Buying Subject-To deal

[Dan G.]

Hello fellow BP Members.  I went on a walk around my neighborhood and came across a pre-folosure lead. It is a over/under duplex that has a way door that allows to connect all 4 rooms in the house.  The owner is behind about 10k in payments, and is willing to do a subject to deal.  I have no experience with doing subject to deals.  My idea is to house hack the duplex and rent out each of the 4 rooms to college students.  The duplex is close to a nursing school and 2 medical schools. I live very close to the duplex so it would be easier to keep an eye on it and manage it.  I used rentometer and came up a very conservative estimate for the gross rents to be $2600 and expenses of $1885 (includes property managment).   That leaves $715 of cash flow.  This deal would require me to pay off the (owed amount a little under 10k+closing costs).  BP is telling me the Cash on Cash return would be 59%, pro forma cap rate 12.56%, and an income expense ratio of 2.18%.

Do any of you have advice on doing subject-to deals?  Have any of you done subject to deals? Would you mind sharing your deal and how it went down, and perhaps what you would do differently.  What should I watch out for? Is closing on these properties these properties same as any other?  What is the paperwork I need? And anything else you I might have left out.  Im a newer guy to investing doing wholesales, and am interested in building my portfolio.  

I appreciate your expertise and input.

[Account Closed]

@Dan G. Unfortunately it is possibly illegal to do in Washington what you want to do. Used to be legal, now maybe not. It may be considered to be "equity skimming" and he has up to 6 years to come back and sue you. Talk to a real estate attorney first. It may be legal if he doesn't occupy any of the units. I am not an attorney so make a quick call and find out first.