# Invest in a more expensive house



## clueless2019 (7 May 2019)

This might be a bit insensitive due to housing crisis, and people generally struggling,

But I wonder if its a good investment to move house and buy something more expensive. The circumstances:

1. Pension contributions use up all tax free allowances as a percentage of salary
2. a buy to let or other investments are subject to dividends tax or CGT
3. No CGT on principle private residence
3. Houses generally increase with inflation irrespective of boom/bust. land is a limited resource.

i dont need a more expensive house, im happy in my area and dont need anything bigger.

but its an asset investment that i can enjoy. Alternatively i could use the interest payments, about 3000euro per year for each 100k borrowed on enjoying life, but i wouldn't have anything to show for it. any views greatly appreciated.


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## Steven Barrett (7 May 2019)

Your money will be tied up in an illquid asset that you don't really want. If you want to access some of the value, it will take months to realise the cash, be expensive to do so and you will have to move house too. You may also get push back from other members of the family (if there are any). It's a terrible idea. 




Steven
www.bluewaterfp.ie


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## Brendan Burgess (7 May 2019)

It would not make sense to borrow money to buy more house than you actually need and enjoy.

It _might _make sense if you had cash savings. 

"investing" in your own home does get a better return than other asset classes because of the tax treatment, but you are already heavily invested in property, so if you have surplus savings, diversify into equities.

Brendan


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## clueless2019 (7 May 2019)

Thanks guys. i dont think it would make sense if i had cash savings. as in order to save an extra 100,000 euros for example i would need to save and why would i do that, with 0.01% deposit interest rates. if i was to borrow 100k euros, interest rates are about 3% but likely the extra 100K invested in private house would raise by 3%, or similar to what inflation is. 

illiquidacy of the asset is irrelevant, its there for my kids when i die. 

i think equities and land purchase are quite linked so i dont think there is a need to diversity. plus with equities i have to pay tax on dividends and increase in value.

In the absence of compelling arguments against, this is what i will do, which is not good public policy.


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## RedOnion (7 May 2019)

clueless2019 said:


> illiquidacy of the asset is irrelevant, its there for my kids when i die.


If this is the goal, no CGT arises on death, regardless of the asset.


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## huskerdu (7 May 2019)

The reason why illiquidacy is relevant is that you can only release those assets to your children when you die. 

If you live to be 88, and you had kids in your 30s, you cant hand it on to them until they are in their 50s.


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## clueless2019 (7 May 2019)

actually thats a good point Red Onion, and sure CAT only arrises if its over the threshold, which it wont, so it wont matter what the asset it. well spotted. Thanks for that.

and thanks Huskerdu, i didnt think that my kids would be quite that old (them being in their 50s and probably need it sooner). good point too. 

suppose there is always the chance i want to liquidise it. so CGT would be relevant then. 

besides from pension and principle private residence, any other ways to save without incurring tax. im ignoring state savings with post office (prize bonds etc) as they are so puny. And i dont feel good about avoiding tax, but im only talking about 500euros a month, im hardly in the 1% richest.


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## Brendan Burgess (7 May 2019)

clueless2019 said:


> i think equities and land purchase are quite linked so i dont think there is a need to diversity



I give up.


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## clueless2019 (7 May 2019)

Brendan Burgess said:


> I give up.



hahhaa, i expect you have to deal with my sweeping statement regularly enough.

going on the 2008 crash, we saw both equities and land values decreased. If a companies fail, their values decrease. and so they lay off staff, staff cant afford houses, so there values are loosely linked. 

What i mean is, id rather take a bigger hit on property decreasing than equities decreasing as ill take a 50% hit on dividends and 25% hit on CGT of equities.


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## Gordon Gekko (7 May 2019)

I can see the logic in buying a more valuable house than one might need if the intention is to downsize. But there are so many other variables. And, for non-downsizers, the fact that CGT disappears on death is a key point. However, so too is the ability of an older parent to cohabit with his/her kids and to pass on a home free of CAT.


