Subject To Monthly Payments

Need some help with subject-to (ST) deals. I get quite a few leads on properties with little equity that would be good candidates for a ST deal. The main issue I keep running into with them, however, is that they almost all SEEM to have higher monthly payments than I’d be able to get a tenant buyer to pay (i.e. 2 recent examples - $1800/month payment on a $190k house, $2300/month on a $250k house). My question is how do you get a good feel for what monthly payments should be in relation to the market value of the property - or any other way? Is there a good ratio of monthly payment to market value, do you look at rents in the area, can you look at what payments would be for a mortgage with very little down (like a tenant buyer would pay - say 2-5%, 30 year and a higher than average interest rate - say 7-8%)? I don’t want to do a deal and then pay holding costs for months because the monthly payments are too high. How do you folks who are making ST work in your area figure this and know when you have a deal you should pursue and when you should walk away?

Thanks for your help!

If I were you… I would get the deed… and do a rent survey or simply market the house to see what you can get before you record the deed.

Rent survey= talk to realtors, neighbors, property management companies etc.

Thanks Arie - that may work on some deals but not on all. For example, I’m working on a deal that appears to me to be just on the verge of acceptable monthly payments for the area at $1500 and is going up to $1610 in January. This guy is motivated but not so motivated that he’ll give me the deed unless I buy the house - so on this one I have to buy it or there’s no deal. He may be willing to do an option though as long as he can market it at the same time.

Any thoughts? Thanks

I’m not sure exactly what your saying. Subject-to is buying the house. Are you talking about getting traditional financing of some type?

If he wants retail price and all cash… why are you talking to him? That’s not the kind of person you want to deal with.