I would appreciate some advice/assistance with evaluating this potential opportunity.

6 Replies

ok. So a good friend and co-worker of mine (we'll call her "cindy") has a home which she purchased in 2013. At the time her  mother was living in the home and assisting with mortgage payments (although the loan is in Cindy's name only)

Not longer after, mom splits out of state. 

Cindy works as a Secretary in an entry level position and struggles to make ends meet every month. She's tried for over a year to keep a reliable roommate to assist with bills,  but has been screwed over to many times so she's given up.  She confided in me that she is three  months behind on her mOrtgage, and she is considering to look into deed-in-lieu  as a last resort.

i advised her to research possible alternatives with me and maybe we could help each other,  Since I've been interested in jumping into rei for a long while,  and have been already considering acquiring another home as my first investment property but haven't decided on the route to go.  

She's eager to just have peace of mind that she can afford her living expenses and raise her son without the monthly stress of lack of funds. (She was considering downsizing to an apartment akin to the projects, which makes me sad cuz she's my friend:)

Sooo I'm asking for your help here. She's pretty much said she's open to anything at this point as forclosure is surely on the horizon. ...

the home details: (she says she's taken good care of the home since purchase and pointed me to zillow for preliminary info. A fix n flipper had just renovated and sold to her.  If course we made a date for me to come see for  myself but for  now this is what I've gathered)

4/2   (relatively, now) new kitchen, flooring, appliances, paint, carpet

4br  2b, 1180sqft

LOT: 6780sqft

single family

built in 1985

Garage 264sqft

1 story 

although i couldn't find any 4br, 

A home with 1 fewer br(3) but 50 more square feet did sell within the last three months for 98000

Another is on the same exact street as Cindy's home, has 1 fewer br(3) and 41 fewer square feet sold within the last three months fur 95100

Another next street over 1 fewer br(3) and 156 fewer square feet sold within the last six months for 96000 

the area does have several foreclosures,..but overall isn't a neighborhood in which i would feel unsafe living

now, (for what it's worth)she says appraisal when she purchased was 94000, and she bought it for around 92000

Interest rate 3.4%

Payment 677.00/mo

She still owes 89500

Is behind about 2400.00 (including late fees)

I would like some suggestions if possible,  from those more experienced than I (I'm a determined/excited newb) as  to the best way if any to do this

She's pretty much open to anything:)

Or, like i said I'm green,  so this may sound crazy,  or  maybe I'm actually thinking of an actual way of structuring a deal...but what if:

I purchased subject to with an agreement that she and her son could remain in the home for a year,  but only pay half or another- predetermined-amount of the mortgage and i pay the other half. 

She could use that time to save her money

(i offered to help her with a budget regardless of what we decide because the poor woman is clueless about anything financially related. Not irresponsibly so,  though,  was just never taught. .and she's almost twenty years older than me!!)

then after a year she will have saved a few grand to help her get into a better place for her and her son

i would only personally be forking over the equivalent of a car payment for that year:)

Meanwhile i will have saved some of my own money (I'm an rn) to fix the place up and possibly lease option to tenant buyer or another exit strategy

I truly do want to help as much as i can because i believe in karma and all  things related...

But i haven't had but a few days to mull it over so that may not be the smartest way to go about it. ..

i do want to make money on this so if i have to help her in other ways and have her vacate I'm willing and she would understand. 

Or  of this is a crap deal. .lay it on me:)

Thanks so much! -T

Hey Tiffany. 

I personally don't know that I would help someone with their mortgage payments for a year while allowing them to live there. I could see this going poorly for you. Honestly seems like she needs to get about 91k out of the sale of the home. Sounds like it could be worth a few grand over 100k. If I was her I would be trying to sell the home with an agent. She may make a few grand. 

Being that close LTV I don't think it would be a great investment for you.

Medium head icon colorRyan Dossey, Call Porter | http://Callporter.com | IN Agent # RB15001099

This is a tough one! On one hand she is a friend and you want to help. I understand that completely. On the other hand what if something goes sour in the deal, how do you handle it? If for some reason she can't make the payment, job loss etc, what do you do? Are you prepared to evict her or take legal action?

I think I would not get financially involved but would act as a mentor & financial planner to lead her to what she should do.

Best of luck,

If I were Cindy then I would either sell the house, rent it out, or find better roommates.  It will probably be easiest to rent the whole place out for more than the 677 mortgage payment and then move in with someone else or to the projects.

Do a shortsale. Offer to buy the house at $60K. You are the buyer. She is the seller.

For the meantime while you are helping her with a shortsale, she does not pay the bank anything. She should be able to save money doing this. You don't fork a single dime.

Now the danger with a shortsale is that the bank does not accept the offer and she goes into foreclosure. She might blame you for the idea or even sue you. Involve an attorney so the attorney can draft documents to protect you and her in case the shortsale does not go through.

If the bank asked for more money, it's up to you how much you're willing to offer. If the house does not need work, I would probably go to 80% of what the property is worth - maybe go no more than $75K. But start low with the bank. Depending on the bank you're dealing with, the shortsale could take 6-12 months anyway - at which time, your friend can save up money (hopefully...).

thank you so much for the great advice! I'm going to check the place out tomorrow or Friday....the bank is Chase bank.  Someone said i should just talk to the bank and see if they'll let me assume the loan ..

But i was under the impression that "assumption" is a thing of the past and banks rarely,  if ever,  allow it anymore....

anYway. .short sale is going on the option pile. .have a blessed evening

Hey, I just joined this sight. I was just looking around for local conversations. Did you get this figured out? I'm a local agent so if you still need help or if you are still looking for deals, let me know. 

Jeff