Would anyone take this deal?

[Erik Gladish]

Seller is the surviving decedant of a home that was in reverse mortgage. She is working on taking possession of the home with her own reverse mortgage and as a successor she can although she has not been paying or able to afford property tax payments of 900 a month (ish). She has trouble paying taxes on the property- and it has gone to foreclosure for non payment of property taxes.

She has applied to the state sponsored Home For All and hope this will help her.

She got a covid extension on the foreclosure till October 3.

She would deed the property to you with the clause that she will remain there untill her death.

This home is literally 20 homes to the beach in a neighborhood of 1.5M homes + in ventura county. She owes 503K and the property is valued at 1.4M right now. She is 59 so could live for another 20-30 years.

You get $900k equity on day one with the above conditions.
What benefits could there be to you?
Using property as a HELOC to draw against for future projects?
Using property for Depreciation against active income?
1,400,000 / 27.5 = $50k a year and maybe you bump it up with a cost segregation analysis and bonus depreciation.

I'm sure you brilliant minds will find more ways to skin this cat, but does anyone see any value? Enough to put togther a deal?

I am a Realtor in Ventura County and have been coming across situations for creatives more frequently.

Erik

[JD Martin]

If you are her realtor your fiduciary advise to her should be to sell it and pocket the $900k or thereabouts and find somewhere cheaper to live. For what you're saying here you would be essentially purchasing the property for $500k and granting her a life estate. If she has any heirs they would probably be suing you somewhere along the line here. Your basis on the property is not going to be 1.4 million, it's going to be 500k x whatever the structure part of the value is, and in this case here it might be the land is the high value so who knows - 60%? 70%? 80%? 

You'd likely have to have the $500k cash to buy this as I don't see anyone giving you a loan under these circumstances. I don't really think you have anything here other than a nice fat commission if she agrees to sell in a normal fashion.