Buying a property w/existing HELOC and seller financing

[Deborah Kowalchuk]

Hi, I have a friend who owns a house outright and uses it as an airbnb. She manages the property by herself and it's successfully pulling in 125k/yr. Title is in her name. Here's the drama part, while married her husband somehow went behind her back and pulled out a large HELOC. They divorced she's stuck with the HELOC since he can't pay anything. She's put the property up for sale already. My question is if I made the HELOC go away from my cash reserves, could we then agree to seller finance the remainder and then use the cashflow from the STR to pay her plus give her a percentage to manage the property? Does this make any sense. What formalities would I have to go through to make this happen. Also, this would be my first deal!

$400K HELOC

Home valued $1,150,000

Cashflows $125,000/yr

[Jaycee Greene]

Hi @Deborah Kowalchuk. If we put what her husband did to the side (I would recommend that your friend consult an attorney for that) and assuming "made the HELOC go away" means to pay it off, then most certainly this makes sense.

You're essentially buying into a partnership with your friend with the partnership owning and operating the property.

Now, the financial side of that gets more complicated and would generally include an advanced proforma/financial model that includes a GP/LP equity waterfall schedule that is based on how you and your friend agree that you will pay her and also share the profits.

I assume that won't make sense to you right now, but I'll send you a DM.