Structuring JV deal with home owner

[Account Closed]

Hi everyone,

A client of mine wants to sell her property and the house currently has about 85 % equity. A contractor left a mess in the basement and I don't think it will be passing FHA. I suggested her to pull a HELOC and finish the basement but she filed for bankruptcy and can't get any loans.

I told her I would be willing to loan her the money but I would have to think about a way on how to structure the deal. Does anyone has any suggestions?

I thought about structuring it this way. For every 1,000 I get 500 back, or a 50 % return of my money. So, I would be lending her money to finish the basement, putting some carpet, and doing some interior painting (about 15k so I'd make about 7,500). 

Should I be hiring an attorney for this?

[Robert Smith]

You mentioned this is your client, I would be talking with your attorney for sure. Disclose, disclose, disclose, as they say. I have done this myself and it worked out well. Check your local board and state rules, but you would have a vested interest in the property so you would need to let other agents know this when calling on and showing the homes more then likely. For the drawing up the paperwork, the one option you would have is to essentially be the bank and write up a deed of trust and promissory note and put a lien on the property payable with a due on sale clause or however you structure the payments. You would be in a second position so make sure the bank in the first position is getting paid or you could be out of money. I have seen many investors work out much harder deals then this one. If you are new at this it is worth the cost of paperwork rather then the expensive cost of a hard lesson learned and getting burned. For the terms and conditions these would be up to you and the owner of the property, talk with an attorney about your lender laws for your state as there could be limits on what you could charge. If the work does not get done or you financing this fix does not work out you could always inform any agents showing the home that cash or a 203K loan may be the only option to be able to purchase a home. Government financing can be very difficult when repairs are needed but not impossible when repairs are needed.