Money Advice Needed

[Ailaena]

I am money stupid and since there is such a wealth of experience here, I am hoping to get at least a couple of opinions.  

At the end of a long story, my mom needs money.  All of her cash is wrapped up in two homes because she needs to move from one to the other and she no longer has the cash for a remodel (because people kept not showing up to complete work and yet bills keep coming).

As far as I can tell, we have two options: a line of credit and a loan using the equity in the house.  

Is there one that’s better than the other?  Why?  How does a loan even make any sense because you have to make another loan payment when you already have no money??

What kind of details do you need in order to effectively to help me?  We probably need 100k, one home has $4-450 in equity, the one that needs the work has just over 100k.   It makes sense to take it from the house she’s going to sell so it gets paid back quicker, but also, interest is <insert something special here> when you use a line of credit for home improvements?  It’s not all for improvements, there’s also monthly bills.  But again, how do you pay this back with no income??

Soap box moment: Please make sure your parents communicate with you an actual retirement/surviving spouse plan other than “Don’t worry about it.” Especially when you know that you will, in fact, have to worry about it eventually. 
 

Thank you!!

[livetoread]

Maybe a couple of meetings with a fee only financial advisor would be helpful here. Sounds like she needs a plan not just for this particular situation but for longer term. 

[JustEm]

In this current market are you certain she needs to make the repairs in order to sell the house. I'd start by talking to a realtor in the area where that house is. 

[Carrie12345]

35 minutes ago, Ailaena said:

Soap box moment: Please make sure your parents communicate with you an actual retirement/surviving spouse plan other than “Don’t worry about it.” Especially when you know that you will, in fact, have to worry about it eventually. 

I have no advice, but I sure wish I could get my mom to talk about it.  The closest I’ve come was basically a “don’t worry about it, we’re good”, just before the stock market tanked.  So I’m not feeling confident.

[Ailaena]

24 minutes ago, hjffkj said:

In this current market are you certain she needs to make the repairs in order to sell the house. I'd start by talking to a realtor in the area where that house is. 

She can sell her current house at some crazy price with zero repairs, but she needs to make some adjustments to the new house to live there.  Like, she needs a walk-in shower, flooring (human and animal soiling), and the basement has broken windows (ok, that’s not entirely necessary).

[Calm37]

25 minutes ago, hjffkj said:

In this current market are you certain she needs to make the repairs in order to sell the house. I'd start by talking to a realtor in the area where that house is. 

Yes, a home down the street sold "as is" just this week. It had been torn apart inside for a never completed remodel-no kitchen, no flooring, and the foundation was buckling in one corner with cracks down both sides!. I'm thinking it likely sold for $50-60K under market price.

[JustEm]

22 minutes ago, Ailaena said:

She can sell her current house at some crazy price with zero repairs, but she needs to make some adjustments to the new house to live there.  Like, she needs a walk-in shower, flooring (human and animal soiling), and the basement has broken windows (ok, that’s not entirely necessary).

Well can she sell her current house and use the profits to make repairs on the other house before moving in. She could either move in with someone short term, rent short term, or do a rent back for a few months with the person who buys her current house

[Ailaena]

6 minutes ago, hjffkj said:

Well can she sell her current house and use the profits to make repairs on the other house before moving in. She could either move in with someone short term, rent short term, or do a rent back for a few months with the person who buys her current house

Those are good ideas, but nobody to live with and temporary renting seems like spending more money for no reason.  I like the idea of renting back, but we have no way of knowing how long she will need.  This all should have been done by Xmas!

[mlktwins]

4 minutes ago, hjffkj said:

Well can she sell her current house and use the profits to make repairs on the other house before moving in. She could either move in with someone short term, rent short term, or do a rent back for a few months with the person who buys her current house

I agree with these options!  Do you live near her where you can be involved in this process?  I would sit down with her after she gets this important part settled and figure out what is what financially.  You will be better able to help her if you know.

