Dear all
my parents (~64 years old) have two home: one they rent (where my father grew up, only-child) and one where they live/sublet a part on AirBnB.
From July, they longstanding renter has decided to move out. My parents have now the choice to either sell or re-rent.
My father, who is smart but with a traditional mindset on investment, ran the number by himself on possible scenario (selling, invest proceeding vs renting) and came to the conclusion that the first one will leave him more free income after taking into considerations all kind of variables.
This surprised me since he was never one to run such scenarios. Anyhow, it was funny that he wrote all numbers in a doc table and used a pocket calculator to make operations, because âhe hates Excelâ
He thinks after selling, and after all overhead of selling, he will have 400k to invest. He approached me for ideas and concept. Their goal is to use a part to reduce mortgage (they are a bit unlucky - their 10 year loan needs renewal december this year, and my father is budgeting 3%-4% interests)
but from the rest (~300k) he would like to get 6000 chf / p.a. to complement their pension, which is around 2% ROI.
They are new to invest in equity and is my impression they will struggle with volatility. What are good options to generate 2-3% with limited, see almost no volatility?
One of the options I see is that they loan 200k to me, we sign a regular contract, well defined etc, and I get them 3% in the form of monthly installment of 500 chf (which I can easily do from my take-home salary already now without their loan). The advantage for them would be that they have 0 volatility - they see and must declare a credit of 200k on the taxes, which generates 6k p.a. They will pay income tax on that, they are aware.
My advantage is that I know their money is managed with best intention, I will keep track of any additional surplus that the 200k will generate when invested in something like VT and make sure that in the future they get as well this surplus (or my siblings; since I have 3, I am projected to get a fourth of the surplus as per inheritance). Additionally I know they will not panic with any stock market crash and will sleep without problems.
The only problem I see is if they in the future happen to want to take out the 200k from me with short notice, during a bad market situation. So I will need to discuss this with them and phrase it accordingly in the contract (eg that loan repayment request can only happen over 4 years period time, 50k p.a. or something similar).
Are there any other option you see to get my parents a solid 3% out of 200k, with limited volatility? I understand that mixing money management and relatives is very often a bad idea. We are a very tight and united family, both with my parents and siblings, so this is giving me some confidence. But you never know.
I know as well it will hurt me to see them wasting away money in some untransparent product from some banks.
I welcome any idea/critique.