Dad forced into retirement early with mortgage & struggling

Matt Whitney · 2020-12-21T14:41:36-08:00

So my dad is currently 55 years old and has been unemployed for the past 8 months. He's been in the hotel industry his whole life but was let go from his job back in May and is struggling both financially and mentally as a result.The problem is just like everyone else in his position, he wasn't prepared. He currently lives in the Florida Keys and the mortgage to his home is roughly $3000 a month (from what he told me). This is a lot of money for him and he can't pay it all. As a result, my stepmom is working 7 days a week to be able to help him keep up. As a result, this is putting immense stress on her and the overall relationship.I called my dad the other day asking about what his plans were for the holidays and he told me he was depressed. Not what you want to hear from your dad. I know my dad is a grown man and can figure stuff out on his how, but he's not business or financially savvy enough to do some creative real estate deal, especially now that his head isn't in the right place. This home is really the only asset he has and would do whatever it takes to stay there. (Probably not possible IMO)I was hoping that the BP community could offer some advice for my dad. The home is worth close to $800k, he has $325k left on the mortgage and can't refinance because he's unemployed. I want to say there are roughly 20 years left on the mortgage (If I could guess). Putting the home in my steps mom's name isn't an option.I'm starting to get into real estate myself so I don't know what other options he has other than sell the property. Are there other financing options where he could sell the home to someone and receive a check every month and stay in the home? In terms of job prospects, things are grim due to his age and job market overall. Did I mention, he sued the company for firing him due to age discrimination? fun stuff I would be super appreciative of any guidance on this matter. Thank you in advance

Dan W.

Member since 2020 · 5 posts · 9 votes

5y

First of all my heart and my prayers go to you and your family. I commend you for looking for guidance in order to help your family. I will lay some options out there that you may or may not have thought about.

1) Your mom and dad can isolate a portion of the house and AIRBNB it out. Like the basement. See what comparable rents go for on airbnb and crunch the numbers but this may help cover the mortgage. I only say this option because if your dad is stubborn and insists on keeping the house, he is going to have to do something like this. There is no magic fairy that will just pay his mortgage for him, unless we are talking about the magic airbnb tenant.

2) If he wont rent out a portion of the house, he can look into a reverse mortgage. I hear that the devil invented reverse mortgages. Basically what it is, is some bank will pay your dad a monthly check, he gets to live in the house and after the end of 20-30 years, the bank owns your house and he is homeless. This would be an option if he wants money in his pocket and to stay in his house and kick this can down the road for 20-30 years. Also in this scenario, there goes your inheritence.

3) You need to sell the house. Mathematically you will drown without the income to support the house payment. Sell the house, get the equity and downsize/rent until he can get back on his feet.

I wish I could wave my wand and make the troubles go away, but those are some options to at least get some ideas flowing. I would NOT do a reverse mortgage, or recommend to my friends/family, but everyone's circumstances are different and I am just putting it out there.

9 Reply

Todd Rasmussen

Rental Property Investor · Clarksville, TN · Member since 2016 · 1k+ posts · 1k+ votes

5y

@Matt Whitney

Anyone in the family willing to cosign? If your step mom is already helping out, then maybe just formalize that in a lease? If he rents to her then that income she is already providing could potentially help him refinance? Frankly, barely being able to to make the house payment on month nine and looking down the tunnel to 20 years is a pretty big hurdle. Hopefully he's going to get back into the employment pool once things recover. Doesn't sound like his income/expenses are in balance enough to be actually retired; changing the expenses portion of that equation is the most effective...

1 Reply

Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

5y

Try to put it in context for him. How many unemployed/retired people can afford an $800k house? I understand they may want to live where they live. But imagine selling and buying an above average home for $400k. Suddenly they have $3,000/mo extra tax free.

9 Reply

Account Closed

Lender · Fairfield, CT · Member since 2018 · 183 posts · 82 votes

5y

If your dad were to look at a reverse mortgage, he would not be kicked out of the home. He would be able to live in the home until he died as long as he pays his taxes and insurance. With that said, this may not be the best option, compared to selling the home. I just wanted to point that out with a reverse mortgage, your dad would not be kicked out of the home.

