I have a friend who wants to partner with me. I have the credit , she has the resources (but her credit is 520 w/3 bankruptcies). She wants our first investment property to be on her own home.
She was renting from her landlord who did not pay the mortgage co. She found out by “accidently” opening his mail when the mortgage company said that they will foreclose on the house. She contacted her landlord and he signed over all rights to her to speak to the mortgage company and buy his home.
The bank appraisal said the house can be ss for 80k w/20k of work needed. The home market value is 145-160. Her loan broker said that his appraisal came out to be 150k and can give us a loan of 150K. She wants to get some funding back at closing. So, this is where I come in.
She wants me to get financed for 130k through her lender to buy the 80k shortsell. Her name will be on the title, but not on the mortgage. At closing, she will pay all cost and downpayments and we will walk away with 50k to divide. We will establish it as she is my tenant, so her rent would cover the payments, tax, ect.
I am not a natural risk taker and find doubt in everything. Is it possible to buy a ss from the bank and they give money back, in our case 50K? And what actions can I take if she stops paying the mortgage if her name is on the title?? Should I avoid this one?
I’m not sure how you can take out a mortgage through a bank on a property that you won’t be on the title for. The property is the security for the mortgage - which the bank would foreclose on if payments weren’t made.
And there is no way the bank will give you money back at closing for a shortsale. They are taking less money than owed, so how could you get anything back? You would have to refinance to pull money out after the SS.
You could purchase the house short sale, then you could sell it to her holding a mortgage. But are you really sure you want to tie up any finances or deals with someone who has 3 bankruptcies on her record???
Then dont do this deal! If the bank finds out that your name is not on title, they will exersice the due on sale clause and you will have a foreclosure in your credit, your score will match your friend’s
This deal smells very bad. The whole, I am on the deed, you take out a loan and we walk away from closing with cash is very shaky. Not saying it isn’t possible but this is precisely how mortgage fraud works.
Who is going to pay the mortgage payments? Will rents cover them?
3 bankruptcies? You lie with dogs, you get fleas.
I would NEVER do this deal.
If you do the deal, use YOUR mortgage broker and put your name on the deed.
1st it is illegal to open someone else’s mail.
How is it that you will “walk away w/ 50K?” from the post you will walk away with 50k of borrowed money, 25k of it given to your friend while you are the one responsible for the payments. The idea is to secure the house at 80k and then sell it and pocket the profit which you do not pay back. This is just a loan for 50k. And how would you go about removing your friend from the property for non payment if her name is on the title? Remember you would be responsible for for paying the bank for both her 25k as well as your own. Again, this sounds wrong.
I would not do the deal the way you described it. If the numbers are what you stated, I would entertain this scenario, if any at all:
you buy it for $80k, without her on the deed or financing
you rent (or L/O) it back to her with standard deposits and market rent or greater
you would have already talked to a lender to see what she needs to do to fix her credit enough to buy the house from you at some point down the road
when she is ready, she buys the house with her own financing from you for $105k
if she won’t be able to get financing, she can find a subsequent credit investor to collectively buy the house from you for $105k (or greater)
if she doesn’t pay the rent, you evict her and are left with a ton of equity in the house you could either fix, rent, sell or some combination thereof.
She needs you more than you need her. Don’t lose control to someone with 3 BKs.
Is it possible to buy and get $50k back at closing? Yes, I’ve seen it done (not $50k but certainly in the five figures) but I will never be part of any transaction like that - don’t want to end up on the local news or even remotely close.