Advice for my parents

[Shaggygirl]

Hi All

I wanted to call on the wonderful members of this forum for some advice for my parents. I have been trying to convince them to look seriously into some property investing for their future. My Dad is wishing to retire or at least semi-retire (he'd be happy to work part-time) in the next few years. My Mum has a small business but it needs to be built up, but she loves it so she'll do it for as long as she can. They have a respectable income between them. Dad's Super, however, just isn't going to be anywhere near enough for them.

They own (almost outright) a PPOR around the $400K mark. They looked into a loan once before and were told they wouldn't get one(!!?) and they were very discouraged by that. I questioned that but they are from the generation who believe what the bank says (as well as you buy your house and pay it off and that's that). Since then they had a bit of a payout and paid off credit cards etc so their financial situation is better than before.

Some background, they are planning to stay in their PPOR for the next few years (my Mum has been renovating etc and plan to enjoy that for a couple of years at least). Then they will either build or buy something more suited to their current needs (rather than a family home designed for a family of 6). They would really love a trip to Europe one day - Mum has never been overseas but have convinced themselves it will never happen now.

I have my Dad reading Jan's books but he is highly risk adverse so I need something that will be low-med risk that they can start now that they will be able to see what the later benefit will be. (I don't feel qualified enough to develop a strategy for them). What I'm looking for is some reasonable advice to give them - a starting place, so they can develop some additional income towards their retirement as well as even make enough for a trip (even if they made $10-15K on a property, that would get them a trip at least) without jeopardising their plans to move at a later stage. I just feel that all that equity in their house is going to waste when it could be working for them. They are nervous at the prospect of having a "mortgage" hanging over their heads for the rest of their lives though.

Thanks in advance for your ideas.

Sharon
(PS - Sorry for the long post).

 

[WillG]

Hi Shaggygirl,

My parents sound similar to yours. It is difficult to help them 'see the light' of investment.

It may be worth while setting up a spreadsheet containing their curent financial position (monthly expenditure, estimated time to retirement ...). Expand on this and show scenarios of buying 1 ..nn investment properties or some shares.

They will quickly realise they have to invest for some passive income to 'top up' their super.

I understand they don't want to put the family home on the line. They can get around this by setting up a LOC on their PPOR and paying a deposit on an IP with cash; hence the IP is not secured against the PPOR.

I believe the trick is helping them draw their own conclusions.

Hope this helps

 

[Aceyducey]

Maybe we need to form a 'Seniors Investors Club' for those parents who are considering whether to step into investment properties.

Shaggygirl (nice nic BTW), Will's approach is a good one, but rather than Excel if you can do it with pen and paper it may work better. From my parental experience, putting figures on a PC only makes them feel uncomfortable and you're already on the backfoot.

You could also lead by example....we've found that several of our relatives are now either buying properties or investigating purchases based on hearing about our purchases.

A key factor is removing the fear of risk. There is ZERO risk in buying an investment property provided you do your risk management in advance....get them exposed to some other investors in person socially (and discuss why these people invest) so that their fears are mitigated - playing Cashflow can help them understand the basis for their fears as well.

Finally, introduce them gently to the concept....they can always start by joint-venturing with you on a cheap cashflow property that costs $50K and delivers cash to them every week - this always opens peoples' eyes (read Kristine's thread about her daughter getting a cheque from the PM).

Cheers,

Aceyducey

 

[Sam_H]

Hi Sharon

I'm also trying to convince my parents of the advantages of PI
They have a PPOR and 1 IP, and have loads of equity at use!

I've done a few things like leaving some of Jan's books around...

They have only 5 years left to retire and I guess are concerned that with the remarkable growth that the market has had in the last 5 years....is there any room left to grow in the next 5?

Cheers

Sam

 

[dantheman]

Hi All,

I've got the same problem, my parents have two IP's and are only interested in paying the loans out rather than buying more. Their PPOR is fully paid, these are Nowra properties though so around the $200k mark.
I think they understand the theory but are reluctant to give up their holiday weekender lifestyle and intend to continue working a bit longer instead.
Once one of their friends just said I didn't want them to spend my inheritance lol! They have plenty of years left and by that time I'll be retired myself on my own investments

Good luck Shaggy! It's hard to teach an old dog new tricks..

Dan

 

[mort the frog]

You can lead a horse to water but you can't make it drink.

