Yeaaa, another sub to....HELP! ;)

General Real Estate Investing
1

LOL,
I got a sub to yesterday, they are the greatest, but I am a worry wart when it comes getting all the documents straight. So I will put the negatives out there and I ask you guys to check it out for me.

first: 162k fixed for 5 years at 5.99%, payment 1141.00 includes piti, 7k prepayment penalty for the next 2 1/2 years.

Second: approx 32k at 6 3/45, HOME EQUITY line of credit, $100 monthly (should be about $50 owner said, but minimum payment is $100, with payment this low it must be intrest only payment???) Prepayment penalty on the second to of unknown amount just yet.

Seller gets $2200 cash from her last line of credit on the second thus bring the total from about 29k to about 32k. I give her no other monies.

Cash/John, do we have a form in your book to have seller sign so she cannot charge anymore on that second after the 2200? thus to close it out?

House comps about 210k, it is a 2/2, 1132, pool, shutters drapes immaculent condition, custom tile thru out, 1 story, 6600 sq ft corner lot with palm trees and two car garage, black granite counter tops, black quality appliances.

I know there is not much equity in this but its in just perfect condition, this is why I want to get it primarily!

Now…was gunna rent it out cause I am gunna start holding properties, but decided to move into it possibly, due to renting now. Untill I can find a larger subto in the area I want of green valley, this one is by Mt. View hospital for those of you who know vegas, in the woodcrest subdivision.

Well your input is appreciated, got to get started on my due dilligence, by the time this one is done with all the hurtles it has, I should much better at sub to’s.

Happy Holidays,
Have Fun

2

Bill,

You need to shut down the HELOC, since lenders have different forms for this, you need the paperwork from the lender to close it down so it cannot be borrowed against anymore.

Depending on your relationship with your seller if you feel comfortable have the seller call and get this paperwork from the lender to close down the second. This is not an uncommon situation and can be handled easily.

With the rate of appreciation in Las Vegas it may lack equity now, but wait about 6 months and you will have plenty of equity. If you sell on CFD and have your buyer refinance in 2 years, you might think about the prepayment penalty being built into the selling price or set the refinance date for 2 1/2 - 3 years and make another $7K on the deal.

Now if you are going to move into it then all you need to do is close down the HELOC. Remember 5 years rolls around pretty quick so take this into consideration.

John $Cash$ Locke

3

thanks John,
there are a number of peices in this deal to address, but if I close the heloc that may trigger the prepayment penality, dont know, guess I gotta read the paperwork.

thanks,
Bill

4

Bill,

Closing the HELOC so that the seller can not borrow any more money against it does not trigger paying the pre-payment penalty, paying the loan off does.

John $Cash$ Locke

5

Oh okay, thanks!

Happy Holidays