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## moneymakeover (7 May 2019)

I think the idea makes perfect sense

The only negative I can see is if you do need the money, it might not be ideal having to move house/neighborhood in your retirement


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## clueless2019 (7 May 2019)

why thank you very much 'moneymakeover'. stamp duty is 1% so wont be a problem to downsize and profit the difference. suppose if it was increased to 2006 stamp duty rates, it might become more of a problem .

Gordan Gekko, i dont suppose you could briefly advise what the "other variables" are that you refer to in your post 2 above.

i came to this site as opposed to a financial advisor, as i was looking for general advise, not which equities to invest in. and i am genuinely looking for advice, wondering if there are hypothetically good reasons not to buy a more expensive house than is needed for investment purposes.

in case someone suggests buy to let as investment, ive seen the hassle and cost that entails. 

Its bad policy by the government, there should be an incentive to not buy a bigger house in a nicer area. but there you go.


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## joe sod (7 May 2019)

clueless2019 said:


> i dont need a more expensive house, im happy in my area and dont need anything bigger.



there seems to be a fashion especially in rural ireland of building bigger houses than you actually need, its also the case that people dont downsize when they get older, at that stage its too much hassle even if the "big house " is alot of work and hard to maintain. Big houses are hard to sell especially in downturns, remember the half finished mansions that could not be sold back in 2010 even at ridiculously low prices.


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## Steven Barrett (8 May 2019)

If the purpose of the exercise is to leave inheritance to your kids, stick it in a PRSA and leave it until you die. You can pay in the equivalent monthly mortgage repayments instead of having to take on the obligations and cost of moving house. You will also get tax relief on your contributions and can access some/ all of the fund if you wish in the future. 

And yes, property and equities are linked except equities perform better over the long term. Don't know why I would invest in the 2nd best performing asset when the best one is also available. 

Also, you are not generating any return by investing in your own home. There's no rental income being generated. All you are doing is going without now so your kids (who will be adults nearing retirement with children of their own) can inherit more. 



Steven
www.bluewaterfp.ie


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## NoRegretsCoyote (8 May 2019)

If you have a solid income, and have €200k sitting in the bank, and you really, really like living in a big house, then it might be a good use of your wealth.

Any gain isn't of course taxed, and stamp duty and estate agents' fees are low in Ireland if you ever want to downsize.

That said, houses depreciate, and can decline in value too.


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## Sarenco (8 May 2019)

SBarrett said:


> If the purpose of the exercise is to leave inheritance to your kids, stick it in a PRSA and leave it until you die.


Not sure that works here -


clueless2019 said:


> Pension contributions use up all tax free allowances as a percentage of salary


Also, wouldn't you have deemed drawdowns from 75?


SBarrett said:


> And yes, property and equities are linked except equities perform better over the long term.


Actually, some academics dispute that claim -
https://qz.com/1170694/housing-was-the-worlds-best-investment-over-the-last-150-years/

But I agree that borrowing money to buy a bigger PPR than you either want or need is bonkers.


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## Gordon Gekko (8 May 2019)

SBarrett said:


> If the purpose of the exercise is to leave inheritance to your kids, stick it in a PRSA and leave it until you die. You can pay in the equivalent monthly mortgage repayments instead of having to take on the obligations and cost of moving house. You will also get tax relief on your contributions and can access some/ all of the fund if you wish in the future.
> 
> And yes, property and equities are linked except equities perform better over the long term. Don't know why I would invest in the 2nd best performing asset when the best one is also available.
> 
> ...



Has that ship not sailed?

i.e. it’s now deemed to become an ARF at age 75


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## clueless2019 (8 May 2019)

Thank you all. very good insights. 

i hope this thread will be useful for anyone else wondering if they should use money to invest in a bigger house instead of equities that are taxed. and based on that  from Sarenco, property has performed better. 

