We target four buyer groups. Here we discuss who they are and how specific mortgages enhance the financial advantages of our product. The mortgages are considered single family mortgages and are for 1-4 unit properties. The owner must occupy one unit as their primary residence.
1) Homeowners aged 62 and older will be a significant portion of our buyers because of this incredible US government backed mortgage: Home Equity Conversion Mortgage For Purchase (HECM FP). The HECM FP allows people aged 62 and older to put about 50% down on a 1-4 unit property and never make an interest or principal payment-ever.
They benefit from rental cash flow without the outflow of a mortgage payment. There is no other safe investment that can generate this amount of cash flow. Virtually everyone with the 50% down qualifies for the loan. They just need to show the ability to pay the property taxes, maintenance and insurance.
This target buyer needs more investment income. If they stay in their home and take out a reverse mortgage the money available to them is half compared to buying our investment home. Here's why: If they have a $300K home paid off they can access about 150K with a reverse mortgage (HECM); if they sell their 300K home they can use that 300K to purchase a new Group Privacy home worth 600K with a reverse mortgage for purchase (HECM FP). Either way their home has the required 50% equity-but with the new home purchase they have an additional 300K compared to just 150K if they stay in their existing home.
The owners home does not need to be paid off to do a reverse mortgage for purchase. To buy a new home with the reverse mortgage for purchase, they simply need to put about 50% down on the new home. They can use the equity in their existing home or combine other funds to reach the required down payment. They will have no mortgage or interest payments as long as they remain in the home.
The HECM FP is a non-recourse loan that is paid off only with the value of the home when the owner dies or leaves the home. The only way to default is to not pay the property taxes, maintenance, insurance and HOA or condo fees. The property management company will pay all those expenses before distributing the rental proceeds to the owner. A true no default mortgage.
With no mortgage payment, this buyer has less concern that the rentals be fully rented up at closing.
2) Empty Nesters aged 40-59 are our second target group. We target buyers who can take the equity in their existing home and make a 20% or larger down payment on the new property. The large down payment will keep their mortgage payment low. The rental cash flow will reduce their housing costs compared to their existing housing costs.
Additionally, they could set up the new mortgage so that the payments are as low as possible now while enabling them to reach about 60% equity when they turn age 62. At 62 they can take out a traditional HECM (not a HECM For Purchase). With 60% equity in their property, the traditional HECM allows them to pay off the balance of their existing mortgage and eliminate their mortgage payments-forever. With this strategy, their housing costs are lower now, and much lower at age 62 when they benefit from rental cash flow without the outflow of a mortgage payment. The rental cash flow could cover their property taxes, maintenance, insurance and possibly more. This is a non-recourse loan that is paid off only with the value of the home when the owner dies or leaves the home.
These first two empty nester target groups will make up the majority of our buyers. See the "Empty Nester Layout" menu tab for a suggested layout for these buyers.
3) Renters of homes and high end apartments in and around the zip code where you plan to build is our third target group. They can get a loan for 2-4 units with just 3.5% down-provided they haven't owned a home in the past 7 years. The down payment can be gifted from a family member, friend, employer or some other lender approved source. Up to 75% of the gross appraised rent can count as qualifying income for the loan. This loan is guaranteed by the US government- FHA (Federal Housing Authority, a division of HUD-Housing and Urban Development).
4) Veterans and Veteran spouses can buy 2-4 units with no money down. This loan is guaranteed by the Department of Veteran Affairs (VA). Like with the FHA loan described above, up to 75% of the gross appraised rent can count as qualifying income for the loan.
Rental cash flow management: The management company collects the rent, pays the expenses and distributes the monthly rental income equally to the owners regardless of each units' vacancy. The risk of vacancy is spread between all the owners ensuring minimal cash flow interruption for each individual owner. The property taxes, maintenance and insurance are paid before the owner receives any rental cash flow.
These mortgages are the only way many people can borrow money to make a substantial investment. Until now, very few people were interested in the mortgages because they didn't like the attached housing product they financed.
You decide what to build. We have some suggestions in the Empty Nester Layout and Various Layouts menu tabs.