DT,
This question is more complex than it appears to be on the surface. Ultimately, the appropriate question is, "What is your mother trying to achieve?". Then you can answer the question appropriately. Based on the quote below, it sounds like she really wants to stay and the real problem is not enough money to pay for the house.
Originally posted by David Tower:
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.
There are many options for this situation and I definitely think you are smart for brainstorming with us for ideas.
Here are my thoughts....
The first question I would have is how much does she need to stay in the house if that is what she really wants to do? If the taxes, upkeep, and a little spending money add up to 15K a year, just an example, she may be able to draw some of the equity and find a conservative investment that will return her what she needs. For example, if she draws out 200K and finds an investment returning 10% annually, she will have the 15K she needs plus 5K to play with. In this market it shouldn't be too hard to find a 10% return; however, I urge you to be very careful who you get in bed with.
If you want to get real aggressive...maybe you take 200K and start flipping homes and go for a much higher return 20-30%. This will involve more skill obviously; however, when you have money you can get a lot of real estate investing done.
(***My caviat...IF YOU DON'T KNOW WHAT YOU ARE DOING YOU CAN ALSO LOSE A LOT OF MONEY TOO...SO I AM ONLY ADVISING THIS IF YOU HAVE SOME KNOWLEDGE OR EXPERIENCE. I'd really hate to see you guys get hurt over this)
Your mom is still very young at 60 and can still do a lot of real estate in the next 20+ years.
Another big question I would have is what would her desire be in the next 5 years? 10 Years? Will she eventually sell to be closer to family? If so, then you have to start looking at all the factors like....will interest rates be going up in the next 5-10 years? No one can answer this with certainty (if they say they can...they're lying); however, most arrows point to YES....
So now you will be selling an EXPENSIVE HOME down the road when money will be more expensive....which might equal less buyers or a forced reduction in price.
Right now interest rates are LOW LOW LOW...so that should help her decision on wether to sell now or not.
She can sell the property with some money down and create a note which will give her some income for some time (one of my personal favorites)...again, not something that should be done without professional help. This may provide a greater return than a CD, Money Market fund, or Annuity.
I am in agreement with Jon in that why would you want all that headache if it's just you; however, I also know that telling a MOTHER to sell her house and memories in the house etc. is a very very difficult thing to do.
Bottom line is you have to sit down and ask her in a perfect case scenario what would you like? Then get to work solving the problem of how to get her exacty that.
Make sure she makes the decision armed with the proper knowledge...my mother was in a similar situation not too long ago and my brother told her to sell and buy something smaller...etc. She did what he told her and years later, as she got even older :), she wishes she had kept it for cashflow and kinda sorta blames my brother for "telling" her to sell it. LOL...my poor brother! It comes up from time to time at reunions :)
Little did she know her youngest, and by far favorite son ;), would grow up to be a professional RE Investor. Today I would have given her completely different advice...oh well.
Lastly, as for the condo deal....the Golden Girls seem happy. My wife makes me watch that every night...oh what I do in the name of love.
I am so sorry for the long post, but as I told you...it's more complex than it seems. I hope I have given you food for thought!
Amigos,
Mark
