Buying a property sub to

[Jon Robinson]

Hi everyone,  I just learned about a property that will be going up on the market soon.  The seller is looking to get somewhere in the high $300k for it with comps for the area in the high $400k. The property need quite a bit of work to get it to that number, however it is in a good tourist area and can probably serve well as a short term rental.  The property has a small mortgage on it about $125k, but it is an open end mortgage with a future advance clause.  If I can get the seller to agree to selling sub to, would it be a good idea to take over such a loan, what can be some of the pitfalls in doing so?  If I were able to take over the loan would I be able to use the future advance to rehab the property or would only the mortgagor be privy to the future funds.  Has anyone had any experience in taking over this type of loan?  any advice would be appreciated.  Thank you.

[Derek Dombeck]

As long as you understand the terms of the loan and have a back up plan to pay it off if it ever was called due, go for it. You can negotiate the future advance into your overall deal as long as the seller is willing. I also often pay the remainder equity in an installment sale using a note and mortgage. In the last month, I've  done this with a zero percent seller 2nd twice. If you don't ask, you do not give them the opportunity to say yes.