Please Advise - L/O Back To Seller?
I am a relatively new investor, and have an interestin opportunity. Looking for some advise as to the possibility and your opinions....
Property FMV is about $400K....liens on the house 1st mrtg $270K (in forclosure), and a 2nd for $20K. plenty of equity in the house.
I talked to the owner, long interesting story, but he basically wants to stay in the house. He got behind, and can pay monthly now (he says), but the 1st mortgage company wants 12 months worth of payments, which the owner can not do. The existing loan is also currently at a high rate.
Here was my idea..... I would buy the house from the owner for $340K. He would then lease the house back from me for his current monthly payment (which would be cash positive for me still due to the difference in the interest rates), and I would SELL him an option to buy for 2 or 3 years out (so he has time to fix his credit, etc) . The option would be to buy the house for $340K during that time, and for the option he would pay me $50K at the time of my purchase.
He gets to stay in the house, I get cash up front, I atleast break even on the monthly payments, and he protects some of the equity in the property. Property values are going up stil in the area, so he may continue to gain value.
His other option (at this point) is the house to get foreclosed on, and he loses everything.
Does this sound feasible? Any legal issues?
Thank you very much for any guidance!
Any thoughts on this? I know of several people doing this in my area, but I too am not sure of the legal implications.
From what I see, there are two legal issues:
1) Predatory lending (e.g. equity stripping)
and
2) Fraud -- if the homeowner plans on giving you back $50k from the purchase, and it is not disclosed
Anyone have any thoughts?