How Much Equity Should There Be?
I might have a subject to deal but I'm not sure. Someone told me that in order for it to be a good sub2 deal the house needed like 10-20% equity in the house. I don't know. How much equity are you looking for in the house or does it even matter?
You can do deals with little or no equity, or even negative equity, but why bother unless there is no equity. At the courthose on foreclosure day there are no bidders on houses that the seller owes what it is worth. Flippers and rehab guys need a spread of 30%.
You really have to set your own guidelines. In days of rapid appreciation and inflation you could pay too much and hold a few years and still sell and make money. This aint true today. At 3% inflation the value of a $100,000 house is only going up $3000 per year. Even that would not be too bad but you have the headache of collecting and the risk of moveout and repairs. To take alll this risk you need to get paid. Most all REI courses say make your money buying. Do not be so greedy and not buy unless you get a 50% deal. If you do buy no equity deals and want to wait for inflation then make sure you have reserves to carry the negative cash.
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr