I’m trying to help my mom as much as possible without getting financially involved.This is all in rural Ohio.Main objective, aquire $50,000 cash and refinance other commercial properties
Here’s as many details as I can give confidently without mixing it up since I don’t have the docs.Any help in solving any of the issues at hand would be great!
- 1.There is a trust involved.It was under my grandmother’s name with my stepdad and mom as trustee.Most deeds owned are in this trust with mortgages under either grandmother(Whom passed away about 10 years ago) or stepdad(whom passed away last year). ..but might also be commercial mortgages with them as personal guarantors.
- 2.Before my stepdad passed away he paid cash for a complete reno but the deed to this property is in my mother’s name personally.
- 3.She is bleeding cash without his income to try to fix this property up and do a couple major upgrades in some other properties (furnace, AC).
- 4.Her intention is to fix part of this property up and have my youngest sister live rent free and rent out the other portion.The property is free and clear and she has invested quite a bit of money to try to get it in liveable condition but she is starting to get crunched and her credit score(roughly 650 now from 715) is coming down because of the credit she is using to try to complete the job.Are there renovation loans for this?203B are typically for purchases I believe and for personal residences, but if her daughter lives there does that help at all?
- 5.She is trying to get $50,000 total to try to fix up the reno project plus pay for the expensive repairs on the other properties.
- 6.She would also like to refinance the other properties which may be under commercial loans but deeds are in trust.One is over 12% and others I believe are over 8%.
- 7.Her personal property has a mortgage for $130,000 and is showing about that value on auditors website + corelogic/Zillow.However, they completed gutted and rehabbed their house many moons ago and turned it from a 3 bedroom 2 bathroom church house into 5/6 bedroom 4.5 bath house.I believe theres plenty of equity to be found here but she's afraid if she gets an appraisal for HELOC either she will waste money and it will come out to what the internet says or the county will reappraise the house and raise her taxes significantly which she can't afford right now.
- 8.She has a promissory note from a lawyer my stepdad lent $50,000 to some time ago.The note was due for $83,000 balloon in 2011 but he has only paid $5,000 on it.I don’t know the full details of this but she is supposed to send me a copy.
Thanks for any help...this is pretty complicated, especially since I don't have the paperword to really lay down the exact details. My mother is stressed out of her mind and I think she's starting to go into a shell to avoid the issue at hand rather then let me help her solve it!
Long problem but any help with any of the issues would be awesome!
Mom is bleeding cash but she thinks her youngest daughter should live rent free? Hard to help that sort of thinking IMO.
An appraisal, or a HELOC, on her personal residence can not possibly affect her taxes. She may need to sell some of the properties. As Steve suggested, reality has to enter the equation.
Thank you both for your time reading the situation...i agree about the reality check!
@Joshua Springer I would talk with the lawyer about getting the note paid off. Sounds like he is taking advantage of the situation. Is there anything backing this note as security, can you file a lien on his house? Are there late fees? This guy is taking advantage of a widow, not cool. He needs to put down some money and start making payments, if he does this you could get your 50k problem solved. If not you could sell the note as non performing but would likely only get 5-10c on the dollar depending.
Your mom also could sell the property that she wants to your sister to live in and your sister, assuming she has good credit, could do a 203k loan to rehab the property. If she doesn't want to transfer the whole property to your sister, I don't recall your mentioning what kind of property it was, she could transfer it to a new trust or LLC and sell part of that to your sister and then your sister might be able to pursue a loan.
I would also talk with a local banker about refinancing some of your mom's high rate debt, just that might free up some cash-flow and that always helps.
As a last resort you mom might have to sell some property to get funds to bring the the remaining holdings on line and up t speed.
Honestly, the answers given thus far are the best in light of the absence of information in the post to give better direction.
