Reverse Mortgage Deals Pack Profit

Posted on May 6, 2014 by

The Reverse Mortgage (RM) market has had massive growth in the last decade. This phenomenon makes ripe a great opportunity for investor success as Americans live longer.

Basically a RM it is a product to help seniors finance their retirement in an age of longer lifespans, long-term stagnant wages and fewer younger workers to fund public and private retirement programs. An RM is similar to a refinance but different in that a monthly payment from the overall principle is paid monthly like an annuity.

Frankly, a significant group of older Americans just don’t have enough to retire. Thus, an RM is a product that needs to exist. We as investors come in when the family member who has to sell the house to cover the principle which was utilized up to the time the family member passes away. Believe it or not, this is literally happening today.

For those of you already connected to REIAComps , the control and feeling of confidence you have over your deals is priceless. Add these new Reverse Mortgage deals to your tool belt and it gets even sweeter. Using REIAComps to investigate the value of houses as they come to market, against other less reliable sources continues to be a no brainer.

A look at the potential market tells the tale.

  • 41.4 million Americans are 65 and older (13% of the population)
  • 92 million 65 and older are projected by 2060 (20% of population)
  • Currently, those 65 and older have $33,118 median income
  • This group has $170,128 median net worth
  • Fully 80.7% are homeowners

In 2013, the total home value for seniors was $4.54 trillion, with $1.08 trillion debt and $3.46 home equity. If we have a 2-3% market penetration today in RM’s, we could have 20-30% over time. Think of this way, potentially $3.5 trillion of the $9 trillion in home equity is controlled by seniors.

So what is the immediate outlook? Standard mortgages for 2014 could come in around $1.1 trillion with 2015 rounding out at $1.23 trillion. By contrast, Reverse mortgages are projected at 2014 $13.9 billion with 2015 looking like $16.4 billion.

Now the fact is this, not every senior should entertain this product. However, the growth of this type of mortgage has to do with as much with responsible management from originator, servicer and the home owner’s standpoint as with anything.

From the prospect of a person with aging parents, if your mom, dad, aunt, uncle, etc., can’t afford to cut their own lawn, pay their utilities – this is not a product they can afford. But done right over the next couple of decades or so, it could be the way to go for retiring seniors. Equally, providing a platform for investors to engage once the dwelling must sold.

The market is full of opportunities. Reverse mortgages valuated and analyzed properly for profit will be an excellent business model for years to come.

Take these musings in realm of RM’s and turn some extra profit. Of course, use REIAComps to determine the best acquisition and ARV for every deal you look at. Don’t for one moment let someone tell you the value of a deal. Let REIAComps show you for yourself.

Mark JacksonMark Jackson is an appraiser, real estate investor and property valuation specialist who teaches others to get more out of their real estate investing business. In 1999, Mark founded an appraisal company and soon found his true gift was analyzing property values for real estate investors. Since 2000, has closed millions of dollars’ worth of his own domestic and international real estate transactions. Mark’s passions are: faith, family, golf and real estate.

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