Sub2 or Wrap Structuring ??

Hello Everyone

I got a seller that I am meeting on thursday who has agreed to sell me his moms house on a sub 2 basis where i would just take over the payments. I would like to know what is the best way to structure this deal so that it would interest some cash buyers that I know.

I would like to wholesale this deal and get it wrapped up nicely so I can use the funds to further my investing. I have been talking with this guy for almost 2 months now and his family is moving to fresno so the money to take over the mortgage will be used for that and he would like to make a downpayment on a RV with 5k .

so some details about the house
built 1926
2b 1ba 1048 sq ft
3800 sq ft lot
needs a roof and some patching up the drywall
kithchen and bath are both outdated
has nice old style feel to it

now this house is in Oakland Ca where values are a bit tricky but right now everything is getting snatched up i have seen 2beds go for as low as 130k and as high as 260k in the same area

so details about the financing
seller owes 8k in payments
payoff to lender is 187k
mo payments 1200

seller told me that the guy that owns the lot behind the house which is a metals recycle plant wanted it and bought all other houses on block and tore them down but at that time they did not wish to sell. so i was thinking since seller is moving maybe i can have a chat with him about it

now in total I would probably agree to give them
3k moving expenses
5k RV Down payment
would need 8K to catch payments up
16 k before I can even think of profit

now this house has a ton of potential for a rehab flip
how would i structure this and sell the contract to a rehab flipper

Sub 2 or wrap is totally new to me . :anon

Thanks in advace

To Your Investing Success

How much to rehab it?

You need to know precisely what the value is, all fixed up. Otherwise, this is a crap-shoot, more than it’s a flip.

Your range of value is so far below the existing loan balance, and the lot is so small, it just makes me think that this is just a bad deal.

I would not give the seller anything. He’s upside down and behind in payments. Anything you put into this property is a risk of loss.

All that said, if the ARV was $230K, and it costs $25K to fix it, you still don’t have enough equity left over to work with. This is an emaciated, leprosy-infected deal.

For example:

$230,000 ARV
less $25K Rehab Costs
less $8K back payments
less $3K Seller’s moving money
less $5K Seller RV money
less $187K Existing loans
equals $2K Gross Profit
less $14K RE resale commission
less $7K resale closing costs
less $5K assignment fee
equals gross profit = -$24,000 (That’s negative twenty-four thousand dollars)

These are the numbers your buyer is going to use to determine if he wants to buy your property, or not.

This deals sucks drain water.


How are you

I was hoping id get the straight to the point answer from you

now my response

an investor could fix this thing up with 20 k or less no prob its in good shape just needs roof tub and kithcen .

the ARV is around 240k+ this is what non rehabbed homes are going for in this area with like
square footage

if you have MLS access here are just a few recent (as in sold last week ) comps for cash i found

MLS # 40604901,40609066

i dont know what the heck is going on in oakland right now but crap homes are flying off the market.

what my question was aiming for would be would this be a interesting deal if an investor could come in with say 26k down and own the thing and make the payments while rehabbing then resell

i still am wondering if i should talk to the owner of the plant behind the home as he offered them 200k a few years ago …

your rebuttal sir …

OK, so you’ve shaved $5K off my rehab estimate.

What’s the ARV? That makes all the difference in the world.

Would the back neighbor pay $26K to control the property without having to get new financing? I don’t know. If it were me, and I had the money, yes. Especially if I had a plan for the property that motivated me to buy all the other lots. The fact is, this ‘last’ lot, might be worth a LOT more money, because it IS the last lot needed to control everything.

Will the property rent for more than the loan payment? If so, how much more?


that is my plan in a nutshell

gain control of the property and offer it to an investor without having to get financing for about 26k

this is the last lot on the tract where the back metal recycle plant is on. so he may be interested.

this thing could definately rent for more than the payments with Oakland bieng a HUGE sec. 8 market the rent for a 2 bed are just about guaranteed at 14-1700 monthly by the county

the ARV is 240 k this is what houses sold for recently

I would just get it under contract to tie the property up, try to locate a buyer, give them a fixed price that includes your wholesale fee and also give them terms if they were to take it over subject to. Only put up a small escrow amount that you don’t mind losing $10 - $40. Try to get as long a contract as long as you can, 45 - 90 days. Don’t even mess with anything else, let your end buyer get creative if they want the property. If this is a real deal it will be gone in a week, if not, terminate the contract and move on. Good wholesale deals don’t last long, if it’s not a deal it will drain your time and energy.

Also, be sure you have your seller sign a Release of Information so you can talk to the mortgage company and really find out what the situation is. You may not have to make up all the back payments right now but you just want to forestall a foreclosure. They might also be willing to do a short sale which would make the deal much more attractive with the lowered price. A short sale specialist can help if that’s an option. And since this is an estate sale you need to have the will/estate probated, if there is a will, so there are fees and delays for that. Does the mortgage co know the owner has died? That can stop the foreclosure as well and give you more time to work on the deal.
Good luck!