All Forum Posts by: Audra Berger

Thanks for putting this together. We will probably join in virtually for this one. Looking forward to it.

Thanks Patricia and Darius! Those are just the kind of critical questions I was looking for. I don’t know a lot of the details of the financing, etc. These are mainly the ideas I wanted to vet based on a conversation I had with a friend last night. Exploring possible solutions. So, to Patricia’s point, I don’t love the house; I love the seller. But, that is also not a reason to do a bad deal. 

I know the principle of buy low/sell high. Just wondering if you don’t have any money in or a very little, can you rehab a bad situation? Like those that buy an underperforming business and turn it around.

To Darius’ point, assuming we can even assume the financing, I know in one sense, they are not completely free of that financing for a while till we could sell it, but perhaps it would be psychologically freeing that they don’t have to worry about managing it from across the country.

Question, what would be another solution? Is there one? Perhaps just help them manage the rentals better for a PM fee?

Scenario -

Sellers bought house in highly desirable neighborhood in Phoenix, AZ at peak of last crash.
They still owe $650K. The home is worth between $595-610K. ARV could be right around $650K. Home is 5 bedroom.

Sellers currently live out of state and have tried to make this work with rentals, air bnb, etc. But have not managed well, and this second mortgage is a major stressor in their lives.

They did a loan modification in the past so they actually have a very low mortgage payment given the size of the debt at $1900. They are currently renting it ($2200) way under what it could rent ($2700-3000).

Would it be crazy to offer a subject-to for a fully furnished home, have them cover closing, and be into a $600K house with no money out of pocket even though it is under water $40-50K?

Pro's - (1) No money out of pocket and we have money in reserve to cover vacancy and do repairs. (2) It is in one of the best neighborhoods in the area. (3) The mortgage payment is low enough that it can cash flow just fine. (3) We can aggressively pay down the debt with cash flow. (4) Would there be tax advantages?

Con's - (1) Your obviously starting out WAY underwater, (2) the house is not the sweet spot for renting given its size and price range, (3) uncertainty about rent and homes value given the circumstances.

I would appreciate any expert advice. This would really help the seller, and viewed long-term, could be profitable especially with no money up front.