Subject to deal 10 properties

[Jason Walkowicz]

I have a possible 10 property deal that the seller is willing to do subject to existing financing. The primary issue is even though there is positive cash flow on the 10 properties the existing debt on the portfolio is approximately 8 % OVER FMV

I'm interested in hearing the opinions of the community about this type of subject to scenario which I'm sure comes up frequently otherwise the seller probably wouldn't be willing to do a subject to.

[Don Konipol]

A "subject to" purchase, with no personal liability, no or little cash in, and a positive cash flow makes an interesting "option" on future inflationary price increases. At only a 8% premium, this can be a VERY interesting leverage opportunity with little downside and lots of upside.

It's important to note that this is an investor to investor transaction, not the same as doing a deal with a homeowner who may be unsophisticated with buyer intentions etc. As long as the seller realizes his continuing liability on the loans, and that the buyer has the ability to walk away with no personal liability, this can be a great "insurance policy" against inflationary erosion of the dollar.

Essentially trading equity for leverage, much depends on your projected holding period, debt coverage ratios, projected growth (positive or negative) for the particular area, etc.

I don't disagree with other posters, I just believe this potential deal can be looked at in a different light.

I am interested in other thoughts on my take.