I took over all my in-laws financial stuff in December 2020 and got it all organized and a spreadsheet with everything laid out.  I also set up on-line access for them to all of their banks, etc.  They had resisted the help for years, but thank goodness they finally let that burden go.  They both ended up passing away very quickly a few months later.  It was a blessing that we had a handle on everything as my DH is the executor of the estate.  My FIL was still able to answer my questions when I was figuring everything out before he passed away.

I also took over all my dad's stuff in September 2018.  His dementia is bad now so it is a good thing as I handle everything for him now.

Thankfully, money wasn't an issue for either of them, but very stressful all the same.  I will be having these conversations with my boys over the years so they are not blindsided.  It is already stressful helping our elderly through various crisis, then to not know what the plan was supposed to be makes it even worse.

 

 

[Annie G]

It sounds like she has no income, so will you be co-signing on the line of credit loan? Without income she might be unable to qualify on her own.
Once the first house is sold and the other is fixed, will she have the funds to support herself and maintain the house? Is there a second bedroom she can rent to someone? 
Have you looked at the estimates for the remodel? What’s the budget for bathroom reno and the flooring? Prices are high but 100k seems quite high for those items. Perhaps she’s overestimated how much it’ll cost or she’s being overcharged, or maybe she can downgrade her materials. Like instead of a tiled shower either do a prefab one or get low cost tile from a big box store vs a specialty tile.
 Could she have a roomie in the current house while the renovations are being done in the 2nd house?

I have to say, selling the first house and using those funds for the second seems like the best option, and if she has no friends to stay with, a short term hotel rental might work. A shower replacement and flooring really shouldn’t take long. 
I’m sorry. This has to be stressful. 

[Corraleno]

I would get a home equity line of credit on the house that will be sold. That way you don't need to take all the money at once (and pay interest on it) like you would with a loan, you can just take out what you need for each job as necessary. I would prioritize the most critical things first (from what you mentioned I assume flooring would be the top priority), and then when it gets to the point where she could move in if she had to, I'd put the old house on the market and request a month or two of rent back. Many buyers will be fine with that (I agreed to 2 months rent back when I bought my current house), but even if she can't find a buyer who will agree, or if she has a much higher offer without the rent back, then she can move into the new house as-is at that point, or use the extra money to pay for a short term rental (like an extended stay motel) for a month or so. (ETA: the reason I would prioritize the flooring is that once that's done, she can at least move her things into the new house, even if the bathroom and other jobs aren't completed yet.)

Edited June 29, 2022 by Corraleno

[Ailaena]

25 minutes ago, mlktwins said:

I agree with these options!  Do you live near her where you can be involved in this process?  I would sit down with her after she gets this important part settled and figure out what is what financially.  You will be better able to help her if you know.

I am 100% in charge of the money and can usually talk her into doing whatever would be best.  The problem is, I have no idea!

 

12 minutes ago, Annie G said:

It sounds like she has no income, so will you be co-signing on the line of credit loan? Without income she might be unable to qualify on her own.
Once the first house is sold and the other is fixed, will she have the funds to support herself and maintain the house? Is there a second bedroom she can rent to someone? 
Have you looked at the estimates for the remodel? What’s the budget for bathroom reno and the flooring? Prices are high but 100k seems quite high for those items. Perhaps she’s overestimated how much it’ll cost or she’s being overcharged, or maybe she can downgrade her materials. Like instead of a tiled shower either do a prefab one or get low cost tile from a big box store vs a specialty tile.
 Could she have a roomie in the current house while the renovations are being done in the 2nd house?

She has no income other than SS, but I also have no income.  Didn’t even think about having to qualify for anything!   We could get my boyfriend to co-sign if we had to (they are on the new house together).

she absolutely refuses to have a roommate.  Right now my daughter is living with her but she also has no income because she just got back from England.   She should have enough money to pay the bills as long as she isn’t trying to support two other people.

