How to combine a wrap around mortgage and lease-option

[Elliot Tan]

I have an interesting scenario for you creative finance experts:

I've found a seller who is in pre-forclosure and owes $69,000 on his mortgage. He's asking for $95,000 so he can walk away from his debt and pocket $26,000. Since speaking with me though, he's found a program that helps veterans in these situations keep their houses. He did not share the specifics of this program. So I don't know what I'm competing with.

I want to help him stay in his house, and hopefully help him acquire the property back from me in a few years when he's back on his feet. His monthly payment is quite low, so I'm having a hard time figuring out how I can make this deal beneficial for both of us, while keeping him in the house, and then give him the option to buy back the property from me in a few years.

To me this would be some sort of combination of a wrap mortgage and lease-option. I don't know enough about either strategy to know how to combine the two! I'm also trying to explore what is possible with this creative finance thing! Would love any suggestions or ideas on how I might be able to tackle this.

Goals for me would be: cash flow in the short-term, then a little profit on the sale in a few years.

Goals for him: keep him in the house, don't let him go into foreclosure, let his family stay in the house, purchase property back at a discount in a few years.

Would love a win-win situation here. But understand if that just isn't possible.

[Andrew Kiel]

I agree with @Tom Gimer- The best way to help would be to make a fair offer on the property and discuss all options.  If you buy the property, you should be very clear that it's not for him to "save" or "buy back" the house later.  I have purchased many pre-foreclosure homes and the one rule is they MUST understand they cannot keep the house or have any hope of buying it back later.  You could have some very nasty repercussions if you give the impression that you could save the property read some of those articles Tom mentions above - scary stuff.  You can best help by helping this person move on to the next chapter of their life with some cash and hopefully not having a foreclosure on their record.