Mum needs help in retirement

[dean75]

Hi,
My mum has recently retired and she is living on the pension of $315/wk. She has a mortgage of $200k and her townhouse is worth about $850k.
She has $100k in super and draws out down about $900/mth.
I have just started out in property investing and am sure there is a better way for her to retire with more money, I just don't know what.
If she purchases an investment property I believe she will lose her pension and seeing she does not earn an income she cannot get any tax breaks.
Any strategies of cant do, can do, should do to improve her financial freedom would be greatly appreciated.
Thanks
Dean

 

[Sunfish]

Be VERY careful what you advise. The last thing your Mother needs is an investment property. IMHO

 

[dean75]

Yeah thanks, Im not advising anything yet but would like to if someone knew a better way. I was under the impression that equity in property just sitting there is better off making money elsewhere.

 

[jingo]

Hi,
My mum has recently retired and she is living on the pension of $315/wk. She has a mortgage of $200k and her townhouse is worth about $850k.
She has $100k in super and draws out down about $900/mth.
I have just started out in property investing and am sure there is a better way for her to retire with more money, I just don't know what.
If she purchases an investment property I believe she will lose her pension and seeing she does not earn an income she cannot get any tax breaks.
Any strategies of cant do, can do, should do to improve her financial freedom would be greatly appreciated.
Thanks
Dean

As your mum doesn't have any income besides her pension, I don't think she could support the costs associated with maintaining an investment property.

Has she considered selling off her townhouse, paying off the mortgage and downsizing. If she was to buy a property worth $400,000 she would have around $250,000 plus the extra $100,000 to invest in cash/ shares which could generate some more income for her.

Regards Jason.

 

[dean75]

Not yet she loves her area and its a nice place, to sell her townhouse and buy a property for $400k, she would be looking at units of average quality. I know, If she wants more money maybe she'll have to bite the bullet. Just want to give her options. Thanks

 

[rugrat]

what about a reverse mortgage? Don't like them myself but might suit her situation.

 

[marg4000]

Is your mum concerned about her situation?

She has quite a bit of superannuation up her sleeve, so talk of downsizing or reverse mortgages seems a little premature. These actions may be necessary in the future, but for now it may be best to let her enjoy her home.
Marg

 

[Sunfish]

I was under the impression that equity in property just sitting there is better off making money elsewhere.

Think about what you just said: Retirees SHOULD own their house CLEAR AND UNENCUMBERED! You want to set her back. I know that on Somersoft having free equity is considered "a sin" but I had no idea this also applied to retirees.

If your Mum were to borrow against her house to invest, she must get a net return after tax GREATER THAN the interest she pays PLUS a risk premium. If she knew how to do this she not need your help anyway.

If you knew how to do it you wouldn't be asking us how.

Your serve.

 

[The Y-man]

Hi,
My mum has recently retired and she is living on the pension of $315/wk. She has a mortgage of $200k and her townhouse is worth about $850k.
She has $100k in super and draws out down about $900/mth.

From what I read here, her entire pension payment is going to the mortgage interest.... so she can actually get by on $900 per month.

If she down sized to a prop worth $600k-ish, she would:
1. have an unencumbered property
2. have $1300 per month from pension and not have to draw on her super at all - or if she can still get by on $900 per month, she can even have $400 per month to put aside!

Cheers,

The Y-man

 

[Aaron Sice]

what your mother needs is another stream of income - like Sunfish said - ABOVE AND BEYOND outgoings.

think serious cashflow positive and bugger the growth in this situation.

the US has some awesome deals but carries a decent risk profile.

regional areas have some great deals and as long as the employment prospects are good then the risk profile is reasonably neutral.

another stream of income - money talks and bullsh*t walks.

 

[Ausprop]

investment properties are LONG term investments when you have very strong cashflows elsewhere.

it is a harsh reality but I would suggest your Mum is

(a) living beyond her means, or

(b) retired too early.