Flooring will be $12-16k for upstairs, depending on floor she chooses, $5-6 for basement. Bathroom (using not high-end materials) is about $20k, windows $3k, she will need a stove and cabinets painted.

You are correct that this shouldn’t take long, but I have had ten months of people ghosting after an estimate or ghosting after refunding my deposit and now… 🤷🏻‍♀️

[Beth S]

Is it possible that her new house is unsustainable?
Is it a substantial downsize for her?

Would she consider moving into a condo or senior-style apartment instead?
It would already have the safety features, and possibly less debt (which could trigger a foreclosure).

If long term finances are an issue, I would evaluate the scope of doing extensive upgrades to the new house.

Recommending a HELOC, like PP said, on the old house. 
It's the cheapest & quickest option, since it rides on the equity of the old house.

Edited June 29, 2022 by Beth S

[Annie G]

7 minutes ago, Ailaena said:

 

Flooring will be $12-16k for upstairs, depending on floor she chooses, $5-6 for basement. Bathroom (using not high-end materials) is about $20k, windows $3k, she will need a stove and cabinets painted.

You are correct that this shouldn’t take long, but I have had ten months of people ghosting after an estimate or ghosting after refunding my deposit and now… 🤷🏻‍♀️

So this seems to come in under 50k, and could perhaps be lower. Have you thought about using a big box store to do some of these? We’ve found them very reliable and usually really good with price quotes. Carpet upstairs might be cheaper and an option if she doesn’t have pets.  If she has decent credit she might qualify for a credit card from lowes or Home Depot. Though the interest is high, it would give her time to pay minimum payments until she sells the other house. 

[DawnM]

26 minutes ago, Ailaena said:

I am 100% in charge of the money and can usually talk her into doing whatever would be best.  The problem is, I have no idea!

 

She has no income other than SS, but I also have no income.  Didn’t even think about having to qualify for anything!   We could get my boyfriend to co-sign if we had to (they are on the new house together).

she absolutely refuses to have a roommate.  Right now my daughter is living with her but she also has no income because she just got back from England.   She should have enough money to pay the bills as long as she isn’t trying to support two other people.

Flooring will be $12-16k for upstairs, depending on floor she chooses, $5-6 for basement. Bathroom (using not high-end materials) is about $20k, windows $3k, she will need a stove and cabinets painted.

You are correct that this shouldn’t take long, but I have had ten months of people ghosting after an estimate or ghosting after refunding my deposit and now… 🤷🏻‍♀️

I am surprised at the bathroom.   We literally had a brand new bathroom (like there literally wasn't one there before) and it was made for my dad for handicapped accessibility, and we paid a little over $15k for all of that, without a bathroom already there.

Instead of getting a contractor for the floor, can you go ahead and hire a flooring place like Empire or something?   That would at least get that done.  I would also look into getting a bathroom specific place to come out and take care of that.   I know they exist because I looked at a few of them, but I didn't use them.   

Once those two things are done, she could move in couldn't she?   The painting could happen later.

[BusyMom5]

I would put the expensive house up for sale now.  Right now housing markets are hot, but interest is going up and it will cool the market.  As for the house that needs work- is it the best long-term housing?  If not, sell both!  Buy in a place she can stay until she needs constant care.  Pick a house that doesn't need any major renovations.  Without knowing about the new house that needs work, its hard for me to judge. 

Flooring can be purchased from a flooring company that installs- it took me about 6 weeks to get carpet installed last fall.  Took 4-5 weeks to come in, and then a few weeks to schedule installation. If you buy what's in stock, it could be quicker!  Ask for specials.  

