To sell or not to sell - that is the question..?

Hallo

Hi There,
I've been to Martin's site many times in the past for tips and stuff, but never had a problem I couldn't find a solution to until now. :huh:

My mum and dad retired a few years ago and are lucky enough to own two properties outright. One of which they rent out to a very reliable and pleasant gentleman.

Now, the problem is they live quite a bit away from their grown up (? lol) children and want to buy a bungalow nearer to us, as their health isn't what it used to be.

If I'm being completely honest - they are AWFUL with money and have spent all their savings since leaving work - that's a pretty mean feat let me tell you! lol
So, here's the long and short of it. I think they should sell the house they live in and buy something cheaper. They think they should sell both and buy something larger - which will cost more to run and they will lose the income from the rented property. They are in the red every month even taking into consideration the rent they are paid currently.
I wondered if there was a way of releasing some equity from the rental property so that they can get a bungalow they like, but not lose the rental aspect? I really don't know how these things work...lol. Maybe I'm actually just as bad as they are!! lol :rotfl:

Anybody have any ideas?

ermine

releasing some equity from the rental property so that they can get a bungalow they like, but not lose the rental aspect?

Most commonly called a Buy To Let Mortgage Don't know how available these are to people already retired, however they have good collateral.

Trouble is that there seems to be something deeply wrong in their spending, perhaps they have not adjusted to a lower income from when they were working. Why do they want to buy a bigger house, for instance?

Hallo

Hi Ermine,
Thanks for your quick reply!
Unfortunately they have delusions of grandeur..! lol This is the only reason I can see that they feel the need to buy a detached 4 bedroom bungalow on the better side of town! They honestly are very poor with controlling their expenditure AND they both smoke (a LOT) and like to drink also. Neither of which are cheap. I have TRIED countless times to get them to see the error of their ways, but people of that age can be stubborn and are sometimes nigh on impossible to change.
The scary thing is even if they sell the rental property and only use say half of the equity to put toward a bungalow - they would spend the remainder within 3-4 years if not sooner. It's very difficult to make them understand that once the money's gone - that's it! They will be in a terrible state financially. At least at the moment the rental money stops the deficit from being too momentous.

Loughton_Monkey

As, I think, you realise, this is not really a 'financial' issue.

For 'normal' people in your parents' position, a review of their spending requirements, age, tax position, and overall wealth would eventually get to the 'correct' solution. Not only does no-one (here) know any of the figures or details concerned, but a 'rational' solution is not necessarily the best in these circumstances.

The way you describe it, your parents have a [what is quite a common] 'financial disease' that you could call "Have money - will spend it". I know several people like this and have had more than my share in my family. Sadly, however, I know of no solution other than to try and protect them from having large amounts of cash available. But when it is another person, this is usually impossible. If there's nothing you can do to persuade them, then I wouldn't know what else to suggest.

Hallo

Hi There Loughton Monkey, (great name btw!),

I know it may seem a lost cause as their spending IS way out of control. But I have to do something to help - they are my parents after all. I've discussed it with them many times, but not felt it was my position to take control of the situation. However, I realise now that unless I do something and quickly - they will be in big trouble in the not too far distance.

So..going back to my original question - does anyone know of any 'good' schemes that allow them to release say 30-40% equity from the rental property whilst still being able to keep the full rental amount?

Alternatively. Does anybody provide a financial BOOTCAMP that I can enrol them on?? I honestly want to shake them by their ears until they see sense! I keep getting the feeling that I have become their parent and they are now my children! lol

Am also getting the feeling that I'm not gonna find the answers I need here too. But thanks for letting me join in for a tad.

gadgetmind

Hallo wrote: »

I keep getting the feeling that I have become their parent and they are now my children! lol

Don't worry, I think that fate awaits a great number of us, and I'm sure that more of us that would care to admit it might also experience it from the other side at some point.

Care, love and respect are the three qualities you need to employ and from what I've read above, it's only the last of these that needs a little polishing. :-)

And as everyone else has said, anything that increases the flow of money heading their way is pointless unless they balance the yin and the yang of income versus expenditure.

ermine

does anyone know of any 'good' schemes that allow them to release say 30-40% equity from the rental property whilst still being able to keep the full rental amount?

You could see if a Buy to Let mortgage would be available to them. That effectively allows them to release some of the equity, while still keeping the rental income (reduced by the cost of servicing the mortgage).

Though you have to ask yourself is this is the right answer. In many ways the sooner they encounter the financial crunch the better, and they then get to the point of realising Something Has to Change.

Releasing the equity merely enables them to overspend, thereby reducing their capital wealth, before reaching the same financial crunch. In some ways it would be a disservice to assist them in releasing the money, unless they are old enough that there is a good chance that in would enable them to live their lifestyle fully but not run out while they were still alive.

That's a very hard call to make

jamesd

There are no schemes that will release any part of the value of the rental property while letting them keep all of the rent. They will have to make mortgage payments out of the rent money. So they can get the capital, 60% or so of it, but will then lose almost all of the rental income.