If this is truly a 100% business decision, which I doubt, since you want to pay them $80k, instead of just taking over their debt, subject to, which any good RE investor today MIGHT do, and giving them NO cash…then I’d advise your looking elsewhere and telling them no thanks.
With the economy still aching, there are many GOOD deals out there, where $70k might buy $150k worth of RE value.
Frankly sounds like they’re playing on your friendship to get out of their problem and take some of your cash.
Now I may be way off-base here, so I invite you other readers to put your two bits in here.
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
ps.this will be a business deal no emotional ties
I am not an attorney. However, I have read of problems with this approach. At least here in CA.
This may be construed by a judge as a “hidden security instrument.” Thus, it is considered a loan. Then state usury laws come into play. You take too much money and you may get zero interest, or even have to give up all of your principal, if you are in court here in CA.
I don’t what the situation is in TX. But, I would advise you to do nothing until you have consulted with an attorney in TX who is familair with foreclosures, etc.