Latest / Aging Parent TrapX / Hidden Costs of Keeping Mom's House
Transcript
- Nikki Flynn: No, because they just moved in with me. Allison: Sold it. Yep, they just moved in. They just moved in. Yep. Okay, Julie Cook: sure it's pressure when you do that. just, you did. Allison: to the Aging Parent Trap X podcast and YouTube channel. My name is Allison Newland. I'm the broker owner of Platinum Properties of Florida in the Greater Tampa area. And I'm joined here today with my friends and colleagues, Julie Cook with Generational Transitions and Nikki Flynn ⁓ with Elite Preparation And today we are talking about the hidden cost of keeping mom's home. And boy, do I know a lot about this. my goodness. I was actually asking ⁓ Nikki and Julie if they have had experience with this personally, but had experience with it professionally with their clients, as ⁓ as have as well. But ⁓ if you don't know, I have been trying to hang on for dear life to my mom's house in Sarasota. Now Sarasota sounds super fancy and it is, but not where I grew up. This is a very modest home. It's about 1200 square feet of living area. It has a pool, which is nice, we had it rented for two years. My mom's in assistant living and the rental income helps offset her assistant living expenses, which as you know from previous episodes are around $6100. Dollars a month just for her that's meals and ⁓ her rent for her little studio and some you know home health care that's built into the facility, ⁓ I really need that rental income and I lost those tenants, and so I had to go through the whole thing of trying to find new tenants. As you know, I'm a real estate broker, sounds ⁓ ⁓ yeah, you should be able to do this, but ⁓ an hour and a half away. ⁓ could service the which would been my mom properly because I was too far away honestly to just pop in and show a renter ⁓ a house so I hired a management company I don't know I'm gonna let you guys I'm gonna stop there and I'll come back because I want to know what you guys have experienced with your clients on this subject. Who wants to go first? Julie Cook: I'll jump in. Oh, sorry. So from my perspective, the thing that the clients that I deal with trying to figure out, and it sounds almost kind of morbid, but it's just reality is how much money are we gonna need for our aging parents' care? How long are they gonna live? And that just to have those words come out my mouth just sounds horribly cold. Nikki Flynn: Okay. No. No, no, no, you go ahead. Julie Cook: But the reality of it is, have the finances to cover their care themselves with just the income they earn? ⁓ it needs to be supplemented, then is it more smart to rent? Is it more smart to sell? ⁓ it's almost like you have to pull all of the emotions out of it ⁓ look at it as just a financial decision, which especially if this is a family home that's been maybe for generations or where you grew up, ⁓ easier said than done. ⁓ Allison: That's true. Very true. Nikki Flynn: And ⁓ if you're a single child, then that's usually a lot easier. But when there's multiple children involved, that's usually where there's the problem. Allison: I might have to disagree with you there, Nikki, but Nikki Flynn: only because from ⁓ a well, mom and dad promised me the house standpoint, ⁓ or always one child that is still lingering around in the family home with the parents, ⁓ but not really being the supportive caretaker type, ⁓ but still want to be able to stay in the house. And it's like, no, that's that's not how it goes. so I've into a couple of those situations where it's been Allison: Yep. Mm. Nikki Flynn: The one of the siblings did not want to leave the house, but did not want to pay rent because it was mom and dad's house and they didn't want to pay rent. And it's like, okay, well, mom and dad have now had to move into a facility. We need that rental income. So two things are going to happen. You're either going to apply for a loan to buy the house from us. So then it's yours. Mom and dad said you could have it, you could have it, but you have to buy it. or the other option is that you're gonna have to move out and we have to rent this house out. Allison: Yeah. Mm-hmm. Nikki Flynn: Those we don't really have an option because they were not planning for that stuff when they got older. ⁓ it of went from I feel like I was just having this conversation with a a friend of mine where th there's a gap, like somehow, some way, this wasn't really a thing like 20 years ago. Like grandma and grandpa were able to stay at home and age at home and everything was okay. But I feel like all of a sudden it's just like now this is like a a new thing. This is the new trend. This is how things are supposed to be. But it's already too late for them to do the planning for it. So if they never had a savings or retirement plan, the only other option is the properties that they own. Or we start going down the horrible road of Medicaid or the other awful road of having them live with you. So which I don't advise. Allison: my gosh. ⁓ that's not everyone's experience, but sometimes it is. And I would say that I wouldn't want I don't ⁓ mom can't live with me. My house is not set up for it. It's not modified for that. But I understand what you're saying be and that that's a whole nother ⁓ episode you know, what is it really like? What's it really like to have, you know, your family move in with you when that's not what you are planning with your life, right? ⁓ And right, Nikki. I