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Duplexes and Triplex Inv
Charlotte, NC
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| NOI: $30 | | CAP: 0.107% | | Price: $280,000 | | FMV: $350,000 | |
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LO Better Than Sub2 |
SKrei
96 Posts
Member Since: 07/10/2003
Aurora, IL
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Posted: 01:47 on 05-10-2008
In this uncertain market would it be better to buy on LO rather than Sub To? That's bec the property values may fall; the rent (on selling end) may not cover the mortgage; and you dont want to be stuck with a neg cash flow prop with low/no equity if your tenant buyer does not (or cannot) refi.
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loon
1012 Posts
Member Since: 03/27/2003
Duluth, MN
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Posted: 18:51 on 05-10-2008
That's your call, but I like the long-term gain treatment of gains from a Sub To. With a LO, when you exercise, it's short term gains. Plus it's nice to be on title, more control. I've done LO (using sandwich leases) before and also took title, you might want to consider that, many sellers are open to that too.
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GetErDun
8 Posts
Member Since: 04/12/2008
Tempe, AZ
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Posted: 10:52 on 05-11-2008
I would think that depends on your comfort level.
If you're brand new or unsure of your market, or don't have a huge margin, stick with the LO.
If you have plenty of LO under your belt and have a real good feel for the market where the house is, and get a smokin deal, then heck yes go subject 2 and hold that baby for several years until the market recovers/gains
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MichaelQuarles
100 Posts
Member Since: 11/25/2007
Bakersfield, CA
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Posted: 13:55 on 05-11-2008
Always get the Deed.
Don’t ever buy something that requires a lot of "I f this happens then I can make money" if it isnt a good deal it isnt a good deal and you shouldn’t try and make it one.
How you sell the property is a completely different question.
As a guy who has done a deals I can state that equity buying is much safer than creative reselling. However you most certainly can make a ton of money in the arena.
As for what happens if the buyer can’t refi... Most creative financing investors are banking on that fact...
You get to do it all over again with someone else... Anytime you can sell the same pair of shoes over and over again without a cost of production or shelve cost you’re ahead. We happen to be in a market where most lenders are requiring a considerable amount down on a purchase therefore our 90% seller financing deals look great to the buyer pool. Not to mention that marginal buyers can even qualify for a loan right now.
The one consideration if you are buying marginal deals to make certain that the rent roles are close in line with the cost of the property to the buyer.
I like to be within 200 per 100k of purchase.
Good luck.
Michael Quarles
[ Edited by MichaelQuarles on Date 05/12/2008 ]
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LeaseOptionKing
1436 Posts
Member Since: 07/26/2004
Columbus, GA
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Posted: 17:34 on 05-11-2008
Grabbing the Deed should always be your first line of attack. Then I go for a L/O (which I can often turn into a Sub To later on when I gain the Seller's trust, or should I say "earn" the Seller's trust) to get the deals where the Sellers are only marginally motivated. After that I go for a Joint Venture where I keep half of the profit and all the monthly cash-flow, and lastly I just line up the Seller with one of my Buyers, and I back out of the deal keeping half the option consideration. It goes in decreasing order of profit for me, as well as decreasing order of responsibility on my part.
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"A deal is only as good as the quality of your Contracts." --Me
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dirtman89
184 Posts
Member Since: 08/04/2003
Derry, NH
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Posted: 00:50 on 05-12-2008
Michael, that's good golden advice "Don’t ever buy something that requires a lot of "I f this happen then I can make money" if it isnt a good deal it isnt a good deal and you shouldn’t try and make it one."
Or should I say this will help save the Gold you already have. I have done several deals where I paid between $20-50K for the privilege of doing a rehab and helping a seller. I've bought several "if the market does what it did last year" props and paid dearly for it.
[ Edited by dirtman89 on Date 05/12/2008 ]
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SKrei
96 Posts
Member Since: 07/10/2003
Aurora, IL
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Posted: 13:39 on 05-12-2008
I am not sure which way to go at times; I guess comfort level best describes it!
How much equity would you need to take the title? Would you take this deal? (just examples; buy S2/ LO and sell LO)
Case1: mtg=$240K; payment=$1900/m; value=$290K
so equity=$50K. You can rent it for 1500/m; cash flow= -$400. After you buy if a home in the area sells for $265K (motivated seller/ REO/ SS etc) now equity=25K! After you pay for vacancy, holding, final TB closing costs there is not much left!
Case2: mtg=$500K; payment=$3500/m; value=$570K
so equity=$70K. You can rent it for $2500/m
What if you could rent it for $3500/m? Now the mtg is covered but if goes vacant in future you will have to pay up the mtg until you find a new tenant.
If it were LO you could have a provision for vacancy/ return the property. Also, if the home had equity you could ask rent credit on your payment (some people ask 50-100%!) so your payoff drops and backend profit increases.
Please advice
[ Edited by SKrei on Date 05/12/2008 ]
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omicron3000
31 Posts
Member Since: 08/18/2007
Philadelphia, PA
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Posted: 13:50 on 05-12-2008
Sub-2 and LO go hand and hand.
When aquiring a property, it can be done in these ways:
1.)Assumption of Mortgage
2.)Payoff of existing loan (Standard Way)
3.)Taking over the loan Sub-2, many sellers are less likely to do this, because they want mortgage relief now
Whether you choose to sell the property quickly, or do a lease option (sandwich LO is the most common) is up to you.
Saying that Lease Option were better than Sub-2 is in itself an oxymoron.
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