What To Do With This Deal?
Owner of two duplexes called me with this: Each 2br 1ba and rents for $595. Two of four now vacant. Owes $125k on each duplex. Wants $133k to cover taxes. Bought 1.5yrs ago. Doesn't like landlording. MV is about $130k -140k.
I have a buyer who is interested but wanted seller to carry 15%. Seller says sure. Seller however has no extra money and obviously the property will not bear out that kinda deal. Took a couple calls to extract that info. OK, so seller is mathematically challenged.
I suggested the possibility of a Subto on this and once again seller seems accomadating. Buyer also may be interested.
My question to you guys, has anyone subto'd on a duplex? As i am only the deal engineer here, i'm not so concerned about being the buyer. But, as neither the buyer or the seller have any experience in subto, i am the expert such as that is. So, i am the creative force trying to get this done.
Any ideas or comments will be, as always, greatly appreciated.
wishing success to all
john 
It's not real clear to me what you're asking. You want to know if someone has done a sub2 on a duplex? I haven't but I can tell you the theory is the same. I'd collect the rent from the other half myself until they pay the loan off however. It sounds like you've got everything you need to know and have the knowledge regarding what you should do. So go make it happen.
Ryan J. Schnabel
Yeah, sorry to be so vague. I tend to ramble some times. I suppose i am more concerned with options i can put to the buyer/seller how to ensure these two get together, and i get my commission.
the buyer want to use no more than 5% of his own money. The seller has no money to carry a note.
I proposed the subto as an option. I suppose i was looking for reassurance that there was nothing about doing this with duplexes that would prevent me from suggesting it.
Also, is there any other ideas how the buyer might structure bying NOO with only 5% down. Just trying to prevent him from walking now that he realizes the owner cannot finance 15% as he orignialy stated he could. .
john
Before I offer some more advice, I'd suggest that IF you're not a real estate agent, that you quickly back away from this "middleman" ground, because you're trending on dangerous ground.
That said, there are always options, if you sit down and think thru the problem.
Does the buyer have credit enough to get a loan at all? If the seller is willing to do a subto, does he want any money upfront? If not, how will he pay the taxes that he needs to pay, or closing costs?
Once you have all the information, you can formulate ideas to solve it.
I'll give you an example of a deal that I am currently working on. Realtor friend has a house that has been put under contract for $65K, but buyer couldn't get 100% financing, which they need. Seller really wants to sell, and said they would take $55K for the property. Buyers' really want property and would pay more if it helps get it.
SOLUTION: New contract for $70K between buyer and seller. Buyer goes to my mortgage broker to qualify for 80% 1st and 100% CLTV, pays closing costs. Seller accepts $56K payout and a $14K 2nd mortgage, which I will buy at closing for $1K. Seller gets $57K at closing, buyer gets property with little money out of pocket and affordable monthly. I get a $200/month cashflow for 5-10 years. WIN-WIN-WIN.
Added note: When I do this, I always have an early payoff bonus. On this one, for example, I'll tell the buyers that if they can pay $7K in a year, I'll consider it paid in full. 1/2 off, talk about motivation!
Roger
Hey roger, thanks for the reply.
Couple questions. One thing I am trying to do when someone calls, is to match them up with an investor that can help them. I am not a RE agent. In my last deal I matched up an investor who bought a three income generator on one lot property. The investor gave me a promissary note for my $5k fee. So please explain your concern for me as the "middleman" here. I kinda felt that i could continue to make an income at RE by engineering deals that i personally did not want. But at times i can be naive. Please take a moment to define the worrys I should consider when bringing two partys together.
secondly, excuse my continuing ignorance, but what does the "C" stand for in CLTV?
Thanks again, you have provoked thought...
john[ Edited by rainforrester on Date 03/06/2004 ]
Matching them up with an investor is great. Get the two together and let them hash out a deal. You're acting as a birddog then.
Being the go between person, ie both buyer and seller negotiating thru you, you are then acting as a real estate agent without a license, not that will be frowned upon with heavy fines minimum if you're ever caught. And no offense, but this sounds exactly what you are doing. You even mention getting a commission.
In short, unless you are a principle in the deal (a buyer or seller), you can't really do anything more than say, "Mr. Investor, this is Mr. Seller. He is wanting $xxxxx for his property. Do you two think that you could sit down and make a deal? Let me know when you're done."
CLTV stands for combined loan to value. Some banks want the buyer to put some funds down regardless of their loan amount, so some lenders will not allow a 100% CLTV. Example, 1st bank will only loan 80%, but will only allow 95% CLTV. So the buyer can only get a 2nd loan for 15% of the LTV and must come up with 5% cash.
Roger
thanks roger. I see the distinction. Yeah, I see your point about getting into a position it may be construed i am acting as a REA w/o a license. Will take appropriate measures to prevent that.
john