To rent or not to rent? that is the question

It’s actually difficult to discuss this without further info, eg., how old are each of the children?

But, if I were in her situation, I would consider both financial and lifestyle issues.

Financial:
From the $800/f.n (in the hand), I’m assuming she is in the 30% tax bracket (with gross approx. $30K-$35K p.a).

I’m assuming repayments on $150K (@ 6.5%) are around $185-$190/wk (let’s say $190). So, my first question is – what’s the problem with her paying $380f.n.? If she can’t, then this might force her to move in with parents.

However, if $220/wk is coming in from rent, it will cover repayements. But, she is payig out $210 per week in rent herself (more expensive than the mortgage repayents!). So, there are no real gains from positive gearing & no tax efectiveness from negative gearing. Therefore, I don’t see any real financial advantage in moving in with parents.

Lifestyle:
Moving in with parents might cramp your lifestyle somewhat (depending on your lifestyle). I hear other single mums reading this, laughing and thinking..”what lifestyle – I have 3 kids!!” But moving in with family could potentially save on child care costs. Only your friend would know the answer to this one.

If your friend could afford $250/f.n., then she only needs $65/wk to make the repayments ($190/wk mortgage – $125/wk repayments. Could your friend borrow $65/wk from family instead and repay the debt when she has built up some more equity in the unit & when her cashflow situation improves?

Just a thought…

Anyway, there are people in this forum who are far more intelligent than me, so hopefully they will come up with some innovative suggestions for you.

Best of luck.[biggrin][biggrin][biggrin]

Might be a good move.

She will possibly be able to save a little bit of tax by negative gearing (inc claiming depreciation etc). She could do this for up to 6 years and still claim it as her main residence for tax purposes (no CGT if she sells).

She will also get more centrelink payments (rental assistance?).

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

Brahms,

I thought freedom5 was saying the friend was paying $250/f.n., which is less than required for the min. repayment, hence she is struggling to pay the mortgage. Not that the min. repayments were $250/f.n.

Is this correct freedom5?

concur with Jason, particularly after re-reading earlier post with “lifestyle” subheading.

cheers

brahms
CALL NOW…adults only (boys and girls ask mummy or daddy first) ~~ 1900 HOT BROKER ~~

Agree in principle, woodsman, but in this case mum is doing it tough and the 16 y.o. is old enough to take some responsibility and help the family out. It’ll be character building too. A couple of shifts a week at Coles or McDonalds would certainly give them that taste of working life without impacting too much on studies. At award rates that would easily be enough to fund a reasonable social life and help mum out with $20 a week board. I’m sure a 16 y.o. would consume far more than $20 worth of food, electricity, phone, mortgage payments, mum’s labour etc etc in any case.

I am a white collar professional with 3 kids under 7 and on my income we barely make ends meet. My heart goes out to any single mum trying to make it on 30odd grand.

I gave 70% of my Ausstudy to my parents as they were both pensioners at the time I hit High School.

I believe that it also creates a stronger ‘ownership share’ in the family when a teenager is asked to contribute not only with doing house work but can help out with little things like adding a few bobb to the family income.
I guess it is my upbringing, but I have been doing odd jobs (mowing lawns and the like) since I was 10 and have used that money to put towards my Nick-nacks that I dreamed off so my parents didn’t have to carry the burden! Felt great to be independent (what I thought then)!

I can’t see any harm in contributing $20/wk and working a couple of nights (as long as it is only a couple of nights – not get sucked/ bullied into doing more and more shifts) and that would leave plenty of time to do study and have fun.
Another Thread talks about the purchase of Cashflow 101 and Cashflow for kids for training and fun! So that Forumite parents can educate their children, rara; and here we are contradicting ourselves over $20/wk. Would working not be an education in itself?

Hmmmm…….food for thought -self assessment?!

Cheers
C@34

Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas Edison

Freedom 5,

Without a shadow of a doubt – far better to stay in her home, especially with 3 children, and get her mortgage under control and then on her way with passive income alternatives.

The uncertainties of moving make the whole thing a bit rubbery;

1. Is she sure she’ll get $ 220 p.w. for her place ??
2. Why is her family charging her $ 210 p.w. ??
3. This extra $ 70 p.w. is on top of what amount ??
4. How much is/are the father/s being forced to chip in ??

In my mind point # 2 is the clincher….why would an extended family that wants to help their daughter and grandchildren in a supposed bind charge them rent that is the same as what their own prop can command ??

No – this whole thing revolves around grandparents accepting growing families back into their downsized homes….won’t work. All this number crunching about 6 years on…don’t think so…family dynamics overrides everything – it won’t happen.

Bottom line – struggle through and stay where she is.

Cheers,

Dazzling

“Go hard or go home”