Help w Mom's housing

[TOTO]

I'm not sure how to reach out to you all for help so please forgive me if I get lots wrong, such as abbreviations you all use that I rarely understand.
PROBLEM: Buy Town-home for elderly mom w refi cash out, second home mortgage or Investment loan.
FACTS:
My Mom is 87, driving, banking, texting, computing, so you might say doing very well. She lived in a 3k sq ft house in a TX gated community when Dad died and the expenses became a bit too much so she moved into a 14x12 room in my brothers house in another TX gated community. She pays them a 3rd of expenses. We would have Mom share the cost of the mortgage.
My DH and I are retired - 63 years old and live in California in a house w a mortgage of $220k @ 3.75% and an est. value of $920k, so we have plenty of equity. Our assets are enough to cover expensives. Tempted to start taking my SS to pay Town-house. Credit scores in 800s, LVT says we could mortgage a $500k property.
PROPERTY TO BUY INFO:
$130k Townhouse in gated community that rents out for $1400. Property tax of $230/mth, HOA $143/mth, Ins.$40/mth, surrounding houses valued at $124k -204k-380k-400k.
WHICH MORTGAGE: with our current mortgage at $1140/mth and $40k downpayment, using comparison tools online...
Cash out refi = $253 more /mth @ 3.5%
Second Home Loan = $90K loan @ 3.75% = $417/mth more
Investment Property Loan = $90k loan @ 4.25% = $443/mth. Would have to claim Moms $ as rent but could write off visits, repairs and such.
Future plans would be to rent the house out as an investment property or retirement home.
Any suggestions on which would be our best bet or leave Mom at brothers were tensions are starting to rise? Clear as mud?
Many Thanks

 

[cathy63]

I'm sorry, but I just have questions instead of answers. Maybe if you can provide some additional info someone will be able to give you better ideas.

Is there an option to have Mom move in with you? Maybe split time between you and your brother? Or is it very important to her that she has her own place? Also, what happened to the proceeds from the 3K sq ft house? Can't she use that money to pay for housing instead of relying on you to purchase for her?

Have you looked at renting an apartment instead of purchasing another home? "Townhome" usually means stairs and while she is clearly doing well now, what will happen if she's not doing as well a year from now and can't manage the stairs any more?

Would have to claim Moms $ as rent but could write off visits, repairs and such.
Future plans would be to rent the house out as an investment property or retirement home.

Consult a tax advisor before you do any of this. If you are renting to Mom at less than fair market value, the IRS will have something to say about writing off expenses. You'll also need to make sure you keep good records if you later convert it to an investment property rental, because when you eventually sell it, you will need to know the real "in service" date for calculating the depreciation recapture.

 

[pb4uski]

Why buy? My mom is 89 and doing well but in reality is one fall away from living in a nursing home.... thank God she knows it and is very careful.

Why not have Mom rent a place like the one you are considering buying and you and DB can help her out with the rent if she can't afford the $1,400/month. Less hassle. And to be real, at 87 the time horizon is likely to be short.

Alternatively, do you have room for a granny pod on your property?

 

[CardsFan]

WADR,
1- What does mom want to do? THE MOST IMPORTANT QUESTION!
2- can she afford a nice independent/assisted living place?
3- I could be wrong, but it sounds like you and your sibling are deciding who can take the most advantage of Mom's situation.

 

[gwraigty]

Is there an option to have Mom move in with you? Maybe split time between you and your brother?

From personal experience, this may not work. When tensions were high after my grandmother moved in with her son (my uncle) after my grandfather's death, DH suggested that she come spend weekends with us. It only resulted in tensions being high in 2 households and resulted in ending relationships in ways that couldn't have been anticipated.

Why buy? My mom is 89 and doing well but in reality is one fall away from living in a nursing home.... thank God she knows it and is very careful.

+1

 

[Sunset]

Why buy? My mom is 89 and doing well but in reality is one fall away from living in a nursing home.... thank God she knows it and is very careful.

