Ok, I know everyone says not to rent back to previous owners…but I’m thinking about it. So far my deals have mostly been rehabs so I’m looking for some advice on this one.
3bed/2bath…in great shape currently worth $225-235k. Owners have been in the home 25 years but the husband had a brain tumor and was out of work for many, many months. His wife had to take time off work to take care of him and lost her job because of it. Bills piled up (resulting in a few liens), got one vehicle repossessed (and now the husband is getting $500 a WEEK garnished from his wages - He is back at work now), etc. They don’t want to move out of their home, but money is very, very tight. They owe $130k in mortgages and liens, but he doesn’t want to try to refinance because his FICO is in the 400s. I’m thinking of trying to purchase it and rentit back with an option to buy some time down the road once their credit is restored. He sounded open to not getting paid for his equity until he exercised the option to buy, but we’ll see. Any advice on additional ways to structure this or how much I should try to be making on this type of a deal? I know I need to buy it for a decent price so that if they should back out, I can still sell it to someone else and make money. I’m open to any advice or criticism.
Also they are current on mortgage payments, but that could change at anytime. Someone also mentioned that even though I buy it and option it back…it could be looked at like a “loan” in a judges eyes if something were to go bad. Any ideas?
I’m confused. How is you buying the house and selling it back to them going to benefit whatsoever? If they are current on the loans now and not losing the home, all you are going to do is increase their payments and increase their chances of not being able to pay?
cash flow is their biggest issue right now. They are willing to sell me the house at a large discount if I will rent back to them with the option to buy. Their monthly mortgage will go up $100, but their other bills would dissappear (lien payments, $500 week garnish for auto repo, other bills they are behind, etc). Plus They would be getting some cash in hand to help pay for future bills/issues (but most of the equity they would be willing to wait to get until they buyback the home.
You need to make sure there are no laws or pending laws about buying from, then leasing back to the owner. There are a lot of states making laws regarding this. I personally would never consider doing it under any circumstances.
This might be a deal just not a sub-2 deal. What about a short sale? L/O from them? Owner finance the home to you on a note? Regardless the homeowner has to leave. Just don’t even do it. I have considered it like yourself Nato-WI and I just assume not to go down that road. I really enjoy helping people out to but don’t let that cloud your business decisions.
To me this seems like a great deal from the numbers you posted.
100k in equity, property not in foreclosure, no repairs to be completed!!
WOW!! And to top it off the owners are going along with you so far.
If you bought for @ 160k give them 20k or so and make them pay your
cost & get 3% cash back for reserves/carpet/paint etc.(lender approved
of course) then you have a decent start. You lease option back to them
for 180-190k or whatever they agree to and you make another 20k+ on
the back end and they get their property back with good equity. Also I
would help enroll them into some kind of credit restoration program to
get their scores back up to purchase from you without issues. That’s
what I would do anyway.