Del: My husband Chris is about two years away from retirement and we find ourselves in a bad situation.
We have a rental property on the NSW Central Coast which we have owned for about eight years and it is worth about $600,000. The mortgage is about $275,000.
This was our retirement plan, as we only have $200,000 in super.
Unfortunately, a few people let us down. Two years ago we had the bathrooms and showers resealed with a well-advertised company that offered a 20-year guarantee on the job.
This failed within the year but it was not noticed until there was lots of damage.
After a lot of communications with the company responsible we find ourselves up for $30,000 to $50,000 in repairs to rebuild both bathrooms. The house is not able to be rented.
What is the best way to finance this?
Paul: To put it bluntly Del, that is a bugger.
I assume you have taken this to Fair Trading and so on, in particular given the 20-year guarantee, but what a setback for you.
Putting aside the legalities of what the resealing company has done to you, the property has to be fixed.
I really doubt you would get a super release on an investment property, so I think your best option is a loan using your home.
I would hope your mortgage is under 4%. If not you should be shopping around – home loans of around 3.7% are easy to find these days.
I also want you to talk to your accountant or tax person about the tax deductibility of these critical repairs.
I suspect the new bathrooms will be depreciated from a tax perspective but I would be interested to hear how the costs you will have incurred will be treated.
Finally, do get landlord insurance for your investment property.
These policies should provide rental protection for situations such as this, and possibly with repairs.