Potential Subject 2 Deal , HELP !!!

6 Replies

I met a guy today who came to me wanting to possibly do a short sale , his job is transfering to Florida and he leaves sometime this summer he owes 60k on his house and has never missed a payment so his loan is in good standing , he is upside down in his house I haven't done a indepth CMA but I know the area good enough to know there is no way he could sale his home the traditional way and not avoid bringing money to closing the guy is 65 and said he doesn't want to buy a house again he will stay with his family after talking to the bank ( local bank ) they said they werent to inclined to do a short sale and if they did they would most likely go after him for the differance so I was thinking about possibly trying to take over the property subject 2 any thoughts?

You should not buy a property sub2 that is upside down.

Thanks for the reply,

I figured that I just didn't know for sure , his payment is low enough I think I could generate a decent cash flow being young its hard for me to qualify get a loan to buy investment properties.

How far upside down is this property?

If he owes $60k, unless you can get over $1000 a month in rent, there is no way you should pay over retail value for a home, even if you have a hard time getting financing. Buying sub2 is a great means to avoid traditional financing, but it does not mean you buy a property that is over priced or pay over or even at retail value. Always buy at discount which guarantees initial equity, room for potential depreciation, and ability to better cash flow.

Hi Adrian,

There is a lot of missing information here.

1) How much is the monthly mortgage payment?
2) How many years are left on the mortgage?
3) Is it a fixed rate loan or an ARM?
4) What's the condition of the property? Any deferred maintenance?
5) How much is the market rent for a similar property in the area?
6) How much is the estimated market value of the property?

There are other things that need to be factored in, but as long as there is at least $100/mo in cash flow, I would consider it. I would usually want more than $100/mo, but if you can just assume the loan and not have to invest a lot of initial capital, it can be a decent deal.

If youre wanting to buy sub2 and sell sub2 or creatively then market to owners with 5-15% equity and buy those homes. filter your search to length of ownership of 7-10 years as well.

The key to Sub2 resell is that youre making a spread on interest, down payment, pay down and pay off... Very hard to with upside down property.

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