For me personally, i will reflect on how easy i will find it to downsize when i retire so i can pass on $$$$ to kids. And whether i would benefit from having a more expensive house, with depreciation, upkeep, etc.


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## Steven Barrett (8 May 2019)

Sarenco said:


> Not sure that works here -
> 
> Also, wouldn't you have deemed drawdowns from 75?





Gordon Gekko said:


> Has that ship not sailed?
> 
> i.e. it’s now deemed to become an ARF at age 75



Scrap my original post. My error


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## clueless2019 (8 May 2019)

quick question, i have checked about 10 different websites but its not stated anywhere so i need to ask:

You are permitted to take 25% of the value of your pension fund at retirement. (200k threshold). Anyone know what the retirement age for this purpose is??? As in, can i leave work at 50years old and say im 'retiring' and proceed to take 25% of my pension pot without paying tax.


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## RedOnion (8 May 2019)

clueless2019 said:


> As in, can i leave work at 50years old and say im 'retiring' and proceed to take 25% of my pension pot without paying tax.


Generally 55, unless retiring early on medical grounds. You just have to leave the employer that pension relates to.



clueless2019 said:


> i came to this site as opposed to a financial advisor, as i was looking for general advise, not which equities to invest in. and i am genuinely looking for advice,


You might find it more useful to complete a 'money makeover'. Go through you circumstances and your objectives, and you'll get a wider range of ideas. E.g. do you want to retire early, or pass wealth to children tax efficiently?
As it is, you've just asked s specific question about upsizing your PPR.


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## Gordon Gekko (8 May 2019)

RedOnion said:


> Generally 55, unless retiring early on medical grounds. You just have to leave the employer that pension relates to



No, it’s generally 50.

For the self-employed, they need to be 60 to access RACs/PRSAs.

And for owner/directors there are more complex rules (age 60 unless shares sold etc).


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## RedOnion (8 May 2019)

Thanks @Gordon Gekko 
I can retire 5 years earlier than I thought!


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## Gordon Gekko (8 May 2019)

Academic for most of us!

Although a point worth making is that if one leaves one’s job and has a decent size fund, it can often make sense to either leave it where it is or move it to a Buy-out-Bond rather than bringing it over into a new scheme.

That way you can access it at age 50 without having to leave the new job. Useful in an emergency or to clear down debt (e.g. €100k left on mortgage at 3% and €400k in a BOB at at 50 enabling easy access to 25%/€100k).


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## Investadvice (10 May 2019)

NoRegretsCoyote said:


> If you have a solid income, and have €200k sitting in the bank, and you really, really like living in a big house, then it might be a good use of your wealth.
> 
> Any gain isn't of course taxed, and stamp duty and estate agents' fees are low in Ireland if you ever want to downsize.
> 
> That said, houses depreciate, and can decline in value too.



This is a prescient thread for my personal circumstances - would be good to get opinions...

First off realise how lucky we are and in some ways feel silly for asking the question but need direction/validation.

Married couple in our late 30's with 2 kids aged both aged <6. No mortgage on home worth 1M, 1.5M in cash savings and pension funds worth 450K with contributions maxed each year. Currently saving an additional circa 150K a year.

We aren't interested in any risk in terms of using savings on equities investments, we do that through our pension funds. No interest in the hassle of buying and renting out properties, our work lives are too busy. At the same time we realise having a lump sum sitting in the bank is pointless as there is no growth and we aren't getting any utility out of it.

For that reason we are considering keeping 500K in cash, selling PPR and buying a bigger PPR for circa 2M.

