Sell or rent?
Question from Christie updated on 7th May 2018:
A very elderly family member is moving into a residential care. She will have to pay for her own care as she is over the government threshold because her property has a value of approximately $750,000 to $800,000. She does not have ready cash besides her Super to pay for care so we are looking at having to sell the property.
However, a few people have said that we should hang on to it and rent it instead. We are very confused as to what the right thing to do is and what the best financial decision is as well. It will have to be sold eventually within the next 10 years. How to best calculate this?
Our expert Kris Pedersen responded:
That’s a hard question to answer here. Firstly, you want to do a bit of a profit and loss where you look at what kind of rent you will be receiving minus any costs connected with the property to see what net return you will get. You then want to estimate (not the easiest) the likely capital growth you may get over this time period.
Combined that should give you an estimate of what the benefit of hanging onto the property looks like. You can then compare that to what just paying the residential care costs upfront from sale would look like.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz