Any issues with this deal?

[Steve Burrell]

Last year I bought, rehabbed and rented a home in the Denver area. The next door neighbor got my information, and contacted me a few months later. He’s going through a divorce, and currently in chapter 13 bankruptcy. He is court ordered to sell his home, and would like me to buy it and rent it back to him.

This has been a few months of discussion, but here is the bare bones of what we landed on as a possibility.

$200,000 purchase price (it is worth about $35,000 more, and is in poor condition).

He offered to pay $2000 per month, this would cash flow roughly $850 per month. $2000 deposit

The first year would be a one year lease, paid in full using funds from the sale of the house. He will still have a good chunk of change left.

The house certainly has some issues, I’ve toured once. I will have it discover any BIG issues that I can’t see with an inspection. But let’s assume it’s ok.

At first glance, it’s seems like an awesome deal. Even if he bugged out after a year, I rehab and recoup major equity. I know the neighborhood, and it’s a sold investment at $200k as is. And with a year paid in advance at a solid cash flow. What more could you ask for?

So what am I missing here? I certainly don’t have the experience most people reading this will.

Thanks for your input!