Equity Rich Cash Poor! Need HELP~
Hello,
I know two retired families in my group, sitting on $3M+ real estate, free & clear. They living in it. Very humble, hardworking, blue-collar family and they happen to grow up in a part of California that is highly desirable now. So their not-so-good place is wroth more than 3 million.
They have no income, so they can't refi or HELOC to use their equity for their personal expense. My question to this forum is, what's the best practice here? How can they tap into their equity and live a normal life? I feel sad when I see them stressed out about money all the time.
All suggestions are welcomed :)
Thank you.
Hey Ruchit,
A few ideas come to mind.
1. Would be to sell and perhaps down size. I've had some older relatives go this route. They sold their home and retired to a very walkable 2bed 1 bath apartment in a neighborhood they liked. They used the profits to fund their life style.
2. I know this is a somewhat controversial product but a reverse mortgage is an option for folks who want to remain in their home and age in place but need a source of cash flow.
Hope this points you in the right direction.
I hear you. Appreciate your insights. I will look more at the reverse mortgage on Google.
The husband is a pretty emotional person, he kept saying that all the memories of his kids are in that house, and he would not be able to sell the place!! So, I am staying away from suggesting that, otherwise I will lose the friendship.
Any other ideas are welcome. At least for now, I am trying to have him sell at least one of his land, also worth more than a million. At some point, I was willing to cosign for HELOC to have him some cash, but not sure, how much risk I would be talking on my name in return!
@Ruchit Patel, too much risk in that, especially when he is an emotional person. You make suggestions and he chooses his path.
Quote from @Kerry Baird:
@Ruchit Patel, too much risk in that, especially when he is an emotional person. You make suggestions and he chooses his path.
Worst case scenario, I can take control and sell one of his property to pay lender, right? I mean, if I co-sign, then does it give me any power to sell one of his land there to recoup money and rest goes to him? How does that work?
or literally he can choose to never pay and my credit gets in trouble?
@Ruchit Patel I don't know about CA but in Oregon a senior can defer their property taxes. If his property is that valuable his taxes must be huge. The person has to qualify and be able to have the where with all to maintain the paperwork.
You are talking about cosigning then worrying about taking his property? He has kids isn't this their problem?
Quote from @Jeff S.:
@Ruchit Patel I don't know about CA but in Oregon a senior can defer their property taxes. If his property is that valuable his taxes must be huge. The person has to qualify and be able to have the where with all to maintain the paperwork.
You are talking about cosigning then worrying about taking his property? He has kids isn't this their problem?
From my 6 years of living in USA, my observation, I have realized that in American norms, parents' well-being in not their kids' responsibility. But yes, he has many kids and grand kids. Guy is 65 and he chopped woods for almost 50 years, still does.
He has been taking 14%+ hard money loan for last few years! Pretty insane, right!
One question to you all: He bought huge property, 3 lots, together, one title. On one lot, he has his house. Rest are empty. What is the legal way to separate out one lot, and sell it for $1M?
Would wells-fargo allow it? he still has small debt left on the house.
Almost no lender will allow you to sell the lots separately if all three were pledged as collateral.
He will need to take a reverse mortgage or face the reality of his situation. His options are limited, but clear. He just doesn't like the options.
This is actually an interesting situation that is highly educational for anyone who reads it. The people involved have a particular amount of assets(equity) and no or negative monthly cash flow. This is simple math to figure out when they become destitute unless they change their cash flow.
I would strongly recommend not consigning any loan/HELOC for this property. You would only be putting yourself at risk while having no control of the property itself.
I am with you Richard. I agree with all the people here in this thread.
I will learn more about reverse mortgages and propose to them. Also, I have heard about companies that give out cash for partial equity in the house, is that a property route to consider?
Quote from @Ruchit Patel:I think you are referring to companies that do equity sharing. Those could be an option. I know when I looked into it, out of curiosity, there were many restrictions/rules/conditions. Best of luck to your friend!
I am with you Richard. I agree with all the people here in this thread.
I will learn more about reverse mortgages and propose to them. Also, I have heard about companies that give out cash for partial equity in the house, is that a property route to consider?
@Ruchit Patel definitely reverse mortgage or an asset/equity based loan! As a direct lender, we have all of this at Movement Mortgage!
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Quote from @Grant Schroeder:
@Ruchit Patel definitely reverse mortgage or an asset/equity based loan! As a direct lender, we have all of this at Movement Mortgage!
oK, let's talk. I sent you a message with my phone number.
This is a wild idea but could he use the collateral in his property here in California to buy cash flowing properties in another state to generate some income. I always say a million in equity plus 5 bucks still wont buy you a cup of coffee but there has to be a way. So I am assuming he makes money from wood cutting but claims no income to the IRS and FTB?
Quote from @Craig Parsons:
This is a wild idea but could he use the collateral in his property here in California to buy cash flowing properties in another state to generate some income. I always say a million in equity plus 5 bucks still wont buy you a cup of coffee but there has to be a way. So I am assuming he makes money from wood cutting but claims no income to the IRS and FTB?
at 3% interest rate, that would be amazing. At 7% interest rate, doesn't work. Number won't add up. If you know something, let me know. Thanks.
Quote from @Ruchit Patel:Why do you say that any deal can work if you buy it cheap enough. Your ROE may be low but you can still get an infinite ROI
Quote from @Craig Parsons:
This is a wild idea but could he use the collateral in his property here in California to buy cash flowing properties in another state to generate some income. I always say a million in equity plus 5 bucks still wont buy you a cup of coffee but there has to be a way. So I am assuming he makes money from wood cutting but claims no income to the IRS and FTB?
at 3% interest rate, that would be amazing. At 7% interest rate, doesn't work. Number won't add up. If you know something, let me know. Thanks.
I'm not sure how you are connected or what you have to benefit here, but none of these situations end with him getting everything he wants. He has to figure out what he wants most and live with the consequences. Borrowing, reverse mortgage, any other way to tap into the equity probably won't end well but let's him stay in the house. Selling solves the money problem but makes his life worse (as he sees it).
It sounds like he loses (sells) the property now on his terms or loses it later on someone else's. Maybe he can kick the can long enough to make it worth it, but there's no magical scenario where he gets everything.