All Forum Posts by: Chris Pasternak

Experienced Sub2 investors/bankers: When the bank acted on the "due on sale" clause, how much time did you have to perform your exit strategy? What was it? Enough time to list it and sell? Paid off in cash? Would you take the penalty and use your retirement savings to pay off debt?

Worst case scenario, what happens if investor can't come up with the money?

Also, I was told third hand that once the real estate taxes come due, the bank sees the change of title and calls note due.  True through your experience?

How long do you carry a sub 2 deal?

Thank you

good stuff.  how are you enclosing the tub?  curtain? slider?

How are you financing? Most mortgages will be much less down if its owner occupied. Think FHA

@Ben Leybovich So the quick and dirty of what you're saying is if you buy in a B class neighborhood for example but its only maybe 1 or 1.5%, over time that will climb towards 2% with rental increases?

It's all in the eye of the RE holder...  I personally find comfort in striking a balance.  I don't like one extreme or the other (A class, D class).  I like to cashflow and I use 2%.  The couple properties I have both are 2%, cashflow and came with a few initial repairs.  Probably C class neighborhoods but not the "C class" spoken of before that requires a weapon to be carried while mowing the lawn... Nothing pressing about the repairs but it cleans the place up and my tenants are happy their landlord is doing something, as are the neighbors : )  Appreciation smells and spells like speculation to me.  I'll take the money while I can get it and collect it without getting killed : )

Be careful of telling a contractor its just a flip as opposed to a primary residence.  You may get a better price (but how will you really know?) and you might also get an out of level backsplash!  I wouldn't tell them more than they need to know.  

@Account Closed If we do this deal sub2 and take over payments at 42k, how could we get the seller off the hook completely based off of his health?  Refinance?

Keeping in mind this is a long term buy-and-hold property

@Rick H. Do you have any experience with telling the bank you are going to take over payments?  I once heard an investor describe that he actually calls the bank which holds the loan and talks to someone high up in mortgage dept and tells them he's going to make payments because current owner can't.  Also, the purchase price is equal to the mortgage balance, so as it stands ~42k.  

Anyone ever call a bank and tell them they're taking over payments in a subject to scenario?

UPDATE: I just got off the phone with the bank that holds the loan and because we have a land contract, they will not allow us to assume the mortgage with that in place.  Because the assumption is not guaranteed and we would lose all legal capacity if we mutually end the land contract, we are not willing to pursue this route any longer.

@Tyler Mills Thanks for the heads up on the mort rate, honestly didnt cross my mind, since we have agreed the purchase price is the mortgage balance.  Irrelevant at this point though.

@Gerald Harris Thanks for the response.  The purchase price is ~42k, Expenses, unsure exactly at this moment but at a safe point considering property condition and income.  It will cash flow at a monthly income of 1215. Appreciation at best will be slow in near future, but this is a long term hold.   renter is section 8 so always on time and other we just moved in but has paid on time first two months.  Owner has owned property for I believe 4-7 years off the top of my head.  Originally owner occupied himself.

@Adrian Tilley Thanks for the advice.  I think it has gotten to the point where a lengthy sit down with an attorney is required.

Now wondering if because we have already contacted the bank if they would be more likely or less likely to call due on sale clause if we were to pursue subject to route.

Hey BPers,

My scenario requires a bit of a background knowledge in order to fully understand.  I will try to break the scenario down piece by piece for ease of digestion.  Here goes.

The Buyers:  Myself and a partner (licensed RE agent)

The Seller:  Elder man in declining health

The property:  Fully occupied duplex.  1 market renter and 1 section 8 renter

The situation: Buyers and Seller have an agreed upon, signed contract whereas the buyers are renting the property with the right to sublet.  Buyers also given the right to purchase property within 3 years (currently 6 months in).  At end of 3 years, balloon payment is due for sale of property.

Buyers thought process: Collect rent (1215/month) - (650/monthly payment to Seller to cover mortgage) = 565 income/month.  565/2 (50% rule) =282.5x36 months= 10k for downpayment, cash for remaining balance.

Sellers wrench: Seller feels health situation is declining to the point they need out ASAP.  States that they will be hospital ridden soon.  

Actions taken since wrench: Discussed with bank option of assuming mortgage. Only possible under owner occupy circumstances because loan is FHA. This is a last resort because Buyers want property as investment, not to occupy.

QUESTION to BPers:  Can we purchase subject to existing mortgage even though seller is in declining health?  Will property go to probate if so?  We are confident our current contract will hold up if Seller passes but would like to pursue outright purchase at this time.  A key to this all is that the agreed upon purchase price is the mortgage.  We have given small downpayment in order to gain current contract.  So the Seller doesnt have anything to gain by selling now other than piece of mind and not writing a check every month for mortgage.  How should we proceed?  Fire away