Ok here is a situation that perhaps can be solved with some good financing, so I will put it to the forum for advice. Family have asked my opinion on whether to sell or refinance 2 ip's for them to move forward.
I have extended family members (married couple) in their late 50's own ppor in sydney outright (650-750k value I'm not active in that market so bit hazy)
They also own 2 ip's in beenleigh area SEQ - purchased around 130k each, vals in 150-190k range currently both rented around 250 each (from memory so again the numbers could be marginally different but thats close to correct)
They both work - he full time earning 90k+ and her part time earning 50k+ (this bit is an estimate as I didnt feel comfy asking them for exact amounts yet)
They have an adult daughter (29) living at home and working full time earning 70k. They want to help her into some property and out of the home if possible. They are considering whether to purchase a 2 br unit in their area (sutherland shire) which from my very brief research looks like costing 400-450 at this stage. On 70k with small cash deposit (may have 5% soon but no more in genuine savings at this stage) the adult daughter cant afford this and no one in the family wants to relocate to western sydney or a cheaper area (that is a whole nuther conversation that I had with her but anyway). So mum and dad want to consider their options to get her into the property market.
An alternative I suggested she consider is to rent(share) and invest in other locations based on her borrowing capacity and market conditions (which I could help her analyse) but she doesnt want to share rent if she can avoid it.
So the parents are considering. Selling both units at (what is my opionion) a lousy time in the cycle to sell with minimal profit realised and indicators saying that the next 3 yrs should create some more capital growth, so there would be lost opportunity there. Selling both would allow them to borrow to buy up to 50% of a unit with their daugter.
I suggested they at least consider a range of options including keeping the units (my reasons in above paragraph) and refinancing the house to get into the unit for their daughter. Also I suggested that (given they all actually get on fine and she has a separate part of the house) they consider her staying on an extra 2-3 yrs and invest in 1 or more ip's either in the local area or elswhere.
I suggested to them that (because they hadnt throught about finance at all prior to talking to me) some good mortgage brokers might have a range of ideas on how to tackle something like this and work out what is possible. They dont currently have a good broker so (heres the hook!) anyone with an amazing set of recommendations that are reasonably low risk and suits them might get the loans business at the end pending on the decision they make.
Issues that might be problems or might not:
1 Their age and how this effects borrowing capacity
2 The fact that right now they want to help 1 adult daughter but in 3-5 yrs they might want to help their other 2 sons who may also find Sydney RE unnafordable
3 They appear to hope for a 3-6 yr retirement plan. I am not sure exactly how realistic this is and can see them working at the long end of that window or perhaps part time in "semi" retirement for a while. They have a few hundred k in super but not huge balance as far as I know. Main thing being they need to consider their current retirement savings plans in their asset purchase decisions and the way they help their daughter (ie they thought of just loaning her the money at no/low interest but there is huge opportunity cost with that that they cant really afford at this stage)
4 The daughter has wants but these are no necessarily easily fit into current market realities. There is also some parochialism ie she wont move to a cheaper part of sydney. I have had numerous conversations about this issue with the whole family and they wont budge so they would rather find a solution that is financially more difficult if it obtains the goal.
Sooooo...
Any thoughts are greatly appreciated.
Matt
I have extended family members (married couple) in their late 50's own ppor in sydney outright (650-750k value I'm not active in that market so bit hazy)
They also own 2 ip's in beenleigh area SEQ - purchased around 130k each, vals in 150-190k range currently both rented around 250 each (from memory so again the numbers could be marginally different but thats close to correct)
They both work - he full time earning 90k+ and her part time earning 50k+ (this bit is an estimate as I didnt feel comfy asking them for exact amounts yet)
They have an adult daughter (29) living at home and working full time earning 70k. They want to help her into some property and out of the home if possible. They are considering whether to purchase a 2 br unit in their area (sutherland shire) which from my very brief research looks like costing 400-450 at this stage. On 70k with small cash deposit (may have 5% soon but no more in genuine savings at this stage) the adult daughter cant afford this and no one in the family wants to relocate to western sydney or a cheaper area (that is a whole nuther conversation that I had with her but anyway). So mum and dad want to consider their options to get her into the property market.
An alternative I suggested she consider is to rent(share) and invest in other locations based on her borrowing capacity and market conditions (which I could help her analyse) but she doesnt want to share rent if she can avoid it.
So the parents are considering. Selling both units at (what is my opionion) a lousy time in the cycle to sell with minimal profit realised and indicators saying that the next 3 yrs should create some more capital growth, so there would be lost opportunity there. Selling both would allow them to borrow to buy up to 50% of a unit with their daugter.
I suggested they at least consider a range of options including keeping the units (my reasons in above paragraph) and refinancing the house to get into the unit for their daughter. Also I suggested that (given they all actually get on fine and she has a separate part of the house) they consider her staying on an extra 2-3 yrs and invest in 1 or more ip's either in the local area or elswhere.
I suggested to them that (because they hadnt throught about finance at all prior to talking to me) some good mortgage brokers might have a range of ideas on how to tackle something like this and work out what is possible. They dont currently have a good broker so (heres the hook!) anyone with an amazing set of recommendations that are reasonably low risk and suits them might get the loans business at the end pending on the decision they make.
Issues that might be problems or might not:
1 Their age and how this effects borrowing capacity
2 The fact that right now they want to help 1 adult daughter but in 3-5 yrs they might want to help their other 2 sons who may also find Sydney RE unnafordable
3 They appear to hope for a 3-6 yr retirement plan. I am not sure exactly how realistic this is and can see them working at the long end of that window or perhaps part time in "semi" retirement for a while. They have a few hundred k in super but not huge balance as far as I know. Main thing being they need to consider their current retirement savings plans in their asset purchase decisions and the way they help their daughter (ie they thought of just loaning her the money at no/low interest but there is huge opportunity cost with that that they cant really afford at this stage)
4 The daughter has wants but these are no necessarily easily fit into current market realities. There is also some parochialism ie she wont move to a cheaper part of sydney. I have had numerous conversations about this issue with the whole family and they wont budge so they would rather find a solution that is financially more difficult if it obtains the goal.
Sooooo...
Any thoughts are greatly appreciated.
Matt
