Would any investor ever be willing to pay for a deal like this?

[Richard C.]

Originally posted by @Dennis Brody:

I appreciate the information.  I haven't got a contract on this I am just trying to think up creative ways to convert the leads that I am getting.  I have been getting a lot of action on pre foreclosure lists.  But most of the deals have very little equity.  Any advise?  I've also been mailing inheritance but much less action.  Any other ideas on list I should target? 

 I don't have any ideas about lists.  I would just suggest that if you are going to market to landlords, you need to understand what works for them.  I would do a search here for the 2% rule and the 50% rule.  I don't love those "rules" but as a rough rule of thumb, they will give you an idea of what landlords will be looking for.

For example, the 50% rule holds that 50% of schedule rents will need to be dedicated to expenses, EXCLUSIVE of financing costs.  So for your $1,000 rental, about $500 a month will go to taxes, insurance, vacancy, property management, capex and maintenance.

That leaves $500 from which to subtract the principal and interest payment.  What is left is the cash flow, which represents the buyer's return on their investment.

In your example, I will assume that the $800 payment includes an escrow for taxes and insurance.  So maybe $600 is the principal and interest.  $500 - $600 = negative $100 a month.  So you can see why no one would buy it (unless they were in a super-high appreciation market and were essentially speculating on further appreciation.)