Too good to be true?!?!?!?!

General Real Estate Investing
1

I have a homeowner in pre-foreclosure and she is willing to orchestrate a short sale with the lender and sell the property to me. She wants to remain in the house and pay rent with an option to purchase the home in 6-18 months at market value (this way she can hopefully repair her credit). We have tentatively agreed on the monthly rent, and it will cover all of my holding costs and have $150/month positive cash flow.

I can only foresee two risks: 1) she defaults on the rent, thus I am forced to evict her and she stalls the eviction process the way tenants normally do since I am the “big, bad, investor.” 2) her credit does not get better, the lease expires, and I am forced to sell the house on the open market. Thus, I must now absorb the holding costs without rental income.

Your comments are appreciated…

2

Two basis legal maxims regarding options 1. you must have this dealings writen down in contract format 2. you must have an option money taken and a separate contract put in place for the option. No option (one dollar is fine) money and contract no cigar

3

The deal you are planning to structure is called a foreclosure reconveyance. There are a few states that place severe restrictions on the investor who participates in such a deal. I also understand the courts have been very sympathetic to the former homeowner if the deal unravels and goes to court.

Suggest you only take the property if the owner moves.

4

Could you get the owner into another property ?? maybe one of yours ??