Back on October 29, 2009, I gave you a brief overview of the Community Living Assistance Services and Support Act (CLASS Act), the long-term care insurance plan that’s within Obamacare. And as I wrote, the plan wouldn’t do a heck of a lot to help with expenses in case your health changed. Well, look at what someone else has to say: According to The Washington Times, Health and Human Services Secretary Kathleen Sebelius, in a February 16 testimony before the Senate Finance Committee said that the CLASS Act “is at significant risk for failure.” And it’s not even off the ground yet! You can read the full Washington Times article by clicking here. The point to take away here is that you cannot count on the government to protect your assets and provide for you as you get older. The time to start planning is today. Best wishes, George P.S. I’m now on Twitter. Follow me at http://twitter.com/efinancialwrite for frequent updates, personal insights and observations on how to have a healthly retirement. If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://twitter.com/efinancialwrite to receive updates on either your cell phone or Twitter page.
Thursday, March 10, 2011
I got an e-mail this week from a reader who wants to invest in income-producing real estate. Without going into all the details, he seems well-versed in construction and could handle repairs himself … a very important aspect of becoming a landlord. However, he lacks the cash for a sufficient downpayment and is considering taking out an equity loan on his home to come up with the funds. As an alternative, I suggested he consider seller financing. But he is concerned that that is too risky. Here is a recap of my reply: Sean, you’re right … seller financing can be risky. To me, a big risk is that sellers generally will only provide short-term financing. For example 30-year amortization with a 5-year balloon. That could leave you scrambling in five years to find financing. And you might have to pay a higher interest rate than what banks charge. Plus you don't have much negotiating power on the price when you're asking the seller to carry the mortgage. But I'd rather take the risk of possibly loosing a rental property back to the seller than risk loosing my homestead. The key is to do your homework and carefully look at every potential expense that could impact the cash flow. You just might come across a seller who owns the house outright and has to move. Could be because of job relocation, personal reasons ... you never know. If the price is right and you strongly believe that you can generate enough positive cash flow to accumulate a decent down payment over the course of a few years, you could be in a position to get a conventional loan by the time the balloon is due. Anyway, never rule anything out, including seller financing, especially when you don’t have enough cash for a downpayment or otherwise can’t qualify for a traditional mortgage. Best wishes, George