Reasons to do so:
Use the money on something we can get utility and joy from
Have a store of wealth (granted it can depreciate) that can be passed on
We can downsize when kids grow up & use the surplus to fund retirement
We can downsize if times become hard & use surplus to cover life expenses
We would still have a significant cash cushion for life's unexpected events

Reasons not to:
We realise our jobs and current wealth generating ability wont last forever - could we afford the upkeep of a larger house if we made significantly less (i.e. one of us chose not to work or both of us decided to slow down on our careers/lost our jobs.
Are we setting unrealistic expectations for ourselves and our kids, we don't want them to have a gilded lifestyle
Are we setting ourselves up to a run rate of a high cost of living that we will forever be a slave to?

Would like to hear reasons not to do this and reasons to do this. We are relatively young and would like to learn from experiences of others.


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## Palerider (11 May 2019)

Congratulations to both of you, you are high earners and clearly have worked very hard to build your wealth and careers, the question is really good and I can see your incentive.

I have prize bonds languishing, I'm already in property investment and am also sitting on a lump of cash, I am in my 50's and retired and I am now asking myself if I should trade up to a nicer home, I'm happy with our current house, location etc but want to get value as you do from your cash reserves, as I was hammered in the crash I am avoiding equities and high risk.

Your thinking makes sense to me, it will be some time before the children need a pot of your money for marriage, their own home etc so you have plenty of time for your careers to generate more cash.

I'm with you on your thinking, makes sense to me .....go for it.


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## NoRegretsCoyote (11 May 2019)

@Investadvice 

€1m buys an extremely nice house for a family of four absolutely anywhere in Ireland.

€2m would buy you a nicer house of course. But at that point it's just positional and I doubt it would give you 2x utility. LPT on a €2m house is also €300 a month.

Obviously you have money burning a hole in your pocket. But prices are very volatile at the top end and it can be very tricky to sell when the market takes a turn.


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## Gordon Gekko (11 May 2019)

Based on what I am seeing, there is major value to be had in that €1m plus space due to Brexit amongst other things.


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## Blinder (11 May 2019)

clueless2019 said:


> T
> i think equities and land purchase are quite linked so i dont think there is a need to diversity. plus with equities i have to pay tax on dividends and increase in value.



2 things:
If you think equities and land purchase are equal I suggest you take some of the 1.5M in the bank and pay a wealth management advisor, who can gather all the information available and make informed recommendations.
Buying land and buying equalities are 2 completely different investment types.

As for not investing in equalities as you have to pay tax on profits?? That's like turning around and saying, no I don't want a 100K salary increase because I'd have to pay an extra 50K in taxes!


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## mtk (11 May 2019)

Gordon Gekko said:


> Based on what I am seeing, there is major value to be had in that €1m plus space due to Brexit amongst other things.



Hi Gordon ,Can you explain that  bit more please? 
mtk


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## Gordon Gekko (11 May 2019)

mtk said:


> Hi Gordon ,Can you explain that  bit more please?
> mtk



It is tricky to sell the more expensive houses these days (i.e. €1m plus). The lending rules are still a handbrake. But significantly, a lot of transactions run into trouble because the buyer can’t sell his or her home in London and the banks don’t really do bridging anymore. It is underreported how bad the market is in the UK.


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## RedOnion (12 May 2019)

Gordon Gekko said:


> Based on what I am seeing, there is major value to be had in that €1m plus


I'd completely agree.
There's a lot better value in the 1m+ range than at any point up to 800k (in Dublin).
As well as people not being able to sell London property, the banks are still wary at this level, and the CBI rules are making things complex. I've seen cases of people coming to Ireland to take up C level roles on 300k plus, not being able to get a mortgage.


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## Investadvice (12 May 2019)

RedOnion said:


> I'd completely agree.
> There's a lot better value in the 1m+ range than at any point up to 800k (in Dublin).
> As well as people not being able to sell London property, the banks are still wary at this level, and the CBI rules are making things complex. I've seen cases of people coming to Ireland to take up C level roles on 300k plus, not being able to get a mortgage.



This is one of the reasons for my thinking, I have seen houses in my area of Dublin in the 2M+ range fall by 15%+ in the last 2 years. 

