Should I sell my house and invest my money? Good answers to a good question
By Alison Burgess

10/11/2016 12:00am

Should I sell my house and invest my money? Good answers to a good question

Should I sell my house and invest my money?

This is a legitimate question and one that is not asked frequently enough; in fact, it wouldn’t even occur to many homeowners.

For a lot of people, the ‘great Australian dream’ of owning your own home lives on, despite alternatives existing that may be more financially viable for them, depending on their life stages.

As with all major financial decisions, I recommend that you obtain advice from an experienced financial advisor, who will examine your individual situation and present options to suit you and your lifestyle.

Thinking outside the box

Following are some general principles to consider concerning selling or keeping your home.

At certain stages of life—around retirement time, when your nest becomes so empty that you’re the only one left in it, or when ill health or frailty prevent you from maintaining a home—it is prudent to stop and assess the costs of maintaining a large traditional house against other options.

If you are ready to downsize your property and reduce the associated costs, you may find that you can be ahead financially by selling your home and renting elsewhere.

This can be a more palatable solution at this time in their lives for older people than moving in with family members or into an aged-care facility, allowing them to maintain their independence while reducing their outgoings and ridding themselves of the upkeep on a large home.

Should I sell my house and invest my money? Here's a real life response to this question

In a real-life example, I remember the story of a couple in regional South Australia who owned a house worth $300,000.

Selling it and investing the $300 000 at 5% interest yielded them $15 000 a year.

They then rented accommodation for $200 a week ($10,000 a year) and found themselves $5,000 better off a year with NO rates, taxes etc. and no maintenance.

Such a strategy depends on the homeowner having 100% (or near) equity in their home, but those who have been paying off their homes for many decades are likely to be in this position, as well as younger people who have made concentrated efforts to pay off their mortgages.

With appropriate advice, surplus funds can then be invested in, for example, shares, term deposits, managed funds or superannuation.

Thinking even further outside the box

For those who can’t bear to part with their home, ASIC’s Moneysmart website offers three further alternative strategies to selling it with all that that entails:

  • convert your home to dual occupancy so you can live in one half and rent or sell the other half
  • rent out some rooms (there are tax implications that may affect your aged pension so seek financial advice first)
  • consider a reverse mortgage if you need extra cash and have solid equity in your home.

I’d like to reiterate the necessity of seeking advice from a financial advisor before considering any of these options.

Think deeply about your future needs

Additionally, whatever your plans are, it’s a good idea to talk to supportive family members about them.

They may have other ideas to add to the mix and be keen to help you accomplish your plans.

If you do decide to stay in your existing house for the long term, consider planning renovations to make it safer and more suitable for occupation as you age.

At McGrath Real Estate, we’re interested in seeing our clients happy and fulfilled; whatever your property plans are, we’re here to help you achieve them.

If you would like to know the current market value of your home, please click through and use our online form to request an appraisal of your property value