please help to figure out the best way to buy

12 Replies

So I was trying to do a deal subject 2 in a lien theory state. The seller owes 35K on the mortgage, property value is 65k. And the seller wants 65K. So if I buy the property, then the seller will continue to pay the mortgage, the seller will give me the title, and I will pay to the seller monthly. Do I understand it correctly? I do not really like land contracts because the seller keeps the title. Is subject 2 the best way to go? Is there another way of buying the property (I do not like lease options)...

Thank you!

@Mary Jay I'm not understanding the benefit to you here.  If you are paying full market value for the home...which not many investors would do.....just buy it with a traditional mortgage.  Then his loan is paid off and you don't have to mess with the seller again.

Otherwise, based on your description above, you would be bringing $40k+ to close that property.  No reason to do that at all.  Unless I am missing something?

Originally posted by @Andrew Postell :

@Mary Jay I'm not understanding the benefit to you here.  If you are paying full market value for the home...which not many investors would do.....just buy it with a traditional mortgage.  Then his loan is paid off and you don't have to mess with the seller again.

Otherwise, based on your description above, you would be bringing $40k+ to close that property.  No reason to do that at all.  Unless I am missing something?

 cant buy it via traditional financing.

Property does not qualify. The house is old, needs a new roof, etc...

It does have a good cash flow. 

Where did you get the "40+K to close that property"?

I am putting down only 5K if I do subject2

@Mary Jay what is your recourse if the seller does NOT make the payments?  You pay the seller upfront then the seller has no reason to ever pay the mortgage.  The mortgage company forecloses and you have nothing.  

Originally posted by @Lynnette E. :

@Mary Jay what is your recourse if the seller does NOT make the payments?  You pay the seller upfront then the seller has no reason to ever pay the mortgage.  The mortgage company forecloses and you have nothing.  

 The mortgage is still in the sellers name, I do not get foreclosed on. The seller gets foreclosed on.

Originally posted by @Andrew Postell :

@Mary Jay the seller is asking $65k for the property...how will you be paying his $65k?

 renters will pay me the rents and I will be paying monthly to the seller 650$ per month, then from that payment the seller will pay their mortgage

Originally posted by @Mary Jay :
Originally posted by @Lynnette E.:

@Mary Jay what is your recourse if the seller does NOT make the payments?  You pay the seller upfront then the seller has no reason to ever pay the mortgage.  The mortgage company forecloses and you have nothing.  

 The mortgage is still in the sellers name, I do not get foreclosed on. The seller gets foreclosed on.

Yes, the seller gets foreclosed on! Guess what ??? YOU loose the house! So, why would the seller care if there was a foreclosure? He may get a lower credit rating, you loose the house you already paid for.

Originally posted by @Lynnette E. :
Originally posted by @Mary Jay:
Originally posted by @Lynnette E.:

@Mary Jay what is your recourse if the seller does NOT make the payments?  You pay the seller upfront then the seller has no reason to ever pay the mortgage.  The mortgage company forecloses and you have nothing.  

 The mortgage is still in the sellers name, I do not get foreclosed on. The seller gets foreclosed on.

Yes, the seller gets foreclosed on!  Guess what ???  YOU loose the house!  So, why would the seller care if there was a foreclosure?  He may get a lower credit rating, you loose the house you already paid for.

 Do you have a better idea? 

Originally posted by @Mary Jay :
Originally posted by @Lynnette E.:
Originally posted by @Mary Jay:
Originally posted by @Lynnette E.:

@Mary Jay what is your recourse if the seller does NOT make the payments?  You pay the seller upfront then the seller has no reason to ever pay the mortgage.  The mortgage company forecloses and you have nothing.  

 The mortgage is still in the sellers name, I do not get foreclosed on. The seller gets foreclosed on.

Yes, the seller gets foreclosed on!  Guess what ???  YOU loose the house!  So, why would the seller care if there was a foreclosure?  He may get a lower credit rating, you loose the house you already paid for.

 Do you have a better idea?

 Yes!  YOU pay the mortgage.  If you must keep it in her name, then YOU take the responsibility to pay it directly to the company to ensure it does get paid.  If you are paying her more than the mortgage amount then you write 2 checks one for the mortgage directly to that company, you mail it or do it on line, and another to her.  

And make sure you are added to the property insurance as an other insured, and get your own liability policy.

@Mary Jay I'm still not following here. So the seller lets you get the home with his $35k note. This is a "subject to" deal. You will then pay the seller the additional $30k difference from the rents....so the seller is doing a 2nd lien? Or a wrap to you? How are you financing that additional $30k?

Normally, with a "subject to" the seller signs you the deed and you pay that $35k mortgage. Anything OVER that $35k is something you pay for up front. Unless the seller is also providing you a loan for that amount.

Again, paying full market value for a property is not what most investors do....unless the seller is helping you with a loan.  That might be good.  There's benefits to not bringing a down payment or money out of pocket, right?  So let us know the terms of that loan and that will help us make better recommendations.

Originally posted by @Lynnette E. :
Originally posted by @Mary Jay:
Originally posted by @Lynnette E.:
Originally posted by @Mary Jay:
Originally posted by @Lynnette E.:

@Mary Jay what is your recourse if the seller does NOT make the payments?  You pay the seller upfront then the seller has no reason to ever pay the mortgage.  The mortgage company forecloses and you have nothing.  

 The mortgage is still in the sellers name, I do not get foreclosed on. The seller gets foreclosed on.

Yes, the seller gets foreclosed on!  Guess what ???  YOU loose the house!  So, why would the seller care if there was a foreclosure?  He may get a lower credit rating, you loose the house you already paid for.

 Do you have a better idea?

 Yes!  YOU pay the mortgage.  If you must keep it in her name, then YOU take the responsibility to pay it directly to the company to ensure it does get paid.  If you are paying her more than the mortgage amount then you write 2 checks one for the mortgage directly to that company, you mail it or do it on line, and another to her.  

And make sure you are added to the property insurance as an other insured, and get your own liability policy.

 Thats a very good idea!

I did not think about it..

Thank you so much for your input!

Originally posted by @Andrew Postell :

@Mary Jay I'm still not following here.  So the seller lets you get the home with his $35k note.  This is a "subject to" deal.   You will then pay the seller the additional $30k difference from the rents....so the seller is doing a 2nd lien?  Or a wrap to you?  How are you financing that additional $30k?

Normally, with a "subject to" the seller signs you the deed and you pay that $35k mortgage.  Anything OVER that $35k is something you pay for up front.  Unless the seller is also providing you a loan for that amount.

Again, paying full market value for a property is not what most investors do....unless the seller is helping you with a loan.  That might be good.  There's benefits to not bringing a down payment or money out of pocket, right?  So let us know the terms of that loan and that will help us make better recommendations.

 So the seller still has mortgage 35K, 1.8K rents , I pay to seller 650$ monthly , I am left with about 800-1K cashflow...

I pay 650$ monthly for 10 years, then baloon. Interest 4.7-5%, whatever current market is...

Property does need a new roof, and siding, and windows, but probably all can wait except roof...