Friend Aged 47 Wants 1 house paid off Before Retirement - IP or PPOR ?

[Rob Williams]

I agree with the other Rob and Monopoly.
I've have friends at work who are now investing, having seen what I've done. They already had much of the mindset in place, just needed some fine tuning and some direction.
Others make comments and pretend they want to learn, but they don't really.
Also, it sounds like there is a bit of "levelling" going on in your relationship in that your friend may try to bring you down a little to her level, rather than genuinely try to elevate to yours.
To use a climbing analogy, there may come a time when you need to "cut the rope" in order to move in the direction of your choice and the speed of your own making without being held back my someone moving at a slower pace or trying to hold you back.
I've been there myself with various relationships and friendships. I've had lots of rope cutting practice. It's a valuable life skill.

 

[Lil Skater]

Surely you can help her get into a PPOR with a similar repayment of the mortgage to the amount of rent she pays?

I think people need to give the lady a break, no matter her age she's stood up and said she wants to change things, so why not help out? It's her choice if she jumps on the band wagon or not. Give her a chance and see, if she isn't as commited as you thought, then leave it.

Personally i think you should help her find something that's mortgage repayments be equal to her current rent. Also help her out with the books and stuff, but if she doesn't read them it doesn't mean she's not commited, maybe books just don't interest her and something more hands on would get her moving.

Maybe help her go through her finances and see what she can live without, she may get her nails done every fortnight when she could be saving that money instead, just as an example. Show her that you can still have life's little luxuries on a tight budget to get her into her own place, investing may be an after thought, but it's a start.

Goodluck with her, and i hope that just because people's assumptions may be what many would consider to be correct and the normal (i'd usually have the same view, but because she's trying to help herself she may be the exception), i think you can possibly help this lady. The first way to helping yourself, is realising you've made a mistake; ( or in this case not done anything to help themselves.)

Goodluck, and keep us posted.

 

[JamesGG]

Surely you can help her...

I've been a little trigger-happy with the kudos button in the last 24 hours, apparently, but you summed up my thoughts quite well. Good post.

 

[alexlee]

I think people need to give the lady a break, no matter her age she's stood up and said she wants to change things, so why not help out?

Actually, no, she hasn't. People who start with 1) excuses (I have bills to pay) and 2) jealousy without asking 'what is she doing different that I am not' has not, in fact, said she wants to change things.

 

[Lil Skater]

My friend and co-worker in her late 40's and who plans to retire at the age of 67 has decided to buy a house.

Her goal is to ensure she has her ppor paid off by the time she retires so she wont have to worry about rent payments.

She totally has a negative mindset towards money. I hope she can start to feel a bit more positve. She will have to be if this is going to work for her. I am there for her if she wants to come to talk to me. She has started opening up to me. I hope she will be ok and things can turn around for her. I am supporting her and giving her encouragement

She has started without excuses.

Yes i can see she is starting making excuses, maybe cold feet? Or just maybe the way she's being approached about it is scarying her a little.

Some people can be helped with a sentence, others need more of a shove. I may be viewing this a little optimistically but i think that in some ways she has stood up and said she wants to change things..

Heck how many times do people say they want to lose weight, but make excuses to eat the burger instead of the salad? Sometimes it takes more time to be commited enough to *actually* take the salad instead of the burger, but eventually some will take the salad and do what they said, others won't, and that's when you stop offering it.

 

[RumpledElf]

Heck how many times do people say they want to lose weight, but make excuses to eat the burger instead of the salad?

Hey, I like burgers! Salads have no calories and don't stop me being hungry.

This friend won't get anywhere if they can't save. There's a lost opportunity right there with that payrise to get a LOT of money squirrelled away with no lifestyle chance. She's probably already used to the extra now ...

 

[Lil Skater]

Hey, I like burgers! Salads have no calories and don't stop me being hungry.

This friend won't get anywhere if they can't save. There's a lost opportunity right there with that payrise to get a LOT of money squirrelled away with no lifestyle chance. She's probably already used to the extra now ...

Lol, me too! Give me a burger any day, doesn't mean i won't complain about the size of my a***...

That is true, she probably has gotten used to it. I still think there may be hope for her, if not she becomes a statistic..

 

[VYBerlinaV8]

The mechanics of this is easy.

