Success Stories


By: Wm, PA

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Today I just closed on my first Subject2 deal (my third creative deal) and I now have 30K equity!!

The seller found me from one of my bandit signs I placed on a busy road. Seller has a house that she bought from HUD. She lived in it for 3 years then let her son move in and take over the mortgage payments. The only problem was he forgot to make them. Seller calls and tells me she is 3 months behind ($1,760 + penalties = $3,250 that I paid to mortgage company just prior to closing, yes very risky to do so) and just wants some equity out of the house. Seller owes $26,530 on the house that comps for 75K. Seller says there is a gas utility lien of $700 and I said no problem. 
So I figure I can get this house for $3950 cash plus some equity for seller.

I go to her house, and give her 3 offers.
Offer #1- $10,000 cash in 14 days Subject2
Offer #2- $12,500 cash in 3-6 months with a Subject2
Offer #3- $20,000 cash in 12-24 months L/O.

It took her 30 seconds to say I want offer #1.
Now I know what is at stake equity wise, and so does she. She asks me right away, do you think you could give me $12,500 total (extra $2,500) because I have a family member who will give me this sometime in the future. I know I should have stuck to my guns, but I said O.K. In return I tell her I can only give her a portion of this at closing and the rest in a note due in 3-6 months. She asked how much I could give her at closing, and I asked her what was the lowest she would accept, knowing I am giving her an $2,500, she replied how about $6,000? I said no problem.

At closing today we find 2 liens that seller was not aware of. Gas lien for $1,100 and water lien for $400. I told I would only pay for the original $700 gas lien and she was responsible for the remaining $400 and the $400 water lien and that she can pay for the liens from her $6,000 payment today, she reluctantly agreed to this. I walked in to closing with a check for $7,700 and walked out with $30,000 equity! She walked out of closing with a check for $4500 (after transfer tax and extra liens) and a promissory note from me for the $6,500 balance (no interest and due in 6 months).

I will L/O for $75K at $800 with a cash flow of $430 per month (HELOC for 45K for 30 years at 6%= $270 per month plus $100 per month for taxes and insurance).
Here are the numbers:

L/O price $75,000
Mortgage -$26,530
Repairs -$ 2,000
Seller's equity -$12,500
Back payments -$ 3,250
Lien -$ 700
Sub total $30,020
cash flow ($430x12) $ 5,160
Total Profit $35,160

If I made a mistake with my calculations please let me know, I went over this 1000 times prior to closing so I hope I am right.

I put in about 3 hours of my time so that equates to about $10,000 per hour!!! 

I can not wait for the next one!!!


     
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