Preparing for retirement
Question from Pam updated on 26th March 2013:
We have three rental properties plus our home with a $30,000 mortgage. My husband is 60 and we are considering making changes in preperation for retirement. Would it be advantageous to sell one property now (although it is making a small profit) and pay off our mortgage, plus some off another rental. This would release money for travel etc and increase profits from the other two rentals?
Our expert Kris Pedersen responded:
I think that there are a few factors that you should take into consideration such as:
1. You say that you are getting ready for retirement but are not quite there yet. You need to decide whether your region is likely to experience some price rises over the short term as if it is likely you may be better to wait a bit longer before selling to build up some more capital.
2. Working on the assumption that any additional capital gain you get is tax free you do want to analyse this benefit with the fact that you say that the property you are looking at selling is running at a profit as in decreasing the mortgages across the board it is likely that you will start paying more away in tax. Consider talking to an accountant so you can weigh up the pros and cons of both situations.
3. Interest rates are very low at the moment. Have you made sure that you are getting the best possible interest rates out of your bank/s as if you are on their standard rates it is worth giving the bank a push as a good discount on the rates may free up a fair bit of additional money for travel etc as well. Again also I don't know how you are structured but if you are paying principal on any of the properties one option again if you believe there could be growth is to put some of the mortgages to free up some cashflow for your lifestyle while still giving you the benefit of any asset growth in the meantime.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz