Need HELP Structuring a "Subject To" Deal

Here’s the deal, i’m going to look at a little Cape Cod 3/1, 900 sq.ft. Homeowners in Pre-Foreclosure and needed to sell like yesterday, he has a 1st mortgage for approx. $90,000 Properties worth between $145,000-$160,000 ARV, i know it will sell quickly for $150,000 Property is in “MOVE-IN” condition(so my birdogger says). I told my birdogger that i would pay him $1,500 if i closed on it. Oh, and the homeowner obviously owes money in arrears, not sure how much yet(i have only been talking to the birdogger and he dosen’t know). I was thinking of offering $100,000 total (including my birdoggers fee), I want to do this deal “Subject To” the existing 1st mortgage($90,000) and give the homeowner some U-Haul(moving money) money, the crappy part of this hole thing is, i have 0 dollars and am going to need to WHOLESALE this property, i would Love To Do this deal, But i just don’t have the funds to cure the defult and payout the homeowners U-Haul money. My question(s) are #1 Do i just add the “Subject To” terms to an Addendum and if so, what else do i need to do(paperwork wise)? #2 What do you guys think about the Deal? Thanks For Your HELP, SULLY

I just wanted to add that after thinking about this for quite a while now, my thoughts are: instead of trying to Wholesale this “Subject To” Deal(which i really didn’t want to do) has anybody used the down money from the potential buyer/tenant in order to bring the homeowners payments current? I know it’s risky, because as i stated i’m DEAD BROKE, but i was thinking that could work

And one more thing, when doing the type of deal that i posted(“Subject To”) would you rather put a Lease Option Tenant/Buyer in the property or sell the property on “Seller Financing?” Thanks for your Replies, SULLY :help

If you don’t have the cash to close and hold the property, then you can’t afford to take title. Your strategy should be to assign your contract to another investor for $3K to $5K. You will have to pay the birddog out of your proceeds.

Yeah, thats what i kinda figured :cussing it’s just this deal is a good deal and i don’t want to just hand over for a measealy $5,000 when i could be making $40,000 on the backend and $10,000 in the frontend. I actually just got back from looking at the property, it’s a nice little Cape Cod, needs a little more work then my birdogger originally said, but still a good deal.

So Dave, you never answered what i asked earlier, you don’t think it could work, by me collecting the Option Consideration upfront to pay the Default(make the payments current) he only is behind $3,500 in Arrears? And what i would collect in Option Consideration would more than catch up the payments and pay my birdogger, Do you think it’s too risky?

Dave did answer you “you don’t have the cash to close and hold”. Find a rich uncle or private lender ASAP it sounds like a good deal.herbster

I have one more question, the homeowners payment is $617.51 without TAXES and INSURANCE, so how do i figure out what the total payment is so i can calculate CASH FLOW per month? SULLY :help

Taxes-do a public records search. Both- just ask to see the bills or get your own quote. Do some due diligence.

Yeah, makes sense, do some “due dillegence” well… i would if i knew how to get the darn information, i mean, i am NOT educated at all when it comes to payments that DON’T include TAXES and INSURANCE, all is i know is the homeowner said that they take it out of escrow? His TAXES are $2838 a year, so i know this might sound stupid, but do i divide that number by 12 to get his monthly tax bill? As for INSURANCE how would one go about figuring that out? Herbmyster sorry, but your answer is NOT very HELPFUL, it might be obvious to you, but to someone who has NO idea how to go about getting the info, it’s NOT so obvious, i have a deal riding on this and NEED to know, Thanks, SULLY

My appologies Sully, You were talking of a Sub2 and I figured you must know. I assume you haven’t done a Sub2 either? I’m not qualified to tell you how but a few on this site are and hopefully they’ll chime in.
About the taxes, yes divide by 12. Now if the seller says the taxes are taken out of escrow then they are part of the payment, chances are the insurance to.
Note here that Sub2’s aren’t the easiest thing for a beginer and will probably cost you some cash. Like you said and Dave said to, you have no money.
One thing that stands out to me here is that payment looks to small on a 90K mortgage, more here to look for, a lot of DD.
I’ll send you a message of how I aquire public data in my area, maybe yours is similar. Herbster


You are getting off track. You have lost focus.

You said you don’t have any cash. You said that you want to wholesale the deal.

If you don’t have cash, you can’t take title to the property and hold it for any length of time. If you are planning to wholesale the deal, and can’t afford to pay six to twelve months holding costs (depending upon title seasoning requirements), then you have to ASSIGN your contract to another investor for an assignment fee.

Because you can’t afford to hold the property yourself, the potential cash flow is irrelevant. The investor who buys your contract will have to get his own hazard insurance and liability insurance anyway for his planned use of the property, so whatever the current owner is paying now is immaterial.

Since your only viable course of action here is to assign your contract, you need to figure out how to structure an offer the seller will accept that leaves enough “meat” on the table to attract an investor. If this property is in pre-foreclosure, you don’t have a lot of time to find a buyer. Hopefully, you already have a buyer waiting in the wings.