Possibly Flipping an Elderly Neighbors House

[Patrick Durham]

I live in a subdivision that was built in the 70's.  Four years ago I purchased a house that was in rough shape.  I ended up doing a total renovation, it turned out great and I have a lot of equity.  During that time I built a relationship with my neighbor (widower) behind me.  After some medical issues she decided it was time to move into a retirement home.

I don't have the money to do a full purchase, but I would like to work out a deal where  I renovate/modernize her home (it is the same layout as mine), then when it is sold I get a percentage of the profit.  I'm fairly certain she does not have a mortgage on it.  My plan:

1. Get current appraisal

2. Renovate the home

3. Sell it - I would get back what I put in + a percentage of the final price minus the original appraisal 

Example (60% to me):

$175,000 - Original Appraisal

$35,000 - Cost of Renovation

$275,000 - Sale Price (after paying all real estate fees)

--------------------------

$65,000 - Total profit

I would then get $35,000 back for materials then $39,000 of the profit.

My questions:

1. Would it be reasonable to approach her with the offer.  I would include her daughter in the conversation just to make sure the family is ok with the situation. 

2. What would be an appropriate cut of the profits to take?  Would 60% be too much, too little?

3. How do I properly protect myself in the transaction?  Add myself to the title via quit-claim?  Standard contract?

Thank you for the information.

[Valerie Hiscoe]

Maybe you could offer $185k with vendor financing with payments not starting for 6 months. They (family will want to control the decision) would make an extra $10,000, you wouldn't have to qualify for a $185k mortgage, you might be ready to sell before your first payment is due, and although you'll pay her more for her house (benefitting her), you'll make $55,000 instead of $39k. And you'll hold the title which would make me more comfortable.

I'd find a real estate club or try through this site to find a lawyer who specializes in investment real estate and not do anything without their blessing. Before you spend the money on the consult, run it by the neighbours to see if they are willing to sell to you if you could pay $10k more but they wouldnt receive the money until later.