[CF Student]

CF Student

I have a friend who just moved into a new home and wants nothing to do with his old home. He may be forced to be a landlord by renting out the old home, but would prefer to have the home off his hands. I told him if he was able to do a harp refi with a 30 yr fixed low interest loan I might be able to help. So he did and now I am evaluating the deal.

He is upside down. Owes 115k, FMV about 85k. BUT his monthly payment PITI is 675, fixed rate at about 4.5% and it would rent for 1000/mo PLUS the principal paydown would be $115 monthly and grow with time.

All major items are updated: new roof, new kitchen, new ac. So Barring any major unforseen repairs or set back this could be an easy cashflow deal but no equity since it is upside down..

One thought would be to do a LO. I would give him 1-2k for a 5 yr renewable LO with the option price being the balance of the mortgage and my lease payment be equal to the PITI payment.. His loan is with an institutional bank and the home is insured in his name, etc. Is this worth pursuing?

[Jackie Lange]

Jackie Lange

start with a master lease only.

you can always go back to him later to get an option. not sure you would even want one since it is upside down

You should insist on YOU making the payments directly to the mortgage company. Then you will know they got made.

[Mike Weiss]

Mike Weiss

Be careful with a HARP refi.
Read the loan documents to ensure it does not accelerate if the owner moves out/becomes a landlord.

Had a experience like that a few years ago – it was exciting (and not in a good way)

Mike Weiss
Las Vegas, NV