Many current homeowners can use the equity in their home for a down payment to invest in 1-3 professionally managed rental units-and a new home. Up to 75% of the rental revenue can count as qualifying income for the loan.
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When you turn age 62, you could eliminate both your home and rental property mortgage payment with a government backed reverse mortgage. From age 62 on, you'll prosper with ever-growing rental cash flow and no mortgage payment on your home or your rental units for the rest of your life.
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So what's the catch? The rental units must be attached to your new home. The most common home with an attached rental, the duplex, isn't popular:​​
pGroup Privacy Housing
Above: Homeowners don't want to see or deal with renters.
Below: My patented homes with hidden attached rentals eliminate those issues. You never see or interact with your renters. The rentals are managed by a professional management company.​ Your renters have a separate entrance to the community at the rear of the property. The rendering below shows a one story owners ranch home with two rental units above each owners home. There is an option for a full finished basement for you. The renters outdoor area is shaded red. A wall separates the owners and renters outdoor areas. You'll never see or interact with your renters:
The management company handles all rental concerns. They collect the rent, pay the expenses and distribute the rental income equally to the owners of the community regardless of each units vacancy. The risk of vacancy is spread between all the owners insuring minimal cash flow interruption for each individual owner.
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Below is a top down view showing that the renters have a separate car entrance at the back of the community. The renter car entrance and outdoor area is shaded red. It is separated from the owners outdoor area (green) by a barrier. Owners and renters never encounter each other. Each owner has a private side yard and patio which functions as your back yard:
Below shows that the front of your home looks like a single family two story home:
Below is a view of the rental units at the back of the property. The rentals are on the second floor and have a balcony as well as a fenced in area at ground level. They also have a one car attached garage. They are high quality rental units to attract premium renters.
Here’s one of many financial strategies you could consider:
Use the equity in your existing home to make as large of a down payment as possible on my new multi-unit property. Take out a mortgage that keeps your payments comfortable for you-typically by choosing a longer pay back period.
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During good financial years, pay extra towards your mortgage with the goal of having 60% equity in your property when you turn age 62. Keep in mind that your property will likely gain equity each year through appreciation in addition to mortgage debt reduction through your monthly mortgage payments.
With about 60% equity, at age 62 you will have the option to take out a reverse mortgage. The reverse mortgage allows you to pay off the 40% balance of your existing mortgage and eliminate your mortgage payment for the rest of your life.
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Now you have rental property that provides ever-growing cash flow without a mortgage or interest payment for the rest of your life.
Most rental property investors borrow money and pay interest and principal payments. Your cash flow will be considerably higher without those payments. And annual rental rate increases consistently keep up with or exceed inflation. Your rentals provide you ever-growing cash flow without an interest or principal payment for the rest of your life.​
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The reverse mortgage is a non recourse loan that is insured by the US government and is paid back only with the value of the property.
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Just about everybody over age 62 qualifies for the reverse mortgage. You need to show the ability to pay your property taxes, maintenance and insurance. The rental income will likely cover all those costs and more.
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The reverse mortgage is officially called the:
Home Equity Conversion Mortgage (HECM) and is backed by the U.S. government.
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It can be used for a single family home or a 2-4 unit property. The owner must live in one of the units.
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It is a nonrecourse loan-that is paid off only with the value of the home when the owner(s) die or leave the home. The only way to default is to not pay the property taxes, maintenance and insurance. The property management company will pay most or all of those expenses before distributing any rental proceeds to you-reducing or eliminating the risk of default.​
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When you collect Social Security, this income won't count against your Social Security. Social Security only counts income from employment towards the retirement earnings test. Other kinds of income — including income from rental properties, lawsuit payments, inheritances, pensions, investment dividends, IRA distributions and interest — will not cause benefits to be reduced.
This mortgage information is to the best of my knowledge. I am not a mortgage lender or financial advisor.
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I offer an easy way for you to sell your existing home before you buy my new property. See the "Transition" tab.