think you know, the Julie Cook: you Nikki Flynn: Mm-hmm. Allison: my grandparents, gosh, I don't even know how old they were when they passed away. They must have been young, you compared to what we ⁓ like, of I thought they were old and I didn't really know them. They lived in other parts of the country. But ⁓ they you know, they died at home or one was in a a facility that was a state facility, which was awful ⁓ for my dad's ⁓ parents. they the my dad and his sister were not in charge of taking care Of their parents, and they passed away maybe when I was 10 or so, so they couldn't have been too old, but people are living longer, right? Because of the nature of our healthcare system. I think people get better care ⁓ they're living longer, and yes, you know, they might run out of money. That is my biggest fear ⁓ that my mom runs out of money. And still needs care, right? Because I am an only child, and you know, I have to care of her, make sure that she's taken care of. And that is why, even though I could sell her house, I'm scared because it's not a big house. We just discussed that. I mean, maybe she would get three hundred thousand dollars. Well, that's not gonna last very long at six thousand dollars a month plus some other expenses. And I would say, well, and I did the math and I did a spreadsheet and I've been keeping me up at night and we were running at about a a a thousand dollar a month deficit right so I knew I had to tap into say some savings ⁓ which are not plentiful at all that's gonna go pretty quick ⁓ and so ⁓ you have and these are the hidden cost of keeping the home you've got insurance you've got to have property insurance now I don't have to because it's paid off but what if something happened to it right ⁓ what there was a fire what if there was a flood the neighbor Her she's not in a flood zone, but her neighborhood did flood two years ago with the storms that we had here in Florida, the back-to-back hurricanes, and the water came onto the like the edge of the driveway. It was getting pretty close. So I went ahead and got flood insurance for the future. ⁓ so you've got your insurance and taxes. Now, when you don't live in a home, your property taxes go up. So her taxes were pretty low because she had lived there for 40 years and you get a homestead exemption, and then they can't raise your taxes. Taxes more than a certain amount each year. So they were literally like around a thousand dollars a year. That is not the case anymore, and they're gonna continue to go up. And P.S. By the way, in Florida, the property tax home homestead exemption, ⁓ if the is raised, the homestead exemption is raised, thereby reducing our property taxes, ⁓ they're gonna to come up with different ways to collect property taxes or to collect money to run. local municipalities that's a whole nother pot ⁓ podcast as well ⁓ people point is is that people who have investment properties their taxes may go up even more so you got taxes you've got insurance ⁓ maintenance i've got maintenance i've got to do ⁓ the last tenant painted like the walls like bright purple bright blue on a couple of walls i mean i gave them permission ⁓ paint what didn't do was make sure that they painted before they left right because i didn't tell them that they paint it. And so the property management company I had to hire to help me find a tenant ⁓ ⁓ you have to paint this. Well, guess what? $2,000. I said, No, ⁓ not doing that. You know, if they don't like the paint, they can paint it. I, you know, so I'm getting around it. it wasn't a bad paint job, it just was very bright. and then Yeah, so those are some of the hidden costs. ⁓ and if you rent out the home, by the way, and you use a property management company, which I suggest that you do, unless you're close by and you know what you're doing, they're gonna take one month's rent right off the top, and then they're gonna take 10% of that rent every single month for the term of the lease. And so I'm still gonna be, know, not in the black here, but at least I'll have some money for her. so I mean, does and I and I have some more to say about this, but some Else should talk because I could just go on forever. But I have something to say about trying to get money out of a home that is in this situation and I'll ⁓ you my story about that in a minute. But somebody add something please. ⁓ Nikki Flynn: Mm-hmm. Julie Cook: I feel like you're the pro on this one because you're in real estate and you have firsthand knowledge of this. Allison: Well, I I mean then then I will tell you that know, the that I have learned during this process, first of all, when you lose the tenant, so I lost a tenant ⁓ for the month May, for the month of June, and now we've got ⁓ them booked for July, mid July, fifteenth. I will not collect rent until August. So that's three months ⁓ rent, right? ⁓ there. that ⁓ I'm not collecting, ⁓ basically. So I looked at and and I was scared that my mom wasn't gonna be able to make her neck her July first payment of her six thousand dollars because her operating account, her regular checking account was getting pretty low other things are tied up in investments. Remember if mom and dad have an IR IRA a C D, ⁓ if take money out of that stuff, they're gonna get penalized. Okay. But I've got I've got a good story about that because ⁓ I into ⁓ doing a a line of credit, home equity line of credit. Well guess what? ⁓ Not easy as you would think. She's owned the house for 40 