Where would I find an investor for this project?

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Submitted by gpdrasnin on April 28, 2016 - 2:17am

I have an amazing 81 yr old client in San Diego searching for a cash investor open to generating an immediate 20-25% equity gain on a cash investment of approx $280k. Here's how it works.....she is single, no children or heirs. She wishes to buy a 1-2 BR condo in the UTC area (approx value of $350k). She will have approx $75k from the sale of her current condo to put in to the purchase and is looking for the investor to put the remaining ~ $275k in cash toward the purchase. The condo will be titled in both my client's and the investor's names, and my client will pay all maintenance, HOA, upgrades and all or partial property taxes. In return this is a "life estate" wherein she is able to live in this condo until she dies--at which time 100% ownership goes to the investor. What a win!

There are many seniors in the same situation and this could lead to several opportunities for both the seniors and investors! Rents and home prices are so high that seniors cannot sell their current home and afford the cost of rent or a mortgage in addition to living expenses for any length of time. I love helping seniors and I truly believe that my client has come up with a wonderful solution that may work well for many others. Are there investors that would consider this type of Life Estate scenario? Is it a good deal for them? Please feel free to pick it apart....THANKS!

Submitted by harvey on April 28, 2016 - 3:06am.

Lol, "anyone here want to speculate on how long this woman will live?"

But it's an interesting idea. I see the win-win.

Submitted by njtosd on April 28, 2016 - 6:04am.

My real estate law is rusty, but my recollection is that a life estate is a tenancy that is created with a deed from the owner. Life tenants do not get title. If the woman gets title it would not be a life estate. Life estates are very weak rights - it sounds a bit fishy to me. I'm sure there are others here who will chime in who know more than me - this is not legal advice.

Submitted by livinincali on April 28, 2016 - 6:53am.

I ran some numbers and it looks like a terrible deal for an investor. Let's compare it to the obvious alternative. Somebody investing in a rental property with a cap rate of 5% after all expenses. That way we can ignore the appreciation aspect of real estate (both investments would appreciate the same). So if you assume investing $275K and a 5% cap rate you collect $13,500 per year in rent. Here's what 10 year of collecting rent looks like.

Year Total Rent Collected
1 13750
2 27500
3 41250
4 55000
5 68750
6 82500
7 96250
8 110000
9 123750
10 137500

This lady is giving $75K in equity so what this means is right after year 5 as an investor you would have been better off just buying the property outright and renting it rather than entering this deal. In addition this investment is completely illiquid while a investment in rental property is liquid. You'd probably want a better return for the illiquid aspect of the the deal. It's great for the lady is she can find an investor dumb enough to enter into this kind of arrangement.

Submitted by svelte on April 28, 2016 - 7:01am.

If an investor had $275K cash, they could put it in the stock market and earn 8-10% a year.

Even at 8% they could earn $22K a year on their money in the market.

That means if the lady lives more than 3 years, the investor will have done better in the stock market since she's only putting in $75K.

I wouldn't take her deal even if I had $275K burning a hole in my pocket.

Submitted by La Jolla Renter on April 28, 2016 - 7:58am.

livinincali's thought process looks accurate to me.

I did a quick search on the internet and found that a 81 year old woman's life expectancy is 9 years.

Way better play to put 40% down on 2 condos that you own outright.

A 350k condo should rent for $1,800 - $2,000 per mo.

Submitted by FormerSanDiegan on April 28, 2016 - 7:49am.

Let's turn this around:

If you had $275K to invest and were looking for a $350K property would you rather:

a). Take 5 years of up-front rent payments to cover the rest of the purchase price in exchange for i)forfeiting rents in years 6 through 9 (on average); ii) freezing the liquidity of the investment; iii) the possibility that you forfeit rent for years 10- 20 if the person survives into their 90's; and iv) depend on the person with the free rent paying expenses for which they have no down side if they cease paying (other than possibly eviction... good luck with that)

or

b) Take a loan for 75K and have immediate cash flow of maybe $600 - 700 per month.

for me it seems like a steep price for the investor to pay for such little benefit. We're talking $75K here.

Submitted by livinincali on April 28, 2016 - 8:15am.

