My mum is just about to sell her house to pay out all of her debts and walk away with around $100K. She is 53 (I think), a single woman working full-time (in real estate as a property manager) and also owns (is paying off) a coffee shop which is only just making ends meat. She is most concerned about her retirement having no assets after she sells her house.
My question is what should she do with the $100K, rent and maybe start investing for her future or buy another PPOR and therefore have another mortgage?
I hope I have given enough info above for your comments. If not post questions and I will answer.
Thanks in advance
ShelleyWhy does your Mum want/need to sell?
Other than the home loan, what other debts does your mother have?I know this is a property forum, but really this is a bad market for positive geared property so I think your mother should buy about four blue chip stocks, take the dividends and write options over those stocks for extra income. That’s 100k well spent in this market, making at least 20%
Hi Woodsman
My mum wants/needs to sell for a few reasons.
She currently has a mortgage for her PPOR, a loan for the coffee shop, $5K she owes me from when she set up the shop, credit card debt plus a couple of others I think. She hasn’t told me every debt she has but has said that if she gets what she wants for the house she should have all debts paid off with around $100K left over.
She has also come to the realisation that because her house is situated on a small amount of land she can’t keep up with the maintenance and only getting one day off per week she just needs to relax and have time to herself on this day rather than mowing, etc. Both my sister and I agree with this as we tend to do the mowing, whipper snipper for her!
Woodsman
I should have added that she is struggling financially at present and by selling her house this pressure would be released.
She is thinking of buying a smaller house, maybe a duplex with not much upkeep required and only a $160K mortgage which should be more manageable.
Has she explored the option of renting out the property. Not sure what rent her property could rent for versus outgoings. Depending the current valuation of her PPOR, maybe debt consolidation maybe an option.
You may need to provide some more information about current house value, mortgage & location…
The reason for pursuing this option is to overcome the need for selling today in a buyers market, costs and the loss of an asset that may provide future capital gains.
Thanks Woodsman
I don’t really know her mortgage or even debt details. Market appraisal happening tomorrow. I don’t want to pry too much into her personal liabilities but thought from the limited info I have given a few might have some advice. She doesn’t know I have done this. I am just trying to help her out as much as I can.
I am sure she would have thought about consolidating debts and even renting but ultimately the maintenance is an issue too so she has come to the conclusion it is time to move on.
The question being what is best to do with the $100K left over?
Thanks so far.
It sounds like it will be a great relief for her to be debt free. She could put the $100k or whatever on fixed term deposit while she is researching her options or else in an account on call, eg ING. Financial advisers cost money so I wouldn’t suggest that (got caught once). But get the term deposit rates from all the banks and building societies and compare them, short term, longer term etc.
Yes, for the future a duplex might be a good idea too, or a townhouse with a courtyard and not much ground maintenance. Being in RE she would know the prices. As long as her money is earning interest while she is considering her options, she can relax.
Anna
My sister has a house at bathurst, she and her husband moved to Port macquarie and rent a house. The one in bathurst they refinanced and bought 2 more IP’s. For them to own the house in Port would cost them $800/wk mortgage and they are also in their 50’s. As they rent it for $270/wk while they run with these IP’s they are saving a whopping $530/wk in servicability.
Ok so they want to buy a ppor eventually. If the market goes according to plan then in 5 years they sell 2 of the three IP’s and have a massive chunk off their neww ppor paid instantly saving them years of repayments.
Not only do they each get tax benifits from having the IP’s, they have piece of mind as they are already living in the right part of the world for them, and all without a huge mortgage as a stumbling block to their future happiness.
To me this is way too conservative but its them not me, so I help them achieve their goals I get warm and fuzzy anyway.
So just another alternative or slant for you to look into.
Whatever you choose, happy hunting.
DD
PS146 Certified Financial Planner and Buyers Agent
Don’t sweat the small stuff,and it’s all small stuff!!shelley
seems like you have some good responses to your question/s. may i add my 2c worth (or $100k worth as the case may be [smartass]!!!)
if it were my parent/s, with the state of the market as it is (buyers), i’d be suggesting that maybe consolidate bad debts (cc’s, store purchase, loans etc.) by refinancing the ppor. ive personally been in the same `boat’ before and after doing this free’d up alot of cash. was able to avert the costly scenario of selling etc. as i think one of my fellow forumites mentioned, selling for the sake of relinquishing debt is expensive. refinancing the way to go. all the best, eric
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