Any creative ways to invest in property with negative equity?

Question

Hello BP! I've been following the forum for a while and have finally come up with a question that I hope is worth discussion.

I've recently come across a seller with a home worth about 60k+ after-repairs that has about 30k left on the mortgage and a 25k home equity loan on top of that. I haven't been on the inside, but I suspect about 15-20k in repairs are needed.  It's vacant, homeowner probably does not have the capacity or desire to fix/rent it. and would like to wash their hands of it for the amount of the loans.  The owner probably does not have the desire/capacity to pay any balance of the loans either.

Obviously, I can't buy it for 55k, and a lease option will not work considering the monthly payments on the loans.  Is this (and situations like it) just a complete no-go, or are there creative ways to work with the lienholders or any other solutions?

Thanks!

Ray Jones · Answer

Thanks, Gilbert! I did not consider that at all.

Ray Jones · Answer

Thanks, Al!

Ray Jones · Answer

Thanks for the response, Joe! I agree that being upside down after purchase is no good in any circumstance.  I was curious as to whether there are ways, generally speaking, to get such lienholders to settle to a lower amount prior to buying the property, or something to that effect.

Gilbert Dominguez · Answer

Well it depends. Does the seller have other property they can transfer the home equity loan to as collateral and then see if you can negotiate a lower price if not then I would say move on. You can't force a deal if there is no deal and purchase a house that would out you upside down is definitely no deal at all.

Al Williamson · Answer

• @Ray Jones It's a no go but a good exercise to run the numbers.

Joe Villeneuve · Answer

I would never buy a property that put ME upside down after purchase, or that had negative cash flow.  I'm not in the business of taking over someone else's problem(s) and making them mine.  I am in the business of taking someone else's problem(s) and solving them.

How sure are you about the ARV being $60k?

What would the Taxes and Insurance cost be?