Mother close to retiring/downsizing - Keep or sell the family home?

My mother is looking to downsize soon, and still has a few years left in a full-time job with a good salary. She can pay off the loan for the downsized place while working (even with no tenant in the family home) - but once retired its a different game.

So some rough figures:
- 4 bedroom house in South Penrith 2750 (~525k). Full ownership.
- Looking at a loan of ~$350k for the downsize

Either sell the house, and do some sort of bridging loan - move and take the profit. Or keep the place, rent it out and hopefully with added payments - pay off the loan, then might be a nice goose for retirement. Haven't really looked at options around super yet, but any advice regarding that would be great too.

So just looking for some informed opinions/options?

Cheers,
Dan.

 

its a big 'depends' type answer

She could buy the new property now, borrow to do so, and rent it out. Work on saving in an offset account attached to the loan. Then when she retires she could keep the old home and rent it out getting around $20k per year income.

She could even sell the old house, probably CGT free once she moved into the new one. But then she will have another $500k (or more) and has to invest that. Keeping the property would mean keeping future capital growth.

She might also like to set up her loans now so that she can borrow later while she has no income. She may want to invest in high yielding shares for instance.

 

Big depends on what she wants to do.

My parents are living in their house worth about 3M on 5 acres in Brisbane. Dad thought when they get older they will be unable to tend to the yard or clean the house (72square home, single level home). However they have decided to still stay there for at least another 20 years (that is what they said 20 and even 10 years ago).

Reason being if the property price goes up even at 5% p.a. on average that is $150,000 they are getting tax free. Even if you paid someone to tend to the yard and clean the house each week (lets pretend 50k p.a.) they are still 100k better off and they get to enjoy their place.

Makes it hard to leave!

 

The riff isn't far off peaking so holding won't be great for cg, and the yields aren't fantastic but given the situation probably not a big deal.

If your Mum is moving the next 6 to 12 months there will be some more growth, then if the cash is to invest look at selling then buying interstate and/or the shares etc

Last peak was around 2004 and median sat at 340k till 2012, then crazy town!

 

What does she want to do? Will she want the hassle of keeping the older house and renting it out? Is it going to be easier to sell it CGT free, pay cash for a smaller place and use the cash left over for something else?

 

South Penrith saw a huge move mid to late 2013. I was chasing a property there about August 2013. Finance was delayed. Missed it. They wanted 360k. Was ready to go in February 2014. Found something similar nearby. It was 440k. Timing counts for a lot in property. 6 months cost me 80k.

 

Is it a pre CGT property?

 

Yeah things were going bananas! Im from out there and was looking to buy a unit at the time (early 2012) as thats all the budget would allow ( poor finance advice!! i could have bought 3 with the yields!! ) instead did a reno which made good money. i still went to a few opens when i could and it was choas!! i imagine similar to logan at the moment. i walked out of a couple houses laughing at the agent saying no one will pay that for that!... big mistake by me! i didnt realise how hot it was!! selling over asking!
you'd be up at the >500k mark now i'd guess. still gotta be happy with that

I havent kept up with whats happening but think there is still more growth and it wont go drop but hold steady for the next few years. still a lot going on out there. uni stuff, cbd upgrades, airport blah blah blah

 

Yes you're right. It was bananas. It's a great place Penrith. Has really grown and done well last few years. There is alot of attraction for the money. Decent industrial area. Plenty of shopping centres, uni, river, close to freeway etc. Airport news really helped push prices up too. Good place to own property going into the future.

 

I'm not so sure there is growth still to come. Things have quietened down a LOT. There MIGHT be a new surge, come spring, but that's not guaranteed.

 

Yea - I think selling would be the best option, 'the hassle' being the main reason, but as others have said the growth of capital by holding may be worth it.

Yes, the property was built/purchases pre CGT. 1975 I think.

That will be the other thing to think about - sell now and rent until we find a place to move into, or keep until a new place has been purchased - then sell.

 

Extra care is needed as it is a preCGT property. Any future growth, even while rented, will not generally result in CGT. It may therefore be better not to sell.

 

Selling our big family home and moving to a newer, smaller townhouse was the best and most liberating thing we ever did. We did this a few years prior to retirement.