Newbie Need help analyzing possible deal

I have a seller that is relocating and wants to get rid of her house. The house is a 2/1 but has storage space that can be made into a third bedroom. I thought about purchasing the house subject to and renting it out on section 8. Market rents in this area is around $ 600 -650 for a 2/1 and $750-800 for a 3/1. Would this work as a S2? Should you rent a house out when purchasing subject to or only do a lease option?
Lastly, the seller is willing to walk away with no money paid to her. Should you use the 50% rule of thumb when doing a S2?

loan balance 39K
interest 9.75-10%(variable)
2bd/1bath

Please help. Thanks in advance

two things make this a no-go as a subject to or straight purchase.

  1. the variable interest rate. you will inherit a mess as your monthly payment is unpredictable and you won’t ever pay it off.

  2. it only has 2 bed rooms and 1 bath. the amount of work needed to add an additional bedroom makes it even worse.

I would pass.

for a subject to property you should look for the following:

  1. at least 3 bed rooms and 2 baths
  2. fixed interest rate
  3. no more than $15k in repairs
  4. at least $200 per month in rental income
  5. potential to earn at least $25k in profit on resale
  6. at least a 200% return on any money you invest in it
  7. located in areas that most of the people that can qualify for a home loan want to live
  8. located in areas with decent schools and low crime rate
  9. Located no more than 20 miles from major work or population centers
  10. existing debt no more than 70 percent of the after repaired value

Who did you learn subject to’s from?

Hassan

Go after the the home but make is subject to a loan modification. See if you can get this rate knocked down to the mid 5 or 6% range for a few years or even for the life of the loan.

If you can get that then go for it. You don’t state what the value of home is. So I am under the assumption that it has a TON of equity. If not then move on unless you can get the rate down and get a decent profit margin.

Thank you both for your responses. I will check to see if the loan can be modified to a lower rate, if not I will move on.

i agree take over sub2 a successful loan modification to get the rate fixed. im making my full price offers subject to a loan modification. let me know if you need help on that.

In my experience, renting is cool IF you find the perfect renter. However, most of the time you won’t. It is better to L2P because since they will invest more than a renter, they willl take much better care of the house than a renter. Also, 39K is an awsome balance but see if you can do a short sale and get it down further than that. If not, if her monthly payments are decent, just take over the payments