Owner will carry/sublet leasing questions Colorado

[Jaylyn Heartso]

Hi everyone!

Let me start from the beginning as this is kind of a crazy scenario! Here we go:

There is a lady that I know that is a friend of a friend type deal. She's facing possible foreclosure (not sure how far behind she is) on a 70-acre property located in Colorado. The house has strong bones but is distressed to the point it will not qualify for most financing (FHA, USDA). She is now, after the last deal she had going fell through, wanting to sell the property to me via owner will carry/lease with option to buy OR assumption of the loan. There is plenty of value in the property and she's willing to get rid of the house for what she's owes to me in order to avoid foreclosure.

Okay now, my wonderful situation:

We are planning to move out of state. We have been planning this for awhile. We cannot do conventional financing for at least another year and would honestly prefer to have a deal such as this being an owner-will-carry type situation where it is not on my credit (tying up my ability to purchase a house elsewhere).

So... I guess my questions are:

-Can an owner actually do an owner will carry if the house is not fully paid off?

-What I would like to do is fix it up (bare minimum), sub lease for a year as an MMJ friendly rental (higher price tag), then buy it at the end of the contract with conventional financing or something creative. Would that be feasible? or even possible???

-What are some of the obvious hurdles someone would face? Who would I talk to get something like this going? I have not familiar with owner will carry whatsoever.

Thank you all for any input. I really appreciate it.

[Steve Vaughan]

Hi @Jaylyn Heartso.  Lots of questions!  I'll give you a couple quick thoughts.

Homes in arrears do not make good lease options. Obviously she could lose the home in a couple months and you'd both be out. Look up on county recorder site how much the balance and arrearage is. Here it's a Notice of Trustee's Sale. Also check NOD maybe.

Best may be to buy sub2, catch up the arrears when she vacates and wholetail or flip it.  Not something you want to be holding and dealing with when you move out of state most likely.  

If an owner carries that has a mortgage, it's called a wrap or wrap-around mortgage. It only wraps equity though.  Not needed if buying for what is owed plus arrears.

I've been a landlord for a while and I don't allow smokers or growers of any kind no matter the higher rent. I've had to remediate smoke smell from 6 places.  It's a nightmare. Smoke damage and mold issues and electric meter monkeying/diverting (with huge fines from your utility) will knock any extra monthly you got out quickly.   

Do not do a sale/leaseback to the seller.  Dodd Frank and predatory buying regs could get you in hot water. Pay arrears only when vacant or she is at the end of drive with full moving truck. No holdovers. Good luck!