I've got three STR units running and I'm used to putting real money into deals, but this one the seller is current, loan balance is basically purchase price, and I cannot figure out what number I write on a check at the table. Do I owe her anything at all, or is the value I'm bringing just taking the loan off her hands?
The value you're bringing is exactly that, debt relief plus a clean exit. But I made the mistake of treating that as automatically enough on a deal in rural Tennessee, 2021, seller was current on a 3.4% note and had maybe four thousand in equity. I brought zero to the table, she signed, and two weeks later she came back saying she felt like she got nothing for her house, and that emotional reality almost blew up the closing on a second property I was trying to buy from her brother. The relationship cost mattered more than the math. I ended up cutting her a $2,500 goodwill payment after the fact just to keep things clean, and I should have just built that in from the start. On a zero-equity sub-to, even handing the seller $1,500 to $3,000 cash for moving costs or just dignity money changes how they feel about the deal for years, which matters when you're doing long holds and you need them not to call the lender.
Had a deal like this in 2022, brought $4k to cover arrears that weren't disclosed until day of closing.
That 3.1% loan is the real value in this deal, well ahead of the price.
Depends on what her actual pain is. If she's current and has no hardship, she has zero reason to hand a 3.1% loan to a stranger unless you sweeten it somehow. I'd find out why she's selling before I decided whether to write any check at all. Last year I picked up a house in Tulsa where the seller was current but facing a job relocation in six weeks, so I covered her next two payments and moving costs, about $3,800 total, and that was enough to make her feel like she got something. The rate was the whole deal for me and I would have paid more. What I'd want to know is whether she has a realtor in her ear telling her she can list this thing and get full pop.
Sometimes the number you write is zero, and she still needs something to walk away clean. What is her monthly payment, and what is the property grossing as an STR right now?
The framing of what you owe her is the wrong frame entirely. What gets acquired here is control of an asset and a below-market debt instrument at the same time, and equity is not part of the transaction at all. Conflating those two is why the number will not land. A 3.1% loan on a current 30 year is worth real money, plausibly $40,000 to $80,000 in interest savings over a 7 to 10 year hold depending on the balance, so the actual question is how much of that spread you are willing to share with her to get it done. Back into it from her situation instead. If she has zero equity and is current, her reason for wanting out is not financial upside, so it tends to be relocation or a life event that makes carrying the property inconvenient. Work out what walking away cleanly costs her, moving expenses, lease break fees, and write a check for that specific number. Take a seller who needs $6,200 to cover a deposit on a rental in another state, against a loan balance of $214,000 at 3.4%. That $6,200 buys the solution to a logistics problem, never equity that was never there, and it closes the deal. That is the number you are looking for.
The check you write, if any, is a function of her alternative, not her equity. If she can list the property tomorrow and walk away flat after commissions and closing costs, she has a real option and you probably owe her something close to those avoided costs, typically 6 to 8 percent of the balance, because that is what you are saving her. If she cannot sell cleanly because the market has softened, she has a vacancy she cannot carry, or she just needs the obligation gone without a closing process, then the avoided cost argument flips and the 3.1 percent rate is the consideration you are both trading on.
The assumption doing the most work in your math is whether she has a prepayment penalty or any due-on-sale clause enforcement history with that servicer, because if the loan gets called you have paid her nothing and absorbed a refinance event at current rates.
What is her actual reason for selling, and how long has she owned the property?
The risk nobody is naming: a zero-equity sub-to still triggers the due-on-sale clause, and if the lender calls the note you inherit a payoff problem the seller thought she escaped.
What's her alternative, list it retail and net maybe 5 to 6% in commissions and closing costs on a loan she'd have to pay off anyway? She'd walk away negative. That's the conversation, not a number on a check.
What does she actually need day-of, though? Sometimes it's $1,500 for a moving truck and first month on an apartment, and that small number is the whole reason a deal dies instead of closes.
What is her alternative if she walks away from this conversation today?
That single answer determines whether zero is fair or insulting, because if she can list it retail and net the same outcome, you are not solving her problem.
When equity is zero, the check you write is determined by her motivation, not by arithmetic. If she is behind on payments, facing a divorce, relocating on a deadline, or simply done being a landlord, the value of a clean exit without a realtor commission, without a closing timeline measured in months, and without her credit taking a foreclosure hit can easily be worth two to five thousand dollars even when the spreadsheet says she has nothing coming. That number is not a purchase price, it is a moving-cost payment or a goodwill close, and framing it that way tends to land better than offering her equity she does not have.
The assumption doing the most work in your question is that her pain is financial. If it is logistical, the dollar figure matters less than certainty of close and speed. The risk you have not mentioned is the due-on-sale clause sitting inside that 3.1 percent loan. Every conventional loan has one, and while lenders have historically been slow to call it, a missed payment or an insurance claim that surfaces the new owner's name can accelerate it. You need to know the loan servicer's track record on this and whether you are wrapping the deed in a land trust before the seller signs anything. What is the actual reason she is selling, and how much runway does she have before her situation forces her hand?
Closing costs she would have paid if she listed are not nothing. In Illinois you are looking at 5 to 7% all in between transfer taxes, agent commissions, and attorney fees, and on a zero-equity deal that comes entirely out of her pocket or she does not close. So the floor on what you might offer is some portion of that avoided cost, not as charity but as the thing that makes her choose your table over just listing and writing a check to get out. I have seen people frame a 4 to 6k cash at closing on a 200k loan as "here is your transfer tax and moving truck," and it works because it is concrete and tied to a number she already knows she would owe.
What I would actually want to know before committing to any number: what is her monthly situation right now. If she is current but grinding to stay current on a house she does not want, the payment relief starts the day you take title and that has real value to her that cash at closing does not. If she has breathing room and just wants out for lifestyle reasons, the cash matters more because she is not in pain every month. Those are two different deals and one of them probably costs you more at the table.
Two structures exist here: you close at zero cash and the value exchange is the loan assumption plus relief from whatever her pain is, or you pay a small "equity bonus" above balance to make the deal feel clean to her and reduce the chance she wakes up at 3am and calls a lawyer. The first wins when her motivation is getting out of a mortgage she cannot service or a property she cannot manage. The second wins when she is not truly distressed and needs to feel like she sold rather than surrendered.
What is actually driving her to the table?
Two structures to compare: you close with zero cash to seller, which works when her real motivation is payment relief, credit preservation, or just escaping a property she cannot sell conventionally without bringing money to close herself. You close with a small cash payment, typically a few thousand, which works when she has carrying costs eating at her between now and closing, or when she needs something tangible to feel the deal is real rather than someone taking a loan off her hands and calling it a favor.
The rate is doing most of the work in your favor, so the question is whether she understands that. A seller who sees the 3.1% as your windfall will want compensation for it. A seller who sees it as a problem she cannot get rid of any other way will not.
What is actually driving her to sell right now, and has she tried listing it?