FormerSanDiegan wrote:

b) Take a loan for 75K and have immediate cash flow of maybe $600 - 700 per month.

I forgot about that aspect of the deal as well. You aren't even cash flowing. You have to wait until the end of the deal before you see any money.

Probably best to just advise your client to move to a lower cost of living state. Albuquerque, NM might be a good option. Property taxes are low you can get a condo for < $75K. Climate is pretty nice year round although it is at elevation. You aren't staying in San Diego for the kids or grand kids.

Submitted by scaredyclassic on April 28, 2016 - 8:18am.

Are her medical records avail. For review?. For the right level of extreme decrepitude, it could work. Of course, then , she's probably be in assisted living

Submitted by Coronita on April 28, 2016 - 8:45am.

Pass. Extremely crappy deal for the "investor"

$275k not generating any cash flow, no chance or raising rents until the person dies. God knows when she dies.

Top much risk for the "investor" to take on.

Investor would probably be better off putting $275k as a down payment and take a loan out for $75k loan on 3-3.5% 30 year.

Why would anyone in their right mind want to get involved with something so complicated when loan rates are solow and loans are so cheap right now?

The old lady, if she wants to live in UTC, can rent herself.

Submitted by moneymaker on April 28, 2016 - 8:57am.

Isn't this type of deal already available. Get a loan, then get a reverse mortgage. Oh maybe the reverse mortgage people want you to have more equity, right! Mobile home maybe for your client? I don't really know about the reverse loan equity so if anyone else cares to chime in.

Submitted by ltsddd on April 28, 2016 - 9:57am.

I think it's a great investment idea. Where do I sign up?

Submitted by Coronita on April 28, 2016 - 10:21am.

I still think the winner of the most creative real estate deal attempted was the guy that tried to rent one of my homes for the only purpose of turning it into an AirBNB rental without telling me, putting all the liability and costs for upkeep on me.

Jackass. Don't try this shit with me.

If it sounds to complicated for something that should be simple, walk far far away.

Submitted by Myriad on April 28, 2016 - 2:15pm.

Reminds me of a story I read once about these deals in France where the buyer gets the property after the death of the owner. In exchange, the buyer just pays the owner a certain amount each month.

Well this guy went into this deal with a lady who was 60. 40 years later, the buyer is already dead and his kids are still paying the lady living in the house.

http://parispropertygroup.com/blog/2013/...

Submitted by Coronita on April 28, 2016 - 2:30pm.

Myriad wrote:
Reminds me of a story I read once about these deals in France where the buyer gets the property after the death of the owner. In exchange, the buyer just pays the owner a certain amount each month.

Well this guy went into this deal with a lady who was 60. 40 years later, the buyer is already dead and his kids are still paying the lady living in the house.

http://parispropertygroup.com/blog/2013/occupied-paris-property-forthcoming-movie-my-lady-puts-spotlight-french-real-estate-law/

Lol.

Yeah like I said, pass. For all we know the nice old lady cold be the OP's relative

Submitted by harvey on April 28, 2016 - 6:32pm.

It's a clever idea but the numbers in the op definitely don't pencil.

And how do I know granny won't trash the place with wild parties?

Submitted by bearishgurl on April 28, 2016 - 9:17pm.

La Jolla Renter wrote:
livinincali's thought process looks accurate to me.

I did a quick search on the internet and found that a 81 year old woman's life expectancy is 9 years.

Way better play to put 40% down on 2 condos that you own outright.

A 350k condo should rent for $1,800 - $2,000 per mo.

If the OP's "client" lives 9 years in the "new" condo with only a $75K "investment," then that comes out to just $694.44 month "rent" for her (for 108 months) to live in the UC area! That's wa-a-a-a-ay under the market there and actually "well under the market" for just about anywhere in SD County!

OP, you say your "client" owns a condo. Is it located in SD County? I'm guessing that she is a bit old to still have a mortgage and if that is the case, it likely located in a much cheaper market in the state or country. OP, why is she considering selling at this late date? And are you sure she can actually recover $75K from the sale of it? And why must it be UC area?

