How to Buy Where Owner Doesn't Have Enough Equity

Question

Good afternoon.  The question here is: how do I buy a house under the following circumstances?  Owner has a reverse mortgage of $190k.  House is worth about $250-260k after rehab.  That ARV isn't  high enough to support the profit we'd be looking for after carrying costs, cost of rehab, etc.  Owner can't sell for below $190k because she doesn't have the money to pay off the mortgage.  Buying this house in the $170's would definitely make the deal work, or perhaps even in the low $180's.  Any thoughts on how to make this deal work would be greatly appreciated?

Curt Smith · Answer

If the seller is willing to sign the house over leaving the mortgage in place, called subject to closing (complicated), AND the mortgage payment is less then rent by $300++ then this is a possible deal;

- Seller signs the deed over, agrees that you can take over paying the mortgage.

- Put a renter in doing the least fix up just needed to rent

- after a few years appreciation will create the spread for your flip profit.  Near term you are cash flowng as a rental.

This is called a delayed flip and a perfect use of subject-to.  But the seller needs to be highly motivated and willing to sign the house over for little payment to them at closing.  There are many sellers are highly motivated BTW it is not that rare.