# Complex situation - need suggestions.



## Starbuck (22 Jul 2010)

This is a bit complex, but maybe an outside observer might have a better take on it.

I sold my home in Dublin in 2008 to finance a build on a fantastic sea-view site we own. It has FPP for the new build.

Before getting into the build my employer offerred me voluntary redundancy. I decided to take it. 

We are now living abroad and its doubtful if we'll be coming back any time soon. I'm not working, and will be pensioned in 4 years. A DBS.

The site has a mortgage of 400K on it. No rental income from the derelict cottage on it.

I also own an apartment in France which I rent out. It has a mortgage of 250K outstanding.

We have the guts of 1M in cash from the redundancy and house sale.

I'm very undecided about what to do next.
We need a home to live in here in Asia - but there's every indication of the same bloody stupid bubble behaviour here as I just witnessed in Ireland. The euro has fallen 20% against local here, which doesn't help either! 
Not interested in getting stung again, so probably gonna rent, at least for a while. It seems better to use my (weak!) euro to pay off euro debt, rather than exchange it against a strong local currency to take a gamble on property here.

So now I'm trying to decide whats the best way to sort out the mortgages in europe.

I'm tempted to start by paying off the french mortgage. Its a tracker, but not as good as the Irish one!!
This would release the rental income to go toward paying the mortgage on the site in Dublin. 
I know you'll say sell the site - but its an insurance policy for the future. If anything goes bang here we might need to return to IRL. Its a fantastic site, with a fantastic view. We love it and can't easily let it go.

Another alternative is to pay off the mortgage on the site. The apartment in France could remain self-financing (pretty much).
But we'd be clearing a tracker! Hard to get! 
And we'd be seriously depleting the 'build fund' in the event we decide to do the build. Build will cost around 350K - 400K.

Maybe we should just build and rent the dream home?

Another alternative is to ditch the big house and fix up the derelict cottage.
I'm loath to do this as it seems like wasted money to me. Why spend 100K to make a 1 bed cottage liveable, and then get - what - 850 a month(??) in rent? It'd be almost 10 years before we'd get the investment back, and if we later decided to go ahead with the build - we'd have to demolish the cottage!

I'm half thinking of demolishing it right now, while its cheap to do. And it'd avoid that bloody property tax (due for a hike soon I expect).
But knocking it removes one of my alternatives....

I'm quite confused about all this. The heart tends to rule the head at times. 

Any suggestions?

Thanks in advance!


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## number7 (22 Jul 2010)

350 TO 400 is a pretty big bill for build alone, how big a house are you building?

I would also use you own figures to prompt your thinking, 500k investment for 850 a month return if you do up the cottage or 800k investment for a what? maybe 2000 a month return. its not much of an improvement really. Unless the house was going to get you massive rent on completion. 

You seem only to be considering the build cost as the investment not the mortgage on the site as well.

Cant say I would advise my dad(I am assuming that you are 60 + due to your DBS pension coming good in 4 years) to invest his nest egg Irish property just at the moment unless he was in for the long haul, I mean very long haul.

I would forget about the french apartment, its doing its job just fine by the sound of things (its on a repayment mortgage?)


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## Starbuck (22 Jul 2010)

Hi No.7, thanks for your input.
Yes, a partial payoff of the french mortgage has several benefits - a bit of (French) tax relief on mortgage interest being one of them.
The thing I don't like about the french mortgage is - although its a tracker - it tracks EURIBOR not ECB rate. This may not seem a big deal (it didn't to me) until the credit crunch hit. Banks jacked up their InterBank Overnight Rates because they were afraid of lending - even to each other. So while the ECB rate was plunging...my french mortgage interest rate was actually rocketing upward! This EURIBOR link seems to be the standard for all french tracker mortgages btw, I've never found out why the Irish banks missed that trick and plumped for ECB rate!

So, the risk in not paying it all off is that if we have another banking crisis, EURIBOR interest rates will rocket up again.

Another risk is in holding on to cash in a low deposit interest/rising inflation scenario, and banks going pop all around. If McWilliams is right it could be dangerous having much cash on deposit (in Ireland). If you don't use it, you could lose it.
I'm currently fixing that. Its all going offshore.
Never thought I'd be complaining about too much cash....

Yes, there is a time limit on PP, but you can keep re-booting it by just applying for minor changes to the plans! Anyhow, I have 4.5 years on the clock. The build would take 6 - 9 months. Plenty of time to think yet.

Its a 2,200 sqft house - but its in Dublin, and it has loads of glass. Its also not a standard construction - its a complex build, hence the cost - but you're right, thats it done and fitted out to a fairly high standard. It could probably be built to a lower spec for around 250K - 300K.

As for age - I'm not that old - I'm lucky in that my DBS kicks in at 55.
Assuming its still there in 4 years....


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## mercman (22 Jul 2010)

First thing -- Most mortgages track the 3 month Euribor rate and not the overnight rate. You might be best to ask some questions to get clarity on this mortgage.

I don't want to sound rude, but you seem like somebody that thinks they will live forever. Unfortunately life is not as good as that. Little point in planning where you will be in 20 years time if you are unable to cover the living expenses up till then. 

