Hello, I'm a newb from Bentonville, Arkansas.
I found a motivated seller in a nearby town that has around 30k in equity paid into his 105k home loan. I contacted him because he needs to sell "ASAP". He told me his wife is pressuring him to move further south and he needs to get rid of his current home quickly.
I've considered offering to purchase his home "subject to" the existing financing. I assume he will also want cash up front in exchange for the equity built in. I can maybe haggle this down to the $10,000 cash I can offer him today, based on the fact that he doesn't have to pay a Realtor or any of my closing costs.
I would be borrowing the $10,000 from a family friend at a 10% interest rate to be paid within a year.
The current Mortgage is around $450/month, and I can realistically expect double that in rent (comps in the neighborhood.) So it looks like this:
$75000 remaining balance on loan
$11000 cash and interest borrowed
$2000 advertising/cleaning/touchup for lease option or sale
Sale price is realistically around 100k, so I'm looking at around a 12k profit, correct?
If this sounds ridiculously juvenile, its because I am just winging this.. trying to learn.
Updated almost 4 years ago
Turns out, the seller was misleading, he stated that he had been making double payments to get to a $30k equity.. turns out it was only $4k. Due to this dishonesty, I will look elsewhere.
You know... if the numbers still work out as a rental, there's no real need to be giving him any money if you're taking it sub2. You might not get the equity, but (conservatively) if your rent can be $400 more than the payment, you are looking at about $4,800 a year in cash flow minus vacancy and capital expenses. You could lease option it and have some cash reserves built in as well. This also assumes the guy was telling the truth about what his payment is.
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