Why not have Mom rent a place like the one you are considering buying and you and DB can help her out with the rent if she can't afford the $1,400/month. Less hassle. And to be real, at 87 the time horizon is likely to be short.

Alternatively, do you have room for a granny pod on your property?

++
OP could suggest Mom rent an apartment - no stairs which is important in old age.

 

[TOTO]

Thanks C63... Mom loves Texas and would lose all her friends if she moved with us in CA. My Dad was a firm believer in NEVER paying off your mortgage so she didn't really walk away with much, maybe $40K.
The Townhouses we look at to buy have one ground floor bedroom for sure! We figure if she gets to where she can't drive or needs more help, DH and I could move in with her and if son doesn't still live with us we would rent our CA house out for $3k. Also, if brother and his wife divorce he could move in with her... thus helping her AND him out (us too but not the real reason to be doing this).
Many thanks for tips on the tax rules of receiving less than fair market value...we don't know it all and that is why I appreciate ER's responses.

 

[TOTO]

Sadly true but what are we going to do. I want her happy as long as she is mentally and physically capable.

 

[TOTO]

Mom would LOVE her own place. Every time I show her a place she describes where all her furniture would go.

 

[TOTO]

I apologize but I don't really know how to reply properly, thus ALL my responses show up at the bottom.

 

[TOTO]

CardsFan wrote: "3- I could be wrong, but it sounds like you and your sibling are deciding who can take the most advantage of Mom's situation"

We've had that train of thought. Moms moving in with them 2 years ago helped them out a lot. They are not prepared for retirement! They both work plus recently started SS and now think they are richer than rich and say they don't need her $, although I doubt they have $20k in savings.

DH and I would be paying most of the mortgage and Mom paying her utilities and such. It's true that any $ she pays would go towards our mortgage but with us putting $40k downpayment and us possibly paying $300/mthly on the mortgage at least she would have her own place. DH shakes his head but is willing to do it.

 

[imoldernu]

Plan "C" CCRC.... independent living with further option for assisted living, and futher options for a bounce-back recovery and nursing home if needed.

Best part is the social interaction, with other residents.... #1 help in extending healthy aging. Full service retirement living, with health and safety.

Google the main website for our CCRC Corporation to see how it works.

"Simply the finest". Go to the FAQ page for detail.

About $30K/yr covers all expenses. Happiness and peace of mind, including food, social atmosphere, transportation for shopping and entertainment,, internet, TV, all utilities, weekly housekeeping. The safety net of being able to go to illness or fall recovery or nursing home.

Worthwhile to take the time to find the right place. We've lived in our CCRC for 15 years now, and are totally happy.

Good luck with your decision.

 

[CardsFan]

TOTO:
Back to my #1: What does mom want, and #2: what can she afford with out financial help?

 

[Vacation4us]

What is mom paying now? What can mom afford on her own?

 

[Doribe]

CardsFan wrote: "3- I could be wrong, but it sounds like you and your sibling are deciding who can take the most advantage of Mom's situation"

We've had that train of thought. Moms moving in with them 2 years ago helped them out a lot. They are not prepared for retirement! They both work plus recently started SS and now think they are richer than rich and say they don't need her $, although I doubt they have $20k in savings.

DH and I would be paying most of the mortgage and Mom paying her utilities and such. It's true that any $ she pays would go towards our mortgage but with us putting $40k downpayment and us possibly paying $300/mthly on the mortgage at least she would have her own place. DH shakes his head but is willing to do it.

No. not a good idea. Please help pay the rent for mom.

