Deadbeat dad or investment opportunity? Need advice.

[Jake M.]

Let me begin by stating that I’m by no means a professional real estate investor but I’m looking to take my fist steps in building cash flow/appreciation as soon as physically possible.

I'm interested in getting my toes wet in the world of REI and I believe I can leverage my experience with construction in this career.

* I need advice on whether or not an opportunity to help a loved one refinance there home is an investment opportunity or a total red flag. A member of my family has fallen on tough times and cannot keep up with there current mortgage payments. This person would like their monthly payments to be in the $500-$800 range but with a recent close call with having there home foreclosed on, along with the fact that this person doesn‘t have a steady paying job (small business owner) to maintain a mortage over $1000 a month, they’ve reached out to me in an effort to fix the problem.*

*Keep in mind that in order for the homeowner to get there mortgage payment down to a reasonable amount, the length of the loan would be astronomically longer than most, probably 40-50 year mortgage. *

The home in question is worth about $125k currently & has about 50k left on the loan. The home is by no means perfect and there’s definitely a lot of opportunity to up the value with the right work. The terms of the hypothetical deal go a little something like this:

(1) Appraisal of the home, (2) refinance home and work in another 20-50 grand into the deal to renovate, after renovations are all said and done this homeowner believes that the home will be worth at least $230k. So we're looking at about a 100k loan split between the two of us on a, hypothetical, ARV of $230k.

Now this person is asking for two things in particular: 1. for me to sign on the loan with them due to my credit/stable income & (2) Sweat equity in the form of helping out with renovations that were financed.

This is a childhood home so the homeowner would likely live there for a few years after the renovations are completed. The homeowner has agreed with me to write in a clause to the contract forcing him to buy my equity position out over time or pay out a lump sum after a certain period of time.

I feel a bit of uncertain about the deal due to my inexperience in real estate investing but I would really appreciate any insight & advice I can get.

I can see how this is an opportunity for some good appreciation, but if i can’t get my hands on that cash until the sale of the home/or until the clause kicks in, how will this deal benefit me?

*** My question/concern is how will this affect me moving forward in the purchase of my own home in the future if the homeowner doesn’t decide to sell the home soon after renovations?***

Thank you to all who took the time to read this and if I’ve left out important details please let me know and I can provide.