Seems this price range is back to 2013 prices.


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## galway_blow_in (12 May 2019)

clueless2019 said:


> This might be a bit insensitive due to housing crisis, and people generally struggling,
> 
> But I wonder if its a good investment to move house and buy something more expensive. The circumstances:
> 
> ...





Investadvice said:


> This is one of the reasons for my thinking, I have seen houses in my area of Dublin in the 2M+ range fall by 15%+ in the last 2 years.
> 
> Seems this price range is back to 2013 prices.



"2013 levels"

Surely not?


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## Investadvice (12 May 2019)

galway_blow_in said:


> "2013 levels"
> 
> Surely not?



I don't understand the question in reference to the two quotations? 

My 2013 statement was an opinion, I don't have quantative evidence.


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## galway_blow_in (12 May 2019)

Investadvice said:


> I don't understand the question in reference to the two quotations?
> 
> My 2013 statement was an opinion, I don't have quantative evidence.



Well I highly doubt any segment of the market is back at 2013 levels, they might be down 15% but that would only bring us back to at most 2016 prices


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## Colm Fagan (12 May 2019)

Investadvice said:


> First off realise how lucky we are and in some ways feel silly for asking the question but need direction/validation.





Investadvice said:


> We aren't interested in any risk in terms of using savings on equities investments





Investadvice said:


> At the same time we realise having a lump sum sitting in the bank is pointless as there is no growth and we aren't getting any utility out of it.


First of all, I like your attitude.  I'm sure you're also generous, given that you realise you lucky you are.

I don't object to your idea of trading up to a more expensive house that you might get more "utility and joy" from, but don't dismiss equities so quickly.  (Anyway, given your assets and joint income, it doesn't have to be an either/or).  

Don't think of equities as faceless financial assets that fluctuate wildly in value and cause sleepless nights.  Think instead of investing directly in a small number of good quality companies, ideally ones you know already and admire for their values.  They might be in sectors you're familiar with from your work.  Hold them for the long-term, and don't worry too much about short-term price movements, provided that the fundamentals of the businesses remain sound.  Read the chairman's and chief executive's reports every year (not a major overhead to read about four or five pages once a year).  Over time, you will get to know the businesses and their people better.  This will enable you to top up your investments in the better companies from time to time when their values are depressed, so that you're actually happy rather than sad when their prices fall.  Speaking personally, it makes life that bit more interesting.  It can also be profitable.


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## NoRegretsCoyote (12 May 2019)

You don't get taxed on the imputed income you get from letting your PPR to yourself.

You don't get taxed on any capital gains on your PPR, should you make any.

The tax treatment of equities is pretty severe by comparison.


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## Investadvice (12 May 2019)

NoRegretsCoyote said:


> You don't get taxed on the imputed income you get from letting your PPR to yourself.
> 
> You don't get taxed on any capital gains on your PPR, should you make any.
> 
> The tax treatment of equities is pretty severe by comparison.



Indeed, this is why I am willing to have equity exposure, but only in a pension wrapper. The tax system in Ireland is not kind to equity investments. 

Thank s for everyone's opinions do far, had not thought about property tax increases. 

All in all though I don't feel like the strategy I laid out is financially inept.


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## Colm Fagan (12 May 2019)

I didn't say NOT to go for the bigger house.  With their incomes/ assets, they can do that AND buy some equities.  Yes, of course they've to pay tax on the income/gains on the equities.  So what?  It means they can make an even bigger contribution to society than what they're making already.  If they get an average gross return of 10% a year, which ends up at (say) 6% after tax (assuming less than 40% tax on gains, more than 40% on marginal investment income), why wouldn't they be happy?   In net terms, they'll be earning a heck of a lot more than they'd get from leaving it in the bank.    Also, you can't spend imputed rent.  You can spend actual dividends and capital gains, even if they've been taxed.


