When Best Advice equals smallest Comission

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I just wrapped up a unusual scenariowith a referral client today. Here’s what happened.
“Bob” and “Carol” had been married about 3 years with 2 small children. They lived in a small condo in one of the most desirable cities in the Bay Area. This was bought when there was just the two of them. It was simply no longer suitable and they wanted to talk about selling it to buy a 3 bedroom detached home with a back yard in a neighbouring cheaper city.

Problem is they were only just getting by from week to week so an increase in monthly expenses was not possible. In fact there was a serious need to either reduce expenses or increase income.

Bob is Pastor of a start up church and receives a total of $47,000 per year split between Salary and a generous housing allowance.With the 2 toddlers Carol will not be working in the near future.

Although they have close to $180,000 equity in the condo the increased mortgage and property tax payments for even a small detached house would be impossible to make.

So what advice can I, a Real Estate Broker, give when buying, selling, or refinancing are not options, yet a nice young family have a genuine need.

Answer:

First, refi the current Adjustable Rate Mortgage into a 5 year fixed to take out some equity, part of which pays off the misc Credit Card debt. The balance to be safely invested to obtain a ongoing income stream. (this really is possible but beyond the scope of this discussion). At the same time set up a small Home Equity Line of Credit to be used only for emergencies.

Second, move into a rental house for themselves and rent out the Condo. The condo will still be cash flow positive even after the refi, and the house they will rent will be far nicer than any they had thought of buying, for approx two thirds the monthly expense.

Net result is is as follows:

They still have a foot on the property ladder.

They are living in a home much better suited to their current family needs which incidentally is not only closer to Bob’s church, but is served by the best elementary school in a top rated School District.

Their monthly income has increased.

They have an emergency fund available as required without ever needing recourse to credit cards.

Commisions to me – ZERO

Goodwill earned – PRICELESS

 

 

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