No Income/Too Old for HELOC

[Jeremy Kong]

Hi everyone, I'm just getting into the real estate game and I'm looking to partner with my parents to fund deals here in California. They are down and want to take a HELOC on their SF/Bay Area home that they have 100% equity in, but they've spoken to a couple lenders and can't make it happen because they're "too old" (they're both 70+) and don't have income (both retired). Does anybody know of a way around that? Is there a way to maybe cosign with my parents, or should I simply call up a bunch of lenders until we find one who will do it? This conversation was all before the pandemic started--I understand that it will be more of a challenge to get a HELOC now because of the pandemic, but regardless I don't have enough experience to tell if this is a "no duh" kind of thing or if we just need to try harder.

Appreciate any advice you all can offer. Thanks!

[Jason Dillard]

Reverse Mortgage is the solution.

[Jeremy Kong]

Thanks for the response Jason. I haven't actually considered a reverse mortgage for investing purposes before. There's one thing I forgot to mention in my original post that will likely disqualify them from a reverse mortgage--this house is actually not their primary home. Also, we prefer HELOC's for their flexibility to only have to pay interest on the amount that is used and only when we decide to use it.

[Jason Dillard]

Discount sale lease back with option then.

Or, even better, create paper with house as collateral to use in new deals.  What's value of house?  

[Nate Sanow]

@Jeremy Kong

I’m self employed and therefore this next year plan to do more “no documentation” loans and “non-qm”

I’d suggest researching these as options...

[Joni Chin]

@Jeremy Kong

Maybe you should try another lender. My mom applied for a heloc a several years ago to help us both to make additional investments in real estate and she was “retired” and 91 years old. They didn’t not disqualify her on age.

What killed it eventually was the 6 months it took to approve because more than 70% of her income were from rentals and we were constantly asked to show endless documentation for that rental income—all of the rental income was paid online by tenants through Zelle/QuickPay at the time, the lender/processor kept asking for cancelled checks, etc. at one point stating that without cancelled checks they couldn't verify(!!!)....it was insanely ridiculous. And this was the bank where we both had our accounts for many years! They eventually offered a 130k HELOC equal to 10% of the value of her primary home that she owned free and clear. (that even has a separate rental unit on the property!) But it got to the point we didn't want to deal with it anymore, it wasn't worth the stress and time involvement. About a year later she got a reverse mortgage to use for home improvements, for nursing/rehab care and to use for more real estate investment. The HELOC would have been better cost wise as interest rate is lower and you only pay for what you use, but the reverse Mtg provided far more flexibility, access to the equity in the home (4x more) without having additional payments to make. But there are drawbacks too so it's best to see what's right for you and your family.