**First Deal: Exploring Mortgage Assumption and Negotiation on a Competitive Property

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**First Deal: Exploring Mortgage Assumption and Negotiation on a Competitive Property

David Ricketts
Investor · West Palm Beach, FL · Member since 2019 · 18 posts · 7 votes

Hello, everyone!

Excited to be diving deeper into real estate investing and making time for my first deal. I’ve been exploring various strategies to land a solid rental property, and I’m particularly interested in trying mortgage assumption for this one.

I'm currently looking at a property listed at $350K. It was originally purchased for around $150K in 2020, with a $50K HELOC added in 2022. I'm collaborating with an investor who can help cover the remaining balance, but since the property isn't in the best shape, and maybe fairly priced, but I'm evaluating how much room I might have to negotiate. It does seem competitively priced for the area.

If anyone has insights into how the existing HELOC might impact the mortgage assumption or tips for negotiating on a deal like this, I'd greatly appreciate it. Looking forward to hearing your thoughts!

Thanks in advance,
David

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y

@David Ricketts

If it's not a VA loan you will not be able to assume the loan. People have done loans subject to but the original borrower stays on the loan and it could be at risk to be called once a deed is transferred

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  • Mike Fingleton
    Real Estate Agent · Scottsdale, AZ · Member since 2024 · 155 posts · 103 votes
    1y

    Hey David,

    Awesome to hear you're jumping into your first real estate deal... exciting stuff! Mortgage assumption can be a smart move, especially with rates where they are.

    Funny enough, my buddy Mike over in Austin ran into a similar situation last year. He was eyeing a property with a HELOC attached, and we found out.. from what I've herd, banks can be a bit cautious when there's a second lien. You'll need to chat with both lenders to see how flexible they are. In Mike's case, we managed to negotiate paying off the HELOC at closing, which smoothed things out.

    As for negotiating, properties that need some love are perfect for that. Since the place isn't in tip-top shape, you might have some room to negotiate the price down or ask for seller concessions.

    Partnering with another investor is a solid movee; two heads are better than one, right? If you ever want to bounce ideas off someone who's been around the block a few times, feel free to give me a shout.

    Pat and Jasper

    Turning investment visions into REALITY in Phoenix, AZ - Ranked #1 for residential real estate growth and opportunity by PwC

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  • T. Alan CeshkerPro Member
    Attorney · 3409 Executive Center Drive Ste 110 Austin, Texas 78731 · Member since 2020 · 99 posts · 92 votes
    1y
    Quote from @David Ricketts:

    Hello, everyone!

    Excited to be diving deeper into real estate investing and making time for my first deal. I’ve been exploring various strategies to land a solid rental property, and I’m particularly interested in trying mortgage assumption for this one.

    I'm currently looking at a property listed at $350K. It was originally purchased for around $150K in 2020, with a $50K HELOC added in 2022. I'm collaborating with an investor who can help cover the remaining balance, but since the property isn't in the best shape, and maybe fairly priced, but I'm evaluating how much room I might have to negotiate. It does seem competitively priced for the area.

    If anyone has insights into how the existing HELOC might impact the mortgage assumption or tips for negotiating on a deal like this, I'd greatly appreciate it. Looking forward to hearing your thoughts!

    Thanks in advance,
    David

    David

    The home equity line of credit can be assumed -- it is cancelled with the bank at closing so no further funds can be obtained.

    It is common and same as assuming a non-heloc mortgage.

    Alan
    [email protected]
    1Reply
  • David Ricketts
    OP
    Investor · West Palm Beach, FL · Member since 2019 · 18 posts · 7 votes
    1y

    Hey @Mike Fingleton,

    Thank you so much for sharing your insights. Although that particular deal sold, I’m continuing to search for other opportunities and am excited to work toward my first investment property. I’m especially grateful for your willingness to lend me some of your knowledge along the way. If you’re open to it, I’d love to have someone to bounce ideas off, while being mindful of your time.

    David 

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  • David Ricketts
    OP
    Investor · West Palm Beach, FL · Member since 2019 · 18 posts · 7 votes
    1y

    Thanks for the insight, @T. Alan Ceshker

    Good to know the HELOC will be canceled at closing—appreciate the clarification. I'll double-check with the lender to make sure there aren't any unexpected conditions tied to it. Also, I'm exploring options for covering the remaining balance if the purchase price exceeds the assumable mortgage. Any tips on structuring this with a secondary loan or financing approach?

    Thanks again!

