Friday Focus – All About Real Estate
Friday Focus – All About Real Estate: Reverse Mortgage with Steve Kalscheur
I’ve been working with reverse for the last 15 years. I worked specifically with the government-insured loan, it’s been around since 1988. It’s been evolving and made better, especially since 2017. The government keeps changing it to make it safer, and better. It’s got to be one of the most regulated products that exists.
The idea behind this is to simply have an option that if used intelligently and prudently can help someone have a better retirement, and can potentially build wealth in retirement rather than take away from it.
Reverse Mortgage Misconceptions
The biggest misconception that I get from everybody is that the bank is going to take the house, and it simply isn’t true. The client continues to own the home like they would with any kind of mortgage. There’s simply a lien against the home.
Another misconception is that the mortgage could be more than the value of the house. Because this is a government-insured loan, and it’s non-recourse, the most the client or their families will ever owe is 95% of the value of the home.
Even if the balance is more than the value of the home at some point, they’re not on the hook for that amount, the most they can owe and what the beneficiaries can kids purchase the home for is 95% of the value, not the balance at all, if the balance happens to exceed the value of the home.
Reverse Mortgage Requirements
You have to live in the home and they have to keep paying the taxes and insurance. You have to be 62 years or older and, of course, you have to have equity
Who Could Benefit from a Reverse Mortgage
People who want to stay in their home but need to create more retirement income. They are not as concerned about passing their home to their kids (although beneficiaries always have the right to pay of the mortgage and keep the house).
People who want to use the equity in their house for strategic income planning, either to create some tax-free income in retirement or to supplement income when the market is down. (although with proper income planning, this is not necessary see here for more information on managing for retirement income)
Just like with any financial product, people have to understand what they’re getting into, they have to do their own due diligence. I expect the family to be involved in the decision-making if it’s necessary.
Buying, Selling, and Relocating with Christina Weitzel
When you have been in a home for a long time is hard to sell your house because you’re not just selling, four walls and a roof, you’re selling a lot of memories.
When I work with my clients that are downsizing, it is a much more emotional sale, than one that maybe has lived there for five years. So we work where you’re at emotionally and why you’re selling to try to figure out if it is the right move for you to do and then from there, give you tips and pointers on how to start to de-personalize your house.
Right now is a good time to sell (at least in southwest Wisconsin), even with interest rates up. Part of that is because we’ve had some big industries come into our area, and those employees are coming out to our small rural areas, wanting to find housing, less people are going into the city as they are coming out to the rural areas. Also, a lot of city people want that small-town feel again, so they’re coming out so our rural areas as well.
So if you have a home, in this area and in a small rural area with some industry around it, you should have no problem selling right now. The flip side will be going to buy something.
If you’re thinking you’re downsizing, what does that look like for you? Is that an actual house? Does it resemble a duplex? Does it give the impression of a retirement community? I would want to answer that question before I would tell you how we can sell your house because where you’re going is just as important as where you’re leaving.
Making the Emotional Connection (secret tip!)
There are a couple of things that sellers who are attached to their home look for in a buyer. So I personally love what we call love letters in real estate. This is a letter from the buyer to the seller about why you love their house, and what you see how you see yourself utilizing that house. It has nothing to do with money, nothing to do with finances, just the emotional connection of why you love their house, because sometimes that’ll make our offer stand out amongst a different offer that didn’t have that letter.
I have a lot of little tricks up my sleeve in order to help us win a house, but the buyer love letters do work really well, for those sellers who have an emotional attachment to their home.
People often think they should buy real estate as a great investment, but it is important to consider all the factors first.
There are very few places you can buy and not ever touch again. When you’re looking at something for Airbnb or rental, we do talk about that.
With an Airbnb you have to get a landscaper or mower or somebody to shovel your driveway and clean you have to clean all the time because there’s turnover. So it can be a great source of income but it does require a lot of time to maintain these Airbnbs.
Just because you hear it’s a good investment, if you’re not willing to go through some of the headaches that is going to cause then it might not be the best investment for you.
Long-term rentals require maintenance too. A tenant might be in there for two years and completely trash it and then you have a lot of work and one week versus a little work over the course of the year with an Airbnb.
Just like your house, investment properties are going to take time and effort, and energy from you as well.
It is always important how a real estate decision affects all areas of your financial life, taxes, income, estate planning, and investment strategy. Whether it be a reverse mortgage, downsizing or relocating or investment properties, whatever it may be, it could have an impact on another area. Taxes are often an area overlooked but real estate moves can create large tax consequences.
Stay tuned for our next Tax Talk – 4 Ways to Reduce or Avoid Capital Gains Tax. (one of the largest and often overlooked tax consequences of selling real estate).
Want to chat more with Christina or Steve? Just let us know and we will connect you!
We serve clients in Mineral Point WI, Dodgeville WI, Platteville WI, Lancaster WI, Fennimore WI, Boscobel WI, Richland Center WI, Muscoda WI, Spring Green WI, Mazomanie WI, Sauk City WI, Middleton WI, Madison WI, Fitchburg WI, Verona WI, Mount Horeb WI, Barneveld WI, New Glarus WI, Monroe WI, Belleville WI, Oregon WI, Stoughton WI, Darlington WI, Cuba City WI, Hazel Green WI, Belmont WI, Dubuque IA, Freeport IL
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