Sale/Leaseback 'recharacterization'
I'm in California.
Lots of laws here about buying during foreclosure. Sale/lease back to 'tenant' is frowned upon because of court's perspective of recharacterization as a loan. But here's an idea I came across and wondered if anyone has an opinion on it:
"If the homeowner is not willing to be just a tenant and has significant equity in the property, offer a partnership arrangement wherein the partnership will own the property. Your contribution to the partnership is the money to cure the back payments due on the loan. The homeowner's contribution is the equity in his home. The partnership will lease the property to the former homeowner for market rent. If he defaults on the rent payments, the partnership evicts him. The former homeowner still has a partnership interest, but he does not have possession. At that point, you can buy him out of the partnership"
Thanks
i know there here in Colorado (denver) an investor just got in big trouble for doing this. Having them quit claim the interest over to him and then he leases back at an inflated price. why would you want to lease the property back though??? if they can't pay the bank why are they going to pay you?
The difference here is the PARTNERSHIP leases it back to him. It would be at fair market rent, so as to further avoid problems.