How to help 65-y-o buy house - innovative ideas

[propertyVIC]

So here's the deal... My parents are splitting up. They own fully paid off home in a rural area worth maybe $500-550K.

Mum also has an inheritance (100K perhaps, but might have to give half to dad), ? super (not much) and access to half of dad's defined benefit super (she would get approx 30K a year from this on my guesstimate)...

Mum would like to move to Melbourne, but half of 500-550K is not going to buy her anything there.

Hubby and I are in a pretty good place financially, but she would prefer not to be a "burden" on us.

I'm trying to think of innovative ways we could help her without being out of pocket long-term (not because I'm not willing to help directly, but because she won't accept it).

- Are there any financial institutions which would lend to someone in her position, perhaps in a shared equity fashion, if we went guarantor?
- Potentially we could make a loan to her directly which can be paid back via her will.
- Perhaps we could buy a property that she could rent to own.
- We have an unrenovated, paid off investment property (a former PPOR) in a prime area. Perhaps she could pay for a reno on it in return for life occupancy rights and/or a share of ownership (would spark capital gains tax for us, I imagine).
- She could buy something she can afford to rent out and rent herself.
- She could loan us the money to renovate the unrenovated former PPOR interest free or at low interest and, in return, live there rent free while we pay her back?
- Try to buy a subdivisible property with her, then sell off the back yard - leading to lower price for her home.

Any other ideas people?

 

[Terry_w]

You have to be very careful in what you do.

Life interest etc are complex and there are tax consequences.
Easiest may be for you to buy something and rent it to her.

Or, you could possibly go into a purchase jointly. She may be able to treat her share of the ownership as owner occupied and have it CGT free.

Consider centrelink issues too.

 

[westminster]

Hmm this is a very tricky situation that you need some very careful advice from. Terry (posted above) is very up on these things - so listen carefully or consult him.

I'm wondering.....

1. Could your Mum use some of her money to build a granny flat in the rear of the old PPOR and live there (not sure if Vic laws would allow this)
2. Build a granny flat in the rear of your current PPOR

i think you really want to leave as much cash as possible for her to invest in something safe to generate income for her - like a term deposit or put into safe profile in Super. Sinking all her money I think would do her a disservice but this is where some financial modelling comes into play.

If she is going to get $30k pa via your Dad's super she probably won't be entitled to much Pension so she'll need a place to live and enough money to live off. I think a granny flat is ideal for this as she'll only need to pay $100k or so.

 

[westminster]

Is there an area of Vic in particular she'd like? Near you?

Rather than a house a flat/villa or even over 55s village might be a cheaper option - watch out for the monthly fees when calculating over 55s models

 

[propertyVIC]

Thanks all. Please keep the ideas coming...

I also think granny flat might be an option, but we don't really own anything that has enough land, as most of what we have is inner city Victorian terrace type places... except for one place we were planning to develop into four units (planning permission already granted). She could live in one of those once built, but they are reverse living for greater density so not a long term solution as she has a dodgy knee and hip... and they have the living areas upstairs.

So I guess add to the list is to build granny flat on that place, and develop it a lot longer down the track. Or to buy a new PPOR with enough land for GF... which would be really hard in the inner city area.

 

[propertyVIC]

And over 55s villages don't seem as big in Vic as WA... the ones I saw had hefty buy in prices similar to regular property without huge discounts. Didn't spend hours following that rabbit down that hole.

 

[Terry_w]

Doesn't have to be a granny flat, but could be another room connected to the main house - could be extensions paid by by mum. But get legal advice before doing this - relationship breakdowns, bankruptcy, estate planning issues etc.

 

[Rolf Latham]

- Are there any financial institutions which would lend to someone in her position, perhaps in a shared equity fashion, if we went guarantor?

I will cover that one for you

Under NCCP rules, its very unlikley any lender would lend mum much cash, and you cant really "service" guarantee her loan, because there is no derived benefit for you doing so.

Moving fwd from that, what may work is a family trust where she is co trustee or director of corp trustee.

Millions of considerations to go through there though !

ta
rolf

 

[westminster]

Thanks all. Please keep the ideas coming...

I also think granny flat might be an option, but we don't really own anything that has enough land, as most of what we have is inner city Victorian terrace type places... except for one place we were planning to develop into four units (planning permission already granted). She could live in one of those once built, but they are reverse living for greater density so not a long term solution as she has a dodgy knee and hip... and they have the living areas upstairs.

So I guess add to the list is to build granny flat on that place, and develop it a lot longer down the track. Or to buy a new PPOR with enough land for GF... which would be really hard in the inner city area.

Could you redesign one of the 4 units and make it smaller and more elderly friendly? ie just 2 bedroom

I wouldn't wreck your plans for those places but a small compromise like a redesign might be considerable.

 

[westminster]

And over 55s villages don't seem as big in Vic as WA... the ones I saw had hefty buy in prices similar to regular property without huge discounts. Didn't spend hours following that rabbit down that hole.

From $299k - http://www.amarcoapartments.com.au in Kingsville

But I don't know what type of person your Mum is and whether she'd like some company now she's splitting.

 

[Aaron_C]

A guarantee from you directly in her name won't work. A family trust will though - but this changes the tax implications.

 

[schweedy]

Definately get all your bases covered, legal advice, exit plans etc, depending on what you eventually decide.

I have no idea where your mums coming from, and where your at, so will take a few stabs in the dark.

Your mother, coming from a rural area, may prefer to stick to the outer suburbs of melbourne, so the money she will have should definately pick her up a nice 2brm unit, or a small house on a subdividable block etc, I suggest whatever choice, it be her place in the end, something she can afford.

I have seen many families move to be closer together, only to fall apart or fight and argue until the relationship breaks down....so be careful and still allow her and yourself room to grow, but with that extra benefit of being closer by.

I dont know how old your mum is, but I'm guessing you want something ground level, neighbours etc and I'd suggest finding an area with good senior citizens groups and activities, so she can make new friends and have her own life.

 

[nhg]

Are you an only child? Would she be able to gift you the money and you buy on her behalf?

If your not an only child not worth it as you will clash with siblings come inheritance. I've seen it happen way to many times.

 

[Terry_w]

Are you an only child? Would she be able to gift you the money and you buy on her behalf?

If your not an only child not worth it as you will clash with siblings come inheritance. I've seen it happen way to many times.

Could be a loan from mum, properly documented, which could be repayable on death of either party - but this could cause problems if cash not readily available to be paid back.

Could also be a loan which is forgiven at death, and if there are other siblings then this child's share of the estate could be reduced accordingly.