Ran across BP when I thought about looking for podcasts on real estate to learn while I commute. There have been some awesome shows so far.
Fairly new to real estate in practice, but have been interested for a very long time. I have done a lease option and sold it at the end of the option. Bought a primary residence and didn't need the profit for a down so I saved it and used it elsewhere. In hindsight, I should have bought a 2nd. I was green and didn't know any different. Post divorce I house hacked for a while, finally gave up and short sold it. That could be another thread in itself, but also a mistake in hindsight.
Show 2 really sparked my interest. I have a local mentor who is busy and has offered to help, but he prefers I do most of the research first (which I think is the right way to do it).
After finding a few of the wrong lenders and running through many scenarios we have a pre-approval where my husband and a friend are on the loan. I'm out shopping on the conventional side now. I don't add anything to traditional financing due to child support destroying DTI, so I've go to look elsewhere to move on the 2nd home.
I ran across a single parcel dual home property that is rough, but could cashflow and give strong equity. The agent is dragging his feet so we are leaving the offer in, but looking elsewhere. I'm thinking subject to could be an option when the agent gets back in town and is ready to finally move things along. He is dealing with an out of town and possibly out of country owner.
Check my understanding on how I think I could structure a subject to and the obstacle of this property.
2 home property
1st is 2bd 1 ba needs paint, carpet, and bathroom remodel, and cosmetics Rent would be about $850-$950
2nd home is uninhabitable (fire damage). 3 bed 1 bath. Needs new roof over approx 150-200 square feet. Brick/cement construction so roof is the major issue. Will need kitchen, bathroom, electrical, and paint, carpet, etc. Potential rent about $1000
House is now vacant and the place is ugly, its been on the city's radar and has had many fines.
The parcel is zoned single family agricultural, but is in a gray area of being grandfathered in. pre city incorporation construction so the county shows it as a 2 building 1 parcel, city would want evidence from the county and to make a final decision. $125 and some foot work and we would have an answer.
The seller has a mortgage recorded only a few years back and we estimate they owe $126k, they are selling for $149k. It seems they just want to be done with the headache or don't have the means to maintain. It doesn't look like they have equity (based on the condition of the second home). Utah's market is hot enough that the 2 bed home and 1/2 acre would appraise at the asking price.
Knowing I could rent the front house almost immediately for $850; knowing that the owner is absentee and believing they want to walk away; knowing that traditional financing may not be available if another property comes through first, does it make since to do a subject to, take on the project of the second home remodel?
From what I understand of subject to, I would have to figure out how to pay the listing agent. I would want to assure a clear title and the city is satisfied.
My exit strategies:
I prefer buy and hold and can see keeping it as a rental so refinancing when I have rental income to show might work, right? How long should I run the subject to?
Selling would be an option if the remodel is done the estimated value is $225-250k
I get the concepts of getting into a subject to, but now trying to better understand the exits.
Sorry for the length, I hope I've given enough and not too many details for feedback. It would be great to hear from others who have more knowledge on this. Even if this property doesn't come through, I'm sure I will have learned.
