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NOYB wrote:
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On Mon, 19 Sep 2005 12:37:26 GMT, "NOYB" wrote:

Or they could do a reverse mortgage and retire off the 1000% increase
in
equity that they accumulate over the the next 25 years.

That's not how a reverse mortgage works. The mortgage company pays a
fixed amount per month (usually based on a fraction of the current
appraised worth plotted against an optimistic guess on how long the
person wil live) and hopes to pocket the appreciation.

They only hope to pocket the appreciation beginning from the initial
starting point of the reverse mortgage. Any appreciation that occurs
between now and when the reverse mortgage starts belongs to the home
owner.
The homeowner's equity in the house drops as the bank continues to make
payments. But the homeowners reaps the benefits of the appreciation that
occurred before the payments begin.


They also won't
write a reverse mortage unless the owner is pretty old.

In other words...most retirees would qualify.

It is really just a scam that the banks foist off on old folks without
anyone to look out for them.

It's not a scam. It's a process that allows the homeowner to take out
the
equity of the home without having to pay monthly payments on the equity
line.

Here's another way to look at it:

Suppose you live in a million dollar home, but have zero equity in that
home
(ie--you owe 1 million dollars). In 30 years, that home is worth $4
million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You
decide
to take out $2 million of that equity, and put it in an investment that
pays
a rate equal to what the monthly payment would be on the loan (ie--you
end
up with a net monthly outlay of cash of zero). You can then use the $2
million to live on.

You won't live very well on that $2mm if its only worth "half a house."
First thing you know, you'll need to buy a new $250,000 car or a
$500,000 ski boat. You will think twice before taking that $40,000
vacation in Europe. Surely you didn't expect housing prices to go up in
a vaccuum, right?
Heck, you'll be paying your pool boy and gardners $100 an hour (and
getting by so cheaply only because they don't speak English and work
under the table) when houses are $4mm a throw.

I wouldn't be surprised if my house doubled in value every 5-7 years. But
even if it doubles every 10 years, that means it will be worth $12+ million
in 30 years. I used the $4 million dollar figure as an example.




You want to make some money and retire off real estate?
Here ya go. This will work for you, particularly because you're in your
early 30's.

Buy up as many rentals as you can find. Yes, they will go up in value-
but although the day will come when there are "do you want to sell
XXX Main Street" letters in the mail several times a month you'll never
consider parting
with them. Money machine. You can have a couple of dozen properties
paid down to zero by your mid 40's if you work at it. Then you can
retire, or not, but you won't ever have to worry about money as long as
people need a place to live.


I'm in the process of doing that right now.