Is the bathroom a total gut, or is this a cosmetic remodel?  If there are no leaks and she can move in and use it, then I would suggest not doing that until you have the money from the sale of the other home.  If its a gut job, not usable, then this needs to be priority one.  It can take a while to get on a list, and sounds like you've had a hard time finding someone good.  I'd start back at square one, asking for contractors that specialize in small jobs.  If they do the big work, you can schedule the flooring place yourself.  We are a DIY family, so I would do a lot of it myself.   

As for funding- you shouldn't need it all upfront, so plan to use proceeds from the house you sell.  There are sometimes credit cards with special terms that don't have interest- but you have to be *really* careful with dates, terms.  Call her bank and ask about a home improvement loan or line of credit.  This may have to be on the house where the work is happening.   

[DeainUSA]

I may just sell both as is and start over.

[Ailaena]

2 hours ago, Beth S said:

Is it possible that her new house is unsustainable?
Is it a substantial downsize for her?

Would she consider moving into a condo or senior-style apartment instead?
It would already have the safety features, and possibly less debt (which could trigger a foreclosure).

If long term finances are an issue, I would evaluate the scope of doing extensive upgrades 

The new house is a massive downsize, the floor plan is elder-friendly, and it’s next door to me, so we thought it would be a great idea.   Also, once my dad died she adamantly refuses to consider senior housing.  She says when she can’t care for herself, I can do what I need to do, but as long as she has a say, she won’t go.

I tried using Empire and Carpet Somethingorother and one place ordered flooring and kept telling me for weeks after 6 weeks that it wasn’t in, so I went for a different kind and it never came in and when I went in to talk them, they very politely told me they wouldn’t be able to install in my house??  The other place refunded my deposit and stopped communicating and I just gave up.  I think you’re right, Home Depot is the way to go next.

Bathroom is a total gut - or at least a total replacement of nearly everything there.  Needs a new toilet and shower, we can probably keep the vanity because it’s just gross, not unfunctional.  I love that idea about finding somebody who specializes in small jobs.  Most people I call never call me back, so there’s that.  I swear, I’m super-nice IRL…

 

1 hour ago, DawnM said:

I am surprised at the bathroom.   We literally had a brand new bathroom (like there literally wasn't one there before) and it was made for my dad for handicapped accessibility, and we paid a little over $15k for all of that, without a bathroom 

  I know!  I remember that you did that and was encouraged for a minute!

This started in September and was an issue then, but I think the biggest problem now is that I live in an area that had 1000 homes destroyed by fire in December and they are all trying to rebuild.  At least, that’s what people are telling me 😕

I think the line of credit and Home Depot  will be the best place to start.  I’ve even tried Craigslist for bathroom remodel and they never come back.  It’s a tiny bathroom!  No weird stuff!

[Corraleno]

If your mom wants an accessible walk-in shower stall with grab rails, fold-down seat, etc., you can get prefab versions of those from Home Depot for around $2500. Then instead of trying to get a busy contractor to schedule you for tile work, plumbing, flooring, etc., you can do those piecemeal — get vinyl flooring installed by Home Depot, buy the toilet, shower stall, and vanity yourself and hire a plumber for a day to install them, paint the walls yourself, etc. That will cost WAY less than $20K. If you don't want to do that, your next best option would be to look for a specialist bath (or kitchen & bath) company that can do the whole thing in a couple of days. Google "accessible bathroom installation" and your location and see if there are any companies near you. That will cost more than the Home Depot route, but should be faster than trying to get a contractor to fit you in.

[JustEm]

Nvm: just saw the added info

Edited June 29, 2022 by hjffkj

[City Mouse]

Windows are something that could be completed after she is moved in.

[Jean in Newcastle]

5 hours ago, Ailaena said:

 she no longer has the cash for a remodel (because people kept not showing up to complete work and yet bills keep coming).
 

I am confused on this point.  Are these bills for work that isn't being completed?  She should not pay for uncompleted work. 

First, she needs to see what loans are even available to her.  Can she get a HELOC?  Can she refinance the old house and use the equity for remodeling?  Talk to the bank.  You need more information before going ahead.  The money for the remodel should be separate from the money she's trying to live off of at this point. 