 

[TOTO]

#1... Mom plays the martyr and says she is fine at brothers house and promises not to come out of her room very often. Brother has always said his house is hers but she doesn't even feel comfortable enough to have her book club or guests over. They have a nice house, but brother drinks a 6pack every night and wouldn't talk to her till he's on the 2nd beer when he gets home.
#2. Right now her share is $500 for the mortgage & taxes and then $200 for utilities and such. I actually have not asked her how much she would be willing to pay. She is going to have to pay Internet, TV, electric and maybe trash... that's going to add up. She pays $280 mthly for Long Term that will not cover assisted living. Pays $300 to the church. Pays Lord knows what for her medical, car insurance and give aways to family and friends. Plus she loves her caramel frapacinos.
I'm trying to keep costs down low for her ad don't want brother to have to pay anything, but he would...I want him saving for retirement.

 

[TOTO]

I have a problem helping her pay rent when that same money could go towards and investment?

You could look at the situation as us Californians want a place near Mom and brother (as well as escape crazy California) that we could visit or retire to. When it would be vacant, we would rent it out. And since we would be buying it for those reasons, why not let mom live there while she can?

 

[pb4uski]

I have a problem helping her pay rent when that same money could go towards and investment? ....

But at the end of the day very little of what you will initially pay for housing costs will go towards investment... real estate taxes/nope.... home insurance/nope.... mortgage interest/nope.... HOA fees/nope.... the only thing that really goes towards investment is mortgage principal.

If you have a $90k loan over 30 years at 3.75% and pay $417/month, the monthly principal starts at $135/month and at the end of 3 years is only $152/month so over 3 years the investment is ~$5,184 or ~$1,728/year... chump change in the whole scheme of things.

What if over that time the real estate market goes sideways and the condo is worth less than you paid for it? If we have a recession as many expect what will happen to the value of the townhouse?

You might want to run your numbers on this deal through the NYT rent/buy calculator.... https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

 

[Sunset]

^^^^^ Plus there will be repairs needed, which on a townhouse, as a landlord I would budget $100/month. It won't be evenly distributed, but when the A/C goes, or the furnace goes, or the window cracks... it will be expensive.

OP also forgot special assessments are possible, since its a condo townhouse.

 

[Teacher Terry]

Too bad your mom didn’t rent her own apartment. It doesn’t sound like much of a life in your brother’s house. I would never put myself in this situation.

 

[JDARNELL]

I have a problem helping her pay rent when that same money could go towards and investment?

Paying rent provides you flexibility. Best case time horizon is 15 yrs. worse case could be a lot closer. Are you prepared to be a landlord for the follow on tenant? Pay a premium and rent a nice place for a while. Don’t purchase

 

[Winemaker]

We bought a house several years ago for DMIL, she was 82 at the time, with the intent to turn it into a rental whenever the obvious would occur down the road. The banks would have nothing to do with that arrangement; even if we bought it as a rental to begin with, and have DMIL pay rent. We had to sign a one year agreement to that stipulation. But the did have a wonderful program about family members buying homes for family members; we qualified for a 0.25 point reduction in mortgage rate and another 0.25 point reduction if put on auto pay with an auto deposit checking account. Worked out fantastic for us and her.

The funniest thing about the whole process was our application form where we stating we were buying a house for mother/mother in law. The bank kept on correcting it to mother/mother in law buying house for daughter/son in law. We had to corrected it at least 6 times, they just couldn't comprehend our situation.

After 4 years DMIL passed, and we turned it into a rental as originally planned; and the bank screwed itself out of investment property mortgage rates for 30 years.

 

[gwraigty]

I apologize but I don't really know how to reply properly, thus ALL my responses show up at the bottom.

Click the Quote button. Snip some of the quoted text if needed.

 

[ncbill]

Does OP have enough of a backyard to stick a "grandma unit" back there?

 

[The Cosmic Avenger]

Does OP have enough of a backyard to stick a "grandma unit" back there?

Great idea, ncbill. Toto, if you are considering this google "Accessory dwelling units", maybe along with your county name, to see what the laws are about these in your area. It's better than renting them a room, as there is more independence, but they are still close enough for you to help out. And it is still an investment like you wanted, but in your primary residence. With CA property prices, ADUs can really increase your property value, as they add the flexibility of having a renter help with the mortgage while not interfering with your enjoyment of the primary dwelling.