Question About Owner Taking A 2nd
I finally ordered John's book last night, I can't wait to get going on this as I've been doing all my deals with financing.
I'm wondering, if the owner wants cash out, I read they can take a second, but won't that increase the debt on the house, which will increase the asking price?
-Also, what if there is only about 20-25k worth of equity in the house that you could make at a sell? Them taking a 2nd would affect that won't it?
One of these days, hopefully I'll be able to help someone else 
Quinn
You mean to tell me, no one knows the answer to this question? Come on guys.
Quinn
It depends on what you want to do with the property. Do you just want to flip it? or do you want to keep it for the long haul?
If your just flipping it, the 2nd will need to be factored into the asking price.
If you plan to hold it. Get the seller to give you an interest only, or no payment 2nd so that you can just have a baloon payment due in X years.
With an interest only baloon, you wont have to worry about higher payments (well slightly higher) and the seller is still happy.
In most cases, if you can't get a great price, you can get good terms. I'll take either.
If the owner takes a second, then you figure your profit like this. Sales price - (1st mort + 2nd mort). There are more things to consider, but that's a start.
Advantage is in the property value increasing. As time goes by, your sales price should increase, and the spread gives you the advantage.
Instead of you getting a first mortgage for the entire appraised amount now, you get to wait a while and buy it then for what it's worth now, so you'll have instant equity.
A second for an amount around $20k-$25k is going to cost you at least $200 a month, in addition to the first. Sometimes that's a great deal, and other times you could do better just buying the house outright yourself.
[addsig]