Anita is 80 years old and lives alone with her dog, Minnie, in a 1,500 sq. ft. 3-bedroom, 2-bath home she has owned since 2004. In recent years, she has endured several heartbreaking losses—her husband passed away three years ago, and her daughter died of cancer two years ago. Anita’s health is now declining.

About a year before her daughter passed, Anita took out a Home Equity Line of Credit (HELOC) to help cover medical expenses. She currently owes around $73,000 on the home, which would be worth approximately $265,000 once fully renovated. Her current monthly PITI (principal, interest, taxes, and insurance) payment is $742.

We estimate that the home needs about $50,000 in renovations. In its current condition, it could likely sell for around $210,000. The property is located in a highly desirable area with excellent schools, and homes in the neighborhood typically sell in under two weeks.

Anita doesn’t want to leave her home, but feels she may have no choice. When she took out the HELOC, she believed it would be included in her existing mortgage payment. Unfortunately, she didn’t realize it was a separate monthly obligation. As a result, she has fallen behind, now owing over $14,000 in principal, interest, and penalties. The home recently entered foreclosure and was scheduled for auction earlier this month. Thankfully, Anita found an attorney who helped her file for bankruptcy, which temporarily stopped the auction.

If she proceeds with Chapter 13 bankruptcy, her new monthly payment would be approximately $1,100. Since her only income is a $2,300 monthly Social Security check, this would leave her just $1,200 for all other living expenses—a tight and unsustainable budget, which is why she’s considering selling.

Our Proposed Options

After meeting with Anita, we identified three potential solutions:

1. Cash Purchase
   Offer: $149,000 cash

   • Estimated renovation cost: $50,000

   • Target resale value: $265,000 (75% loan-to-value)

   • We cover her closing costs

   • Anita would net approximately $76,000

   • Our estimated profit: $45,000, assuming projections are met

2. Traditional Listing

   • List price: $210,000 “as is” through our brokerage, Real Equity, Inc.

   • Commission: 6% (approximately $12,600)

   • This option might yield a better financial return for Anita, but requires finding a retail buyer, comes with financial, appraisal and inspection contingencies, and may take time for which Anita may not have

3. Subject-To Purchase with Leaseback

   • We take ownership of the property “subject to” the existing mortgage

   • We pay off the $14,000 in arrears and resume her $742 monthly payments

   • Anita remains in the home, leasing it from us for $900/month

   • Her bankruptcy is dismissed, allowing her to stay in her home indefinitely

   • Our monthly cash flow: $158

   • Over five years, we would recoup $9,480 in rental income—about 68% of our initial $14,000 investment

   • With 3% annual appreciation, the property could be worth $307,000 in five years

   • After renovations, our projected net income would be about $250,000

Anita’s situation highlights why real estate investors should think beyond traditional bank financing and standard sales. Creative strategies like subject-to deals and leasebacks not only help homeowners in distress but can also unlock substantial profits. By exploring alternative solutions, investors can turn challenging situations into win-win opportunities with strong cash flow and long-term appreciation. 

Whether through a traditional sale, a creative finance strategy, or a subject-to arrangement, our goal is always to find solutions that work for everyone involved. In Anita’s case, we didn’t just look at the numbers—we looked at the person behind them. And that made all the difference.

Real estate has the power to generate wealth—but when done right, it can also change lives.

I will keep you posted on which path she chooses.