Hans analyzes a hybrid subject-to deal in Columbus, Ohio, with Josh, a first-time investor, using the Deal Evaluator’s long-term rental tab. The duplex, under contract for $450,000, has a $411,000 subject-to loan (4% interest, $2,015.70 P&I, $2,550 PITI with PMI) and a $19,000 seller carry note (6.5%, ~$125/month, 7-year balloon, potentially negotiable to 0% over 10 years). Costs include $20,000 down, $2,000 closing, and $80,000 rehab. Current rents are $1,225-$1,350/unit, but market rents average $1,850-$2,200/unit. Keeping one tenant at $1,500 and rehabbing the other for $2,000 yields $3,700/month. With conservative expenses (10% management, 5% vacancy, 5% repairs, $100 utilities, $50 landscaping), cash flow is ~$410/month (5.49% cap rate, 5% cash-on-cash return on $100,000 invested). At $2,000/unit, cash flow rises to ~$650/month. Hans views rentals as appreciation plays, not cash flow drivers, citing risks like tenant damage or high rehab costs. Josh sees value in appreciation (~$154,000-$355,000 over 10 years at 3-6%) and potential PMI removal post-rehab.

To mitigate due-on-sale risks, Hans recommends a land trust for anonymity over an LLC, with the LLC as beneficiary, ensuring compliance with Garn-St. Germain.

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