$185,000 in equity but access denied

[Mike Hoskins]

My in laws have a home in Edgewater, FL valued at approx $185,000 with no mortgage(they paid cash 5 years ago). They'd like to leverage the home to help put money in the bank and to help my wife and I find a couple of deals which they know will help them with passive income also. They applied for a HELOC through Wells Fargo but were denied because thier only source of income is social security retirement and a little (about $60,000) in savings. Does anyone know how we can creatively leverage the equity in thier house so we can start a couple BRRRR deals and start income for them as well as my wife and I? Thank you in advance.

Mike

[Jay Hinrichs]

well frankly the banks learned there lesson ... they don't qualify.. and should not be allowed to borrow on this property.

[Jay Hinrichs]

further more i cant tell you how many foreclsoure houses I bought back in the day were the parents leveraged it and were not qualified to borrow the only qualification was equity.. gave the money to children who then went on to lose it.. so not only did the kids lose money the parents lost the house..

leave the in laws alone they worked hard for this are set with a paid for house and such..

go find a real money partner. is my advice.

[Mike Hoskins]

Jay Hinrichs They approached my wife and I. They're afraid right now as their savings is dwindling. They have enough to get through a couple more years then they don't know what they'll do. They were only able to buy it cash because of an inheritance. What you said does concern me though. I wouldn't forgive myself if something happened and they lost it. Thanks for the feedback.

[Caleb Heimsoth]

Mike Hoskins I agree with Jay Hinrichs . Has the house appreciated since they bought it?

I am guessing it has. If that’s the case what I would do is sell and downsize. Go buy something else with less money in cash. Then use what’s left to invest.

As you are in retirement or getting older as it sounds like they are it’s generally not advisable to take on more debt. You want to live in a free and clear house so you don’t have to worry about mortgage payments as you get older. Lord knows there’s plenty of other expensive things to deal with in retirement (like healthcare)

[Jay Hinrichs]

Mike they may be a perfect candidate for a reverse mortgage.. thats one avenue.

and i am not taking a personal shot at you and your wife I suspect your intentions are good.

but like you said what happens if your contractor runs off with 25k of your / or in laws money.

lots of things can go wrong in real estate. 

and most of the those scenarios i was privvy too frankly were loaning the money to the kid to buy a business that went TU  or they just spent it..  its pretty sad to see what some kids do to their parents late in life..

[Bill F.]

@Mike Hoskins

It seems like your in laws have a personal finance/ retirement problem and not a loan problem. Asking the obvious question, have they talked with a financial planner who could help them out with things like Reverse mortgages, Life Settlements, ect. 

At this point in their lives they need to invest in something that preserves capital, beats inflation, and generates some returns. Is a few BRRRs run by you and your wife that investment? 

It could be if you have been a contractor/developer for 20 years; however, if this is your first deal you aren't the best investment for them.

[Mike Hoskins]

Jay Hinrichs Caleb Heimsoth maybe downsizing would be a good option. Appreciation over 5 years has been great. Maybe they could sell and buy a turnkey multi family and that could give the the income they desire. My wife and I could help with any maintenance that arises so they don't have that burden. I do property maintenance on the side as it is so nothing I'm not used to. Great feedback from both of you. And I didn't take it personally Jay. I want to make sure I do right by them. Excellent people. I lucked out getting them as family. I'd rather you be frank with me than the flip side and sugar coat or try to scam us. I am new here which is why I asked rather than try to find someone to just outright give us money and something go horribly wrong and ruin a good relationship. I truly appreciate it.

[Royce Talbo]

@Mike Hoskins Could you buy the property from them and have them rent from you? It seems like a good property if you say appreciation was great. just rent to them to cover all your cost and use this as appreciation play to help them out. Eliminating realtors, the costs should minimal. They can then use the money to do BRRRR. They bring the money, you do the work and split 50/50.

If they dont want to do BRRRR after couple deals they have enough money to do what they want. If they want to downsize they have the money to do so, then you can sell it, hopefully it appreciated and enough principle was payed down that you can profit or keep it and rent it for market price. If they want to buy back the property they should have enough to do so, sell it back to them for the remaining principle and they pay all costs. If they want to keep renting from you they have the money to do so.
At the end of the day no matter what route they take, you will have BRRRR properties without putting any of your own money in.  

[Mike Hoskins]

@Royce Talbo Very creative. another option to run by them.Thank you

[James W.]

Might be best for them to just sell it and rent if they are later in life.  That would provide them with the cash to live off of/invest if they please.  If they decide to do neither, they will be able to live on their own longer before they decide to move in with you.

They need some financial planning advice regardless.

I'm not sure I would like the idea of trying to help family out while putting their house at risk-especially if you are not experienced.  The last thing you want to do is create more problems for them by trying the help.

[Calvin Lipscomb]

Originally posted by @Mike Hoskins:

Jay Hinrichs They approached my wife and I. They're afraid right now as their savings is dwindling. They have enough to get through a couple more years then they don't know what they'll do. They were only able to buy it cash because of an inheritance. What you said does concern me though. I wouldn't forgive myself if something happened and they lost it. Thanks for the feedback.

 You and your wife can go on the mortgage.  The skinny,  you need favorable terms for the mortgage.  Look to refinance the house with everyone on the mortgage to cover the income requirements.

[Calvin Lipscomb]

Originally posted by @Mike Hoskins:

Jay Hinrichs Caleb Heimsoth maybe downsizing would be a good option. Appreciation over 5 years has been great. Maybe they could sell and buy a turnkey multi family and that could give the the income they desire. My wife and I could help with any maintenance that arises so they don't have that burden. I do property maintenance on the side as it is so nothing I'm not used to. Great feedback from both of you. And I didn't take it personally Jay. I want to make sure I do right by them. Excellent people. I lucked out getting them as family. I'd rather you be frank with me than the flip side and sugar coat or try to scam us. I am new here which is why I asked rather than try to find someone to just outright give us money and something go horribly wrong and ruin a good relationship. I truly appreciate it.

 Horribly wrong?  That depends on the investment and risk taken.  There are  number of cash flow properties out there especially for those who can finance with 100% cash.  Look in lower cost areas of the country, factor in property manager costs, and there you go.