any suggestions?

Yeah I have to agree with the others, they need to sell and sell NOW.

Sydney has well and truly peaked and is now on the descent. If they sell now then they can rent for a year or two and maybe try on a different area and home size. Whilst this happens the Sydney market should start to correct and then there $ figure will go a lot further.

Without doing this they will as far as I can see end up being another case of ridiculous amounts of equity living off a tiny pension.

 

I suggested LIC/ETF but they are hesitant on that. Thanks for the above link. So the safest way to keep it separate is by Line of Credit

 

Do they have redraw?
Do they want to keep living in the house?
How long have they owned it? (Pre cgt? About 1985?)

Some things to consider
Rent out the house for a year and drive around Australia?
Would you buy something with them – an investment property with you 10% owner (watch out for the effects on you)

See
Legal Tip 25: Children helping parents out https://propertychat.com.au/community/threads/legal-tip-25-children-helping-parents-out.1323/

Strategy: Incorporating Parents into Property Planning Strategy: Incorporating Parents into Property Planning

 

Few things ....

I do not agree with others, that age is a good time to retire, but I would not be saying I am retiring if you want to borrow, anyway I see no real issue getting equity out. I would not sell something that may have been owned pre CG laws, moving, yes, selling, check out everything first, it may have other potential.

You may make them miserable, there is no way it is passive income, it may be somewhat passive with excellent tenants, near new low maintenance place and a good PM, but it is a commitment and not easy, shares are easy, houses and tenants are not.

To get the equity, may have to already be lining up an IP.

Do they want to downsize and live in a nice modern unit or townhouse ? May be better to invest in a smaller well located place to live and keep the existing place.

What do *they* want out of it ? beware of the above and trapping them dealing with tenants and PMs etc.

I agree with the posts about finding a real good adviser to plan finances, that may be a job in of itself. They do need independent advice I think.

 

They do have redraw
They would like to continue living in the house, but not attached to it. Meaning they can go elsewhere if they need to
The house was built by my dad in 2004.

My dad would like to buy older house and renovate/build. If i need to go in it with them to make that possible I can.

Thanks for our contribution. They will go and see a professional as well. I just thought I would get some thoughts from forum members. Just in case they dont cover something.

 

Thanks for your feedback. They will be going for independent advise. They would like to stay at the PPOR if possible. although if there are better options then they are open to it.

 

How much would the redraw be?

If they cannot borrow further they may be able to use that to invest.

 

That would work well if they cherry pick the place, then semi retire and work on renovating the new place while renting out the place they now live in with the view to sell to generate more funds.

As he is in a trade, would find it easier than those with no trade experience. Also only have to deal with one tenant and PM then

Really key to find exactly what they want so they are happy if it does not go as planned.

 

I agree with pinkboy, lic/etfs. So much easier and better net yields. And yeh if you can bump up the super , and get some good yielding franked shares, as stated, tax free when in pension phase. You might need to lay it all out for them to convince them

 

Is there room on the property for a granny flat? They could build a granny flat, move into that, & rent out the house.

 

you've said 500k would be too large a drop in living standards vs current, is 700k possible?

if so sell the current home, buy a new one for 700k in cash.

that should leave around 600k from the home and 200k savings + 30k super.

I would chuck the 600k into super, prob 500k in your dad's name and 100k in mums since he is 3 years older but get professional advice.

keep the 200k (or whatever they work out as a comfortable buffer until they are able to access smsf funds should anything go wrong) outside super, preferably in something low risk.

if they're able to get 7% returns (growth+dividends) in super you're talking close to 750k in 3 years alone with your dad able to transition to retirement once 60 and potentially pay no taxes on these earnings (or his portion abyway). he can also continue with the part time tiling he is doing should he wish. this figure would be greater if he ramps up the work for another couple of years and they bump up your mum's super contributions too, it isnt inconceivable that with greater contributions and a good couple of years returns that they'd have close to 1m in super.

along with a paid off home and 200k in savings they would be in a pretty good spot. no need to try and reinvent the week and try to turn them into investing geniuses later in life etc or make them battle against not only their natural risk aversion but the banks aversion to lending to people their age and with sporadic income so I definitely do not advocate them buying resi property. don't forget that resi property outside super woild not only be more work, bring more debt, be something new and potentially difficult for them but it would be low yielding and taxed higher should they do it outeide super.

end result would hopefully be a paid off home, 200k or so in savings, over 50k in tax free/low tax super earnings and a constantly growing pool of funds in a low tax environment.

or they could hold on to a 1.7m home in sydneys top heavy market, pay tax on the dismal 3% or so net yield, get into more debt to buy something else and then wonder why they can't retireven in 5 years from now plus have a home loan to pay in their 60s.


disclaimer - there is every chance I have made some errors re super technicalities, i have expert who sort that and so only need to know enough. plus the rules are about to change depends on who gets elected so the above is just my thoughts and not in any way advice.

 

The ppor has to be sold to ensure a decent retirement IMO. Downsizing will fee up some funds, don't rent though.

As per Sanji's suggestion above maximize contributions to super after downsizing ppor.
It's too late IMO to be taking on more debt in this situation.

The best option would involve your father continue working until 65 and to salary sacrifice to super up to the concessional cap. He needs to start this asap, joining a low fee industry fund might be the simplest option or get some advice after downsizing to set up a smsf. Its sounds like they are not very financially savy so an industry fund might be the best option.

Are the offset funds both savings and borrowed funds mixed together?