What could go wrong? Buying 50% of an airbnb Subject to...

[Account Closed]

The seller's husband passed away, and this year she has been trying to sell the house. Problem is, her husband didn't have a will, so his half went to 3 heirs. 

For her to be able to sell it, she needs the kids' signatures. Her and her real estate agent hired an attorney, a private investigator, and has even reached out to Texas senators trying to figure out where these kids are, and nobody has been able to get in contact with them. They think the children (who are all adults, not actual children) are living on the streets in either Germany or somewhere in the US.

I've been working with both her and the realtor, she says that she is moving back to Germany one way or another and is about to quit paying the mortgage because she has no other option, and doesn't want to rent it out. 

My attorney says it is possible that I can purchase her share subject to, it's on a va loan and in total there is about $140,000 in equity, with the monthly payment being ~$1700. It's a 4/4 3700 sq ft, with no property in the neighborhood selling for less than $410,000. I am wanting to form an LLC separate from everything else I own, help her out by cashing her out on what little equity she has and keeping the property as my first property, and AirBnB it. On AirDNA, it projects an annual revenue of $104,000 with $30,000 in operating expenses.

For the monthly income vs expenses, even if I were to have to give up 50% it seems like a really good deal. I am paying closing costs, attorney fees, and cashing her out. All in all, I am going to be spending $20k. 

To me, this seems like a pretty low risk opportunity. It does to some folks in my network as well. I want to take action. What would you do in this situation? 

[Bruce Lynn]

High risk to have partners.  Higher risk to have partners you don't know.   Always think about your exit strategy.   Not sure what it is in this case.   I would speak to your attorney to figure out if you can get rid of the kids somehow.  Quiet title at some point?   What if she says there is no will, but kids show up with one after she leaves the country with your money?

I think it is very very very rare that heirs can't be found. Possible if the kids never lived in US, but sounds like they are offspring of these two....if they are, chances are they are in US. If they are in US, then chances are they can be found. Normally without much effort. Possible, but not probable. Do you know the kids names? Have you looked for them....FB, Linkedin, google, skiptrace? I've done one with 35 heirs, they were all found and all signed off. Realtor in our MLS did one with 300 heirs and down about 3-4 generations....found all of them and all signed off on the sale....so it can be done. Not easy, but can be done.

You say she has $140,000 in equity, so why can you cash her out for $20,000?   Something doesn't sound quite right there.

I guess if you think the SUB2 would work, even if you spend $140,000+$20,000 you're at break even after two years.  Worst case I guess is current lender calls the loan when they see the deed transfer.  They you lose whatever you put in.   If they don't do it for 2 years, then you're at break even if all your assumptions are correct.  After that all gravy even if heirs show up or lender calls the loan....and then no damage to your name if loan is still in her name or his name.   What if heirs show up and say you didn't have full authority to lease the house and now they want 1/2 your airbnb money and want to move in?

To me this is a bet.  It's a casino game.  It's not an investment.  Want to roll the dice...do it...but there are so many things working against you in this deal that are 100% out of your control.   There are plenty of deals out there that probably have way less risk for you.