Creative financing strategy

[David Hertz]

Hi,

I'm looking for some advice on how to create the right strategy for a creative financing project:

The basics:

The seller wants to continue living in his house. 

Purchase price is 500K. Rental income is about 4800/monthly.

Specifics:

The owner wants to live there. He has hard money loans on the house that he cannot pay off. He has bad credit so he can't get a regular mortgage. 

Question 1: Is anybody familiar with how to do a 'subject to' on a hard money loan?

Question 2: Will conventional lenders do a rate and term on one loan if he has a second position on the house? 

My strategy is that, best case scenario, I will take over his hard money loan or come in with a private money loan to pay off his hard money loan and to rate and term the hard money -- private loan. The rest will be seller financed by the owner as a second position on the house.

Any advice would be so appreciated! Thank you in advance.