PROPERTY

Ask Paul: Our investment property is draining us - pay it off with super?

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Dear Paul,

Thank you in advance for your advice.

My husband is 67 and retired and I am 57 and still working full time.

paul clitheroe

We have two investment properties, which are draining us. We own our own home.

My question is: do you think paying out one of the investment properties with my husband's superannuation would be a good idea?

It would take almost all of his $400,000 in super.

We also have more than $100,000 in shares. - Ros

You have me worried here, Ros. Super is a brilliant asset for retirement. It is no hassle, easily accessible once retired and any good, low-cost fund has been generating great returns.

So using super to pay out a property that is "draining" you worries me no end. Interest rates are so low it can't be the interest cost that is a problem, so it may be the properties are high on maintenance or low on rent.

Unless they are providing very high capital growth and you are concerned about a CGT liability, my first inclination is to consider selling one of the properties.

This is a big decision and can't be dealt with without a full understanding of all the facts. Maybe a good start would be with your tax accountant?

But please don't take savings out of a great area such as super to cover a property that is losing money.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the television show Money, radio, and most notably this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is Chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
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