Today I’m going to tell you about the challenges faced by a client of mine who was relocating to a provincial coastal town because she was retiring. Until recently she lived in a medium sized country town where house prices were showing no growth. The area she was moving was a hot spot for retirees with prices booming.
Her first reaction was to rent out her property until she achieved the price she was seeking. I pointed out to her that the house would drop in value by at least 20% the moment it was tenanted and she could find herself in a position where she was stuck with a deteriorating house property while being unable to buy in an area where prices were rocketing. Acting on this advice she dropped her asking price by 30%, which quickly attracted buyers.
One buyer wanted to rent the house until the sale of their own house occurred. My friend was tempted by this, but I told her this would give her no security at all. A better strategy would be to sell the house immediately with interest free vendor finance for six months. This would ensure the buyer was locked into the deal.
When all the deals are finalised my client will have $50 000 less for retirement than she expected as the short fall between the actual and the expected sale price would have to come out of her superannuation. However, her aged pension will increase as a result and she will have the security of mind of knowing that she can start a new life without the encumbrance of trying to sell a house in a difficult area. Sometimes it’s better to take short term pain for long term gain.