Building an ADU/ House Hack, When You Have Poor Credit/Low Income
My friend Ted will receive a house as his uncle is passing away soon. The house is in North Hollywood Los Angeles County with a $525k reverse mortgage, property valued at $950k. Ted has poor income and 670 FICO and will most like not be able to Refi/pay back the reverse mortgage after his uncle passes. If he sells the house he will pay capital gains taxes and squander an opportunity. It would also be good if he could stay in one of the rooms rent free. Can he partner with a real estate investor, pay back the $525k reverse, then accept an interest only carry back for the equity of $425k? Then the investor can convert the garage to an ADU, and rent the other three rooms out allowing Ted to live on site as management. What is the best way to structure this deal so that:
1. Ted has a place to live
2. Ted doesn't get hit with capital gains
3. The reverse mortgage gets paid
4. The investor is able to build an ADU and create a cash flowing property for everyone to enjoy with less money down
5. Ted can benefit in a small percentage of the appreciated value
What is the best way to structure this deal as a win-win?