How middle-aged individuals can plan for life-changing events.
Few weeks ago, I sat down with Arbella Dooman, a Canadian entrepreneur and a Licensed Mortgage Agent, to discuss the latest trends in Real Estate financing. We spent few hours discussing the five life-changing events influencing our Real Estate plans. It was an eye opening conversation and an important subject to share because it affects us all; families or individuals, as well as, professionals and entrepreneurs alike.
The state of the nation
Family dynamics, employment security, and health issues are the three main categories impacting real estate financing and investment for most people in North America. Within these categories, there are 5 trends to be taken into consideration when you own real estate:
Divorce
Divorce causes a huge shift in one’s life and has profound implications on your financial situation. What do you do with your real estate investments and properties and how to divide them? This is a significant life-changing event affecting real estate planning.
Some people choose to sell their real estate properties and split the earnings. Sometimes this decision can be very painful for all family members. Depending on the nature of the divorce, family members may have to relocate, forcing them to change jobs and move kids to different schools. Many people have sentimental attachments and memories and find it hard to let go. This opens up the opportunity to negotiate a spousal/partner buyout to facilitate the lifestyle change (or changes).
Aging parents
This was the most extensive discussion Arbella and I had. According to WHO (Global Health Observatory), the average life expectancy rose by 5.5 years between 2000 and 2015. This is great news. Yet, an aging population creates demand for new sets of real estate products, and a shift in living arrangements. Our aging parents, for example, may need special care as they get older, or as they develop health related disabilities. This life-changing event is becoming more important as the cost of living and real estate continue to skyrocket.
“The average life expectancy rose by 5.5 years between 2000 and 2015.”
There are many choices to evaluate with aging parents to ensure everyone is happy, and can go on living their lives comfortably. But the most important factor affecting our choices is the financial health of our aging parents and us (their children and caretakers).
Live-in, sell, or stay put
In some cases, live-in home might be the best financial option. But this scenario comes at a cost. And this cost is the extra time and lost income caregivers endure when looking after aging parents.
If aging parents have real estate investments, the family has to decide if the aging parent/s should sell their home and: a) buy a house closer to the kids or b) move into a retirement home. If the aging parents don’t want to leave their home, then there’s that possibility of hiring professional caretakers, assuming a healthy financial situation.
Aging parents who wish to stay in their own homes, can use options like Reverse Mortgage. This option allows them to enjoy the comfort of their home and use the Equity to obtain financing with no repayments for the time that they live in the home. However, the family needs to keep current with property taxes, insurance, and maintenance.
Adult children
Young adults contemplate moving out of their parents’ due to rising costs of real estate, among few other factors. And many who opt to move out, end up crawling back to their parents homes. This is either because they can’t afford living on their own, or they want to save towards buying their own home.
As a result, many parents are digging into their own real estate investments (equity or property) to support their children’s real estate dreams. This topic is discussed frequently among parents who hope their children could achieve financial independence without mom and dad’s help. It is an absolutely life-changing event for parents, which could force them to reconsider their own retirement and future lifestyle goals. As well, parents who don’t have financial resources are compelled to find means to help secure their children’s goals. Isn’t this what every good parent does for their children?
Career changes
One of the major life-changing events people over 40 pursue is a career change. Some people want to venture into entrepreneurship, or even take early retirement. Both options will require making some decisions in terms of real estate management such as downsizing, live-in family members and property rental.
Those who chose to resign from a steady job and start a new business may need some initial business investments. Some may leverage their home equity, sell some of their property or consider a temporary downsize.
Medical problems
No one wants to think about the possibility of falling ill at the prime of their lives, Right? It is a devastating life-changing event which we should plan for, in order to avoid the inconvenience of a lost income and delinquent mortgage payments.
Although some places offer disability compensation through employment insurance or corporate group policies, it’s not a 100% coverage. And with rising standards of living, a slight change in income can push owners to make some adjustments to their real estate investment and even lifestyle (i.e. cutting down on expenses).
Real Estate planning for life-changing events
So how can we, the middle-aged women and men, plan for a life-changing event? Knowing and understanding the five life-changing events impacting your real estate is the first step to the planning process. The next step is to start talking with a mortgage expert, as well as a financial planner about these events. My advice would be to meet with a mortgage expert who can walk you through many suites of products and options that can help you prepare for these events.
If you are in the GTA area and want to find out more about real estate planning, Arbella Dooman will be very pleased to answer your questions and walk you through opportunities you and your family can benefit from. She offers complementary pre-approval and consultation services. Mention "Elle Muse" to receive a free rebate & $100 Gift Certificate of your choice. This offer is available when sign up for a purchase or refinance agreement ( debt consolidation , renovation , education etc) with Sherwood Mortgage Group. Offer expires Oct 31, 2019. Arbella Dooman can be reached at 416-705-9397 or via email at arbella@sherwoodmortgagegrpup.com
References:
https://www.who.int/gho/mortality_burden_disease/life_tables/situation_trends_text/en/
https://www.cbsnews.com/news/cost-of-living-2018-increasing-at-fastest-rate-in-10-years/
