Seller financing with Subject-to

Real Estate Deal Analysis & Advice
9yFollow

Seller financing with Subject-to

Ngoc Nguyen
Pleasanton, CA · Member since 2017 · 2 posts · 0 votes

Hello everyone,

I need help on this specific deal. I am speaking with a seller regarding a property in Sacramento, CA. The seller is willing to do 'subject-to'. I was wondering is there any way to do a creative deal combining 'subject-to', seller financing, and a conventional loan? My ultimate goal would be to be able to buy this property, rehab a little so that is appraises where I have 20-30% equity where I can rent it out for 1450 and cash flow $300 monthly with as little cash outlay as possible.

So here are a few ways to purchase that I thought of. Please let me know if there's anything incorrect with my thinking. 

1. Buying 'subject-to' and the remaining be funded through a conventional loan. Would this be possible? 

2. Owner finance 20-30% (around 50K) and the remaining funded through conventional loan.

3. Doing both 'subject-to' and owner finance and the remaining funded through conventional loan.

4. Buying conventionally and downing 20% but I would like to keep my capital.

Here are some info:

Property = good condition. Repair costs may be 5-10k just for paint, new doors, and some landscaping]

Occupancy = has tenant. I don't know what amount it is renting for though.

ARV = 240k

Seller asking = 210k

Rent comps = 1450

Seller first mortgage = 92k

Property Taxes = 2230

Insurance = unsure (500-1000)

Also, according to Zillow this property was listed on August 2016 until March 2017 priced at 240k and did not sell. Now, owner is trying to sell on his own.

0Reply
19 views

3 Replies

Jump to latestLatest
  • Jesse Hinaman
    Lender · Sacramento, CA · Member since 2015 · 112 posts · 62 votes
    9y
    Sorry to break it to you, but you cannot have one existing 1st position mortgage that you put as "subject to", and then get another conventional loan, without paying off the original 1st. Even hard money lender will require first position. You can do "subject to" and record a note for the seller financed portion. Then cash from yourself for remainder or have a private loan from someone willing to be in 3rd position (would have to offer them substantial interest rate incentive to take on that risk). If going this route, you will definitely have a pretty messy title history creating more complications for you when going to refi or resell.
    2Reply
  • Ngoc Nguyen
    OP
    Pleasanton, CA · Member since 2017 · 2 posts · 0 votes
    9y

    Hi Jesse. Thank you for your reply. Yes it does look like it will be messy.

    What would be the best way to utilize subject-to in this specific example if purchase price would be around 180k?

    0Reply
  • Yia Her
    Real Estate Investor · Sacramento, CA · Member since 2016 · 96 posts · 26 votes
    9y
    It sounds like you are trying to present as many options as possible to make the deal work. If your trying to buy as a rental and have minimal cash invested and possibly refi out of the seller finance. I think you may need to run your numbers again. I recommend using the BP rental calculator or the brrrr calculator to make sure you are accounting for expenses. I would recommend contacting a local property management company to see what it would possibly rent for. On top of that, you'll need to know what your exit strategy and requirements are when you get this property rented and cash flowing to see if you can even pull money out. I think a brrrr method of refi would allow you to do 75% LTV base on ARV but to me, if the property was listed for $240k and didn't sell, you'll need to question that as well. Is the home over price, is the true ARV less. Good luck with the deal if it works out.
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free