Hi guys
I am currently running some scenarios for my parents, who will move to Australia from overseas next year and retire here. All in all, it's their money and future but since presumably I know a lot know than them locally I really like to draft a plan for them.
My parents are both over 55s but below 60 at the moment. After moving here, their cash income will be very limited, mostly dependent on their overseas pension, which is altogether barely $AUD1000 per month, subject to exchange rate. They will not be entitled to any pension from Australia, as stated by the immigration rules, for the next exact ten years after their arrival. So in conclusion, their cash flow is AUD$1000 per month altogether.
They are cashed up with AUD$450k, all their savings and profits from selling their overseas property. Put aside at least $50k for their funds for emergency use in the bank, this leaves they circa $400k to buy a residence property here in NSW, where my family live. I now $400k is a very limited budget for buying a property here, so I want to plan carefully for them.
Here are my scenarios:
1) use all $400k to buy a decent one-bedder with low strata and maintenance fees. This leaves them $1k per month plus interest earned from $50k, to live a o.k. life (pls I understand it's way below AU retirement 'standard'). They really have good saving habit and I think this scenario is not too bad for them.
After ten years, they could be having $2000 (AU pension in today's rate) +$1000=$3000 income per month and a paid off home which can make sure them having a much comfortable life.
2) I have an investment property as two-bed apartment, which valued as $550 atm. It is not too bad located and in a very decent status. My parents can simply put in their cash $400k in the existing mortgage, and pay it off straight away. However, this one has a higher strata cost and one extra bedroom they possibly don't need. I don't think they have enough income to cover all the expense in the next ten years, without our finance assistance. I am not expecting them to lease one bedroom out and assume in this age, they don't really want to live with a stranger. And also this leaves complications to the tax and finance for the both families. This seems a last resort to me.
3) In my mind this is a risky but might be a worthwhile try. If they split $400k into two $200k. With the first half, they buy into retirement village which I think $150k will be sufficient for a one bedder. The rest $50k and the saving $50k assumed put aside could cover the supposedly high strata fee and also earn some interest.
With the another half they can invest in a $500k unit which can be at least neutral cash flow after they put in $200k. I think it is easy to achieve neutral cash flow with LVR 66.7%. I can help them set up the loan, and I think it won't have any financial burden on me as the interest is covered by rent.
They will move in this $500k unit after ten years. And almost paid off the loan $300k by at least $200k after sell the retirement village unit (assuming no CP!). They can have a comfortable life with <$50k mortgage, and a cash flow income of $3000/month, after ten years.
All the scenarios are based on some general assumptions of their life style. Scenario 3 seems ambitious but is it doable? What do you guys think?
My parents are non-english speakers and they move here because I am the only kid they have and we all want to be close when they getting old. It is a challenge for them I believe and that's why I need a good plan for them.
Much thanks for help.
I am currently running some scenarios for my parents, who will move to Australia from overseas next year and retire here. All in all, it's their money and future but since presumably I know a lot know than them locally I really like to draft a plan for them.
My parents are both over 55s but below 60 at the moment. After moving here, their cash income will be very limited, mostly dependent on their overseas pension, which is altogether barely $AUD1000 per month, subject to exchange rate. They will not be entitled to any pension from Australia, as stated by the immigration rules, for the next exact ten years after their arrival. So in conclusion, their cash flow is AUD$1000 per month altogether.
They are cashed up with AUD$450k, all their savings and profits from selling their overseas property. Put aside at least $50k for their funds for emergency use in the bank, this leaves they circa $400k to buy a residence property here in NSW, where my family live. I now $400k is a very limited budget for buying a property here, so I want to plan carefully for them.
Here are my scenarios:
1) use all $400k to buy a decent one-bedder with low strata and maintenance fees. This leaves them $1k per month plus interest earned from $50k, to live a o.k. life (pls I understand it's way below AU retirement 'standard'). They really have good saving habit and I think this scenario is not too bad for them.
After ten years, they could be having $2000 (AU pension in today's rate) +$1000=$3000 income per month and a paid off home which can make sure them having a much comfortable life.
2) I have an investment property as two-bed apartment, which valued as $550 atm. It is not too bad located and in a very decent status. My parents can simply put in their cash $400k in the existing mortgage, and pay it off straight away. However, this one has a higher strata cost and one extra bedroom they possibly don't need. I don't think they have enough income to cover all the expense in the next ten years, without our finance assistance. I am not expecting them to lease one bedroom out and assume in this age, they don't really want to live with a stranger. And also this leaves complications to the tax and finance for the both families. This seems a last resort to me.
3) In my mind this is a risky but might be a worthwhile try. If they split $400k into two $200k. With the first half, they buy into retirement village which I think $150k will be sufficient for a one bedder. The rest $50k and the saving $50k assumed put aside could cover the supposedly high strata fee and also earn some interest.
With the another half they can invest in a $500k unit which can be at least neutral cash flow after they put in $200k. I think it is easy to achieve neutral cash flow with LVR 66.7%. I can help them set up the loan, and I think it won't have any financial burden on me as the interest is covered by rent.
They will move in this $500k unit after ten years. And almost paid off the loan $300k by at least $200k after sell the retirement village unit (assuming no CP!). They can have a comfortable life with <$50k mortgage, and a cash flow income of $3000/month, after ten years.
All the scenarios are based on some general assumptions of their life style. Scenario 3 seems ambitious but is it doable? What do you guys think?
My parents are non-english speakers and they move here because I am the only kid they have and we all want to be close when they getting old. It is a challenge for them I believe and that's why I need a good plan for them.
Much thanks for help.
