Buying a Rental with 24 Liens on Title

[Elena S.]

Hello, I am under contract to purchase a triplex in Kentucky. The Seller has declared Chapter 13 bankruptcy and the property has 24 liens on the title. Most of the liens were addressed in the bankruptcy filing and the court allowed the sale to go through. However, there are 5 liens on the property that belong to the Seller’s wife. She passed away in 2017. The amount of the liens is more than the appraised value of the property (it appraised for $106,000). The Seller is thinking about letting it go into foreclosure. I still want the property, because the numbers look good:

Purchase price: $105,000

Total rental income: $2,100

Cost to make rent-ready: $40,000.

Taxes are 1.5% of purchase price, insurance is about $120/month, utilities are separated.

C+ neighborhood, inspection came back good, no unexpected issues.

I am trying to get in touch with the lien holders to negotiate with them directly. If the property goes into foreclosure, they get nothing, correct? There’s an $80,000 mortgage on the property. Wife’s liens add up to $12,600, plus there are 19 more liens that were addressed in the bankruptcy filing. 

Has anyone ever dealt with something like this? What is your advice? I don’t mind coming up in price a little bit if it means getting the deal. 
Another option I’m considering is instead of getting a loan, pay the Seller a little bit of cash to move out and take the property without clear title. Is it too risky? Can the creditors foreclose on me?

My goal for this property is buy and hold for at least 30 years for cash flow.

Thank you so much for your advice!

[Anthony Dooley]

Ask a good closing attorney what their opinion is and if they can still provide title insurance for the property. It is worth paying for this service, so don't be cheap about it. If they tell you not to do it, don't do it at any price.