years. She's got a ton of equity like 300,000 maybe a little bit more ⁓ seems Right, get $50,000 out, her over for a little while, and and in safe place and she's got a little bit of money to help pay those bills. And no, you have get somebody you have to find somebody will do an investment line of credit because it's now considered an investment home. So your regular people ⁓ won't do the regular line of credit, so you have to get the income. Interest line of credit, you have to take a minimum of 50,000 with this one program I found, you know, and the interest was really, really high, and ⁓ then have to start making ⁓ you $450 payments each month. So it's like, okay, ⁓ I do this. ⁓ What going ⁓ on? And if I sell that house and I don't invest properly that money, then she might run out of money. So at least I know if I have it rented, I can at least have some cash coming in, right? ⁓ But Was able to contact, and a lot of people don't do this, and you should contact your financial advisor. And I happen to be married to a CPA and ⁓ CFP. I said, Tim, I just I need to know what to do, I need your help here. ⁓ he said, contact ⁓ bank that has her CDs, tell what's going on, ⁓ ask ⁓ to her take out some money and to waive the penalty as a Hardship. Explain the situation. He goes, they have the autonomy to do that. They can do that if they want to. ⁓ mom and I contacted ⁓ it's smaller bank in the greater Tampa area. They have a branch in Sarasota, which she had set it up many years ago. ⁓ And but contacted the Tampa location. Well, they weren't much help. They're like, ⁓ the manager's not here today. ⁓ And yeah, gonna to call the 800. Number and you know, and I'm on a three-way call with my 80 year old mom, right? Like we're not getting in the car, we're not going down to the bank to be told no. So we're calling. ⁓ said, All right, I said, thank you very much. And then I was like, I've already been on that 800 number one time before, and that was a whole hour call just to get logged in. ⁓ anyways, I said, Mom, let's call the Sarasota branch. So we call the Sarasota branch, and she said, ask for Doris. That's the Julie Cook: Thanks. Allison: Woman who helped her many, many years ago. And so I did. Doris gets on the phone, knows exactly who my mom is. She goes, Darlene, how are you? ⁓ I'm like, She's doing okay, she's you know, ⁓ here's the situation. I didn't have to go through the whole, I didn't, I don't even know. I'm sure she must have verified us somehow, but I don't remember like ⁓ giving of birth and social security. Like she knew who my mom was. It was like old fashioned customer service. she said, let me find out for you and I will get back to you. And within hour, she had an answer. They had an amount ⁓ that asked for that they could give us the hardship without penalty, you know, release it without penalty. And ⁓ was ⁓ I want say that was Wednesday on Friday. I had a ⁓ UPS ⁓ with check in it, a bank check, and I took it to her ⁓ well, you know, big bank, you know, that she has her regular checking account with, and I deposited. Deposited it ⁓ it yesterday and so now she's got some money that should be released today into her account. And so she'll be able to pay her stuff. I'll take the other, ⁓ a a chunk of that money, ⁓ put it in a higher interest savings account. and know, when I made the deposit, the person ⁓ actually Bank of America, she's like, ⁓ So would you like to open a C D? I was like, Lady, no, I just ⁓ jumped to get. out of the CD are you kidding me but i appreciate it but i mean i didn't know it was gonna be that hard and so now i'm looking at her limited savings and i do mean limited she doesn't have and she doesn't have a pension she doesn't have she's you know I don't know. It's very scary. It's very scary people and we always say plan now, but how do you know how long you're gonna live? You just don't know. You don't know. So should you keep mom's house? Should you not? I mean that's a very personal It's a personal decision, but it's a business decision. I think I'm making the right decision. I think I am. Because if I let go of that house and she runs out of money, I have no cash flow at all for her. At least I know for a while I can still have some cash flow, and if I have to sell it in the future, I will, right? Nikki Flynn: Right. Yeah. You always have that to fall back on, so Julie Cook: And I think you're right that. Yeah, yeah. And making it a business decision. That's to me, that's the hardest part is pulling all of the emotions out and just making it strictly a business decision. I think that's the toughest part. And then like you talk to your husband, getting the professional advice on what to do, laying out all the here's the taxes, the insurance, the, know how long mom and dad are going to live. They may live three years. They may live 15. getting professional help. Allison: I you don't know. I you see a lot of things and people are like I mean, there are people that are ninety-five. I'll be in big trouble if mom lives until she's ninety-five because she doesn't have enough money for that. But like I had a friend that was my age that I went to high school and he just had a heart attack and died last week. know, early right? Just done. Like you just don't know what tomorrow is going to bring, right? And so as Jen Xers helping our aging parents navigate their senior years, we just to do our best. and that's all we can do. all we can let us know what you're going through