Came across a potential deal at the office

[Nathan E.]

I overheard a coworker speaking with a tenant. She was complaining about managing the property, the issues, etc, and expressed that she wants to sell.

Later in the afternoon, I approached her and mentioned that I was looking to buy. We got to talking and I found out that her motivation level is very high, and that she just wants out. She then produced the loan statement and mentioned that I could call the bank and ask about assuming the mortgage.

The loan balance is 140K at 3.75% interest. The house has a deadbeat tenant with a lease until May at 1200/month. Nothing sounded that spectacular until I looked up the address. The house sits on a small spring fed lake and is 1500 sf 3/1.5. She’s put a lot of work and money into the place (new septic, flooring, kitchen and bath updates, new plumbing, HVAC, and exterior paint.) Houses in the area are selling for around 110-120/sf non waterfront, so I think there would be some equity.

I am looking for some advice on how to approach the transaction. Thank you in advance.

[Mitch Messer]

@Nathan E. That's some great financing, but I wouldn't assume it; instead, I'd consider purchasing the home subject to (Sub2) the existing mortgage.

Assuming the mortgage puts you personally on the hook for paying it off, and there's no deal worth that, if you can avoid it. Buying Sub2 means she'd remain on the mortgage, but you'd take over her payments, making them directly to the bank. You'd get the deed, and thus be the new owner. Meanwhile, she's then free of the headaches and hassle.

Then, deed in hand, you get to approach the tenant and give the "new sheriff in town" speech. Either they start paying, or they move on.

But let's not get too far ahead...

To know whether or not this approach even makes sense, you'll need to first answer some questions:

• How much is the total mortgage payment?
• Is the mortgage current?
• How easy is it to get a deadbeat tenant evicted in your state/county/city?
• Is the owner ready to just walk away, or is she expecting more?
• Are you prepared to be a landlord?

If you know these answers, tell us here and perhaps we can help you analyze your options.

You may have just stepped into a small goldmine!