Hello, I'm glad to have an opportunity to bring forward a concern of mine. I'm pretty new in the RE World/wholesaling but I have some general knowledge. I have found a distressed seller. They want to get rid of the property ASAP, circumstances have made it a hassle to pay the mortgage. This would be my first wholesale, if I was wholesaling it. But I'm actually interested in purchasing ‘Subject-To' for myself. Property would definitely be a fixer-upper, it would cost anywhere from 15k-20k to rehab although it could be cut down by doing the work myself. ARV was approx $189k, seller still owes $134k. I've read up on subject to existing loan stuff here on BP, and through YouTube , I'm out here in California and I just wanna make sure I know what I'm doing.

Thanks for your time

Sincerely, Issac.

Isaac,

One thing you need to check is the seller is not behind on other things like property taxes. 

Of course, you need to do a title check to be sure the seller is indeed the owner of the property or the one on the deed. It's possible for one person to be on the mortgage and another to be on the deed so you need to be sure you're dealing with the person or all the persons who have the right to sell the house.

During the title check, you will find out if there are any other liens, like mechanics lien, or in some states/cities, you can have a municipal lien for unpaid water/sewer.

Now having said the above, your numbers seem marginal specially if you plan to flip the property. As a rental, it might work but it depends on the mortgage payments. If you plan to keep it as a rental, you need to look at the mortgage promissory note to be sure you're aware of the terms of the mortgage. What if it's a 3/1 ARM and the seller-borrower is 2 years and 9 months into it. You don't want to be shocked that the mortgage payment increases in 3 months.

Use an attorney, there are disclosures about risk to the seller that the seller needs to execute.

Originally posted by @Issac Garcia:

Hello, I'm glad to have an opportunity to bring forward a concern of mine. I'm pretty new in the RE World/wholesaling but I have some general knowledge. I have found a distressed seller. They want to get rid of the property ASAP, circumstances have made it a hassle to pay the mortgage. This would be my first wholesale, if I was wholesaling it. But I'm actually interested in purchasing ‘Subject-To' for myself. Property would definitely be a fixer-upper, it would cost anywhere from 15k-20k to rehab although it could be cut down by doing the work myself. ARV was approx $189k, seller still owes $134k. I've read up on subject to existing loan stuff here on BP, and through YouTube , I'm out here in California and I just wanna make sure I know what I'm doing.

Thanks for your time

Sincerely, Issac.

First, I wouldn't wholesale a Subject To if you aren't experienced in both strategies and actually know what you are doing. However, it might make a good Buy & Hold rental. Do just the amount of improvements necessary to make the property safe and clean and rentable. Most people over rehab a rental and end up losing money.
It looks kind of tight for a Flip and may not work for that. Don't forget you have carrying costs, realtor costs and taxes as well.
If the seller is in foreclosure or behind on payments there is a very specific path to take. If you don't do things the right way on a foreclosure you can get into a lot of trouble.
If their payments are on time Subject To is probably not an issue. Keep in mind that you are on the hook for making the monthly payments on time or you could get sued. Also, the bank can exercise the Due on Sale clause and can make you pay the full amount immediately. Be prepared for whatever may occur. Have backup financing in mind.

 It looks like California is going for State Wide Rent Control. I can't think of why anyone would invest in California with that looming but "to each his own" (headaches) It might still be profitable, it might not.

Originally posted by @Issac Garcia:

Hello, I'm glad to have an opportunity to bring forward a concern of mine. I'm pretty new in the RE World/wholesaling but I have some general knowledge. I have found a distressed seller. They want to get rid of the property ASAP, circumstances have made it a hassle to pay the mortgage. This would be my first wholesale, if I was wholesaling it. But I'm actually interested in purchasing ‘Subject-To' for myself. Property would definitely be a fixer-upper, it would cost anywhere from 15k-20k to rehab although it could be cut down by doing the work myself. ARV was approx $189k, seller still owes $134k. I've read up on subject to existing loan stuff here on BP, and through YouTube , I'm out here in California and I just wanna make sure I know what I'm doing.

Thanks for your time

Sincerely, Issac.

Subject to strategy and investing is a shady business man. I would pivot into something more reputable.

Originally posted by @James Wise :

Originally posted by @Issac Garcia:

Hello, I'm glad to have an opportunity to bring forward a concern of mine. I'm pretty new in the RE World/wholesaling but I have some general knowledge. I have found a distressed seller. They want to get rid of the property ASAP, circumstances have made it a hassle to pay the mortgage. This would be my first wholesale, if I was wholesaling it. But I'm actually interested in purchasing ‘Subject-To' for myself. Property would definitely be a fixer-upper, it would cost anywhere from 15k-20k to rehab although it could be cut down by doing the work myself. ARV was approx $189k, seller still owes $134k. I've read up on subject to existing loan stuff here on BP, and through YouTube , I'm out here in California and I just wanna make sure I know what I'm doing.

Thanks for your time

Sincerely, Issac.

Subject to strategy and investing is a shady business man. I would pivot into something more reputable.

the bp pocast from july 12, 2018 with shiloh lundahl was my introduction to subject-to, anything but shady,  at least the way he did it.  I can imagine it is an abused method though.  Good luck Isaac. 

Originally posted by @Jason Sebastian :

Originally posted by @James Wise:

Originally posted by @Issac Garcia:

Hello, I'm glad to have an opportunity to bring forward a concern of mine. I'm pretty new in the RE World/wholesaling but I have some general knowledge. I have found a distressed seller. They want to get rid of the property ASAP, circumstances have made it a hassle to pay the mortgage. This would be my first wholesale, if I was wholesaling it. But I'm actually interested in purchasing ‘Subject-To' for myself. Property would definitely be a fixer-upper, it would cost anywhere from 15k-20k to rehab although it could be cut down by doing the work myself. ARV was approx $189k, seller still owes $134k. I've read up on subject to existing loan stuff here on BP, and through YouTube , I'm out here in California and I just wanna make sure I know what I'm doing.

Thanks for your time

Sincerely, Issac.

Subject to strategy and investing is a shady business man. I would pivot into something more reputable.

the bp pocast from july 12, 2018 with shiloh lundahl was my introduction to subject-to, anything but shady,  at least the way he did it.  I can imagine it is an abused method though.  Good luck Isaac. 

Think about it, we've got assets and we've got liabilities. In a subject to deal you take a seller, typically an uneducated and distressed seller and you remove the only assets they have (house) while still having them on the hook for the liability (mortgage). This isn't the path you want to go down.

What is the AS-IS value of the home? IS the total payoff 134K ( UPB + ARREARS )? What is the reinstatement amount? Does the seller want money? Is the 189K ARV conservative?

As someone who has done several of these, my advice would be to use an attorney for yourself and you likely should force seller to get their own attorney too if the deal actually makes sense. Subject-to transactions with homeowners in foreclosure are some of the most sensitive transactions one can get into.

This is a powerful tool if used correctly, but things can get ugly real fast if one doesn't have the proper financial backing and disclosures in place.