How do you get more income from property in retirement without selling everything? Often by rearranging it. The properties that suited the building years were chosen to grow. The income years ask something different of them, and the two are not always the same properties.
Growth assets and income assets
An older house on a good block in a sought-after suburb may have grown a great deal and still pay a low rent for its value. A newer home that lets to two households, or a property in a place with strong rental demand, can pay much more rent for each dollar it is worth. Neither is better in itself. They do different jobs.
What switching costs
Rearranging is never free. Selling brings agent’s fees and capital gains tax; buying brings stamp duty and legal costs. Some of the gain goes to tax and some of the capital goes to costs, so the new property has to pay enough more to make up for both, and keep doing it.
A couple in their late sixties hold a house worth $1.5 million that rents for about $900 a week. They are short of income. Selling it and putting the proceeds, after tax and costs, into two newer homes in a strong rental area lifts their rent by about half. It also gives them two properties to manage, a different spread of risk, and a tax bill in the year of the sale. Whether it is the better position depends on their own numbers.
Compare before you move
Holding is always the first position, and every other route is measured against it on the same terms: income after tax, at today’s prices, year by year, with the basis for every figure. That is what Position and Pathways is built to do. I model the positions side by side, from your own documents and goals, and the decision stays yours.
For people living from what they built, rearranging what they hold is often where more income comes from.
Nicholas Lockhart
General information only. No advice is given. Figures in the example are illustrative; an accountant can work through the tax on any sale.