Should I sell my rental property or spend the money renovating it?

I am a 71 year old single low income female with no children or dependents. I own my house, a small 1950s cottage, low maintenance, $0 equity and $1.5 million land. Due to circumstances beyond my control, I retired at age 54. I also have a small rental cabin purchased before 1985 which produces a net income of $5,000 per year. It’s worth $230,000, sits in a prime small-town location, and is heritage listed. I have a lifetime pension of $40,000 in public service and $750,000 in super in the cash wallet, plus $200,000 in the bank. I understand super cannot be added after age 75, and therefore I may have to sell this cottage before then, moving it all to super. Until then, the chalet may need another major update. Unfortunately, the sale seems the logical decision. Is there a better course of action? I understand that it would be better to transfer part of the $200,000 to my superannuation account, as the bank interest is negligible. However, to do so, it apparently needs to be called “pre-tax” or “after-tax.” What does this mean please?

Regarding your rental property, I hesitate to sell unencumbered pre-85 property. However, if ‘updating’ is costing you more than you want and I don’t like the idea of ​​a mortgage so late in life, then yes, a sale is the obvious step .

Beware of the trap that involves the super always earning more than a bank deposit. When people talk about super, they are often subconsciously referring to the “balanced” fund into which their benefits are placed by default. A balanced fund sees its money spread between stocks, real estate, fixed interest, infrastructure assets (such as airports and tunnels) and derivatives, such as currency swaps.

Spending money to renovate an investment property late in life may not be the best decision.Credit:Glenn Hunt

When the economy is healthy, balanced funds usually outperform bank deposits, but that hasn’t been the case for six months or more and your money is currently safer in cash. This may be the case for much of 2023 if a global recession ensues, as expected.

Until age 75, you can invest up to $27,500 in super and claim a tax deduction, that is, reduce your taxable income by this “concessional contribution”. It is taxed at 15% on entry, which reduces the maximum net contribution to $23,375.

Additionally, you can make $110,000 in nonconcessional contributions per fiscal year, that is, “after-tax,” without claiming a deduction and without paying tax on entry. Or you can advance the value three years at a time – $330,000 – but no more for this fiscal year and the next two. Note that if you invest $200,000 this year, you trigger this deferral option and can only invest an additional $130,000 until June 30, 2025.

I am thinking of investing in Bonus Bonds for my grandchildren. One is 10 years old and the other is 8 years old. Is there an age limit for investing? Could you please recommend companies with a good track record for bonus bonds? I also believe that after 10 years any capital gains are tax exempt. Is it correct?

You must be a Kiwi because in 1960 the New Zealand government introduced bonus bonds as a form of savings that also paid prices. They were liquidated in 2020, victims of low interest rates.

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