Advice Needed, Lots of Equity but unsure of next step

6 Replies

Hello everyone,

My mother and I are considering our next move but do not know the best way.

Properties owned:

4-plex: Value $1.15 million. $530,000 owed at 4.25%, $4000 monthly payments over 15 years. Title: Mother and myself

4-plex 2: Value $1.15 million. Owned free and clear. Title: Only my mother is on the title.

SFR Primary Residence: Value: $900k. $605,000 owed at 4.125%, $3300 monthly payments over 30 years. Title: Mother and myself

HELOC:

Can pull out $83,000 on primary residence - currently at zero balance (prime + 1%)

The problem:

I see a lot of untapped potential in 4-plex 2, which we own free and clear. We attempted to get a line of credit with Wells Fargo but was denied because my mother's income is low ($50,000/year). 

I'm personally high income earner ($100k), however, I am not on the title of the 4-plex 2. 

The question:
What is the best way for us to utilize that equity? Should I add myself to the title then get a line of credit? Should we cash out? If we cash out at 60% value, we can get $805,000. However, that amount of cash scares me into inaction. I worry about blowing all of my mother's retirement assets, even though my mother would like to invest this equity.

What would you do in my situation?

Thank you for all of your sage advice!

It is a little confusing, is it you or your mom that wants to invest. I would say it's better to cash out or even sell the property if you want to invest somewhere else for higher return. 

Not sure if you can guarantee a loan your mom applies to help solve the low income problem. 

@THANG BUI I know CA is a unique place, but without the cashflow of property 2, how would your mom maintain a 900k property and the debt service on 605k on a 50k income?  You didn't mention the cashflow on property 1 either?

Big banks are the last place you should go to look for investment financing.

You need some legal and tax advice on transferring title of any of these properties before you do anything that will cost you/and or your mom some serious money!

Mr.  Bui,

Relax. You have best of all worlds in the rentals as a hedge against the inevitable inflation circa 1975-1980's. Put your name on mom's property. It's a good estate plan action as well. When people can't sign up got 11% loans, they will still rent. 

Your welcome. 

Thank you for the responses everyone,

@Zach Liu

 Both my mother and I want to expand and invest. 

@Robert Leonard  

I forgot to mention our rental income

4-plex 1: Rent: $6800 per month, $81600 per year. 

4-plex 2: Rent: $6800 per month, $81600 per year.

It's hard for me to calculate cash flow ince we refinanced recently to a lower rate recently. Ballpark is $30000 cash after all expenses and mortgage payments.

@Darlee Sill

I agree that it's nice to have these rentals, however, we would like to expand. However, according to my CPA Amanda Han, if I put my name on the title and my mom passes away, the taxes would not "carry forward" upon her death (at least for my 50% of ownership). I plan to remove myself from the title on all properties in the future.

My disclaimer is that I am not licensed to practice in your state. I have, however practiced 34 years in the Commonwealth of Pennsylvania. If your mother passes, God forbid, how do you take succession of the property? Let me just think out loud for a moment. If you are on deed. Do you have JTWROS in your state? Have you talked to an estate plan attorney? Accountants are nice accessories in bean counting, but those that are serious about making and keeping wealth think long term, short term, and all in between. I mean no disrespect to any profession , but I don't go to a barber for brain surgery if you know what I mean. 

@THANG BUI

You would have to see what you and your mom could qualify for. I don't see the harm in you being added to her house and splitting the income so you could then make more future purchases and continue to increase your cash flow. 

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