East Orlando Subject-To Section 8 Rental Rehab


by Tom Rumph, Vice-President, CFRI


Editor’s note: if you transacted a good deal that you would like to share with us, please email Please put “MREIA BUSINESS” in the Subject Heading.


Denny Troncoso grew up in a working class home in Orlando, Florida. He has a broad range of professional experience from IRAs to Mortgages, to holding state Broker licenses in Real Estate and insurance. Denny started

property investing in September 2010 and has been a committed CFRI member. He has achieved eight deals in his portfolio, including two rentals. One of his favorite lessons about success that he learned from Napoleon Hill in

“Think and Grow Rich” is that “Knowledge is only potential power...” Applying knowledge is POWER.


Denny received a call from an individual who saw one of his yellow signs posted on the roadside. The owner was tired of being a landlord and wanted to sell right away. He was asking $100,000 for a three-bedroom, two-bath, single-family home and he owed $92,000 on a 30-year mortgage. Denny quickly calculated the After Repair Value (ARV) to be about $110,000.


After visiting the property, Denny calculated the repairs to be about $25,000. The house needed kitchen and bathroom updates, windows replaced, flooring, paint, AC duct work, and construction to build a closet. He began to lose hope, because the sum of the mortgage balance and the repairs were more than his conservative valuation.


Then Denny reached out to his experienced  real estate investing network for some inspiration. He put all his beliefs about the deal aside and opened his mind to other ideas, and he received many. Much to his surprise, the seller chose his third offer:


1. List the house on the MLS for $65,000 and the seller brings $40,000 to the closing. A big chunk of savings or requires liquidation of assets.


2. Short Sale House. - The seller will suffer tax and credit consequences. Plus, he had to continue being a landlord or take a huge risk by leaving the property vacant.


3. Sell the house for $67,000 – “Subject To” the existing $92,000 mortgage and the seller brings $25,000 to the closing.


What is in it for the seller? Why choose option three?


• The house is sold immediately. The seller is no longer responsible for the property;


• The $25,000 the seller brought to the closing table will be used to update the property and  make it more valuable


• The seller avoids the long and painful short sale process and will not have tax and credit  consequences.


• The seller retains the right to take back the property should the buyer stop making payments.


What’s in it for the buyer?


• Use the seller provided funds to increase the value of the house and its rental value;

• Good financing is already in place. The buyer does not have to go to the bank or to a private  lender;

• The property will bring in $1,100 per month for a Section 8 tenant. The US government  pays the majority of the monthly payment. Most section 8 tenants will pay the rent on time to avoid losing government paid rent subsidy;

• The property generates $178 a month and cash flow;

• The buyer is a Broker and is managing the property himself for an additional $288 per  month income and;

• The buyer will own the house free and clear after the rental income pays off the mortgage.

Reprinted Courtesy of the Central Florida Realty Investors. Visit From the June 2014 issue of the CFRI Newsletter.