2 Reply

Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

5y

I assumed he asked for and hasn't received forbearance? An 800k home in the florida keys there has to be a way to do Short term rentals. That is his best bet and coming from the hospitality business he may well suited to the task if he puts his mind to it. He has to consider this is a choice of losing the house or giving up some of it. A 330,000 mortgage at todays rates is maybe 1100 / month so a refinance is a good option too if the taxes are not exorbitant. Run the numbers and verify the loan amount. Is there a co-signer. Could he manage the smaller mortgage?

2 Reply

Derrick Dill

Investor · Hawaiian Gardens, CA · Member since 2015 · 308 posts · 386 votes

5y

There shouldn't be any reason he's not eligible for Cares act forbearance. His situation is exactly who they made it for. Put the payments on pause and figure it out in 6 months, added to the end of the loan

4 Reply

Matt Hurley

Ypsilanti, MI · Member since 2018 · 189 posts · 127 votes

5y

Very sorry to hear this, hard times for a lot of people :(

Unfortunately, a reverse mortgage is not an option (as recommended by others) as these are only allowed for those 62 years and older. To me it sounds like forbearance is exactly the situation your dad needs. You can go into it for potentially up to 12 months, hopefully by which time he will have been able to find another job to tide him over. If the worst case scenario happens and he doesn't find a job by the end of the 12 months, my recommendation would (unfortunately) be to sell. As emotionally charged of a scenario this could be, the worst thing could be if he went into foreclosure. If he got out while he still could, he'd end up with roughly $400k in the bank, which can go towards a down payment towards another home. If he goes into foreclosure, he gets nothing.

Obviously the goal is for him to keep the house, but if there aren't any other creative options, don't let him chase it down the drain like many people do. He'd be better off getting out before that point.

1 Reply

Randy Bloch

Rental Property Investor · Minneapolis · Member since 2019 · 257 posts · 244 votes

5y

@Matt Whitney

I second the forbearance and Airbnb combo. This could help him get back on his feet. Since he was in the hotel industry maybe he could take on some other Airbnb work with other owners? Property manager or handyman? Airbnb as to be big in the Florida Keys?

1 Reply

Matt Whitney

OP

New to Real Estate · Chicago · Member since 2020 · 6 posts · 9 votes

5y

Thank you to all! I really appreciate you spending time to respond.

I think the biggest issue is my dad getting a job so he can at least have some income and be able to refinance. From what he's told me, banks cant aren't that flexible when you're unemployed.The house is almost a 2nd thought but also a big issue obviously. I forgot to mention that he tried getting his real estate license but failed the test 3 times which I found out from my sister in a later conversation. I wish getting back on his feet was as easy as that, but at his age, with the ****** economy and job market, it's not looking promising.

I'm under the impression he's not going to find work there and he's going to have to move somewhere cheaper.. I just don't know what type of work he will find, and frankly, I don't think he does either.

My plan right now is to organize my thoughts, get all the options listed out, and have a call with him.

-I really like the idea of a cosigner, it's definitely worth looking into. I think if they can get the payments down from 3k, it would reduce their overall stress levels, like the idea of Airbnb too, any income can help at the moment. He's a really good handyman and can build anything, I will absolutely bring that up

0 Reply

Greg Moore

Rental Property Investor · Tampa, FL · Member since 2019 · 128 posts · 166 votes

5y

@Matt Whitney you’ve come to the right place for ideas. And I admire your desire to help.

My step dad was in a similar position only at the other side, meaning he was 75 and not able to retire due to too many bills. He still owed roughly 1/3 of his original mortgage (2/3rds paid down). He had car payments, credit cards, and more.

I offered to buy his house for what he owed, plus an amount to cover his debts (plus a little extra for a retirement vacation and to rehab a few trouble areas), as well as 6 months mortgage payment that I would keep in the bank as reserves.

In return, he would rent out the house for exactly my mortgage payment.

There are two things needed to make this scenario work:

1. Your dad has to gift you the equity in lieu of a down payment. This means no cash out of pocket for you.

2. His rental agreement basically needs to be a Triple Net Lease b/c you’re not setting aside Property Management, CapX, OpX.

We’re one year in and the set up is working. He is retired and happy. He autopays his rent on time and my mortgage autopays right after. He has no debt and his stress is basically zero. In fact, he was just out here to visit for his retirement vacation.

Were it not for this kind of creative deal structure, he would have been stuck working until his dying day and not enjoying his golden years. And since it was gifted equity and he pays rent equal to my mortgage, it’s really no big deal from my side. I’m happy to have done it and see him live a stress free retirement. With interest rates so low, you can probably put together a pretty sweet package that is within reach for your dad. Good luck!

