All Forum Posts by: Andrew Kiel

AZREIA would be a great place to find cash buyers.  Always a good number in the room at the monthly meeting.  Next meeting will be Tuesday, March 14th at the Tucson Area Association of Realtors building.

Welcome!  I would highly recommend connecting with our local Real Estate Investors group - AZREIA.  Great group and excellent opportunity for networking.

I agree with @Tom Gimer- The best way to help would be to make a fair offer on the property and discuss all options.  If you buy the property, you should be very clear that it's not for him to "save" or "buy back" the house later.  I have purchased many pre-foreclosure homes and the one rule is they MUST understand they cannot keep the house or have any hope of buying it back later.  You could have some very nasty repercussions if you give the impression that you could save the property read some of those articles Tom mentions above - scary stuff.  You can best help by helping this person move on to the next chapter of their life with some cash and hopefully not having a foreclosure on their record.  

@Kammarie Davis - The subject to option is by far and away the best option here (for you) and it will be up to your friend to decide if it's best option for her.  That 3.5% loan is the real value here.  If you do the math on taking over the current loan vs. getting new financing it will be a night and day kind of difference: $534.36 is the payment at 3.5% (119k, 30 years) vs. $791.71 (119k 30 years @ 7%).  

As far as the drawbacks and issues with a sub-2 type transaction there are some great posts on bigger pockets that go into far more detail - here's one: https://www.biggerpockets.com/...  

Another issue is the real estate agent.  Many brokerages will not allow there agents to do these types of transactions.  The fact is, there is a lot that can go wrong and the agent/brokerage has liability.  The sub-2 option still may be the best option for your friend as it seems like the house is not selling (as you mentioned it's been vacant for 4 months; and is likely a foreclosure risk). 

Best advice - learn as much as you can about subject to transactions (both good and bad) and then have a good open conversation with your friend and you can both make an informed decision together.  

I just have one thought to add.  Don't structure deals with balloon payments if you're the buyer.  Why put yourself into a precarious position like?  None of us have a crystal ball and know what rates will do in 1, 3, or 5 years. 

I had a loan I was refinancing in March of 2020.  I was literally ready to drive to the closing and the lender pulled the financing (we were clear to close) due to COVID concerns.  Luckily this wasn't a balloon payment, just a rate and term refi - but had it been a balloon I may have been sweating it.

Just saying, use extreme caution when using balloon payments when you're the one that has to come up with the payment.  Many sellers won't even bring it up if you don't...

@Raymond Cardenas - I'd be wary of the "due on sale clause Insurance".  If you go this route, do your due diligence on the company that issues, I can't see this being worth it at any price, in my opinion.  If you're going to so a subject to transaction, just be aware that there is a chance the loan could get called.  This isn't the most scary thing in the world if that happens - as long as you have a means to refinance the property - it's nothing more than a foreclosure action by the lender.  If you can handle that, do the deal.  If the possibility of the loan being called is too scary - don't, or structure it another way.

1. Check with CPA/Attorney but I'm nearly sure you CAN claim homestead in this situation. Just make sure you purchase the property using a warranty deed, not some kind of unrecorded trust. If you live there and have legal title in your name, personally (not an LLC), it should be fine. It shouldn't matter who's name the loan is in; it's based on ownership and owner occupancy.

2. Yes, you always have the right to sell your property.  You should also be able to do creative financing on the sale as well, just be aware that you are almost certainly violating a due on sale clause and your end buyer should be made aware of the potential risks.

2 Good ways to handle this come to mind.

1. Set it up with a title company to service the underlying loan/payments - you pay title and title pays the underlying loan and any leftovers go to the seller.

2. Have the seller give you their login for the underlying loan so you can make the payments direct.  I actually prefer this way as I retain control and visibility into the loan.

Many of the Midwest markets are good for pure cash flow / cash on cash returns.  We chose OK for a pure cash flow market (for our secondary market, primary is AZ) and have seen many others doing well in KS, IN, OH, and others.  Most lower appreciation markets tend to do well for cash flow.  Also keep in mind to look for a landlord friendly state.

The lender can start a foreclosure filing any time they wish, just because they choose not to right away doesn't mean they lose the right.