I would think that if you structured it such that your buyer paid the servicer, who paid you, who paid the servicer, who paid the original note, you could feasibly still take the deduction.May want to bring Shawn Watkins in on this...No tax/legal advice.

Jake, can't follow the link, but without reading it, I can see the public purpose, however getting between a lender and a borrower may have some legal issues that they may not be able to afford to fight.

Here is a website that has great information on what these two documents contain http://www.nolo.com/legal-encyclopedia/llc-operating-agreement-30232.html.

I would like to know if there is anything i can do legally to make his life miserable while this is going on?

Anyone see any issues with this situation from a legal or contractual point of view?

A big problem I see is people exchanging trying to use their attorney or real estate broker to hold the funds.With a few exceptions all of these are considered disqualified parties:A close family member or a controlled corporation,partnership,or trust.OREmployee,attorney accountant,investment banker or broker,real estate agent or broker.If you use these people you can get disqualified from the exchange and create a taxable event.You have to use a proper QI or years later you can get a nice surprise from the IRS.Some clients have asked me and I tell them they need to place the funds and the whole process with a proper QI.No legal advice

You must have it in writing and legally binding.

You may want to consider going to a legal services that will prepare the deed for you, for a few hundred dollars.

It is one important tool in the credit repair tool kit.Dan*Disclaimer: Not to be construed as legal advice.

(assume that I'd be able to get qualified for the loan and that it would be "reasonable" to be able to pay back the 40K in the time specified)after re-reading, i assume the investor would need to be a lienholder from the beginner under any circumstance...but is that even possible, or would I have to buy the house "with" the investor, which i'd rather not do...also, do not dwell upon the legal details of the arrangement, i have people that I could do this with on a verbal contract not to mention a seperate written contract that protected their investment+interest in the event I sold the property for a gain...I'm much more concerned about the actual numbers/percentages and how realistic this proposition is from an investment standpoint, not a legal one..