Possible "Subject To" Deal
I have a few questions about "subject to" the existing mortgage and a deal that really only makes sense to me using this type of financing. If any "subject to" experts or those with experience would help me out I would appreciate it. In my case, I would be buying a house subject to the current owners financing and adding it to my buy and hold inventory to rent out.
1. What about the taxes? The title will convert to my name along with the tax bill I would assume. As long as the taxes continued to get paid out of escrow then it shouldn't be an issue, correct?
2. Income taxes: Since the seller still holds the mortgage, pays the taxes and insurance out of escrow, who gets to deduct these expenses on their income taxes? I am really the one paying them but the 1098 will still go to the person who sold me the house.
3. Future sale of the property: Let's assume I hold the property for the next 10 years and sell. Will the previous seller need to be involved in the transaction since their bank holds the lien on the property? Or can I just sell the house outright, include the lien on the HUD and take the equity built up in the house via a check?
Now to the deal:
Estimate home value: $210k
Loan Amount: $180k
I think I can structure the deal so that I purchase the home for $180k and help the seller with the closing costs, they really just want out of the house and don't want to be a landlord. I like the idea of getting equity up front and cash flowing on the property.
The house will rent for $1800 a month and will produce $150 per month in cash flow right away.
I understand the risks of "subject to" with the loan possibly being called so no need to get into that here unless you have some wisdom to share with someone who has never gone down this road before. Thanks!