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3 Choices for Seniors Looking to Downsize Their Current Homes

Written by: Jim Vogel of ElderAction

One of the most pressing, and often emotional, decisions that seniors can face when looking to downsize to a smaller home is how to handle their current home. That home can be filled with so many memories and so many financial options, but it can also be filled with added burden for seniors looking to retire. So if you are thinking about downsizing your home during retirement, here are some ways you can deal with your old home:


Rent Out Your Home to Earn Some Extra Income


Are you planning on moving into an assisted living facility? If so, you should research local facilities and prices before you handle your current home. Many assisted living facilities provide the same services for seniors but come with different costs. It’s also helpful to keep in mind that assisted living communities are designed to provide independent living arrangements for seniors in apartment-style homes, alongside beneficial assistance with daily living tasks, such as bathing, cooking or taking medications. So if you don’t need help with your daily care or routine, then an alternate senior community may be a better fit for you and your retirement budget.

So what do all these choices have to do with your current home? Well, if you decide to move into an independent living community or an assisted living facility, you could always rent out your home to pay for the monthly costs and build more equity. If you play your real estate cards right, you could turn a nice profit by renting out your current home. Before you take this major step, though, you need to be aware of the potential costs of turning your home into a rental property. Aside from the costs to maintain your home, you may also be responsible for additional tax payments on that additional income, and you could end up spending a small fortune attracting potential occupants to your new rental property.

Sell Your Home to Gain Retirement Freedoms


If freedom is the focus of your downsizing move, you may want to just sell your current home outright. To avoid the headaches of having your home sit on the market for months, you should use a few real estate tricks to up the appeal to potential homebuyers and help it sell faster.  Start by picking the right real estate pro to list your current home and take care of any needed repairs, so you don’t have any surprise expenses pop up on inspections. By selling your home before you downsize, you can possibly retire mortgage-free to save yourself some stress.

Keep Your Home in The Family to Preserve Memories


There are so many reasons to hold onto the family home, and there are several ways to pass your home onto your family members. If you want to relieve yourself of financial burden, you could always sell your home to loved ones, but treat this home sale like any other by using brokers, lawyers and assessors to ensure that everyone walks away feeling like they were treated fairly.

You could also gift your home to family members, but this comes with some special considerations, too, like tax burdens for those family members or even income implications for yourself. Consult with an Attorney and a CPA to obtain further information on this subject.  According to Attorney Sarah Morris, “Depending on your needs, desires, and financial situation, a Trust may be the answer. Each client is unique, which makes a strategy session with an Attorney and a CPA critical.”  So, keep these in mind before you decide to give your children the gift of your family home.

Lastly, you may be thinking of just holding onto your old home, in order to keep it in the family. Owning a second home can come with additional burdens and costs, though, so weigh all of your options carefully before you make your ultimate decision.

Deciding what to do with your current home can stir up some strong emotions. What’s most important, though, is keeping those personal feelings from hindering your ability to make a practical decision about your current home. Making the wrong choice could derail your downsizing plans, or at least make the process of moving to a new home more stressful.

Using Regulation Crowdfunding For a Real Estate Fix And Flip Without Violating Securities Laws

As the internet developed, investors and real estate fix and flip companies have turned to “crowdfunding” for investments. While crowdfunding can provide great options for all involved, there are still legal requirements for the investor and the fix and flip business. This short guide provides some information about the federal and Nevada regulations involved in some crowdfunding scenarios.

“Regulation Crowdfunding” Exemption

Typically, any company or individual that wants to offer or sell securities to investors must be registered with the United States Securities and Exchange Commission (the “SEC”) in order to comply with the Securities Act of 1933. When a real estate flip and fix business seeks investors they are very likely issuing securities, and their activity may be regulated by governmental agencies like the SEC. However, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) allows for exemptions from registration for crowdfunding. Accordingly, in 2015, the SEC issued an agency rule adopting “Regulation Crowdfunding,” permitting some investments without requiring SEC licensing. This allows businesses to use crowdfunding without registration under certain limitations.

