·How does a Subject To purchase work?Sub2 example:
Property FMV = $100K, seller owes = $90K.
To sell conventionally thru an agent would be: 6% commission = $6K, negotiating loss = $3k, closing costs = $3k, holding costs = $4k (650x6mo) TOTAL = $16K to sell. Seller would owe $6k at closing.
Sub2 sell: Investor buys property subject to the existing financing. Gives owner $10 for 'equity' at the closing where title is transferred to the investor. The investor will then start making the $650 a month payment on the property.
How does investor make money?
Investor sells on a Contract for Deed or Lease-Purchase/Option on a 2yr deal. In 2 years the property should be worth about $106K (3% appreciation per year). So sells for $3K down, $800 month, balance due at term = $103K
Profit = Upfront $3K - $10 = $2,990; Thru term = $800 - 650 = $150 x 24 = $3.6K; backend = $103K - $90K = $13K
TOTAL PROFIT = approx $19.5K [ Back to Top ]
|
