Helping former tenant/creative situation

[Terri Pour-Rastegar]

Hello. I've been investing for about 8 years now, but have never done anything outside of an outright purchase with traditional financing. I have a homeowner in a tough spot, and she's called on me to help. But I need your help first: Can I help her at all? If I can, will I make any money on the deal, or not? How do I structure this? First and foremost, I want to help her; it would be a bonus if it helps me too! ;-)

Here's the situation:

A former (fantastic) tenant of mine is separating from her husband and wants to keep the house they currently live in. They are not on the deed or the financing--the husband's mother holds title and financing and wants out now that her husband is leaving the house. This is all proceeding amicably at this point, but you can understand why the mother-in-law wants out.

The wife alone (my former tenant) can just afford the $1340 PITI they've been paying (plus $60/mo HOA). The mortgage payments are current. The purchase price of the house back in summer of 2006 was $210K. That same floorplan is going for about $230K right now (actually, the most recent comp I could find sold in June '08 for $244,900, so the $230K estimate is probably fairly close). This is a newer neighborhood right near new schools and shopping and super-quick access to major highway.

The mother-in-law already said she is willing to sell the house for what they initially paid-$210K; and she might consider seller financing with me. However, the wife wants to stay in the house and keep paying no more than what she's paying now; so I'd want to pay less than even the $210K.

I need some help running these numbers to see if I can make this work for her. She's a safe risk--I know her, and she always pays her bills and keeps the house in excellent shape. So I'm comfortable letting her stay there, she and I do not want to maintain a landlord-tenant situation very long--she wants to be the owner at some point. Only problem is her credit is bad (she has a foreclosure on her record from about 2004-2005--an out-of-state house she owned and rented out; situation with tenant went bad, and she had to let the house go--this was while she was paying me $1100/mo rent + utilities). So I guess we're looking at some lease-to-own situation, which I've never done.

So what do you think? Any ideas? I appreciate your help!!!