Need advise on first deal! I think its a homerun!!! Subject To advise needed
Hi everyone. My name is Bill and I am a new pro member. I have my first deal in the works and need advise on how I should structure the deal. I wasn't expecting such a 'fun' time on my first one haha. The deal brings a 25% CAP rate, huge cash on cash return and 35% purchase CAP.
House #1
- 4 units (2/1), 3 occupied paying $425/mo (very low) I plan on occupying the vacant unit for awhile.
- Sale price is $35000 Subject to $22000 first lien on property.
- $0 down (with agreement on house 2)
- 10 years remaining on lien $430/mo including taxes.
- Needs new roof within 3 years, $10k and maybe a few updates throughout
Here is the kicker...The seller was just notified of a tenant injury from a few months ago. He is convinced that there will be litigation/settlement. Bad thing is he didn't have liability insurance on the property so once legal paperwork is filed his assets will be frozen (this could happen in a week or maybe a month).
My question(s) Is a subject to feasible in this situation? Would the subject to purchase open myself up to future litigation as a result of a possible settlement or lawsuit? Would the house be secure enough for me to sell quickly in 6 months, year, etc?
BUT WAIT, THERE'S MORE....
House #2 (next door also owned by seller)
- Identical to house #1, 4 units however, are vacant. 2 are rent ready with one being temporarily occupied by his handyman
- .
- Sale price $30000 cash (pending the agreement on house 1)
- Will rent units at a conservative $500/ea
- needs approx $15000 to get 100% rent ready.
I probably will wholesale this one once under contract for 45k since I most likely will be unable to come up with the 30k purchase price.
Both houses, once fully occupied and total upgrades of 25000 should have an ARV of $65000-75000 each. Maybe more, as a similar cash flow 9 unit occupied row house just came on the wholesale market at $220k in a near-by war zone.
I have been working this deal for weeks went from 90k cash to 65k cash to the terms I have above. What do you think? Also, does anyone have a 'SUBJECT TO' PURCHASE AGREEMENT I CAN USE? I'm almost to the finish line... SHOW ME BIGGER POCKETS IS THE BEST REI COMMUNITY ON THE WEB TODAY!
I look forward to hearing from you,
'BillWill'