Hi, The homeowner, thru no fault of yours, is effectively being "demoted" to tenant. There could very well be resentment and an eviction in the future. Factor those in and I don't see any other reason why not. Unless the homeowner is a friend, in which case I would stay away.
How did you buy a house for $142 if he owed $130K. Make them pay rent, you did them a favor by them not having a foreclosure on their record. He can get a job somewhere, McDonalds, Walmart etc... You're setting yourself up for a huge pain in the butt in one year. He's sitting there living rent free for 12 months, he has no incentive to find a decent job. Why bother? You're enabling them to sit on their butt. After sitting around it will get harder and harder for him to get motivated to get a job, good chance they'll try to milk you for a few months afterward. Maybe give them a month of free rent, but never a year.
Brian good points! The $142 counts the loss of NOI @ $1k per month for the year. I could even do a step-up or graduated lease so the rent would increase $100 per month from $1 for the first month so when it reaches $1k per month it stays. This would solve that issue I believe.
This is a concern I have. In essence I would just be buying the property from the bank at what they owe and then renting the property back to the person for less than market value until it builds up, etc. I'm concerned at the legal issues and will look into it. Anyone have any insight on the legal part of this?