- April 14, 2024
- Posted by: legaleseblogger
- Category: Related News
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### Deciding on Future Financial Plans with Family
I am facing a dilemma regarding the best decision for me, my son, and his wife, as well as our finances moving forward. The current situation involves properties in two different towns and various options for restructuring our living arrangements.
#### Current Property Investments and Rental Situation
Initially, I owned a house in town A valued at $700k with a mortgage of $140k. However, I moved to town B, purchasing a house worth approximately $750k with a mortgage of $550k. In the meantime, my son and his wife have been residing in the house in town A, paying rent of $400 a week to me.
#### Financial Status and Future Planning
My income stands at around $135k, while their combined household income is approximately $110k. They are saving for a deposit and anticipate being ready to purchase a home in 18-24 months, aided by flatmates contributing to rent payments.
#### Proposed Options for Future Living Arrangements
One potential course of action could involve selling the house in town B and acquiring a residence in town A within the $550-650k price range. Alternatively, selling both properties and purchasing a home in the $750-850k bracket, where my son and his wife could move in as flatmates, allocating a rent contribution and shared expenses.
#### Consideration and Concerns for the Future
While the prospect of a larger home with more private space is appealing, there are reservations about the financial implications. With a substantial mortgage and minimal savings after the transaction, concerns arise regarding retirement planning and long-term financial security.
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It’s nice to see a post with enough detail for people to offer advice so kudos for that. But I think there is too much at stake here for putting any weight on any advice here. Good advice here will require a deep understanding of not only your situation but also your family. Hopefully you are also looking at getting personalised financial advice from a professional and take anything said here with a grain of salt.
How do you feel about the compromise of you staying in House B for 18 months and giving your son and daughter in law that deadline to get themselves in a position to buy? 18 months is an achievable timeframe for them to do whatever they have to in terms of increasing income and reducing expenses and the motivation of a deadline is never a bad thing, whilst giving you the time to plan your move without thinking it’s never going to happen. This scenario would keep things nice and simple financially, which I think should never be underestimated.
I see nothing wrong with your original idea of selling house in town B and buying a second house in town A. Then once your son buys their own home, you can reassess at that stage whether to keep that house as a rental or sell it and invest that money elsewhere (since you’re not keen on being a landlord).
That way you can pick a house in town A that will suit you for the long term, instead of ending up with a house that’s too big and potentially having to sell again. Remember everytime you sell you’re losing 4% of the value approximately to realtor fees, so multiple transactions will add up.
Also, who knows what could happen in 18 months with their finances. They could be in a position to buy your current house in town A by that time, so why not leave that option open.
I believe it is also important to have good savings for retirement. If buying the house would leave very little savings, that may not be the best way. Ideally one for rental and one for own use is good, as the rental can generate passive income for long term to support retirement.
Could you buy a place with a self contained flat? Once they shift out you could rent it out or Airbnb it?
You could view a new house purchase that is larger than you need as a retirement investment. The debt you’d be servicing is leveraging a higher lever of investment than you’d other get with your own savings.
I would buy ideal smaller house in town A. Regarding savings for retirement. I wouldn’t be too worried as the first house is an asset for retirement. I would try to move leanding over to the rental though to make the most of any tax deductions.
Buying and selling houses takes not only your time, but money. For this reason, buying a bigger house that is only going to suit you for 18-24 months and then you would probably be faced with having to downsize just doesn’t make the most sense to me.
You would obviously like to help your son and DIL which is really lovely – if the only issue is they need more time to save for a higher deposit, you could consider gifting/lending at zero or lower interest some or all of the amount that they would like to save over that timeframe.
Either way helping them whether buying a bigger house than needed, or helping directly with their deposit, will cost you money. But the latter option to me is cleaner (assuming the way you gift or lend the deposit is done properly, use a lawyer if necessary) – you get the house you actually want and need, and they can start now on their own home ownership journey.
When does your son plan on having children?