Should my parents rent or sell their house? Need long term advice

[Mike Sanders]

The main question I'm asking here pertains to what they should do with their house, but really we need to put together a plan for their retirement. At 59 and 57, they're getting a very late start.

**Overall Picture**

* Age: 59/57
* Income: Father - $100,000 Salary - ~$5.5k/month net (mother unemployed, not looking)
* Credit Score: 857
* Extraordinary Expenses: $0
* Mortgage Debt: $222,000
* Consumer Debt: $0
* Cash Savings: $30,000
* Investments: $70,000 - Work Account (unknown type, fully vested, 100% employer contributions over ~6 years) - $19,000 - 401k Account (unrelated to work?)

**Housing Situation**

* Current Home Value: $207,000 (Zillow Estimate - he's having an appraisal done soon)
* Current Home Value Note: Properties next door and down the road (also on 5 acres) recently sold for $350k-$400k, due to the fact they're stick homes and not manufactured.

* Current Mortgage: 30YR Fixed @ 3.5%
* Current Mortgage Balance: $222,000
* Current Monthly Payment: $1550 (plus $200 extra per month)

* Pre-Approved Loan: 30YR $400,000 @ 4% Fixed w/10% Down + Closing Costs (unsure if it's with him keeping current home or without)


My parents bought their current home in 2008 (yeah) for $255,000. It's a 1,500 sq ft 3br/2ba **manufactured home** built in 1991, located on 5 acres of land roughly 45 minutes north of Portland, OR (in WA state). At the time my father worked for a company about 20 minutes away. Fully thinking he would be there for the rest of his working days, they purchased this as their 'last home'.

Fast forward, he quit that company six months after closing on this house, and has been working for a much better (read: stable) company in Portland for the past six years. His commute time is now an average of 1.5-2 hours due to congestion. He would like to purchase a home on some acreage closer to both work and the rest of our family within 30 minutes of the Portland Metro area.

**The Situation / Questions**

Considering his age and lack of any real retirement planning, we're trying to figure out the best course of action going forward. He feels terrible about not doing this sooner, and he's very open-minded when it comes to evaluating options. Though he is literally going to work until he no longer can (by choice, personality type), I'm not optimistic that he'll be able to accumulate enough cash for retirement. Because of this we're leaning toward options that will provide residual sources of income (looking primarily at rentals/real estate). My brother and I (27 and 33) are both nearby and looking to get involved. Though not much, I have around $15,000 I'm looking to invest as well, and neither of us have any issue with pooling our resources.

**Scenario 1 - Sell the house, buy another**

For better or worse (financially), they **will** be moving closer to Portland, mostly to be closer to my aging grandparents and their new grandson. If we can't come up with a better plan (or if this *is* the better plan) he'll sell the home and use his savings and/or credit to make up the difference (effectively starting at $0). As noted above they've been pre-approved for a loan and have looked at several homes already. I do worry that if they find one they really like they will make a poor financial decision due to the emotional need to be closer to family.

**Scenario 2 - Rent the house, buy another**

My thought here is that this might be his best opportunity to retain an investment property that will provide him retirement income. My concerns here are the horror stories I hear about being a landlord, the rental market in the area (his realtor is looking into this), and the rural location (fewer prospective tenants). As mentioned above, I'm looking into the possibly purchasing an investment property myself for residual income, so future development of this skill set may already be in the cards. Another detail here, he estimates the current home on the property will need to be replaced in 15-20 years. While it seems fine to me, I don't live there nor do I know much about manufactured homes. He's concerned he won't have any equity if he keeps it and the home begins rapidly deteriorating.

**Possible Variation 1 - House in the middle**

If rentals look to be our best bet for residual income, he's not opposed to purchasing a house in the city to live in for 2-4 years before purchasing the home they really want (with acreage).

**Possible Variation 2 - New house on property**

As I noted above, comparable properties with older (70's) stick homes are selling for around $400k. He's mentioned the idea of selling the manufactured home, having a new one built, and then selling it in order to break even. I don't believe this pencils out, is it worth the work, or accounts for other incidentals (like where they'd live!). His next-door neighbor claims to have built his new 3br/2.5ba 2700 sq ft (2 story, flat sided) house for $150,000. The new appraisal of that property values it at $415k.

**Recap**

Basically, we're starting from this post right here. While this is mostly focused on this one aspect right now, what we really need is an all-encompassing plan. Questions are welcome and all advice is appreciated, thank you!