Subject To deal question

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Subject To deal question

Michael Williams
Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes

I have a tired landlord that is selling 4 properties in Georgia. He stated if I give him a good deal on the first one I will get dibs on all of the others. First let me tell you I am not in position to buy it myself, this will be a flip to a buy and hold investor. 
Here is the info: 3/1 - built 1920 - central air installed- PVC piping - hardwood floors - Roof 7 years old - new Hot water heater- ARV on house is $65k - Decent school district- Rated 5-6 and 6 - there is a outstanding loan for $41k - A tenant paying $650 per month. Landlord selling to move to Florida and he understands Subject To and know it's going to be that type of deal. Paying $500 month on loan - fixed rate - rents in area for similar house is- Comps are 3/1 sold for $63k ,1000sq ft - 3/1 sold for $79k ,950sq ft - 3/1 Sold for $87k , 1546 sq ft.
How would you structure a Subject To for this deal to flip to a buyer. As a buyer what would interest you in this deal. Owner may want some cash from deal, how much would you give the seller.

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  • Claudette Attride
    Margate, FL · Member since 2014 · 42 posts · 25 votes
    10y

    Hi Michael:

    Do you know anything about the tenant?  Is it a good tenancy- ie. pay on time, likes area, kids at school nearby. employed etc.. would they consider a rent-to own arrangement with the landlord financing- ?  would the landlord want some monthly cash to finance his re-location adjustment to Florida?  Just an idea!!

    Claudette

    0Reply
  • Josh C.Pro Member
    Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
    10y
    Not much. That price to rent ratio isn't very good. I'm currently selling a house for 37K that's rents for $725 for a reference. Sub to is a nice way to get started though. You can flip to someone anytime, they would just have to satisfy the first lien like any other sale. Although, if you live nearby might be good learning experience. I'd wouldn't recommend offering more than 2k down and take over the loan, insurance, taxes. Good luck
    0Reply
    • Samuel CoronadoPro Member
      Investor · Huntsville, AL · Member since 2016 · 334 posts · 181 votes
      2mo
      Quote from @Josh C.:
      Not much. That price to rent ratio isn't very good. I'm currently selling a house for 37K that's rents for $725 for a reference. Sub to is a nice way to get started though. You can flip to someone anytime, they would just have to satisfy the first lien like any other sale. Although, if you live nearby might be good learning experience. I'd wouldn't recommend offering more than 2k down and take over the loan, insurance, taxes. Good luck

       I know this comment is ancient history now, but just curious how this 725/month property did over the long term 

      0Reply
    • Josh C.Pro Member
      Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
      2mo

      @Samuel Coronado yeah that was 11 years ago. Wow time flies. Believe it or not, no one would buy it. So we fixed it and sold it for around 175k. Then about 5 years later it went back on the market at 285k and sold immediately. They had done nothing to it.  It was in fountain square and that area just popped off for some reason back then. Timing and luck beat hard work. lol

      0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    10y

    The property, numbers, location and rents are rather irrelevant to structuring a Sub-To, either the property is satisfactory to cover expense and your income or it's not.

    The issue is your exit plan, is your goal cash flow as it seems you're just flipping the property. 

    An old tired landlord? Read my blog on TIC, TAC, TOE, you won't need to go with a total Sub-To and done properly you may avoid the due on sale issues. You can also sell you interests.

    What title rights or interests do you need to accomplish you goal? Tat's where you begin structuring your deal. :) 

    0Reply
  • Matt Motil
    Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
    10y

    I'd run this by @Brian Gibbons if you're looking for advice on structuring a sub2 deal. 

    0Reply
  • Michael Williams
    OP
    Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes
    10y
    Originally posted by @Claudette Attride:

    Hi Michael:

    Do you know anything about the tenant?  Is it a good tenancy- ie. pay on time, likes area, kids at school nearby. employed etc.. would they consider a rent-to own arrangement with the landlord financing- ?  would the landlord want some monthly cash to finance his re-location adjustment to Florida?  Just an idea!!

    Claudette

     Hi Claudette

    The tenant pays on time and has been there for 6 years, but the landlord say they don't like him because he is messy, but I repeat he pays the rent on time. The schools are a rated 5-6 and 6. The landlord is very open to all of the creative financing options, he is motivated. I don't plan to mention moving money until he mentions it first.

    0Reply
  • Michael Williams
    OP
    Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes
    10y
    Originally posted by @Josh C.:

    Not much. That price to rent ratio isn't very good. I'm currently selling a house for 37K that's rents for $725 for a reference. Sub to is a nice way to get started though. You can flip to someone anytime, they would just have to satisfy the first lien like any other sale. Although, if you live nearby might be good learning experience. I'd wouldn't recommend offering more than 2k down and take over the loan, insurance, taxes.

    Good luck

     Hi Josh,
    Yes this would be a great learning experience since most of the houses today have some type of financing attached to them. This is definitely a buy and hold for cash flow for a while or forever, unless something drastic changes in the area. It good that the owner is open to all creative financing options.

    0Reply
  • Michael Williams
    OP
    Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes
    10y
    Originally posted by @Bill Gulley:

    The property, numbers, location and rents are rather irrelevant to structuring a Sub-To, either the property is satisfactory to cover expense and your income or it's not.

    The issue is your exit plan, is your goal cash flow as it seems you're just flipping the property. 

    An old tired landlord? Read my blog on TIC, TAC, TOE, you won't need to go with a total Sub-To and done properly you may avoid the due on sale issues. You can also sell you interests.

    What title rights or interests do you need to accomplish you goal? Tat's where you begin structuring your deal. :) 

     Thank you Bill I will head over to that blog as soon as I finish responding to all post. 

    0Reply
  • Michael Williams
    OP
    Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes
    10y
    Originally posted by @Matt Motil:

    I'd run this by @Brian Gibbons if you're looking for advice on structuring a sub2 deal. 

     Thanks Matt I will check him out.

    0Reply
  • Bobbie Mixon
    Wholesaler · Bowie, MD · Member since 2015 · 27 posts · 6 votes
    10y

    Hey Michael,

    Were you able to get an answer to your question, which I assume was how to structure a Subject To in order to flip it/wholesale it to an end buyer/new landlord? There were two issues:

    1. Your seller wanted to walk away with some money from the deal. How does one determine what's a reasonable amount of money to offer the seller? And how does one structure the deal to ensure the seller gets money?

    2. To accomplish the exit strategy of flipping/wholesaling it, how would one present/structure the deal so that an end buyer/landlord would pay the seller (perhaps the $24K of equity in the property), pay you a finder's fee, and take over the remaining mortgage payments?

    If you were able to get answers to these questions, would you please let me know what you found?  Thanks.

    0Reply
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