Think before selling up

Question from Desmond updated on 26th January 2016:

We are a couple in our 40's. We currently own three Auckland properties including our family home. We have a total equity of around $3.5m and a total mortgage of $500k. We're thinking of selling up and moving to the regions and living off the proceeds. Do you think this is a wise move and, if so, is $3m enough for the both of us? 

Our expert Kris Pedersen responded:

Firstly, a couple of questions:

1. I am picking that from your sale proceeds you are going to be looking to purchase a new owner occupied property to live in so how much out of your circa $3m nest egg is that going to eat into?

2. How much do you believe you need to provide you the lifestyle you are after moving forward? As an example if you think you can get a home for $500k this is going to leave you with circa $2.5m. If you can invest this and get a net return before tax of 4% this will give you a gross income before tax of $100k per year to live off. Is this enough?

You definitely also need to take into consideration:

1. You are only in your 40's so you may both have another 50 years to live. You don't want to be living off the capital at this stage so need to find a way to invest it and look to live on the return.

2. You need to be careful about putting it into something like term deposits as inflation can erode the value of the underlying capital and, while inflation doesn't appear to be on the scene for a while, 40-50 years is a long time.

I suggest getting some advice from a reputable authorised financial advisor here.


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

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