Case Studies

In March 2006, EPIC was contacted by two different elder law attorneys in Florida.  Each lawyer had a client interested in purchasing income producing property through EPIC.

The first attorney’s client had $56,000 to invest.  The second attorney’s client had $100,000 to invest.  Both were community spouse situations--an at-home spouse could use extra income while the other spouse was in a nursing home.  Each attorney completed the Request for Services form.

Within three days, EPIC found a modest single family home in a good neighborhood selling for $152,000.  Each client agreed to pay EPIC a flat $1,000 at closing for administration costs, and the $2,000 in closing costs were prorated between the parties.

The first person received a 36% tenants-in-common interest in the home, while the second person got the remaining 64% interest.  Each person received a warranty deed reflecting their ownership in these percentages, and the planning clients own the home outright in their own names. 

EPIC then leased the home back from the new owners, agreeing to pay a net rent payment of $650 per month to the two property owners, pro rata ($233 to the 36% owner and the rest to the other owner).  The lease agreement makes EPIC responsible for all taxes, insurance, maintenance and expenses, and EPIC is responsible for making the monthly payment whether we find a sub-tenant or not—the $650 gets paid to the owners no matter what. 

(Update: EPIC will incur about $225 a month in expenses, but we now have the property leased to a nice couple for $950 per month.  EPIC makes about $75 per month for handling the property--much less than the 10% management fee allowed by Florida DCAF.  Not enough to retire on, but enough to make the property a positive cash flow and a viable investment.)

By calculating the net return on investment, -- each investor is getting a 5% fixed annual return on their money. If they are typical elder law clients, they probably took that money out of a CD earning 3%.  So they are actually making a better return on their money, while gaining Medicaid eligibility. 

Unlike other planning techniques like a Single Premium Immediate Annuity, which is typically set up to return principal as soon as possible, thereby preventing a community spouse from receiving any income diversion from the institutionalized spouse, the EPIC investment is just paying interest, so the total cash flow is usually much better for the at home spouse.  EPIC doesn't guarantee all client a 5% return, but everything we have looked at so far produces more than CD rates, and certainly more than annuities.

It is important to note the senior owns the property by deed.  EPIC promises to buy either owner's interest when they die, or when the five year lease expires, whichever happens first.  In both of these cases, EPIC agreed to repurchase the interest at lease termination for 100% of the original investment.

After closing, the elder law attorneys were provided extra copies of the warranty deed, the closing statement, the lease with EPIC, and the first month's rent check.  EPIC also had a local real estate broker provide a letter for application, certifying the rental paid to the client is fair market rent in the area.