8 Reply

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

5y

I'm sorry to hear he lost his job. I agree with Dan-is there part of the home that is stand alone and could be rented?

I'd also suggest they look at downsizing. $3K/month for a mortgage (that he would have had to pay 10 years into retirement) is a lot of money. Get him to look at a home that has a suite or something that is separate that he can rent out.

1 Reply

Account Closed

Investor · Phoenix, AZ · Member since 2018 · 420 posts · 388 votes

5y

@Matt Whitney I’m sorry to hear about the situation. I just wanted to point out that at 55 years old he is not yet eligible for a reverse mortgage. I wouldn’t suggest this route to anyone who has ANY other options personally anyway. I hope some of the other suggestions here will sort him out. Happy holidays!

0 Reply

John Wong

Member since 2020 · 5 posts · 1 vote

5y

@Matt Whitney I’m sorry to hear and 55 is a rough age to be caught in the middle of retirement and working life. Can they rent out any rooms to ease some financial stress?

0 Reply

Alejandro F.

Investor · San Diego · Member since 2019 · 32 posts · 11 votes

5y

@Matt Whitney, Airbnb is a strong option. As Airbnb Superhosts, we have had a great experience short term renting part of our house. It has led to having our home cash flow positive. Feel free to PM me if you'd like to discuss short term renting in greater detail. I'd be happy to share our experiences and lessons learned.

Another option is renting out rooms on a longer term basis.

I wish your Father the best of luck and I hope it works out!

0 Reply

Danny Grey

Investor · La Jolla, CA · Member since 2016 · 66 posts · 169 votes

5y

I'm seeing so many older folks who got so comfortable in the past few decades of abundance that they just have nothing saved, or what they do is being squandered quickly. I'm having to talk to my now retired and elderly mother about her spending habits and how unreasonable it is that she doesn't want to give up even an inch of her lifestyle even though it could leave her broke and hurting in the end. I hate having to do this but some people (our parents included) need to be prodded.

I agree with the AirBnB suggestion. Tell your dad to rent out a room or a sectioned off part of the house ASAP. Or depending on the home's setup, maybe he rents out the entire place and moves somewhere smaller and more manageable.

I know thats not ideal but its a LOT more ideal than losing his home and wrecking his finances. I wish you all the best!

0 Reply

Gary Mazzarella

Member since 2020 · 31 posts · 12 votes

5y

Sorry to hear this,
First of all don't panic even though this is not a good situation for anyone to be in, working 7 days per week and stressing over the mortgage and life will burn out a person fast...that I know as I worked my business for 32 years and took less than ten vacations during that time. It leads to more stress and poor decision making and not to mention the hardship it puts on the family. He has options, he just has to think it through clearly and accept one.

The ideas mentioned in the other posts seem sound except for the reverse mortgage, I wouldn't go that route. Best scenario in my opinion with the least headaches could be to sell that home and move the equity into a 400K home that is paid for in full, this will elevate a lot of stress and give him time to retool and overcome the rotten economy forced upon us.

Best wishes to all.

1 Reply

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

5y

Originally posted by @Greg Moore:

@Matt Whitney you’ve come to the right place for ideas. And I admire your desire to help.

My step dad was in a similar position only at the other side, meaning he was 75 and not able to retire due to too many bills. He still owed roughly 1/3 of his original mortgage (2/3rds paid down). He had car payments, credit cards, and more.

I offered to buy his house for what he owed, plus an amount to cover his debts (plus a little extra for a retirement vacation and to rehab a few trouble areas), as well as 6 months mortgage payment that I would keep in the bank as reserves.

In return, he would rent out the house for exactly my mortgage payment.

There are two things needed to make this scenario work:

1. Your dad has to gift you the equity in lieu of a down payment. This means no cash out of pocket for you.

2. His rental agreement basically needs to be a Triple Net Lease b/c you’re not setting aside Property Management, CapX, OpX.

We’re one year in and the set up is working. He is retired and happy. He autopays his rent on time and my mortgage autopays right after. He has no debt and his stress is basically zero. In fact, he was just out here to visit for his retirement vacation.

