Home Equity- best option

3 Replies

hello everyone, 

My mother paid off her mortgage this year and we are looking for ways to increase her monthly income. Someone brought up the idea of taking out a home equity loan. My question is, what is the best option: buying a cheap home and flipping it or purchasing a multi unit and collecting the rent. I am aware that she will have to pay a monthly fee on the loan and keep up with the upkeepings of the multi unit. I'm just trying to find better options for her

@Modesta Lopez

If she's over 62 and has a decent amount of value in the home, a reverse mortgage is probably the perfect solution. It's pretty much made for what you said: increasing her income. It essentially turns a portion of her equity into an annuity that can pay her every month for many years or the rest of her life.

If you do decide to check into an RM, make sure to work with one of the top lenders in the business who fund a significant number of loans every month. You can find a list of lenders on HUD's website.

@Mark F. My mother is not 62, she is 44. Will this be an issue?

Hi @Modesta Lopez I would say renting out a 3 or 4 unit building could generate some additional income; but with the additional expenses that come along with it (maintenance, insurance, taxes, etc) and the costs of financing it (home equity, mortgage, etc) it's more of a long term strategy to build towards the future. The flip is still a 4-6month plan and doesn't seem to fit your objective of an increase in monthly income, without being done on a larger scale.

If you/she has the means to get a mortgage on a 3+unit multifamily it may be the way to go. I'm not sure the home equity would get you there, not to mention she now owns a free-and-clear home which is huge. 

There's other options out there but I gave my response based on the two choices you provided.

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