Equity on a Subject-To deal?

Question

hello, I'm curious about subject-to deals and how they work. I understand that you take over the payments and pay what ever payment have been missed. my question is what happens with the equity already in the house? what is normal practice? do you keep the equity when you sell the house or is returning the equity back to the previous owner part of the deal and we just keep the profit from the flip? how does that work?

Thanks!

Nicholas

Thanks!

Nicholas

Nicholas Testa · Answer

@Wayne Brooks ohh gotcha. so on on a 100,000 property with 30% equity, ideally you'd get the subject-to purchase price at 70,000? or as close as possible to that figure as long as the purchase price covers whatever is owed on the mortgage?

Wayne Brooks · Answer

It's all negotiable....of course the idea is to capture as much equity as you can , when you buy.  So most buyers will want to simply buy subject to the existing loan balance, and give very little above that for "the equity".

Nicholas Testa · Answer

@Brent Coombs yes that cleared it up! now what would the buy price be? Since I'm just taking over payments would the buy price just be whatever price the owner bought it at originally? or how is that set up?

Brent Coombs · Answer

@Nicholas Testa, whatever equity the previous owner had has already been sold to you. That equity goes to your end-Buyer. Your profit is from the flip (the difference between your buy price.plus expenses, and your sale price).

Does that cover it? Cheers...