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planning permit | 14 Jun 2015, 09:19 AM Agree 0
Unfortunately, many pre-retirees are finding they may not have enough income to fund their retirement.

The great dilemma; when to downsize and what to downsize to. The transaction costs of buying and selling property make it an expensive exercise, so it pays to do your home work. Once you have a clear idea of your present and future income needs, you will be in a position to understand how much capital you will need to “release” from your home for income purposes.

Capital can be released from your home in a number of ways; you can sell your home and purchase another which will meet your needs into the future. You can borrow against your existing home using a conventional mortgage or line of credit provided that you can demonstrate to the bank that you can service the interest payments. You can use a reverse mortgage, where interest accrues on the loan but is not required to be serviced. You can enter into an equity release facility where there are no interest payments but the lending institution will take a greater share of your property on eventual sale.

Another option to selling and moving or taking out these new debts is to subdivide your backyard. You continue to live and enjoy your home where you have grown accustomed to the neighbourhood while releasing cash or deriving rental income.

Property subdivision can give a you a safe way to cash up. A straight out two lot subdivision in Melbourne could cost around $20K plus any costs to obtain the title- like getting services connected to satisfy the permit conditions issued by your local council in Victoria.
Once the Subdivision and town planning permits are issued by your local Victorian council your backyard is up for sale releasing cash. A purchaser may agree to put in the services or you could do it first and then put it for sale.

This is a lot better than taking out a reverse mortgage where you still have to payout the accrued interest. And if the property value drops you will be in negative territory after five or more years. All properties cannot be subdivided with ease. .

And if you can afford to build the dual occupancy home and not “flick” the backyard subdivision there can be a good regular rental income if you hold the property. Of course you could get a good sale price if you decide to sell the new dual occupancy home. Another option would be to move into the new dual occupancy home with its new kitchen and bathroom finished to your taste and sell the original home CGT free or rent it. The options are there for you to enjoy retirement.

And if you are not anywhere near retiring, a dual occ is twice as nice. You could be in cash positive status with the right properties. Do one every five years and your retirement income is generous even if you don’t pay off the debt.
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