 

[Zorro]

Hi Sharon

I think you may be a little frustrated in the months/years ahead. With your parents resistance, they may be uncomfortable adopted a 'modern-age' strategy at this point in their lives. Considering where the property-cycle is, I believe that it's likely that the next 5 years or so will be good for buying, but with low growth, and probably (if you look at it from your parents point of view) 'a lot of headache for no visible returns'. So, what they may end up doing is increasing their debt, paying high $s for property, to see the prices stagnate or fall, and leaving them with Cash-neutral investments. Unless they have their hearts in it, and are happy to build a portfolio during the quite times (so that they are positioned for the next upwards cycle), I suspect that they will feel that they made the wrong decison (??), and you may feel bad for leading them down this path.

Of course, 'doing nothing' is not a good option also (and you will still feel bad !!).

If your parents are happy to see returns over 10yrs + then things should work out, just be sure to not oversell the short-term, as it's likely that a new investor will take pain before gain (my view).

Sorry to be down-beat on this one ! It's clear that you are trying to help them out !!

 

[Les]

G'day Shaggygirl,

This phrase (in the link below) had a huge effect in helping me to define my direction when considering starting with IP's. And the phrase has stuck with me since:-

http://www.somersoft.com/forums/showthread.php?postid=45586#post45586

You mentioned your Dad is conservative, so maybe re-read the story using "Shane Battler" (rather than Shirley)

I like Acey's idea of involving them in a deal with you - might take time to swing this, but start small by involving them in the little "day-to-day" wins with your IP's.

And I believe you really CAN teach an old dog new tricks - it just might take a lot more time and effort to succeed, that's all.

Good luck, SG

Regards

 

[fitguy]

hi Shaggygirl,

I can relate completely.
My parents are divorced however both have survived the divorce very well off financially.
My dad has a PPOR and two IP's only they are all freehold!!!!!
Dead money!
I try to explain and guide him in the right direction but being his daughter and only 25yrs at that he is reluctant to take my advice.
My mum also has a PPOR and it too is freehold.
Can you imagine my frustration.
My dad is very down to earth to look at him you wouldn't think he had two pennies to rub together but he is very wealthy and tells me he has enough money to do the things he enjoys.
I understand this but it is all dead money.
I am persistant though and for xmas both will be getting Jan's books from Santa. Good ol Santa .

Mrs Fitguy

 

[JamesGG]

I know just how you all feel... dunno how I'll ever convince my old man to get into the property game...

 

[geoffw]

Originally posted by JamesGG
I know just how you all feel... dunno how I'll ever convince my old man to get into the property game...

Yes, I can understand that DaleGG would not just be interested in property at all. I hope you can convince him it's a good thing.

 

[Jas]

Mrs Fitguy,

Why would you try to convince you Dad to take on more risk? He's where he wants to be. Obviously he doesn't want more, or he'd be doing it...


Don't be evangelistic in _your_ new found passion.

Jas

 

[D.T.]

Geoff,

I just don't think someone like Dale would see the tax advantages in it

-Hehe

Dave

 

[Chantal]

Hi Shaggygirl,

I can't really help you out with your initial query, but just thought I'd like to say that my parents were actually the ones that started me in property investment. They only started in 1997 and I started later that same year once I saw how they were going about it - and once I had read the Jan Somers book that they lent me! It certainly helped me a lot. So a big thank you to them!

Cheers,

Chantal

 

[Shaggygirl]

Chantal

Thanks for that. It's encouraging. They are being more open minded about it now.

How did your parents get started and how are they doing so far?

Shaggygirl

 

[perky29]

Hi,
I am thinking of giving my Dad one of the Rich Dad, Poor Dad books....it may open his eyes...but he is 65 now. I think then after that I might introduce him to Steve Navra...

 

[Shaggygirl]

I have my Dad reading some of Jan Somer's books (he has the book and I am feeding him bits to read - like "Dad, read chapter 10 it deals with.....).

Also I will be meeting with Steve Navra and taking my Dad along to his course.

My parents have become more willing but are still a little sceptical that property could make a significant difference to their lifestyle. My mother simply doesn't believe you can buy property for $150K or under $100K.

Shaggygirl

 

[jahn]

Hi shaggygirl, (and others)
I guesss I qualify somewhat to contribute to this as I am probably equivalent to the age of most of your Dads
Got a slow start myself, and hope to retire soon (years??) but realise that life doesn't finish when you retire, so I can still keep in the IP game. (and not rely on little Johnny 'Bonsai')
And similar to Chantal, we had 2 IP's and now am really pleased that no. 3 is a joint venture with daughter & great son in law.
Gamble? or Calculated risk!. Nothing ventured, nothing gained.
So what if property stagnates for 5 years. Averages show they will not stay the same for ever. (That means more CG in the future)
My decisions are mine. You may not be able to force a horse to drink, but at some stage, that water may look pretty good if your thirsty enough.
My first intro was a book by Robert Kyosaki (By my other daughter) (Thanks Karyn)
jahn