Buying a new PPOR and keeping old one for a while as investment (retired)??

I am trying to help my parents' and their situation is as follows. The basic aim is to upgrade the house, whilst losing the least super for the least amount of hassle (tall order, I know, but worth looking into). I am trying to convince them to go to a tax accountant to get some figures and advice, but if anyone here has some rough ideas or advice it would be appreciated (and will help me decide whether I keep suggesting they look at keeping their old property for now).

Current PPOR - valued at 450-470K and owned outright - is 30+ years old, with new kitchen, deck, tiled floors. They have owned this since new, but are looking to move to a lowset place for retirement (in same suburb -within 14km of city, close to transport, shops).

Prospective new property is 5yo, on market for 540K - probably don't want to pay more than 520 though (as a side issue, does anyone here offer list price for a property? Is there an average amount to go below it when offering?).

1 parent is retired, with about 400K left in super; the other works p/t and earns about 40K a year, with maybe 50K in super that can't be touched yet. (and I don't think they will be eligible for pension for 7 or so years). They do not want to touch the super if at all possible as they are worried the super won't last till pension age - its also a bit of a security blanket I think, but to buy newer house they will end up 100K+ short.

So, which option seems the best (if even possible)?

1. Borrow the 100K or so, sell old place.
2. Use super for the 100K or so and sell old place?
3. Borrow 520K (but use it to 'pay' for the old property, and transfer the equity from the old one to the new one, with the extra 100K) and keep the old PPOR and use it as an investment for a couple of years (rent appro. 400wk)? My thoughts with this were that hopefully property will come up a bit (or inflation) and that they might recoup a bit more of the 100K difference, without touching the super. Deducting interest, etc, would not work out as good obviously as if both parties were working as one has no income. How would we go about this? (I should also say that the simplest way is what we I am hoping for - if it goes into anything other than 50%shares in each property between the 2 it will get too messy for them)

Thanks for any advice or strategies you can think of!
 
hi

starting backwards at 3. if they own outright they can't borrow money and pay for the existing property as it is already owned - the interest wouldn't be deductible.

It may also be difficult to borrow if only 1 is working - this would depend on other incomes and debts though. On $20,000 rent and $40,000 income they should be able to get around $300k or so.

Another thing to think about is the existing house may be CGT free, depending on when they purchased it - I think it is 1985 or before. This means it will never attract CGT, even if they rent it out. If it is preCGT then it may be best to hang on as long as possible to get more tax free gains.

But also need to consider who effect having 2 properties will have on the pension. I think you can have your own house and assets of around $300,000 before the pension is reduced. The rules around this a complex and change often too.

Maybe you could consider buying the new property yourself and renting it to them. They may be able to claim rental benefits in addition to the pension in future years too
 
Thanks for your reply. An update to the situation is that they have purchased new property, and the REA is REAALY hounding them to list their current home even though this does not settle for a few months (Feb) and they are in no hurry with 35yrs of stuff to sort/pack/chuck - she's already been sending people up the street to have a look from the road!

I tend to think if the area is in reasonable demand with limited supply that they may be better holding onto the property for a while - at least until settlement in Feb to see where things are headed? I am also trying to see how/if I can buy it or buy into it with parents or a sibling - we know the house, the location, all the faults etc, so I figure it may not be to bad an investment....had I had a crystal ball 5mths ago I would have not bought my PPOR/IP in the same street and waited for this one!

Considerations:
1. Buy with parents - no neg. gearing for them as owned outright, so rent ($20Kish) is taxable income (split 50/50, 1 earning $40K income, other with $0). But this means they have to pay interest payments on about a $460K loan as they need money for the other house - and rent of 400wk pretax will not completely cover this. House has been owned since mid 70's, so no CGT - ultimately they will prob benefit most depending on price trends, but is it worth the out of pocket to hold it when prob not real long term (pension in 7yrs or so so have to be out by then) - can the 'housing shortage/price rise hype' be believed?

2. I buy into it with them, say 50/50. Same situation for them, but less out of pocket for interest payments, less CG. My problem is going to be getting a loan though - 67K income, currently have a $365K loan on a $388 (plus costs) house - was valued at $410 independently when put on market 5mth ago. Have only owned it for 4mths though, and am about to move into it for FHB conditions which means I won't have the rental income servicing most of it for the next 6mths. So prob have no equity in it really to draw on, and not sure anyone would give me a loan. And i am guessing I owuld have to pay stamp duty transfer and obviously CGT (although it was and still is technically my PPOR for 29 years! :)).

3. Go in with sibling, 50/50. Same issues for me as above - how could I get a loan for my share? Sibling earns less, but has no loans and this would be IP 1 - also neither of us have enough for a deposit on this one, and I don't think my equity would cover it obviously.

It is really too soon for me to be considering this I know, but my main goal here is helping my parents (and second to that is helping sibling and/or myself), not the most rutheless investor strategy, but I still have time to gain for retirement! But this is a good solid house in great location, Bris north which *apparently* had higher increases last qtr than rest of city.

So who do we see for some advice? Bank, mortgage broker, tax accountant, financial planner, all of the above? - and who first, no point wasting time if one will kill the whole idea. Any recommendations for these services in Brisbane north? Any other words of wisdom/ways to approach this situation?

Thank you again! :) (one day I hope to be able to give back as much advice as I have received from this forum!)
 
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