All Forum Posts by: Joe Baier

Sounds like he’s not collecting all the rent he says he is otherwise they would still be making the payments. You know there has to be deferred maintenance. I might cherry pick the best property or try a lower price. Make sure you get estoppels for all rents/security deposits.

Good call there. I’ll definitely add a clause to get the security deposits and I already had a clause to pro rate the rents.

0 Votes

Quote from @Bill B.:

Ps. You forgot to put your location in your profile or post. The only way I can figure the seller hasn’t just purchased these properties is the entire market they are in is collapsing and prices are falling, another possibility.

Sorry, the properties are in Norfolk, Va.

1 Vote

Quote from @Bill B.:

Assuming seller had to put 20-25% down it seems like almost zero loan pay down. It seems like they bought them a year or two ago, they’ve been horrible and the seller is just trying to bail? If so, why would the rate be so high? Be super careful if you aren’t able to make these mortgage payments out of pocket if no rent comes in or a large capex expense “suddenly” comes up.

He's owned the properties since 2006. Did a cash out refinance last year and started missing payments 3 months ago. LTV is 75% so basically no pay down but he's been using the rental funds to cover other bills.

2 Votes

Quote from @Jaron Walling:

@Joe Baier From my point of view you're buying two problems. Keep in mind I have not completed any sub2 deals.

1. MTM tenants with unknown history. It's always a challenge increasing rent in that situation. It could even be a driving force as to why the seller is entertaining the offer.

2. Interest rates are not coming down in the near future. The FED is hinting at rate cuts but once they make their first cut, the market will probably start falling because it means the economy has slowed.

I'm not sure where these rents to be for this deal to pencil out, but you better protect yourself on the buy side of things in case you run into the problems above.

I definitely see your point on 1. The units would likely have to be vacant for me to do the level of renovations I'd like. They're rentable in the current state but could absolutely use some updating. For this reason, I don't really intend to raise rents on the current tenants and would prefer they vacate.

Also see your point on 2. Even if I could secure a portfolio loan in the mid 7s it would cash flow with modest increases in rent. I'm hoping the $200k~ equity cushion would provide warranty against a downturn and not having enough equity to refinance.

0 Votes

Hi All,

Longtime lurker first time poster. I’m considering accepting the terms of a Subject To deal and want to know if I’m missing anything. I’ve done several deals in the past but have never done a subject to. I'd like to get everyone's thoughts on the deal but also on subject to generally and make sure I'm not missing anything. This deal was the result of heavy negotiating with the seller and the wholesalers.

Here are the basic contours of the deal. $33k entry fee for three duplexes. The breakdown is $23k in arears, $10k in assignment fees to the wholesalers who brought me the deal. I also agreed to cover closing costs meaning I'll be $40k all in. It is 6 units in total, 5 of which are rented all well below market. The rate I'm assuming is bad (9.25%). My goal would be to buy, rehab, get up to market rents, refinance at a better rate.

Three duplexes in Virginia:

Property 1 (2 units - 2 bed 1 bath each)

- Appraised Value: $245k

- Mortgage Payoff - $183k

- PITI: $1709.57

- Interest Rate: 9.25%

- Total Current Rent: $600 (one unit is vacant)

- Market Rent Based on HUD: $2986

Property 2: (2 units - 2 bed 1 bath each)

- Appraised Value: $270k

- Mortgage Payoff - $202k

- PITI: $1845.29

- Interest Rate: 9.25%

- Total Current Rent: $1450

- Market Rent Based on HUD: $2986

Property 3: (2 units - First is 3 bed 1 bath, second is2 bed 1 bath)

- Appraised Value: $263k

- Mortgage Payoff - $190k

- PITI: $1809.04

- Interest Rate: 9.25%

- Total Current Rent: $1500

- Market Rent Based on HUD: $3572

Other Factors:

Total Current PITI is $5363.90

Total Rent is $3550

Tenants are all month to month with 1 unit vacant

Equity After Deal: $197k (may be more as appraisals were done 1 year ago)

Rehab costs to get market rent: $20k per unit or $120k

Let me know your thoughts!

0 Votes

All Forum Posts by: Joe Baier

Joe Baier has started 1 posts and replied 6 times.

Post: Subject To Deal. What am I missing here?

Post: Subject To Deal. What am I missing here?

Post: Subject To Deal. What am I missing here?

Post: Subject To Deal. What am I missing here?

Post: Subject To Deal. What am I missing here?

Post: Subject To Deal. What am I missing here?