I’ve just inherited a 3-bedroom house from my mother. It needs quite a bit of work – a builder has quoted $25,000 to get it up to basic rental or sale quality. A property manager has been through and said that once we do it up he can probably get $350 per week in rent. A property agent has said that, once the renovation work is done, he would put it on the market for $520,000. I don’t have any investment properties – I own my home mortgage-free. I’m strapped for cash, though, and would have to borrow to do the property up. Should I sell or should I keep it as an investment for my retirement?
Does it suit you?
Firstly, you should make arrangements to talk to us. It’s difficult to answer this question without knowing a lot more about your individual situation. When do you plan on retiring, for example? What other retirement provisions have you made?
Good retirement investment?
This could potentially be a good retirement investment. Overall, prices rise over time ahead of inflation, so this should provide you with a passive income however based on your numbers the yield on this property seems low and would require further research.
Hold or sell?
You might want to consider, though, whether you could get a better return by selling this house and buying a different rental property. Talk to us – we may be able to find a better yield or better potential for capital gains, depending on your financial goals. Alternatively, you could use the funds as deposits on several properties. Bear in mind also that many people have a hard time being clear-headed and professional about properties that they have emotional attachments to. Only you will know whether being landlord to your mother’s house is a good idea for you.
Borrow to renovate?
A clever renovation should add more value to the property than it costs, so borrowing money against your equity could be a good move. Seek good advice here, too – talk to your valuer and property manager about the planned improvements to make sure your renovation dollars are creating value.
Overall, your mother has left you a great opportunity to be more comfortable in your retirement. Speak to us to make sure you make the most of that opportunity.