I have a home in Oceanside Calif that I wish to sell to my renter and wrap the low interest underlying note I have and mark the note up and then add my own note on top to create the sale price. Sale price is $615,000 and he will give me $15,000 down payment plus make monthly payments of $3500 to cover P and I and taxes and insurance on a new $600,000 note consisting of underlying $350K and new note of $250K. How do I safely set up our sale in a trust , or partnership or LLC to protect myself? He has some credit issues and a past bankruptcy that may be still pending. How do I protect myself? Who should make the payments? He is usually late making rent payment but always makes it. Who has had this experience in the past and can offer some advice? Thanks for any comments
I would be VERY reluctant to sell this with a wrap and give THIS buyer title. It could get tied up in bankruptcy. Plus, he has a history of not paying on time so you could get stuck with a foreclosure and get your credit messed up if he does not pay on time.
The payments need to go directly to you then you pay the mortgage company! Do not let him make payments to your mortgage company.
California has some screwy laws so I’m not sure the best way to handle the situation. If it were anyplace else, I’d transfer to a Land trust making YOU the Trustee. Sell him the beneficiary interest of the Trust. None of it would be recorded. But, like I said, in California doing it this way may still require a long and costly foreclosure to get your house back. How long does it take to foreclose in California?
Find a BETTER buyer! $15,000 down on a $615,000 house is not enough!
Instead of two notes, it would be better to wrap the underlying loan.