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y

    @David Ricketts

    If it's not a VA loan you will not be able to assume the loan. People have done loans subject to but the original borrower stays on the loan and it could be at risk to be called once a deed is transferred

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  • David Ricketts
    OP
    Investor · West Palm Beach, FL · Member since 2019 · 18 posts · 7 votes
    1y

    @Chris Seveney,

    Thank you for the quick response and the clarification on VA loan assumptions. I'm continuing to put out plenty of offers on various properties and exploring different approaches to see what gains traction.

    For this one, I’m considering proposing a rent-to-own/deal finance contract with strict contingencies—something like requiring monthly photo proof of bank loan payment, with the understanding that failure to comply would result in a loss of equity of the seller. I’m testing a lot of different strategies right now, so I’ll see what sticks!🤔

    Thanks again for your input. It’s been very helpful as I navigate these options.

    Best!

    0Reply
  • David Ricketts
    OP
    Investor · West Palm Beach, FL · Member since 2019 · 18 posts · 7 votes
    1y

    @Chris Seveney, **different deal from the original post. No HELOC but similar number.

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  • T. Alan CeshkerPro Member
    Attorney · 3409 Executive Center Drive Ste 110 Austin, Texas 78731 · Member since 2020 · 99 posts · 92 votes
    1y

    If in Texas, a lease purchase option longer than 180 days without consent from the lender to receive payment from the tenant/buyer is not possible.

    Also, you can assume the obligations of a VA loan -- it is a non-qualified assumption - meaning the lender is not qualifying or approving of the assumption. The seller's entitlement amount stays tied up until paid off.

    [email protected]
    1Reply
  • David Ricketts
    OP
    Investor · West Palm Beach, FL · Member since 2019 · 18 posts · 7 votes
    1y

    @Alan (and everyone that assisted),

    Thanks for sharing that insight—it's really helpful as I continue learning the ins and outs of real estate investing. I'm realizing there's a lot more to understand, especially around lease options and VA loan assumptions. For now, I may focus on a house hack approach rather than relying too heavily on creative strategies.(I have found a 2-1 that I can afford in a conservative 7% appreciation market)

    I’m also thinking about putting more effort into lead generation beyond just Zillow to expand my options. Thanks again for your perspective—it’s guiding me toward a more refined approach!

    Best,

    1Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    1y

    @David Ricketts

    To enter a mortgage assumption with partner funding, evaluate the mortgage's eligibility, impact of HELOC, and property condition. Negotiate with the seller or investor, considering fair market value and potential price reductions. Conduct a title search and HELOC to ensure clear title transfer. Conduct inspection and appraisal to confirm property condition and market value.

    Good luck!

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  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    1y

    Most loans are not assumable (VA is an exception) and I've never heard of a HELOC being assumed. You can do a subject to (although I've never heard of doing this with a HELOC) and there are a few risks to them and since the loan stays in place and the seller's name thereby stays on the mortgage despite selling the property, it will take some effort to gain a seller's confidence to do such a thing.

    You can read more about them here: https://www.biggerpockets.com/blog/2016-07-03-subject-to-rea...

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  • David Ricketts
    OP
    Investor · West Palm Beach, FL · Member since 2019 · 18 posts · 7 votes
    1y

    @Wale Lawal ,

    Thank you for the reminder about doing my homework. I’ve been following much of the research you suggested, like inspecting the property and assessing comparable homes in the area. When I move forward with any deal, I plan to conduct a title search as well. I also have someone I work with who can handle inspections affordably. I appreciate your recommendation to proceed with caution, as investing without proper research indeed carries inherent risks.

    Thank you and best of luck, as well!

    Best,

    David

    1Reply
  • David Ricketts
    OP
    Investor · West Palm Beach, FL · Member since 2019 · 18 posts · 7 votes
    1y

    @Andrew Syrios

    +200+Thank you for the insight! I appreciate the clarification on loan assumptions and the limitations around HELOCs. I’ll look further into the “subject to” approach and review the article you shared to better understand the potential risks and strategies.

    Gaining a seller’s confidence is definitely something I’ll keep in mind if I pursue this route. Thanks again for pointing me in the right direction!

    Best,

    David

    0Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    1y
    Quote from @David Ricketts:

    @Wale Lawal ,

    Thank you for the reminder about doing my homework. I’ve been following much of the research you suggested, like inspecting the property and assessing comparable homes in the area. When I move forward with any deal, I plan to conduct a title search as well. I also have someone I work with who can handle inspections affordably. I appreciate your recommendation to proceed with caution, as investing without proper research indeed carries inherent risks.

    Thank you and best of luck, as well!

    Best,

    David


     All the best Brother!

    [email protected]832-776-9582Podcast Guest on Show #469
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