Equity

[Lou Sunia]

Is $100,000.00 Equity high equity on a property that is worth $600,000.00?

[Jesse T.]

Originally posted by @Lou Sunia:

Thanks @Kerry Smith.  I am a new investor getting started as a wholesaler..... As far as my question above I am just making scenarios and trying to structure out a sample deal of what I would do. My example was if a person owed $450,000.00, on a home with an A.R.V. of $600,000.00 and i structure a seller finance deal of $50,000.00 down. Buyer is in the property for $500,000.00 with a property leaving it with $100,000.00 equity. Would you consider that a old seller financing deal? Thanks for you reply. 

IMO, that doesn't seem very promising for seller financing. For high equity you would be looking for the seller owing 100K and the buyer being able to pay off the mortgage and have the seller finance the rest. For a "subject to" loan, I think the chances of the loan being called due would be significant. With the original person in the house, the mortgage company is sitting at about 75% LTV, which is a fairly safe loan. However with the house selling for 500K, they would be at 90%, which is considered fairly risky and requires mortgage insurance. The mortgage company would prefer that the seller did a conventional sale, even if the seller only gets 500K even after commissions the mortgage company gets 100% of their principal back. Also from the buyer's point of view the underlying loan will have higher principal payments than a new loan would have.

Overall it may work in a hot market if the 100K in equity/less in loans makes the rental numbers work.  It might be a bit tight for a flip, but again in a hot market if most work will add directly to the value it may be appealing.