Reverse Mortgages. Are they Creative Financing? - Posted by TEW, NJ

Posted by Steve Auten on May 31, 2000 at 19:28:23:

I’m not familliar with a “Reverse Mortgage” but I would suggest a Lease Option or Wraparound financing to give them a cash flow.

Reverse Mortgages. Are they Creative Financing? - Posted by TEW, NJ

Posted by TEW, NJ on May 31, 2000 at 11:15:29:

Since following many posts on this forum over the past few months, I’ve seen little discussion on reverse mortgages, and I don’t know why. I am wondering if reverse mortgages are beneficial to an REI?

I know two ladies, one in her 40? and one in her 70’s. Both are unemployed, single, and need income. What I’m wondering is how can I give them what they want and need ($$$) in exchange for what I want (their houses). Both are sitting on the only assets they have that can generate
cash for themselves, their homes.

Please note that the 40? year old lives in 1/3 of a building where two other units have been foreclosed on and are for sale cheap. In this case, I think it would be beneficial to secure the entire building, whereby I can fix-up the front of the building and raise the value of the total building. There should be enough cash flow from the rentals from the other two units that I could reinvest in to a reverse mortgage of the other 1/3.

As one entering the REI arena, I’d appreciate any light that seasoned REI’s can offer regarding Reverse Mortgages.

Thanks in advance!

They can be. - Posted by John Behle

Posted by John Behle on May 31, 2000 at 19:53:40:

The 70 year old could probably get the best deal from a conventional mortgage company on a R.A.M. (reverse annuity mortgage) - MAYBE - there are some scams and expensive programs out there.

The 40 year old won’t qualify conventionally, but yes you could do a reverse annuity mortgage. The question comes down to rate and terms. At what rate do you feel comfortable investing.

RAM’s don’t have to be based on actuarial tables. You can always structure them with an end date or even an LTV cap.

You could also do a “sale option leaseback” using seller financing. Structure the rent lower than the payment on the seller financing and she/they have a cash flow. OR… you could also do a seller financing deal where they sell the seller financing through a partial. The best bet would be an amortized partial, but most buyers would have no clue what that is.

An amortized partial is a scenario where there is seller financing of seller financing. For example, someone with a note paying $500 per month sells the first half and receives payments of $1000 per month to increase their net cash flow for a period of time.

There are many ways to go.