Have you ever heard of Lutheran Tower in dtn SD or Congregational Tower in Chula Vista (there may be others)? If there are openings (from deaths), she might be able to get in (or on a waiting list) to pledge whatever assets she has remaining to the church or nonprofit to live out the rest of her life in one of these "independent living" apts. However, they typically only have a "kitchenette," a small LR, one small BR and a small bath with a tub and shower for a total of <300 sf per unit. Most of the residents do not drive anymore so there is limited underground parking. Just a suggestion for you and not sure if out-of-county applications are viewed with the same priority as longtime county residents' applications.

Submitted by spdrun on April 28, 2016 - 9:28pm.

The Paris thing seems almost like buying a rent-controlled co-op apartment in NYC. Apartment for sale for $350,000. HOA + tax (combined payment) are say $800/mo. Tenant is paying say $415.31/mo.

Tenant has a right to occupy the place till death do them part, but their children could also move in and then THEY have the right to occupy the place for life.

So you might be stuck owning the place, paying the difference of the rent-controlled rent and maintenance for a VERY long time...

Submitted by bearishgurl on April 28, 2016 - 9:52pm.

I have two "neighbors" (both women) who are 94 and 97 years old. They are living in their long-owned homes but require a lot of care for daily living, of which the burden falls on their 60/70-something children, who live in the same neighborhood. Women can live a long time, especially those from the "Greatest Generation" who never drank or smoked and never had the stresses of a FT job (except maybe for a very few years during WWII). See my relevant post of today:

http://piggington.com/ot_predictions_201...

This isn't a good deal for any "investor." Also, without the whole process of taking $75K in "rent" in "advance of need" being videotaped (to prove she had "sound mind") with her attorney by her side, as an investor, I wouldn't touch it with a ten foot pole. Her "heirs" could slap you with a lawsuit for fraud and elder abuse, especially if she died soon after moving into the property which was to be her "life estate." And rightly so, they could very well win a judgment in this day and age.

Caveat emptor to both sides of this "shady deal."

OP, if the only reason your client wants to sell her (inexpensive) condo in Fresno (or AZ/NV, etc) is to move to a more hospitable climate (SD) at this late date, she should have thought of this at least 20 years ago and planned accordingly.

A lot of people have a "dream" to "retire" in a CA coastal county but realize it can never be a reality because of the choices they made earlier in life. It is what it is.

Submitted by flyer on April 28, 2016 - 9:50pm.

Everyone will get old (if they're lucky--some won't make it that long) and some will need financial assistance in order to live out their lives--so a situation like this is not that unusual.

However, even though we've helped family members and friends with property/financial issues, I can't imagine getting involved in a deal like this with someone I don't know.

Submitted by bearishgurl on April 28, 2016 - 9:58pm.

flyer wrote:
Everyone will get old (if they're lucky--some won't make it that long) and some will need financial assistance in order to live out their lives--so a situation like this is not that unusual.

However, even though we've helped family members and friends with property/financial issues, I can't imagine getting involved in a deal like this with someone I don't know.

Of course, flyer. But what troubles me about this scenario is that OP states his "client" already OWNS a condo with $75K in equity. Presuming it is paid off, why does she want to change things now? The only reason I can see would be to live out her remaining years in a much more expensive locale.

That's not a reasonable proposition for someone of limited means. There comes a time in life when one must face reality about how the rest of their life is going to look going forward, based upon the resources they have available. And that ship sailed long ago for the OP's 81 year-old "client."

Submitted by bearishgurl on April 28, 2016 - 10:12pm.

flu wrote:
Myriad wrote:
Reminds me of a story I read once about these deals in France where the buyer gets the property after the death of the owner. In exchange, the buyer just pays the owner a certain amount each month.

Well this guy went into this deal with a lady who was 60. 40 years later, the buyer is already dead and his kids are still paying the lady living in the house.

http://parispropertygroup.com/blog/2013/...

Lol.

Yeah like I said, pass. For all we know the nice old lady cold be the OP's relative

Ha, ha ... if that is the case, then why doesn't HE try to come up with the $275K to help her buy her "dream" condo?

Are there actually condos available in the UC area for $350K? That sounds kind of low for that area.

Submitted by bearishgurl on April 28, 2016 - 10:17pm.

scaredyclassic wrote:
Are her medical records avail. For review?. For the right level of extreme decrepitude, it could work. Of course, then , she's probably be in assisted living
LOL .....

