My parents are 63 - one working FT, one PT. I have been asked to put together some preliminary figures for them to look at the possibility of purchasing an investment property. They live in an area where there is a high demand for share accommodation (regional area). Other than my concerns regarding the direction of house prices (I lived in ireland for 10yrs...enough said) I have concerns regarding financing and exit strategies. They have equity in their own home to afford a purchase. Exit strategy however is another thing. In time (5-7yrs) I think they would look at my brother taking over the mortgage as his PPOR - i presume in this case my brother would have to buy them out? I don't think my parents would like to use their super as an exit strategy. In addition, what initial loan term would they likely be looking at? I'm guessing 10yrs or less? Any info would be appreciated.
Banks will lend, but probably based on a term so that the loan is repaid before they retire or at age 70/75 which will make serviceability hard. However if they have a lot of super or other assets they may be able to show an exit strategy - i got an 82 year old a 20 year loan recently (with her son). Your brother could buy them out or just keep paying their loan perhaps. There is a way it can be done without triggering CGT too so seek advice.
With investment purchases, longer loan terms are possible and selling is often an acceptable exit strategy - to your brother or anyone else. Before they buy, they NEED to have an exit strategy- not for the banks benefit but for their own. If your brother doesn't move in and things are getting tight, what then? Can they reduce with super? Will they be able to sell or is it a specialised security? As an aside, share accomodation might be seen as a boarding house which will be much more difficult to fund - just make sure it 's like a normal house so it doesn't get more complex than it needs to be.
Sorry but I am confused - what's the end goal here? May be things are being complicated unnecessarily..
