All Forum Posts by: Robert Uomini

I stand corrected. However, a reverse mortgage assumes that the secured debt is relatively low compared to the amount borrowed. My idea benefits those who don't qualify for a reverse mortgage and who are at risk of being foreclosed on, yet who have enough equity in their homes to enable them to pay off the loan when the home is eventually sold.

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Point.com wants to know exactly when a member will liquidate. My idea, on the other hand, uses actuarial tables to determine this: the owner stays in his house possibly for the rest of his life. For seniors, that could be a relatively short while, depending on where they live, but the overriding idea is for the investor to do well by doing good: enable seniors to stay in their homes for as long as they wish by buying out their debt.

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Because a reverse mortgage assumes that the property has no secured debt on it.

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It occurred to me recently that there may be an untapped real estate market in the Bay Area, namely, senior homeowners on a limited income who also have a significant secured debt problem, such as mortgages, lines of credit and the like. These folks likely have lived in their homes many years and don't want to sell their homes, in part because doing so would entail a logistical and traumatic nightmare because of all the stuff they had accumulated during their long lives, not to mention having to leave a familiar environment for a new one.

So the question becomes, is there a way for real estate investors to enable these folks to stay in their homes but which, from the financial point of view, makes sense to invest?

Here's my idea: investors would purchase the debt on the property in return for an equity interest in it, based on an appraisal of the property. The owner-occupant would remain in the property for the rest of his/her life and the value of that occupancy would be calculated from life expectancy actuarial tables and the FMV of the property rental. For example, assume the homeowner is a male aged 70 living in, say, Contra Costa County(for more than one owner, such as a husband and wife, you might use the age and sex of the youngest person). Using the State of California's life expectancy table, which is broken down by county, that person is expected to live to another nine years. If we assume that the house would rent for between $3300-3500 per month, this would yield a total revenue of, say, $3400 times 9, or $30,600. The present value of this would be $26,772, based on the prevailing US savings bond rate of 2.76%. Thus, in addition to the equity coming from the debt reduction, the investor would also enjoy the equity from the additional $26,772.

To me, this looks like a win-win: the homeowners gets to stay in their homes for life, if they so choose, and the investor gets a fair return on their investment. What do you think? I've never heard of a deal like this, so this could be an untapped market.

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All Forum Posts by: Robert Uomini

Robert Uomini has started 1 posts and replied 4 times.

Post: A novel investment idea

Post: A novel investment idea

Post: A novel investment idea

Post: A novel investment idea