The question
I am a 34-year-old professional living in Toronto; my 67-year-old father and 97-year-old grandmother live together in the family home out west. My father lost his well-paying job three years ago, but his spending never fell into line with his new, very modest, pension income. There have recently been instances of unpaid utility bills and Dad is unfortunately thousands behind in payments on his new truck. Dad has about $70,000 of consumer debt. Collection agencies are calling the house: Granny is mortified. They don't have retirement savings outside of CPP and home equity: The home is worth about $380,000 with a $160,000 mortgage and is owned 50-50 between the two of them. In order to avoid putting the house for sale to cover Dad's debts, moving my Granny out of her comfort zone involuntarily because of Dad's financial mistakes, I am considering buying the house to free up their equity and renting it back to them. I want her to be able to stay there as long as she wants. Is this a good idea? What should I do? Help!
The answer
I think it's a lovely idea. And congratulations on being so solvent at the age of 34 that you can bail out your elders, rather than the reverse.
(About which we receive a tsunami of questions: I answered one last week.)
So, yes: By all means, buy your dad's house and rent it to him.
Only problem I foresee: it's a short-term rather than a long-term solution.
Let's do the math. $380,000 (worth of house) minus $160,000 (mortgage) equals $220,000. Divided by 2 (granny's share) equals $110,000, minus $70,000 (Dad's debt-load) equals $40,000.
Meanwhile, the average lifespan of a Canadian male, according to Statistics Canada, is 79; 79 minus 67 (your father's age) equals 12; $40,000 divided by 12 equals (approx.) $3,333 a year.
The Canada Pension Plan is a variable – depends how much your father put in and for how long – but the words "pittance," "stipend," and "Ramen noodles" come to mind.
No matter how you slice it, your father will not have much money as he lives out the remainder of his days.
Now, I hope no one thinks I'm being facetious, facile, or flip. In fact, this question taps into one of my worst fears: I might outlive my money.
Yee-ikes! What a thought! And one I think many Canadians these days share. But tune into the radio, or open the paper and you'll find most financial pundits say essentially the same thing: You should spend less, stick to a budget, make sure you save for your retirement and la la la.
A total sci-fi scenario for those of us just trying to get by from month to month and keep the bailiffs from putting our furniture out on the street.
Now, "spend less" may well apply in your father's case, with the fancy new truck he can't pay for and so on.
But maybe the real solution here is not "spend less" but "earn more."
It's not too late! True, your dad's no spring chicken. He'd be a "late bloomer" for sure – but hey, speaking of chicken, I've mentioned this before, but one of my heroes in the "late bloomer" department is definitely Harland "Colonel" Sanders.
He had a successful restaurant in North Corbin, Ky., until an Interstate was built nearby and people started whizzing past without stopping in.
So, at the age of 65, he closed the restaurant and, with only $105 a month in Social Security, took to the road, selling his "secret recipe" for so-called "Kentucky Fried Chicken" to various potential franchisees.
Legend has it, he got 1,009 rejections before his first "yes." He often slept in his car. The rest is fast-food history.
Now, I'm not suggesting your father hop in his fancy, unpaid-for truck and criss-cross the country, sleeping in the flat-bed.
But maybe get a job? Something that gets him out of the house, into the community, engaged – and puts a few shekels in his pockets?
Why not? To me, 67, these days, is too young to hang up your spurs.
(I've always said to myself: "Dave, you're going to have to keep hustling until someone drops you with an axe.")
So yes – buy your dad's house, rent it to him, sure. But at the same time, encourage him to get out there and have fun and earn money with a "second act."
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