Submitted by bearishgurl on April 28, 2016 - 10:24pm.

livinincali wrote:
FormerSanDiegan wrote:

b) Take a loan for 75K and have immediate cash flow of maybe $600 - 700 per month.

I forgot about that aspect of the deal as well. You aren't even cash flowing. You have to wait until the end of the deal before you see any money.

Probably best to just advise your client to move to a lower cost of living state. Albuquerque, NM might be a good option. Property taxes are low you can get a condo for < $75K. Climate is pretty nice year round although it is at elevation. You aren't staying in San Diego for the kids or grand kids.

Agree, but I feel that OP's "client's" condo isn't even IN SD County, whether she currently resides there herself ... or not. It very well could be in ABQ. If it was located in a CA coastal county, she would be able to recover much more than $75K at this late date if she sold it.

It's not very common for an 81-year old (esp one with limited means who would even want to "buy" a "life estate") to have an outstanding mortgage on residential real property they own.

Persons with means would have already bought their "retirement" home long before reaching the age of 81.

Submitted by bearishgurl on April 28, 2016 - 10:39pm.

gpdrasnin wrote:
. . . There are many seniors in the same situation and this could lead to several opportunities for both the seniors and investors! Rents and home prices are so high that seniors cannot sell their current home and afford the cost of rent or a mortgage in addition to living expenses for any length of time. I love helping seniors and I truly believe that my client has come up with a wonderful solution that may work well for many others. Are there investors that would consider this type of Life Estate scenario? Is it a good deal for them? Please feel free to pick it apart....THANKS!
gpdrasnin, I'm trying to understand why an octogenarian (or older) would want to sell their current home and move to a much more expensive home (in the absence of moving to a board and care facility or nursing home). Especially one who owns a home in CA and may be paying just a few hundred in property taxes in accordance with Prop 13. And one who will not be moving to the more expensive home to be near relatives. And who already owns a condo so doesn't have the burden of taking care of a big lot.

Perhaps you can enlighten the Piggs a bit more on her situation for inquiring minds.

Submitted by Hobie on April 29, 2016 - 5:49am.

This is the good Pigg discussion I like to see !!

I'll add, I think she will cash flow out and you would be stuck trying to evict her. Seems with only $75k, now add her medical, UTC HOA, and taxes, not enough money. On top of that by the time the s*it hits the fan, you would be on the hook for back HOA and fees as you are an 'owner/partner'. No actual life tenant agreement here, just a weak stab to shill you.

Submitted by Hobie on April 29, 2016 - 5:57am.

BG: this is a scam. OP is wanting to ride old ladies coat tails into a UTC condo.

You are right, why would and old lady want to move, both added costs, and location is suspect.

Submitted by livinincali on April 29, 2016 - 5:59am.

bearishgurl wrote:
Of course, flyer. But what troubles me about this scenario is that OP states his "client" already OWNS a condo with $75K in equity. Presuming it is paid off, why does she want to change things now? The only reason I can see would be to live out her remaining years in a much more expensive locale.

I don't think the condo is paid off. Essentially I don't think she can afford to live where she might like. It's really the bottom line of this whole thing.

Submitted by scaredyclassic on April 29, 2016 - 6:47am.

How would you know when she died. Say she sublets it to a relative and moves to points unknown. She could be dead 20 years before u confirm?

Submitted by scaredyclassic on April 29, 2016 - 6:49am.

My mom has lived in the same rent controlled apt. In NYC since the 60s. An investing dentist bought her unit in the 80s subject to her rent controlled tenancy. I think she outlived the dentist.

Submitted by Coronita on April 29, 2016 - 7:42am.

Hobie wrote:
This is the good Pigg discussion I like to see !!

I'll add, I think she will cash flow out and you would be stuck trying to evict her. Seems with only $75k, now add her medical, UTC HOA, and taxes, not enough money. On top of that by the time the s*it hits the fan, you would be on the hook for back HOA and fees as you are an 'owner/partner'. No actual life tenant agreement here, just a weak stab to shill you.

Good point.

I really hate how some of these people exist. One my reasons why I wouldn't want to "partner" with anyone I don't know well, and even then, I am reluctant to.

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