Strategy or advice for inherited property

[Laine Furukawa]

Hi BP!

I'm asking more for a friend who will be "inheriting" his grandparents property (or in this case more debt).  I say this because he cannot sell the property which also is in need of repair and he has to pay out his siblings (brother and sister).  Not really inheriting if you ask me.  My initial thought was to have him arrange a way to just deal directly with his siblings in terms of payment.  I was thinking rather than take out a loan that would require 20% down just to pay his siblings a lump sum -- maybe fix up the bare minimum, rent it out and arrange a monthly pay out figure to his siblings that could still allow for him to cash flow.  He would essentially make his payments to the siblings his mortgage (interest free) and rent it out at a figure to take care of insurance, taxes and possibly even cash flow depending on the numbers.  Of course, there's always the option to pay off the siblings at a higher rate and just break even having the house pay itself off.

The other side to this story is that he's currently paying a mortgage for a townhome he bought maybe 3 years ago. So, his initial thought was sell the townhome and use the money to pay the down on the loan as well as his siblings for the inherited house and use the the rest for repairs. My thought is that if he sells his townhome he'll get taxed and why not find a way to keep both properties? This is an exclusive opportunity that only he can have through family and I believe he needs to leverage that. Of course, there's a lot of variables and what if's in this scenario as siblings may want the lump sum, etc. The inherited house also needs repairs done and I was thinking either refinance his current townhome if it makes sense or maybe even pull a HELOC on the townhome to use funds for repairs. I know there are downsides to HELOC's (variable interest rates) and would just add another payment that would take out of your rental income, but if he's got no income for even the repairs to get the house in rental shape then this could be an option.

Any strategies, creative financing ideas, or advice on how to turn this opportunity into a potential positive investment would be appreciated.  The guy is like a brother to me and he's a great father, husband, son and friend.  I truly want the best for him and his family.  Thank you + much Aloha in advance!

Laine