In-Laws want to retire in 2 yrs, but may not make enough..

[Courtney T.]

My In-Laws are getting close to full retirement (he’s been retired 3 years and she has a couple more to go). Their income is not what it needs to be and they’re looking for additional streams. Keep in mind we live in the Bay Area (East Bay)

I’m turning to my friends at BP. We’re evaluating a few strategies/options for them to get into a smaller home and rent out the larger home with a tiny mortgage. I’m thinking they could get at least double what the payment is by renting it out...

1. Getting a hard money loan to cover the purchase of the new home. Seems challenging and costly. How would pay back happen should something happen in the meantime??

2. Borrowing against her 401K - can you do that nearing retirement???

My preliminary research is just that, preliminary. If you have any other tips advice outside this perspective please dish that out too!

Thanks all!

Courtney

[Arlen Chou]

@Courtney T. if they own their house and their rates are low, they should protect that loan. Don't let them refi into a higher rate just to get a little cash out.  As @Michael Strachan has suggested, a HELOC would be a great tool. If they have the lot size available, I would personally do a HELOC to pull cash out and do an ADU conversion of the garage or maybe even build an ADU on the lot. Depending on the City, permitting is straight forward. The best part is that they COULD protect their property tax base, or at least a part of it, to keep payments low.