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## NoRegretsCoyote (12 May 2019)

I think the point is that they don't want to spend it, they want to live in a bigger house.


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## joe sod (12 May 2019)

please delete, mistake


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## Investadvice (12 May 2019)

Colm Fagan said:


> I didn't say NOT to go for the bigger house.  With their incomes/ assets, they can do that AND buy some equities.  Yes, of course they've to pay tax on the income/gains on the equities.  So what?  It means they can make an even bigger contribution to society than what they're making already.  If they get an average gross return of 10% a year, which ends up at (say) 6% after tax (assuming less than 40% tax on gains, more than 40% on marginal investment income), why wouldn't they be happy?   In net terms, they'll be earning a heck of a lot more than they'd get from leaving it in the bank.    Also, you can't spend imputed rent.  You can spend actual dividends and capital gains, even if they've been taxed.



Reason is risk appetite, it's fierce low!


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## Steven Barrett (13 May 2019)

Investadvice said:


> Reason is risk appetite, it's fierce low!



Is tying it up in one, non incoming producing, illiquid asset not risky too? If you ever need to access some of the value of the investment, you have to move house! And you are looking to take advantage of the slow market for €2m properties. Who's to say that it will not be the same if you need to sell yourself? 

You have an extremely high risk capacity at present; that is, if you invest in assets, you can afford them to go up and down in value without it having an impact on your life. Remember, property values fluctuate too but are a lot more illiquid and expensive to sell than equities. As Colm said, if you pick quality, it will do well in the long run. 

If you have accumulated that amount of cash at a young age, you are obviously working in demanding roles. It's unlikely you'll be getting a golden watch for 40 years service. You need cashflow, access to funds so you can move to a less demanding role (and the lower pay, no share option) but still maintain your lifestyle. You can't sell off a room in a bigger house to do this. Be careful of taking €1m out of cashflow and putting it in an asset that doesn't produce a regular income for you. 


Steven
www.bluewaterfp.ie


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## Investadvice (13 May 2019)

SBarrett said:


> Is tying it up in one, non incoming producing, illiquid asset not risky too? If you ever need to access some of the value of the investment, you have to move house! And you are looking to take advantage of the slow market for €2m properties. Who's to say that it will not be the same if you need to sell yourself?
> 
> You have an extremely high risk capacity at present; that is, if you invest in assets, you can afford them to go up and down in value without it having an impact on your life. Remember, property values fluctuate too but are a lot more illiquid and expensive to sell than equities. As Colm said, if you pick quality, it will do well in the long run.
> 
> ...



Appreciate you taking the time to answer.

You are absolutely correct on the jobs, we don't see this level of earnings continuing in the long term. Maybe it will but best to plan for it not continuing.

I agree that tying up chunk of money in a house restricts liquidity hence my point on keeping a significant amount in cash savings. Your scenario does not provide a value on the utility derived from the property asset. The utility derived from equities = 0 until one realizes the benefit in a sale or dividend payment. Then what - invest the benefit back into equities, rinse and repeat - for what purpose?

You could also argue the utility from a larger house is high and also spread across generations of a family.

What would a wealth portfolio need to look like before you would advise a client to purchase a property in the price range I provided. Does it need to be 2X hospital consultants on 600k a year with DB pensions and a good passive income?

Who said the public service doesn't pay well! 

No offence to any consultants out there, I know many of you work damn hard!


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## EmmDee (13 May 2019)

Investadvice said:


> Appreciate you taking the time to answer.
> 
> You are absolutely correct on the jobs, we don't see this level of earnings continuing in the long term. Maybe it will but best to plan for it not continuing.
> 
> ...



