Would You Buy This Subject-To Deal

[Myles Berrio]

3 bed 2 bath with bonus room 2,000sqft in a nice "newer build" neighborhood, does have HOA but the exit strategy would be mid-term rental 30 day minimum which I already have experience in.

Current loan balance: $249K 

Arrears: $8.8K 

Seller receives: $5K at closing 

Wholesaler receives: $5K at closing 

Buyer pays closing costs (roughly $2.5K) 

House is could use about $10K in repairs to be rent ready and I already have furniture in store to fully furnish from staging my flips. I'd spend probably another $1.5K to fully stock the house as a mid-term rental. 

So, $249K balance + $20,000 cash to close and pay everyone, catch up arrears and closing costs. Brings you to about $270K to own the house but 8% cash needed to close and take over mortgage. 

Monthly mortgage: $1,842.23/month 

Interest rate: 2.75% 

Lender: Movement Mortgage 

Projected midterm gross revenue $5K/month at $167/night (focus is corporate housing & insurance claims NOT traveling nurses)

Total all in cost to reinstate, pay everyone involved and fix up the house = $30K + $249K balance = $279K 

House worth $300K - $310K today

What are your thoughts!?

[Patrick Roberts]

Not much margin if things dont work out. If the loan is accelerated or the HOA decides not to allow MTRs and you have to sell, you might take a haircut on the exit since your basis is 93-95% of the ARV. Also, is this a Conventional loan or a govt loan (FHA/VA)?

Last piece, I'm assuming this is a homeowner and not a for-profit owner. If so, you might be taking on a lot of legal risk. SC is actively hunting wholesalers who are skirting the new wholesaling law in order to make an example out of them. In this case, you may be involved a violation of this law by paying a wholesaler. I'd dig into this aspect if I was in your shoes to see where you fall with respect to this. If this homeowner files a complaint after the fact when they go to buy a home later and finds the original mortgage still exists, you could have serious problems.