Caregivers Nearing Retirement: House of Cards?

As a thirty-plus year investor, I am disturbed by discussions with some very dear friends, recently. Their experience multiplied 100,000 fold contributes to America’s rocky future. To preserve their privacy, their names have been changed and details have been changed without losing the point.

BOUGHT LOW

John and Susan’s bid won at the auction on a foreclosed home in a north Los Angeles suburb during the nineties and California’s last recession. Over the years and with equity loans against their appreciating property, they fixed-up their retirement home. While California’s real estate market recovered, John, an independent contractor, didn’t hesitate to put in sweat equity and quality materials to transform their home. Investing some $150,000 in their $80,000 initial investment, their $230,000 combined total investment more than doubled to $500,000 in California’s hot real estate market.

FIVE YEARS AWAY FROM RETIREMENT

Only five years from retirement, they refinanced to consolidate their loans (equity loan, first mortgage, credit card debt) and to have liquidity during California’s rising market. This new mortgage was for 80% of the market and appraised values of their home.

Not so long ago, you couldn’t get an equity loan for non-home related items. The loan was secured by your home and you got a tax deduction on the interest. Lenders were taking the risk because you were improving the value of the property, which could be sold to recover the loan amount in an event of a disaster.

SUFFERS STROKE

During this time, John’s mother, Betty, suffered a stroke, which left her left side paralyzed. John and Susan decided to move his mom into their home since their children were grown and on their own. Betty was eighty-six years old. She was as independent as strong-willed yet spirited women come. Through months of therapy, Betty eventually regained partial use of her left hand and was able to take steps with assistance.

When John and Susan wanted to get away, Betty, encouraged them: “Go, enjoy yourselves. No need to stay home with me, I can manage myself.”

VACATIONING IN COLORADO

Sixteen months of recovery gave John and Susan the confidence that Betty could manage without them at home each day. They drove to Colorado where this sixty-something couple recaptured their youth hiking, mountain biking, and rafting. Meanwhile, the neighbors looked in on Betty throughout the day. John and Susan had peace of mind with an in-home caregiver to watch over his mom during the ten days they were in Colorado. They loved Colorado so much they bought a piece of property. They used $55,000 of the proceeds from their new mortgage to pay for the entire parcel. “So much for our retirement home in California,” they said.

ECONOMIC DOWNFALL

A year later, the economy began its unprecedented decline. John’s general contracting business slowed to a halt. Being able to live on Susan’s income, they agreed that John would start building their new and smaller one-story modular retirement home on their Colorado property while Susan continued working in California. They used more of the proceeds from their second mortgage on their California home leaving them with a small mortgage and enough with which to buy a new car.

BUILT NEW HOME

Within eighteen months, their home was complete. The only things that remained were the cosmetic details inside and out. That was Susan’s job and she would take care of that while taking short extended weekend vacations.

Conclusion Next week: Caregivers Nearing Retirement…You’ll never believe the outcome!

Brenda Avadian, MA
Caretaker to The American Dream
Founder, TADWU.us and TheCaregiversVoice.com

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For related articles see:
CNN Short Sale vs. Foreclosures
Wall Street Journal Video: Extreme Makeover Home Owners Foreclose on gigantic homes