Help mom keep her house

[David Tower]

Hello BP,

I was hoping you pros out there might be able to give me a strategy that would help my mom stay in her house.

She owns the house free and clear but the house is very big, the RE taxes are high, the upkeep is high (inground pool) and the value of the house (approx 500k) is the bulk of her net worth. She is also living alone and is 60 years old.

She does not want to sell, but she doesn't really have enough cash to live on for the rest of her life without selling. Her plan is to sell the house and buy a condo which won't have the upkeep or all the yardwork.

Should she look in to a reverse mortgage? Are there any other cost effective options she might have to use the equity in the house to support her living there?

Thanks in advance,

-DT

[Jon Holdman]

Lots of interesting suggestions here on how mom might become a real estate investor. Is that something mom wants to do? Perhaps, but I'd guess she does not.

Nevertheless, there's a underlying point. Mom is in a weak position financially. She's 60, which is quite young. She is likely to live into her 80's, possibly into her 90's. That's 30 plus years. You say the bulk of her net worth is this $500k house. If she had this in liquid form, the 4% rule of thumb would apply. That is, she can spend 4% of her assets per year and not run out of money. That's an annual income of $20,000. A $500k life annuity would currently give her closer to $30,000 a year. At some point maybe she can also collect social security. She needs to adjust her living situation to live on that income.

Or, she needs a job. I'm assuming she doesn't have one, but there's no basis for that assumption. If she does have income, shes in a better position. If she doesn't, then it may be disheartening to suggest she get one. But the choice might be to get a job, be supported by you and your siblings, or live on $20-30k. The reality is that if this house is her only asset, she's not very well prepared for retirement.

Without better understanding her situation and goals it's impossible to give good advice. But based on what you've said staying in this house seems difficult.