I have a friend who's home is currently in pre-forclosure status (caused by a lengthy identity theft situation). I would like to help him get out from under the mess by relieving some financial stress, and allow him to keep his home. At the same time, I would also like this to be an investment.
One idea is that I buy into a percentage of the property based on the amount he needs to get ahead of the curve, with an option to sell at a given time (say 3 years). Another option was maybe just a straight loan at 10-12 percent, having the house as collateral. Or, should I just buy the house from him and keep him as a renter?
Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
7y
I see all of these options as highly likely to ultimately end your friendship.
Getting into a financial arrangement with someone who cant make ends meet is never a good idea, nor is becoming a junior lienholder in a default situation.
Buying the house (if it makes $$$ sense) is the only realistic option, but becoming your friends landlord sounds like an AWFUL idea. He cant pay his mortgage now, and when he cant make rent to you later, you will be in the unfortunate position of evicting your friend.
Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
7y
I see all of these options as highly likely to ultimately end your friendship.
Getting into a financial arrangement with someone who cant make ends meet is never a good idea, nor is becoming a junior lienholder in a default situation.
Buying the house (if it makes $$$ sense) is the only realistic option, but becoming your friends landlord sounds like an AWFUL idea. He cant pay his mortgage now, and when he cant make rent to you later, you will be in the unfortunate position of evicting your friend.
Those are all very sound points, and I appreciate the input.
Just to be clear, he isn’t the type who can’t make ends meet. As I mentioned, this was all brought on by an identity theft situation. I would never entertain the idea of partnering up with someone who was financially irresponsible.
I really would like to try and find a win-win solution that keeps him (and his kids) in his home, and is a viable investment opportunity for me.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
7y
Might be better if he has something he can sell you or you can hold for collateral such as a car, with the understanding that he is using that money to get caught up on his house payment, depending on how much he needs.