Were it not for this kind of creative deal structure, he would have been stuck working until his dying day and not enjoying his golden years. And since it was gifted equity and he pays rent equal to my mortgage, it’s really no big deal from my side. I’m happy to have done it and see him live a stress free retirement. With interest rates so low, you can probably put together a pretty sweet package that is within reach for your dad. Good luck!

I advise against doing this, unless you are renting the property at market value. If you are renting at the mortgage payment, it is unlikely to be fair market value. The IRS is very specific that renting to relatives below market value, makes the property a personal residence. That means you cannot take depreciation or other expenses against the property. Basically you are under reporting income to generate a tax loss, so they will expect you to pay taxes as if you are renting at market value. Talk to your tax professional about exactly what you are doing.

2 Reply

Steve K.

Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes

5y

@Matt Whitney you mentioned your pops is handy, maybe he could start doing some handyman work? I know a guy in a similar situation here who started doing handyman work and ending up making double what he made at his previous job this year. There’s very, very strong demand for anyone willing to do small jobs right now in most areas of the country. He could probably get money coming in that way very quickly with a simple Craigslist/Nextdoor add campaign (especially if he tells his personal story in the add, I bet people would be lining up to hire him) and possibly make more than he was making before.

2 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

5y

Originally posted by @Bill B.:

Try to put it in context for him. How many unemployed/retired people can afford an $800k house? I understand they may want to live where they live. But imagine selling and buying an above average home for $400k. Suddenly they have $3,000/mo extra tax free.

and depending on his basis and as long as he lived there the last 2 out of 5 years up to 500k is tax free..

if push comes to shove sell the house pocket the cash and by then the hotel industry should be on its way back

or he could buy a little air bnb for cash and run it since he has expeince in customer care.

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2 Reply

Dalila A.

Rental Property Investor · GA · Member since 2020 · 30 posts · 8 votes

5y

@Matt Whitney do research on subject to creative financing. Where you can take over the mortgage pmt. or an investor van take over his pmts and see if you can do a private money agreement.

1 Reply

Arvin K Nanda

Member since 2020 · 2 posts · 1 vote

5y

Matt, not as concerned about the house as I am with your Dad. He is at risk here. Make sure he sees a doctor and considers anti-depressants. Middle aged men (me too!) losing their jobs and possible their houses contemplate scary ideas. Please make sure his health (mental) is ok. $3000/month mortgage is a lot with no income. Either sell the house for a smaller place or rent it out.

1 Reply

Justin Thorpe

Member since 2020 · 437 posts · 675 votes

5y

Let’s break this out a bit. I see 3 issues, financial, emotional, professional :

Financial - The CARES act has provided unemployment benefits and supplements on top mostly. The new bill passed today in congress offers extended unemployment plus supplement of $300 a week. Hopefully that should help a bit.

Also, like others have suggested, look into the option of renting out a portion of the home to tenants. If his unemployment situation seems long term, he can look to downsize, sell the home and use the equity to put cash on a new home.

Emotional - This is the big one. You ought to work with your dad to get him the mental health / support before things spiral out of control. People underestimate what damage this can do. Don’t wait on this one.

Professional - Options are to take a lower paying job, say retail. Will bring some cash and keep him busy. Also network within hotel circles. People are retiring or leaving the industry and vacancies may open up, who knows.

1 Reply

Matt Whitney

OP

New to Real Estate · Chicago · Member since 2020 · 6 posts · 9 votes

5y

Just to provide an update on this thread...my dad found a few landscaping and construction projects that he's currently working on. He's been able to generate enough cash apparently to keep him afloat for a little bit longer. He says there's tons of demand in the Keys for handyman projects and he's currently building a deck for someone.

My dad and I have never had the best relationship so when I call and share with him possible real estate strategies, sometimes he doesn't take it the right way. Saying that he's stubborn would be an understatement. For example, in my dad's backyard, he has a boat lift that's empty because he doesn't have a boat. I told him he could rent out the boat lift for extra cash and he responded he doesn't want random people, walking through his backyard. I really don't know what to do at this point aside from call and offer ideas.

0 Reply

Terre B.

Aurora, CO · Member since 2018 · 180 posts · 166 votes

5y

You mentioned you are getting into investing, what about partnering with him to invest in florida property? He locates, and inspects a property, you buy, hire him to repair and manage?

0 Reply

Dad forced into retirement early with mortgage & struggling

Dad forced into retirement early with mortgage & struggling

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