I agree with the general sentiment to date - the last thing this lady need is some whinging tenant that won't pay their meagre contribution to the mortgages and maintenance and holding costs

Have a gentle chat to her about finding some part time work??

 

[skater]

I'd check into the deeming rules, before you suggest she downsize her PPOR too, and possibly look into other forms of income for her, if that's a possiblility.

 

[MCS_80]

How about looking at it from another angle.

What if you brought your Mother out?

Buy the townhouse from her at a discounted rate, let her live there rent and mortgage free and also help subsidise her bills etc.

ie. Buy it for say 400k. Your mum gets 200k cash. You now own a property worth 850k. Your mum lives pretty much debt free and you help her with bills and living in her "Golden Years". Win win all round if everything is agreed upon.

Mums help us all of their lives, why not give them something back this way?

Cheers

Mick

 

[13910]

How about looking at it from another angle.

What if you brought your Mother out?

Buy the townhouse from her at a discounted rate, let her live there rent and mortgage free and also help subsidise her bills etc.

ie. Buy it for say 400k. Your mums gets 200k cash, you now own a property worth 850k, your mum lives pretty much debt free and you help her with bills and living in her "Golden Years".

Mums help us all of their lives, why not give them something back this way?

Cheers

Mick

The investor in me is outraged, but the part that makes me human knows better and that this isnt a bad idea.Which is stronger? Who knows.

 

[MCS_80]

The investor in me is outraged, but the part that makes me human knows better and that this isnt a bad idea.Which is stronger? Who knows.

I know its not comfortable to think about, but your mum wont be around for ever. You wont have to let her live rent free for ever. The 400k you save and gain in equity is a big plus I say.

If the cashflow is there to cope, I see it as a great way to help all win.

Cheers

Mick

 

[Ajax]

Am assuming the townhouse is a 2 bedder.

Maybe take in a boarder/student.

The additional income may affect her pension.

 

[BV]

ie. Buy it for say 400k. Your mum gets 200k cash. You now own a property worth 850k. Your mum lives pretty much debt free and you help her with bills and living in her "Golden Years". Win win all round if everything is agreed upon.
Mick

Except for the new $400K loan
which @ 7% interest will be costing her $538 /week
Is mum going to pay rent?
If mum left the house as is with a $200K mortgage and @ 7% interest she would be paying $269 / week

 

[MCS_80]

Except for the new $400K loan
which @ 7% interest will be costing her $538 /week
Is mum going to pay rent?
If mum left the house as is with a $200K mortgage and @ 7% interest she would be paying $269 / week

No, mum pays no rent. This is a gift to mum in her "Golden Years" as a thankyou for selling the property to her son for an extreamly discounted price. (450K cheaper, not a bad saving)

Yes, the son has a new 400k mortgage, however, has made 450k in equity from day 1 of the sale. This equity can be used at any time to aquire more property etc.

I admit, cashflow would be an issue with mum paying zero rent, but long term, I believe this will pay off.

Cheers

Mick

 

[Rooster]

No, mum pays no rent. This is a gift to mum in her "Golden Years" as a thankyou for selling the property to her son for an extreamly discounted price. (450K cheaper, not a bad saving)

Yes, the son has a new 400k mortgage, however, has made 450k in equity from day 1 of the sale. This equity can be used at any time to aquire more property etc.

I admit, cashflow would be an issue with mum paying zero rent, but long term, I believe this will pay off.




Cheers

Mick

I'm pretty sure the sale of property to family/relatives is subject to an independant valuation in order to stop the loop holes regarding stamp duty and CGT.

Not quite as straight forward as that me thinks...


Rooster

 

[MCS_80]

I'm pretty sure the sale of property to family/relatives is subject to an independant valuation in order to stop the loop holes regarding stamp duty and CGT.

Not quite as straight forward as that me thinks...


Rooster

Never thought of that.

So if the house went up for Auction, and the only bid she got was 450k, and she was happy to take it, it can not be sold?

Cheers

Mick