1) Save or borrow $30k.
2) Get a home loan for the remaining cost on 20 year terms.
3) Pay the monthly minimum, and in 20 years it will be paid off.

Doesn't necessarily improve real wealth much (although the home will get some CH along the way), but as has already been discussed this person probably doesn't want to change their lifestyle much.

I'd suggest pointing out that with this approach the weekly/monthly cost will be a bit higher initially, but will go down over time, that is, it will cost more than rent initially but over time won't go up like rents do.

 

[agent007]

My friend and co-worker in her late 40's and who plans to retire at the age of 67 has decided to buy a house.

She is wandering what the best way to go about this would be and we have talked about possible options. She is also going to see an accountant.

A little background about her!

She rents

She spends and doesnt save

She earns $60 K pa

Her goal is to ensure she has her ppor paid off by the time she retires so she wont have to worry about rent payments.

She wants a mortgage no more than $250 K

She doesnt care or trust super

I'm thinking she has 2 possible options


Option 1
Buy a PPOR. Do not have an offset account and instead of offset account she can make extra repayments on her mortgage to try to pay it off as soon as she can. This means it is a way of enforced savings/repayments kinda thing.

Otherwise if she continues to rent and not buy she spends her money rather than saving it because she lacks the discipline. But if she has this goal of paying off her mortgage she might be able to achieve this. I know she is very determined to have her PPOR paid off by retirement.


Option 2
Buy an IP. Again do not have an offset account (for the same reason as above) But pay P & I and with the help of the tenant she will be able to pay it off quickly.

This option means she will be able to stay living (renting) 3 kms to the cbd. In a location that she loves. She could either buy an inner city unit 3 - 7 kms from Perth for her IP or a house further out perhaps in the middle ring.

She could stay living close to cbd renting for the next 20 years (she is 47) and then when she retires at age 67 she move into her IP or sell it and buy a PPOR where she wants to live ie inner city. If there is extra cash left over from the sale she can have that in her savings account as her nest egg during retirement.

If she goes for option 2 a few years down the track when the ip becomes positive cashflow she could use the extra cash to pay down her ppor debt.

The thing is though. What does she do once this ip is paid off. I dont know if she has to discipline to save and invest. But in 10 years time when her first ip has doubled perhaps it would be a good thing for her to repeat what she did. This way she is again paying off the ip2 quickly with her payg salary and excess rental income, rather than frittering it away because i think that is what she might do if she didnt buy ip # 2.


Oh yes i forgot

She will need to save some money for a deposit.

I think she will have to concentrate very hard to save at least $20 K in the next 2 years to have any chance. For this I would suggest that she open up an online savings account and automatically put aside some money and not touch it. Again if she is determined to have a paid off ppor in 20 years time she will have to be strict on herself and make some changes.

She totally has a negative mindset towards money. I hope she can start to feel a bit more positve. She will have to be if this is going to work for her. I am there for her if she wants to come to talk to me. She has started opening up to me. I hope she will be ok and things can turn around for her. I am supporting her and giving her encouragement


edited to say: I think option 2 is the way to go!!


Sorry this is so long. I would like to hear which option you would choose for her and why?

thanks

Option#3 - use the Super (SMSF) to buy the IP. She may well have enough deposit there for a $250k IP. Also, she may continue to pump money into the economy at the same rate she is doing it to compensate for those -ve geared investors. If she wants or needs to sell it when in retirament no CG tax is payable. This may also change the way she thinks about Super

 

[RumpledElf]

Or more likely if she realises she can access her super she'll blow the lot.

 

[agent007]

Or more likely if she realises she can access her super she'll blow the lot.

Do you think she can do worse than the current Super Funds?

 

[RumpledElf]

You read the rest of this thread?

YES.

 

[s050399b]

She totally has a negative mindset towards money. I hope she can start to feel a bit more positve.

what does this really mean? money is the root of all evil? or she's not a saver?

 

[Pa1nter]

Option 3....

YOU not waste your time trying to convince her to buy either (IP or PPOR) because she has ABSOLUTELY no intention of buying anything!!

Sorry but I've witnessed this mindset too many times to care...over it!

I agree,you can lead a horse to water but you cant make it drink,
Just like an addict,they will decide when they want to move forward,not you