Ask Paul: Should I help low-income daughter buy property?
Q. My 24-year-old daughter is currently living at home and due to move out (we are in Perth). I am looking at ways I can help her financially, while still allowing her to build and maintain her independence.
The problem is that she earns only $44,000 a year and will be living on her own. She has about $40,000 in savings, has no credit card and has few expenses.
She plans to rent but is considering perhaps buying a property instead. She doesn't quite have enough money for a deposit but, even so, maintaining the mortgage on her salary would be difficult.
She is not able to increase her income and has little potential to change jobs. She has the ability to save money but it is frustrating to see this young generation pushed out of the market and I can't let her stay at home forever (even so she could build up a decent deposit, which she couldn't service anyway!).
I have a mortgage that is far from being paid but have some capacity to support her financially, as I earn three times her salary, but wish to do so in a way that doesn't usurp her need for independence and self-sufficiency.
How can I help? - Lisa
A. This is a really good question, Lisa, and one that challenges all parents. I do not have a magic wand either, but here are some thoughts.
I do like the idea of her owning a property or it feels like a long-term rent trap.
I know little about property in Perth but I would be curious to run some numbers on two forms of ownership of, say, a two-bedroom apartment.
First, how does this look if she bought it as an investment property and used the rent to meet repayments?
This could have a defined time frame - for example, you both agree she lives with you and saves like crazy for maybe two years. At that time her savings would reduce her mortgage.
Second, the reason for two bedrooms is to be able to rent the second one when she is living there. I usually find a two-bedder makes more sense than a one-bedder due to the ability to rent the second bedroom
It makes complete sense to me that kids are better off with independence but on a fairly low income I worry about her renting.
So I'd suggest you run the numbers with her and look at buying an investment property and saving for a couple of years, and also with someone renting the second bedroom when she lives there.
Finally, your daughter is young. Is there any study or retraining she can do to improve her longer-term earnings?
The issue you have is common to nearly all of us with young adult kids!