If the new house is next door to you, can she move in with you temporarily while her new house is being remodeled?  She won't have to move out for all of it but she would need a working accessible bathroom before moving in. 

[BusyMom5]

1 hour ago, Corraleno said:

If your mom wants an accessible walk-in shower stall with grab rails, fold-down seat, etc., you can get prefab versions of those from Home Depot for around $2500. Then instead of trying to get a busy contractor to schedule you for tile work, plumbing, flooring, etc., you can do those piecemeal — get vinyl flooring installed by Home Depot, buy the toilet, shower stall, and vanity yourself and hire a plumber for a day to install them, paint the walls yourself, etc. That will cost WAY less than $20K. If you don't want to do that, your next best option would be to look for a specialist bath (or kitchen & bath) company that can do the whole thing in a couple of days. Google "accessible bathroom installation" and your location and see if there are any companies near you. That will cost more than the Home Depot route, but should be faster than trying to get a contractor to fit you in.

This is what we would do- but we DIY a lot.  Replacing a toilet is actually very simple.  The shower would be a bigger job that would require a plumber- agree about the fiberglass one from Home Depot.  To replace the vanity, also very simple as long as existing lines are still good.  If you aren't moving fixtures, just replacing what is there, the price could easily be 5K or so.  

[mum]

Somewhere like Home Depot seems like a good way to go. They won't ghost you. I'm not surprised you found flakes on Craigslist. Those repairs should be able to be done in a reasonable amount of time, get them all scheduled now, don't wait to schedule them one at a time when each is finished.

The big question I see is, once one house is sold and she moves into the one next door to you, does she have enough money to make it all work going forward-ie, enough money to cover water, trash, property tax, house insurance, electricity, ongoing house repairs, food, medical costs, etc. I would recommend sitting down and making a list of real numbers, not just ball park "I think this is about what this will cost" numbers. Since you live next door you should have fair idea of accurate utility bills, property tax, insurance, etc. Her medical costs will be the same, so those should be known. What does she spend on food and eating out and clothes and gifts and cable tv/streaming subscriptions, cell phone, landline, etc. Again, not just "this is what I hope I spend/what I think I should spend" but ACTUAL numbers from receipts/bank/credit card statements.

If she does has enough money for all that on an ongoing basis after she sells the other house, great. If she will not, then it's a whole different plan that you'd be looking at. 

[Corraleno]

If Home Depot has most of what you want, or at least the flooring you want, they have a Project Loan card that is basically a line of credit that looks like a credit card but only works at Home Depot. There is no collateral, qualification is based entirely on credit score, credit lines go up to $55K (depending on credit score, obviously), there is no annual fee or "points" upfront, and the lowest interest rate (for a 5 year payoff) is 7.4%. If she can qualify for that (with or without a cosigner), you could get the flooring done ASAP, then put the old house on the market the minute the flooring is in, and start moving her things. Then, depending on the size of the credit line, you could purchase the bathroom fixtures and stove from HD and get those installed, or just wait until the old house sells and then pay off the HD Project Loan and use the cash for the rest of the projects. Worst case scenario is that she'd be making minimum payments on the HD project loan for a couple of months and maybe using your bathroom for a couple of days if she gets that done after she moves in.

 

[Clarita]

5 hours ago, Corraleno said:

If you don't want to do that, your next best option would be to look for a specialist bath (or kitchen & bath) company that can do the whole thing in a couple of days. Google "accessible bathroom installation" and your location and see if there are any companies near you. That will cost more than the Home Depot route, but should be faster than trying to get a contractor to fit you in.

FYI I priced two of those companies out and they were 2-3x what I'd have to pay just buying materials and scheduling contractors. That's comparing whatever they were offering me (limited options) and me getting all the high end bathroom/kitchen things I wanted. So before going the kitchen & bath specialist one-stop-shops I would be very knowledgeable in how much the remodel you want is going to cost. 

