Helping kids or ourselves?

Question from Glenda updated on 20th May 2014:

My partner and I are considering buying a rental property for his son and family. They are fist home buyers and we would rent it to them as cheaply as we could to enable them to save for a deposit. We are currently renting and have money from the sale of my partner’s house two years ago in the bank so we would use some of that for the deposit. We may look to buy ourselves soon too. We want to help the kids without disadvantaging ourselves. Will this work for all of us? We are 57 years old. Thanks.

Our expert Kris Pedersen responded:

It is naturally going to disadvantage you as you won't have as much capital either for the home or for your future retirement.  You need to do more analysis as to whether it is something you should still proceed with. Note that you may need to take tax advice as I believe you need to rent it at market value to family as the Inland Revenue Department take a dim view on you getting a tax break by having the rent at a low level. Have a good look at your asset base and try and ascertain what your overall combined net worth is likely to be at retirement. From there you need to figure out if it is likely to support the both of you for the remainder of your lives with the lifestyle you are after. If not you may need to decide whether you should be helping the kids out or yourselves.

Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies.

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