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Ask Paul: Should I help low-income daughter buy property?

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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!).

ask paul paul clitheroe how can i help my low-income daughter into the property market help kids buy property paul clitheroe money magazine

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!

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Paul Clitheroe AM is a respected financial adviser and Money's chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Got a money question? Ask Paul.
Comments
Heather Hunter
August 22, 2018 4.45pm

Wow, $40,000 in savings! And only 24! And $44,000 income at that age! Imagine being so well off. Not to mention having parents who can help her out financially. How the other half lives.

When I was 24 (back in the early 2000s), I had just finished uni (with high distinctions), and after 7 months of intensive job searching, managed to obtain an exploiting type job paying $24,000.

Martin
August 22, 2018 4.59pm

Little thing called inflation Heather. In the early 2000s housing was a lot cheaper too, so your $24,000 stretched a lot further than it does now,

Grads today earn $15,000 more than what I did 12 years ago, it's just the nature of things.

Megan Humphreys
August 22, 2018 6.34pm

Don't you just love the "back in my day...." comparisons Lol.

Well stated Martin btw 😎

I have a similar dilemma with my youngest...and your advice is pretty standard for back in the day, as much as it is today Paul. Things are pretty much relative re first home purchase for young people thanks for keeping it simple and realistic.

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