If the property market in France is still good then sell that property or sell the site in Dublin and pay off the loan in France and run your life with as little debt as possible. With good planning and Tax advice with €1 million in cash you should be able to work out Ok. Relax, there are thousands over here at home that would love to have your problems.


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## john martin (23 Jul 2010)

I think mercman is talking a lot of sense, why tie up longterm in property at nearly pensionable age. You would be better off to live stress free and debt free, you are actually in a great position. Keep life as simple as possible, you can only live in one place at a time.


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## nai (25 Jul 2010)

what is the position in relation to the planning on the site in Dublin - don't forget the permission will expire or lapse if there is no progress within a certain time period (5 years I think)


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## Starbuck (25 Jul 2010)

From above:
Yes, there is a time limit on PP, but you can keep re-booting it by just  applying for minor changes to the plans! Anyhow, I have 4.5 years on  the clock. The build would take 6 - 9 months. Plenty of time to think  yet.


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## chlipps (28 Jul 2010)

I think you need to sell one or the other of the properties and reduce your debts...

If you dont plan coming back to irl in near future then why not sell the site and buy something in 5-10yrs time when you come back


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## csirl (29 Jul 2010)

Starbuck said:


> From above:
> Yes, there is a time limit on PP, but you can keep re-booting it by just applying for minor changes to the plans! Anyhow, I have 4.5 years on the clock. The build would take 6 - 9 months. Plenty of time to think yet.


 
This is a big risk and not one I'd like to take. Its likely that there will be major changes in planning law in this country in the coming years. Both major opposition parties have talked about it and if the current crowd somehow survives, the Greens will insist on it. We are going to see some dezoning and we will likely see some major restrictions on one off housing. Councils may also become stricter on existing PPs.


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## Starbuck (31 Jul 2010)

csirl said:


> Its likely that there will be major changes in planning law in this country in the coming years.


That would be a good thing. Its a crummy system.
But I won't hold my breath.....this is Ireland we're talking about here......



> We are going to see some dezoning and we will likely see some major restrictions on one off housing.


My site is in a built up area, and has an existing structure on it. It'll be a good thing if they stopped 'one off' housing as part of a planning system revamp....but the farming lobby will kill that stone dead, like they've always done before.
In any case, this is immaterial to me. 



> Councils may also become stricter on existing PPs.


Are you suggesting that CoCo's are going to arbitrarily revoke legally granted Planning Permissions and expect to get away with it?
Dream on.


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## mtk (1 Aug 2010)

interesting thread
starstruck First congrats on being in a reasonable good financial position. 
Would it be possible to give more detail ?

1) Have you decided not to work anymore? most DBS allow benefits at 50. Are you leaving it to 55 to get bigger pension probably a wise move but depnds what reduction factors they may apply . Would it be worth be asking as i presume you are living off and paying mortgage on 400k with the 1m savings at the moment so depleting the €1m on an ongoing basis ?

2) How long do you intend staying in asia? i agree its best not to put more into some of these countries than you can afford to lose ( a coup etc cannot be ruled out ) 3) Related to 1) can I presume your pension wil more than enough to meet living expenses in asia but will it in ireland ?


*Comments *Be careful where you put your money on depsoit IOM didn;t do so well with icelandic crash for example.
With €1m cash but €400k debt be careful against currency mismatching by putting the €1 m in another currency if you dont pay off the 400k .
mtk


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## Starbuck (2 Aug 2010)

Thanks for those constructives suggestions MTK.
The pension is at 55 and can't be availed of earlier unless through medical unfitness to work. Its not a choice I can make unfortunately. I've done the numbers on it, and even with a clawback applied I'd be well ahead for over a decade if I could take a reduced pension now, but due to the state of the fund that isn't on offer.

I originally considered not working - but boredom and a few interesting offers changed my mind. I have interviews scheduled this week.

The cash isn't going to deplete if I pay off the French mortgage. Rental income from that covers the Irish mortgage nicely.

Long term, I see myself staying here, unless things go very bad for some unforeseen reason. The country I'm in is stable, the only future concern might be an overheating economy. China is the local powerhouse and a driver of that kind of scenario, but they are currently taking steps to rein in their growth and it seems to be working. 

Whatever way you look at it this place is a helluva better bet than Ireland in the future. As a Yank I met the other day said to me, the US used to be the land of opportunity. No longer. Now it's the Far East.

But who knows, I could have a hankering to go back if I get too old for the heat....The site in Dub might come in handy then.

On that note, and referring back to some of the posts on Planning (if it's not too off topic) - contrary to what was being sugggested about 'tightening up' of Irelans Planning system, all the stories I'm hearing from home are the exact opposite is happening. It's NEVER been EASIER to get PP in Ireland. And that makes perfect sense - the CoCo's are broke. They need the income. And they're not exactly snowed under. 

The 'Planning Contribution' on my site alone will run to over 20K. For nothing.
Its extortion. Contribution me ar5e. Its a FEE. Another TAX on someone prepared to invest several hundred grand and provide employment. 

If there is any overhaul of the system that should be the first to go. It should be replaced by a property tax. If it was abolished today I'd be looking at starting construction before end of the year. But of course we know now the Property Tax is a non-runner. And even if it were introduced it wouldn't surprise me at all if the dumb shmucks running the country kept the Planning Tax too. Thus utterly defeating the purpose of the changes.


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