What do you guys do with Little to No Equity Deals

[Kyle-OH 0]

I am getting some motivated sellers but they have either A.Little Equity B.No Equity C. Owe A little more then what the property is worth.

 

 

Do you guys still take on these deals and just offer no rent credits? Do you take them on and just raise the price even more to allow rent credits? OR Just don't Deal with them at all?

 

 

Thanks...

[Jonathan RexfordFL 8]

Here is my take for what its worth. Grab downpayment and run with them. If you can modify the loan before the CA is complete then all the better. But there are a lot of them out there. I would do them sub2 and flip them. I was against it in the past but if seller signs off then why not.

[Jason (AL) 1]

CAs are excellent for little to no equity deals.

If the balance is more than what its worth, then tread carefully and make

sure you don't price you and the homeowner out of the market.

 

I'll usually pass or bird dog it to someone that deals with short sales

if that's the case.

 

And yeah, I was against flipping sub2s back in the day as well.

But it can be a good play if the owner is aware of what's going on

and works out in the end.

[MichaelC 160]

Kyle, I look at the deal like this. After adding on the option money that I'm keeping and the rent credits I'm applying to make the emails come in and the phone ring, will that gross price be accepted by prospective t/b's?

So if the homeowner needs a net price of $200K at closing, then I need to offer the property at, say, $212K as an example. Will the house get action at $212K? If so, I'll run with the deal. If not, the homeowner needs to accept less. If they won't, or can't, I'll pass. Had a homeowner from CA on the phone last night. Heck of a nice guy willing to do anything I suggested. But he owed $125K more than the house was worth, and his monthly payment was about $700/mo more than the rental market. My suggestion was a plastic surgeon and a new passort. Next. . .

[Kyle-OH 0]

Kyle, I look at the deal like this. After adding on the option money that I'm keeping and the rent credits I'm applying to make the emails come in and the phone ring, will that gross price be accepted by prospective t/b's?

So if the homeowner needs a net price of $200K at closing, then I need to offer the property at, say, $212K as an example. Will the house get action at $212K? If so, I'll run with the deal. If not, the homeowner needs to accept less. If they won't, or can't, I'll pass.

 

OK...That's a prime example of the kind of deals I have been doing due diligence on. So after running comps in that area, What if the FMV is 200K? That means you are asking 12k over what everything else in the area is selling for. Have you guys had any trouble filling these "type" of deals? I have yet to market a CA so Im not sure what kind of response I am going to get. I am speculating that since I would be marketing a "rent to own" I can ask a little more then the going rate....Am I right?.....On the bright side, you can offer nice rent credits and get a nice option fee at 212K.....

[MichaelC 160]

If the FMV is $200K, the only way to know if the market accepts $212K is by trying. You know you're market better than I do. What do you think? You might have to be firmer with the homeowner is getting them to a more realistic number.

[Guest jvmccall]

Here is my take for what its worth. Grab downpayment and run with them. If you can modify the loan before the CA is complete then all the better. But there are a lot of them out there. I would do them sub2 and flip them. I was against it in the past but if seller signs off then why not.

How can you flip a sub2 with no equity? Who would you flip it to?

[Jonathan RexfordFL 8]

ARV 100K

Owe 100K

Payment PITI 700 per month

 

Run an ad like this:

 

No Credit Check $5,000 and take over payments. NOT A RENT TO OWN xxx-xxx-xxxx

[Jason (AL) 1]

Yep.

Flip 'em to retail, owner occupant buyers.

 

Hey Jonathan,

What makes you decide whether to do a deal as a CA

or flip it as a sub2?

[Jonathan RexfordFL 8]

Jason since my CA deals can be numbered on two fingers I would always go sub2. I have never been a fan of flipping them but the way the market is and the way I can do loan mods it seems to be a good fit fix the financing.

[Jdolinski 0]

ARV 100K

Owe 100K

Payment PITI 700 per month

 

Run an ad like this:

 

No Credit Check $5,000 and take over payments. NOT A RENT TO OWN xxx-xxx-xxxx

 

So let me understand this straight. You are placing the credit of the original homeowners on someone else who you didn't do a credit check on? That seems a bit cavalier with their interest to me. I am all about making a buck, but how are the owners going to feel when you made them believe that you were reputable and were going to ensure them that you would make their payments and then you just give it off to the next person with 5 grand. There is no real equity in the house and they don't have a reason to refinance. They own the deed and well they could care less if they pay or don't.

 

I am not sure if I understand this correctly.

[Jonathan RexfordFL 8]

Jason Dolinski,

 

I am going to have the understanding and sign off from SELLERS that I am going to assign the contract to an owner occupant or anyone else for that matter. It is up to them if they want to approve them or not. Besides, it is going to take someone really motivated to do this. You are not going to do it with every no equity deal. But its an avenue.

 

Now you mentioned that I made the sellers feel that I am reputable. I am reputable for sure. But their problem is not my problem. I can show them how to get out from under the proposed debt. If they don't want to do a transcation like that then that is ok with me. I am their to make money out of their crap.

 

Hope this clears things up. I use not to be a FAN of flipping sub2 contracts but these days it is better than going to back to the bank.

[Jdolinski 0]

Thank you that does clear things up quite a bit for me. I just understood that Sub2 many people get the Deed to property and then they basically forget that they are not the mortgage holder. If you are planning on telling them the plan then I understand how it is a sub2 flip is a up and up deal. It just seems that the idea was to keep the seller in the dark and cash out the $5000.

 

Thanks for the clarification. Not trying to be difficult, but these are the questions that as a homeowner I am going to be asking. (and as a REALTOR®)

[Jonathan RexfordFL 8]

Jason Dolinski,

 

I am a real estate agent also. I have no problem telling the seller how much I am going to make on a transaction.

 

If they are going to have a problem with me making a profit or even an obscene profit then I will not do the deal.

[Guest jvmccall]

Jonathan,

 

I am real intrigued by what you are saying. I have flipped Sub2's to investors before, but never owner occupants. If you don't mind, here are some questions...

 

1) Do you set the properties in a Trust & close with a Title Co?

2) Do you help the new buyer get the Authorization to Release Info and all that stuff (power of attorney, etc)?

3) What about new insurance?

4) Do you have the new buyer send the payments to the bank or to the seller?

5) Does the $5,000 that the new buyer originally give you go towards their future down payment when they refi and buy the house?

6) How many of these deals have you done?

 

I have been passing up a lot of zero equity deals because I can't CA them. But wholesaling the sub2 contract sounds interesting.

 

Thanks,

 

Joe