Let me add some additional thoughts to those already here:
In regards to the Attorney Contract. Get a copy of it. Determine if it is secured or unsecured. If the contract is unsecured, contact a debt collection company that works in the state of the contract. Typically you can make an arrangement with that debt collector to run the administration of the collection for around 35% of the gross proceeds. Since this may require the Collector to first pursue a judgement, that is not all that bad of a deal. In many states there are attorney's who do this as a matter of practice. In some cases, I have seen small fees requested to board the contract with them around $900. Again, worth it. When you get the contract and have some more details feel free to ask for more help here (barring sharing information which my be considered confidential).
The trust itself also needs to be looked at. Since the assets are held in the trust, any equity pulled from those assets must follow the direction of the trust to the beneficiaries in terms of how it is remitted. It is not clear if she even gets any remittance from the trust right now as additional income. If she does not get any income from the trust, then frankly the amount of interest paid to support the assets in the trust is not her highest priority since reducing said interest would not immediately benefit here in any manner.
In regards to the Trust and the assets it holds. It is not clear, as stated, what type of property we are dealing with. The property type, income generated (if any) and total due secured against those assets is relative to give feedback on those. The interest rate on the loan at 12% is high. Makes me believe that is either not an institutional loan or the property is risky like land or industrial. Again, you would have to look to the trust as to how those assets are supported form the trust and the trustees. Refinancing those assets would likely require one of the trustee's being able to afford, even in an off set manner, the assets in general. So, it sounds like your Mom is already strapped, so it seems she would not help qualify any new loan.
The Trustee could ask for relief from the Mortgagee and try and get a reduction in the interest rate. I would feel more comfortable about this option if you posted more details about the assets, as requested above.
Your mother's Primary Residence. Do you and your mother a favor. TAKE THIS OFF THE TABLE. I have seen time and time again where in these situations folks turn to their Primary Residence and it get's put on the line and when it all goes bad, boom, there goes the house. Not the place you want your Mom to be at this point. Just remove it from any and all future discussions here.
Last, this Fee and Clear property. I am concerned that this property is sucking up money and the repair list is not getting shorter. $50,000 in repairs is A LOT OF MONEY. This property, in the state of Ohio in a rural area (even in most urban) better be a large property and worth a bunch of money. Otherwise, somebody is just off on a spending spree with no real idea what they are repairing and why. If your Mom, per your post, is already drawing down on credit cards and that is dropping her credit and you know a relative score differential, then I am also inclined to think she is out hunting for New Credit. Stop the madness. Gas on Fire.
Sit down with here and see what is being put up for repair. Is this property hospitable right now? Work backwards from REQUIRE repairs to WANTED repairs. Some of the repairs here may make sense to pass off onto Sister since that may not mean a monthly demand for payment but can be managed and saved up for and then deployed. Seems like a more make sense approach to the desire. In addition, perhaps seeking a handyman type tenant might help with some of the overall repairs in general. Perhaps you discount rent to get the handyman.
Which brings me to the next issue with this asset. If it is capable of supporting tenants, why does it seem like it does not have any now? Get a tenant in there if you can and get some cash flow going. If you have to discount it, then do that. Cash is tight, stop waiting for it to loosen while you could be collecting SOMETHING instead of NOTHING.
If this asset is not capable of occupancy, get rid of it. Now. If it is capable of occupancy, get it occupied. Now. You need cash. Stop the madness.
My last and final suggestion goes back to the trust. It may be possible, per the terms of the trust and at the discretion of the trustee(s) to be able to borrow from the trust itself, provided the trust has liquidate assets or it's equivalent. Something to look into. It may require the trust to liquidate an asset(s) which may have to be treated a certain way.
For all these ideas around or about the trust, you may want to speak to the trust attorney to ensure you are compliant with the trust documents and state law.
I have to agree with @Dion DePaoli don't borrow money against the house. Your mom needs a place to live and borrowing against her house is a huge risk for an older person.
Thanks for the thoughtful posts...I know it took a long time to read and reply to this situation. I really appreciate it. I've taken all your advice and will hopefully be able to help her climb out of this situation.
Thank you again!
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