Hi all, my mother in law currently owns 2 properties which she would like some advice on. She has an investment property in Griffith NSW which has just become available to rent as her son is moving out and she is currently living in a property which she has recently renovated in Melton VIC. Due to unforeseen circumstances she is no longer able to work and is considering what to do with her properties as she would like to possibly move out of the house she is in and build or buy another property elsewhere. Is there a way she could keep both properties and take out a new mortgage with any existing equity even though she is no longer working or would the best idea be to sell them both or keep one and sell the other? I guess what I’m asking for is some possible scenarios? And is there a way to get the properties evaluated for free in order to see what equity she could obtain?
Hi Derek,
Is there a way she could keep both properties and take out a new mortgage with any existing equity even though she is no longer working or would the best idea be to sell them both or keep one and sell the other?
MIL has some good choices there. You don’t say, but is it likely that she owns these two outright? Since she is unable to work, she maybe should look to freeing up cash, either to invest in areas of good return, or to set herself up in a less expensive place, thus leaving some cash available for “whatever is next”.
I’m not sure she could keep both – that would depend on a whole bunch of other financial things that I don’t know, and couldn’t offer advice on anyway. So let me just throw out an idea or two :-
1. By selling her PPOR, she can walk away with no CGT to pay, and making (presumably) a whole bunch of cash that could do many things.
2. If either of her properties were negative geared, she would get no Tax benefit from it as she would not now be drawing a wage and paying Tax.
3. A quick look at Griffith tells me it could be an interesting proposition. As an example, take a look here :-
http://www.realestate.com.au/property-house-nsw-griffith-118243251Its price seems to be way below Median ( = opportunity? Or caution?) About halfway down the page, you can see that Median Price for a 4bdr in Griffith is $305k. And, Median Rental Yield is 6.1%. Note, these are only “the numbers”, so things like demographics, vacancy rates, infrastructure, population growth/decline are NOT considered. But the numbers say the median 4Bdr brings in $370 a week and costs $305k to buy.
BUT, that one in the link only costs $175k (seems to be older – could it do with a reno to create equity and a higher rental?) and returns $220 a week which is a 6.3% return. Could it be bought even better, have $$ spent, and be returning 8% perhaps? What if you could spend $10k on it and have a rental uplift of $60 a week (still below median rent even at $280 a week)?
Back to MIL – how does HER property in Griffith compare with the Median prices shown? Note the Rental Yield differs between 3 Bdr and 4Bdr homes. Check out re.com.au or similar for the other homes that match her place. Is it worth keeping? i.e. Is it below Median, and is it in a desirable area that could command a higher rent? Would a reno benefit it? By investing a few $$ in it, perhaps she could make it hugely positive geared. Perhaps it could even be a candidate for a Wrap !!!
I know this way of attempting to ascertain the value is way off being accurate – but as an idea, she may find it IS worth keeping the Griffith one, and even buy more (???)
In her situation though, she should take the time to check out her position with an advisor with whom she can share ALL of her personal information, and who can discuss each possibility with her re “the best way forward financially”.
Happy number crunching !!
Benny
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