Please Tell Me If This Deal Would Work??

[Larry Karp]

I'm new to REI and am looking at a couple of different angles. I'm working with a friend partner so we can find a couple of deals to get our feet wet. We are in Illinois. He has proposed the following:

Distressed homeowner is having problems paying mortgage on time. It's pretty much up to date but has been paying late, he needs help and has asked for help. He really wants to stay in the home.

Single Family Home conservative value $220,000.-$230,000.
Mortgage balance about $110,000
Equity in the home about $110,000.

He has had investors who wanted to assume his mortgage and have him move out. Basically giving him nothing but moving money.

My partner wants to have the title signed over to us. Refinance the home for the $220,000 figure. Pull out the equity for our expenses (and profit).

We would allow the homeowner to live in the home for 12 months rent free to help him get back on his feet. No charge to him what so ever. We would then make all mortgage, tax and insurance payments for the year. At the end of the year the previous homeowner has the option to simply move out no strings attached and leave us to sell the house. Or he can get a new loan and regain title to the home. At which point we walk away with him being able to remain in the home albeit at a higher mortgage amount.

We are working with an attorney who says this will work. I would like to hear what others think about it.

Thanks, Larry