Dallas-Fort Worth Real Estate Investor Club

How to Stucture Deal

  • 23 Sep 2014 12:45 PM
    Quote
    Message # 3106572
    Deleted user

     

    I'm looking for a way I can lock up/control a property that is heading to pre-foreclosure without having to be on the hook to pay it off until I can sell it.  Owner just wants out with 5-8K to start a new life.  Property is in a hot area with an ARV of 160K, loan balance 92K, repairs 25K, and owner is 2 months behind on payments ($3K).  

    My current line of thought is:

    1. Pay the owner an agreed upon amount to move out.

    2. Ask the owner to let me assume the loan under their name, deed the property to me and add me to the insurance (taxes & Insurance are included in escrow).

    3. I will get the loan back in good standings and pay the monthly mortgage payment during the rehab.

    4. I will pay off the loan when I sell the property.     

     

    It will take approximately 2-3 months for the repairs and 1-2 months to sell the property.  Owner already has a bankruptsy on their record and heading to foreclosure with this property.  I don't have the immediate cash to buy it outright.  Am I way off line here, or is there a better, more secure way to structure this deal. 

    Any thoughts?

     

    John
    (682) 201-0957 
  • 24 Sep 2014 9:59 AM
    Quote
    Reply # 3108398 on 3106572
    Robin Carriger (Administrator)

    What's your best estimate for the amount of money required to repair/update the house? 
  • 24 Sep 2014 12:29 PM
    Quote
    Reply # 3108498 on 3106572
    Deleted user

    Robin, I walked the property last week and came up with an estimate of 28-30K for the update and repairs.  Still waiting on the formal payoff amount from the lender. This is taking longer than usual because everything must go through the attorney due to their bankruptsy.

    John 
  • 25 Sep 2014 10:37 AM
    Quote
    Reply # 3109272 on 3106572
    Robin Carriger (Administrator)

    Sorry... I should've noticed the repair cost in your original post.  Anyway... for me, the repair estimate is too high for a "Subject To" deal, which is basically what you're describing.  Unless you could get a new buyer to come up with a down payment large enough to cover the repair costs, I wouldn't do this deal.  I suppose it's not impossible for you to get a down payment of 18.75%, but my guess is that it's unlikely.
  • 26 Sep 2014 6:27 AM
    Quote
    Reply # 3110091 on 3106572
    Tim Cook

    John,

    I've been doing "Sub-to" deals for 14 years.  In my opinion you do NOT want to do a "subject-to" deal on this and give him money to take on that much debt and then have to pay that much in rehab and the numbers don't work for most lenders either.  Also, take the word "ASSUME" out of your vocabulary.  You are not assuming anything so you don't want to miss lead them.  If you want to try and help at all you could do an Option-to-purchase, send it to market and see if you can find a buyer that wants to do the rehab themselves.  Then you are not at risk of loosing anything and can only gain.

    Call if you need to.

    Tim

    817-599-8058
Powered by Wild Apricot Membership Software