Can I Assume this Assumable Loan Will Be a Deal?

2 Replies

I've been drawn to some B-C class townhomes in the greater Birmingham AL area and I am wondering if this place is a deal or not. The area is prime for growth and property appreciation. The townhome is a 2 bedroom 1.5 bath. The two rooms are upstairs and have a jack and jill bathroom. The interior has been renovated (crown moulding, all new appliances, tile backsplash in kitchen. A similar property was recently leased for $725/mo. The current owner purchased the property before the recession at $105k, and the property is now valued about $85-$90k. She owes $86k and has what she calls an "Assumable Loan". If what she says is correct, I would assume the remainder of the debt, and only pay 1% of its value toward closing and it's mine. Her property taxes, loan payment, utilities run about $600/mo.

Can someone give me some more info on assumable loans? Does this sound like it could potentially be a good deal?

Ryan Hampton

    It could be a good deal assuming the numbers show that it cashflows.  I assume you wouldnt have to pay utilities for tenant(s) so you should cash flow.  If you can actually assume the loan for a 1% fee you would have a good way to jump into a property with very low money down.  You will still have other closing costs and need to budget for vacancy/repairs/management etc before jumping.  Also keep in mind you wont have any equity so you need to be fairly sure on the values so you dont find yourself upside down.  

    Jeffrey Holst, Real Estate Agent in Tennessee (#343371)

    It would be a gamble because I dont have a lot of capital to cover the potential vacancies. I do work as a nurse so overtime during vacancies would suffice to cover bills. There is a value add property in the same neighborhood that is on the market through HUD. It's listed at $59k and from pics has some minor updates. The cons, it would bring much lower rents I'm guessing at best $675. My lack of funding for the conventional loan I'd have to get is also an issue.

    Ryan Hampton

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