Does this deal make sense?

[Kellen M]

Hi, my uncle and his partner bought a rehab property with cash for 50k, rehabbed it and now its worth around 120k. I'm looking for a rental property, so they have offered me this deal:

Sell it to me for 100k. So they will increase the loan for 110k, so that 10k goes into my pocket. Give me 5k each of their profits because they couldn't find anyone with good enough credit to purchase the property. And also put a tenant in the property for me. I think the area rents for 1200/mo.

So "supposedly" I will end up making 20k just for purchasing the property and potentially have a tenant in it paying around 1200/mo.

Thanks for all responses!!

[J Scott]

There's not enough information here to evaluate the deal, but one thing is clear -- you're bordering on mortgage fraud by increasing the loan amount above the sales price and pulling cash out.

If the cash-out part of the transaction is not disclosed on the HUD (or made clear to the lender), you could potentially face some serious legal issues if you get caught.

As for the deal, what are the anticipated rents? That information will go a long way towards knowing whether the property will cash flow and if so, to what degree.