“Regulation Crowdfunding” Basics: Limits on Securities Sold, Limits on Investors, and Licensed Intermediary

The most significant limitations for Regulation Crowdfunding include limitations on how much can be raised, how much investors may contribute, and requiring the involvement of an SEC registered broker-dealer or funding portal. Regulation Crowdfunding caps the total amount of securities that may be sold to investors to $1,070,000.00 during a 12-month period, including amount sold by entitles controlled by or under common control with the issuer. This limitation means that Regulation Crowdfunding would likely be unavailable to a fix and flip company that created several securities opportunities in different LLCs. For example, if ABC Fix and Flip, LLC created three LLCs, each of which sought $500,000 in investments during a 12-month period, the aggregate total would be $1,500,000.00 and would exceed the securities sale cap, making Regulation Crowdfunding unavailable as on option.

Regulation Crowdfunding also limits the amounts investors can provide. Investors with an annual income or net worth under $107,000.00 may invest the greater of $2,200.00 or five percent of the lesser of their annual income or net worth. If the investor’s annual income or net worth is in excess of $107,000.00, the investor may invest the lesser of 10% of their annual income or net worth. No investor may be sold more than $107,000.00 in Regulation Crowdfunding securities in a 12-month period.

Finally, Regulation Crowdfunding requires the use of either a broker-dealer or portal that is registered with both the SEC and the Financial Industry Regulatory Authority (FINRA). So, even though the company seeking investments does not need to be SEC registered, the transaction will still involve an SEC licensed intermediary. This offers the company seeking investments the benefit of relying upon the intermediary’s determination that the investor limitations (see above) are followed.

Disclosures in Regulation Crowdfunding

While the issuer of a security taking advantage of Regulation Crowdfunding does not have to be SEC licensed, they must still provide information to the SEC in conjunction with the broker-dealer or portal intermediary. Issuers of securities must file “Form C” with included attachments on an annual basis. Form C requires disclosing information about officers, directors, and owners, information about the business including its financial condition. Financial information will include income tax returns. Additional disclosure requirements vary depending on the amount the business offers under Regulation Crowdfunding.

In addition to the annual reporting, the security issuer must also file progress updates under Form C-U when reaching 50% of its target offering amount, and again when it reaches 100%. Other SEC disclosures may be required on a case-by-case basis. State regulatory disclosures may also be required.

Advertising Limitations in Regulation Crowdfunding

The issuer of a security in Regulation Crowdfunding is strictly limited in its ability to advertise offering information. Generally, only facts about the issuer and offering terms may be provided. Issuer’s may still communicate with potential investors, but should do so through the intermediary broker-dealer or portal, clearly identifying itself as the security issuer. In sum, advertising should be done through the intermediary, and the issuer must direct investors there.

State “Blue Sky” Laws

In addition to SEC regulation, many states have laws regulating securities, often referred to as “Blue Sky” laws. It is important to make sure an investment offering will comply with relevant blue sky laws, which could include protecting an out of state investor (for example, if an investor is from another state than the state of the company offering the security, the investor’s state may seek to regulate that transaction for the protection of the investor).

Nevada requires anyone seeking to sell or offer to sell securities in Nevada to register, unless exempt. NRS 90.460 et. seq. Nevada allows for registration by filing, registration by coordination, or registration by qualification. NRS 90.470 – 90.490. However, Nevada exempts some types of securities from registration altogether, while exempting other particular transactions. (NRS 90.520(2) provides the list of exempt securities, while NRS 90.530 provides the list of exempt transactions.)

One exemption, NRS 90.530(11) has similarities to Regulation Crowdfunding. Nevada does not require registration if the transaction is part of a series where there are less than 35 investors in a 12-month period, there is no general advertising or solicitation related to the securities sale, no commission or compensation is provided for the investment (except a licensed broker), and the seller reasonably believes the purchase is for investment. Id.

Conclusion and Additional Information

Crowdfunding offers new options for issuers of securities and investors alike. While regulatory compliance is narrower than a public offering scenario, regulations still apply. As always, if you think you might need an attorney, you probably do, and you can contact us here.

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