A pre-foreclosure deal landed in my lap recently. I am just getting started so I am looking for help in determining the merits of this unusual opportunity… or maybe not.

The property…

The current tax assessment is $686K and ARV ~$780K.

The house in question is a single family 4br 2.5 bath built in 1996 in Massachusetts. Includes a 4-space garage on a 1 acre lot and is ~3.2K sq ft. There is not much information available (no pictures on any listing site) so I am going to check out the property this weekend and determine what condition the property is in.

The deal…

Purchase price is $425K to cover outstanding debit on the property

The caveat…

The owner is only a month or two from going into foreclosure and has ~$425K outstanding debt on the home in the form of the original 30yr fixed loan and a line of credit. The condition of sale at the discounted price is along the lines of a life estate. The owner has no capacity to cover the expenses of the mortgage. So, the owner would continue to live in the house until passing or medically retreats to a nursing home care.

At this point I am proceeding to view the property and collect documents for tax/mortgage/title/bills/insurance/permits etc… and start running the numbers. With no cash flow I see this as a loss in opportunity cost to find something that would cash flow elsewhere. With the size of the main property and land it might be possible to arrange for a seasonal rental or subdividing the property to sell off or build another residence. Is there any opportunity here or should I run away fast?