Texas Foreclosures
I need some help. I have a friend of the family (in Texas) who is going through foreclosure. I want to buy there house rent it back to them then sell it to them when they get in better shape. What is the best way to go about this and limiting my risk?
Here are the numbers
House worth $100000
Owes 70000
I want to buy the house for $80000 and have them give me $10000 repair allowance
Get them on a lease to buy option with the rent being my loan amount (taxes and insurance) and they pay for future repairs with the option to buy the place any time in the 5 years.
Thanks
Greg
You pretty much have it summed up. Just be careful, friends dont make good tenants. Also if they put themselves in this bind, you should put some cash away to make sure they dont hurt your credit if it happens again. I would also add some sort of value to the house with the loan, so that if you need to foreclose you can sell it easier. I would collect more than just the mortgage as well even if its 50 bucks a month, if anything does go sour you will at least make that off the deal.
You could also do a seller wrap around where you get the loan at say 9% and have them pay you at 12% for your time and trouble. It should make it easier for them to refinance and get them off your credit. If all goes well and you feel bad about making the money throw a refinancing BBQ for them.
Good Luck,
Kyle
"They owe 70000 and are in foreclosure already."
But you want to buy the house for $80000 using your credit then have them pay the new (higher) mortgage.
Sounds risky for you.
Can they afford it? What has changed for them?
Perhaps you can just bring them current, give them part of their equity in return for the deed, then continue paying their monthly mortgage via the rent they pay you as the lease option?
I like the idea of adding an extra $$ for your time to structure the deal.
Set a term -- if they do not exercise their right to purchase after X years, then you can go ahead and sell the property later. Put a clause that states that they give you a little $omething (i.e. $10000), when they do finally buy the house back from you.
Benefits: you helped them get out of foreclosure, they are not homeless, you have the title, you make extra cash for the lease, you protect your credit, they get a chance to improve their credit.
CYA always!