How do I Structure this deal?

4 Replies

I have the opportunity to purchase a home for 175K that needs about 40-50K in rehab. ARV is about 320- 335K. The owners (husband and wife) are separated. The husband wants 30K to deed over the house to the wife. The Wife wants to move out of state. There are back taxes owed, a 30 day late as of the first of February and possibly utility payments that will need to be paid. I was trying to do a lease option to control the house and find a buyer, but since the husband said he isn't going to make any more payments, how can I get him out of the deal while protecting my cash. If I give him 30K to sign a deed over to the wife how do I secure my investment? Do I reduce the price by 30K? Do I record a 2nd? Also, they owe 90K on the mortgage at a $500 a month payment. Can I get a third party servicer to make payments to the current lender (as to not trigger a due on sale) and do an AITD? Your help and advice are much appreciated. (it will be my official first deal!)

That seems very complicated for your first deal. 

I would definitely record a 2nd if you give him the $30K. Also, are you sure the AITD won't trigger a due on sale? Lenders have smartened up, and usually have language for any type of wrap now. 

Are you flipping the house or wholesaling it? If you're flipping it, I would just buy the house to make it simpler. Find a HML if you have to.

When a home needs a lot of work -i would rarely recommend an option (especially in a situation like divorce)  to me there is so much risk - remember on an option you don't own the property yet.    This situation sounds like a flip deal -  you need private money - cash them out and get clear title.   If your numbers are right you have some room in the deal.   However there have been a FEW times in my career where i have put money into a home I didn't own - bigger money I mean -  in that case yes a 2nd mortgage OR a lien of interest.  Something to protect your interest in case they don't close later or there is some issue.  Also make sure you are checking the title work .......  lots to consider here and I could write pages to respond to this.   Be careful in this type of situation on a lease option. 

Wendy Patton, Real Estate Agent in MI (#222005)
248-394-0767

@Adam Villaneda I agree with @Wendy Patton and @Sam Grooms that you should try to purchase the home and get clear title.  This structure seems very complicated for a wholesale, so your best bet is probably to buy it and then fix and flip it.  The situation between the husband and wife is unfortunate, but that can be worked out between them, and any payment can be worked out and even potentially included as part of the closing.

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