Taking over loan before Foreclosure?

Question

A family I know may soon be forced to foreclose due to job loss and high mortgage payments. I do care for them and I've heard of ways where I could potentially come in and join the loan? It would allow them to still live there for the time being and I could have some equity in this property. How does this work? I don't have the ability to take over the whole loan myself by the way.

What are some solutions that would 1. Allow them to still live in their home. And 2 be an investment for me in this great house/property.

Thanks :)

What are some solutions that would 1. Allow them to still live in their home. And 2 be an investment for me in this great house/property.

Thanks :)

Brenden Mitchum · Answer

Hey @Dan Ricks, welcome to the BP community!

A strategy often used in situations like these is known as "Subject-to." Basically, you are buying the deal subject-to the existing loan. This means that you start making the payments for the previous owner without actually assuming the loan. The specifics of this strategy are quite nuanced so you will definitely want to educate yourself and speak with a real estate attorney in your area.

The problem here is that you do not simply want to take over the property as an investment and rent it out. It sounds like what you want to do is take on a liability and allow a nonpaying tenant (previous owners) to remain in the property. It also sounds like you cannot afford the loan payments either so that makes the situation even trickier. So perhaps a sub-to won't work. You may want to sit down with the seller and the lender and see if you can help work out some kind of deal. There is no investment strategy (that I know of) that works with a nonpaying tenant.

Unfortunately, I think you may have to pick one or the other. Either help the family remain in their home by helping pay their loan or take the home off their hands with a sub-to deal and rent the property out to a paying tenant. Yes, the family loses their home but at least they don't ruin their credit and lose their home. Tough decision but at least you have options!

Please feel free to message me anytime if you have other questions or just want to chat!