Buy a Pre-Foreclosure from a friend, or give a Personal Loan??

[Bret McKee]

I have a friend who's home is currently in pre-forclosure status (caused by a lengthy identity theft situation).  I would like to help him get out from under the mess by relieving some financial stress, and allow him to keep his home.   At the same time, I would also like this to be an investment.    

One idea is that I buy into a percentage of the property based on the amount he needs to get ahead of the curve,  with an option to sell at a given time (say 3 years).  Another option was maybe just a straight loan at 10-12 percent, having the house as collateral.  Or, should I just buy the house from him and keep him as a renter?

Any thoughts, or advice on  a win-win strategy?

[Minna Reid]

I see all of these options as highly likely to ultimately end your friendship. 

Getting into a financial arrangement with someone who cant make ends meet is never a good idea, nor is becoming a junior lienholder in a default situation.

Buying the house (if it makes $$$ sense) is the only realistic option, but becoming your friends landlord sounds like an AWFUL idea. He cant pay his mortgage now, and when he cant make rent to you later, you will be in the unfortunate position of evicting your friend. 

Buy the house -IF  he wants to walk.