When is the right time for this cash-strapped couple to sell their second house?
Shannon and his wife own two homes but due to unemployment are depleting their savings. They have asked finance guru Noel Whittaker what he thinks is the best strategy in their case.
We are 60 and 54 years old, and own two houses. We live in one and it is twice the value of our second home, which we rent to our daughter. My wife works but I have been unemployed for two years, we are living off our savings and they are being drained at a rapid rate. What is the best way to prepare for retirement? I have in mind selling the larger home and moving into the smaller one and placing the proceeds of the home sale into our self-managed super fund. What are the ramifications of doing this? We have lived in both houses, the current for 14 years, and the second for nine years. What is your advice?
A. You will need to have face-to-face advice with an expert who has looked into your financial and personal situation. But generally, the first home should be free of capital gains tax as it appears to be your residence, but there could be long-term implications regarding capital gains tax on the second property once you live in it. However, the good news is if you live in it for a long time, any capital gains tax on that property may be quite small. Placing the excess proceeds to superannuation could be useful for tax minimisation, but you would need to make a long-term decision as to whether you may be eligible for an Age Pension. An adviser can guide you through all these issues.
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Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature, and readers should seek their own professional advice before making any financial decisions.