Seller's reverse mortgage

[Jayme Duff]

I have an investment opportunity where the owner/seller has a reverse mortgage on a property that needs rehabbing.  The balance of mortgage is above what I would be willing to pay for the property in its current condition but is well below what it would be worth with an extensive rehab. An extensive rehab out of the gate would not make it a good investment in light of the mortgage balance and purchase price. A "lesser rehab" would allow me to make a great cash-on-cash return with the property under a long term lease with an option to buy at the prevailing mortgage balance.

is there anything I should consider with respect to the reverse mortgage on the property from a legal standpoint? Does this sound like an attractive opportunity? 

Perceived unattractive scenario: 

* $254k reverse mortgage

* $125k extensive rehab costs

* $330k ARV

Perceived attractive scenario:

* $500 per month master lease with a 5 year option to purchase for $254k

* 25k limited rehab costs with potential to rent for $1400 per month