[Corraleno]

15 minutes ago, Clarita said:

FYI I priced two of those companies out and they were 2-3x what I'd have to pay just buying materials and scheduling contractors. That's comparing whatever they were offering me (limited options) and me getting all the high end bathroom/kitchen things I wanted. So before going the kitchen & bath specialist one-stop-shops I would be very knowledgeable in how much the remodel you want is going to cost. 

I agree it will cost a lot more, but if they want someone else to manage the remodel, as opposed to buying the fixtures from Home Depot and hiring a plumber to install them, then a bathroom specialist is likely to be faster than trying to get on the schedule of a booked-up GC in an area where 1000 people are trying to rebuild homes destroyed by fire. If it's the difference between paying more upfront for a quick install, or waiting another 6 months while paying 2 mortgages, the faster option may be cheaper in the long run.

[prairiewindmomma]

Honestly, I would do nothing until the two of you can meet together with a financial planner and she has a working budget that fits into her overall financial picture. Owning two houses in a market with a housing shortage is encouraging, and I would also be meeting with at least three realtors to get a sense of what her old home is worth and what her new home could be worth with changes. While you meet with the realtors, get their list of preferred contractors. They will each have one and those contractors will be motivated to keep their realtor friends happy to continue getting referrals.

I would be working to get the old house on the market asap. The fed is giving every indication rates are going to continue to go up and that is going to start knocking buyers out of the market. There is no reason for her to need to fully move out of her new house for construction if she is not frail. It may be less than ideal, but her finances seem precarious at the moment if all she is living on is home equity and social security with no outside investment funds coming in. 

[Ausmumof3]

I like the financial planner advice. If it was here, I would look at selling as is even if it involves temporary accommodation. The market here is shaky because it’s escalated insanely over covid and everyone has variable rate mortgages. Increasing interest rates are aiming to slow it down without causing a crash but no one know for sure that it would work. You could spend a lot of money doing repairs and they could take ages as trades and materials are hard to come by. Then you may not recoup the investment in the property. You don’t want to be tied into a repair contract and have people not turning up to work, no materials available and unable to sell.
 

That said, I would make sure you have accomodation lined up first because rentals are also hard to come by here. 
 

All of that is based on what I know of Australia though: the situation could be different in the US where most people have more fixed mortgages.

[Scarlett]

I gues a financial planner wouldn’t hurt.  I probably would not do that. 
 

If she has 2 homes (am I understanding both are paid for?) sell the more expensive and move into the less expensive. The less expensive one is next door to you? 
 

I know it is not as easy as I am making it sound.  It will take a lot of concentration and planning.

1) Get a competent realtor to access the house that needs to be sold. Do your best to sell it as is.  Look at the current market yourself.  Go on realtor.com and look at the houses like it and near it that have sold recently.  Get a good idea yourself and see what the market is likely to bring.  And get it on the market asap.@
2) At the same time, make a list of absolute repairs that need to be done before your mom can move in.  Get a Lowes credit card and start on what you can before you have the other house sold.  Be conservative.  Is there only one bathroom in new house?  Does it have to be done before she moves in? If she lives next to you she could use yours while hers is being repaired if old house sells quickly. 
 

If the floors have to be redone it would be very helpful to do them before move in.  But it would not  be sensible to lose out on a sell of the old house because you don’t have the floors done yet. 

So.  That is my 2 cents. 

We were in a similar situation when we bought and sold houses at the same time. We got the keys to new house about 30 days before we actually closed….we were fairly sure the sale would go through but we still limited what we did and how much money we spent just in case. Your mom doesn’t have that issue so she is better off in that regard. But what we did before move in was ( ceilings ( pop corn removal and re texture) and lots of painting. That was it.  

Edited July 1, 2022 by Scarlett

[QueenCat]

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