An interesting perspective is outlined in a book called "Rich Dad, Poor Dad" - it's a little folksy but it is essentially a "cash flow" view on investing and assets / liabilities. I wouldn't take just on its own but there is merit in it. Cash flow rather than profitability kills businesses and there is an application on a personal level. It questions utility of an "asset" that costs you cash flow every month rather than generates it. While not strictly true in that an asset can be non-cash generative but increase in value, there is a certain trap that people have fallen into where they have a long term cash flow commitment, a falling asset value and a reduced cash inflow (income). That's the thing to be cautious about. I have always measured how many months liquidity I have were I to lose my income - assuming no change in outgoings (or forced liquidation of house). Personally I like to have 24 months liquidity... that's just me.

On the utility thing - yeah maybe you get significantly additional utility from a different house. I'm not sure I would get the same increase. But again, utility is a subjective thing. But it isn't cost free utility. There will be additional monthly cost (property tax, gas, electricity, maintenance etc) - so you pay every month for that. That cost reduces the liquidity reserve you have.


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## mtk (13 May 2019)

Investadvice said:


> Appreciate you taking the time to answer.
> You could also argue the utility from a larger house is high and also spread across generations of a family.


Just be aware of the money-pit / high maintence costs ( even for someone with your high incomes) some trophy period houses can demand  e.g repairings roofs, "special" windows, old heating systems, electrics, protected structure restrictions/implications, maintaining gardens & maintaining fences  , boundary walls ,security gates etc.


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## Investadvice (13 May 2019)

mtk said:


> Just be aware of the money-pit / high maintence costs ( even for someone with your high incomes) some trophy period houses can demand  e.g repairings roofs, "special" windows, old heating systems, electrics, protected structure restrictions/implications, maintaining gardens & maintaining fences  , boundary walls ,security gates etc.



This is the one I am finding hard as I don't have experience in owning a 100+ year old house.

I reckon gas/elec, property tax and insurance will cost an extra 6K net a year in running costs. 

I am hoping a good survey would uncover the underlying issues, am I being a bit optimistic?


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## Steven Barrett (13 May 2019)

Investadvice said:


> Appreciate you taking the time to answer.
> 
> You are absolutely correct on the jobs, we don't see this level of earnings continuing in the long term. Maybe it will but best to plan for it not continuing.
> 
> ...



While keeping a fair amount in cash, you are tying most of it up in your house. Equities will produce a return through dividends as well as capital appreciation. The purpose is to fund your future lifestyle when you have stepped back from your current roles. Achieving financial independence so you can do what you want without worrying about running out of money.

There is no one size fits all for who can afford a €2m home. A lot depends on the cost of lifestyle and outgoings. Then there is the keeping up with the Joneses effect that may take hold with living in a €2m a house neighbourhood. Even if you can stay frugal, the rest of your family may not. It can have a generational impact, especially if your kids aren't as financially successful as you.


*The public service doesn't pay consultants €600,000 a year, a combination of public and demanding private practice will pay that. And they all work extremely hard for their money and have to deal with the bureaucracy of the HSE on a daily basis. 




Steven
www.bluewaterfp.ie


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## Investadvice (13 May 2019)

Just to correct my wording, I was talking about 2 consultants, each on 300k


*The public service doesn't pay consultants €600,000 a year, a combination of public and demanding private practice will pay that. And they all work extremely hard for their money and have to deal with the bureaucracy of the HSE on a daily basis.


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## Gordon Gekko (13 May 2019)

I think that there’s an optimum mix for people like you who are comfortable but not wealthy. Some people might be surprised to hear me describe you as comfortable rather than wealthy, but that’s the reality in my view. 

There would be far greater merit in having, say, a €1m house plus a €1m diversified portfolio rather than a €2m house. The opportunity to invest in equities over the long-term is an opportunity to create intergenerational wealth.


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## Sarenco (13 May 2019)

Gordon Gekko said:


> Some people might be surprised to hear me describe you as comfortable rather than wealthy, but that’s the reality in my view.


A couple in their 30s with a net worth of almost €3m isn't wealthy?!  Crikey!

If I was in such a "humble" position, I wouldn't buy a trophy period house.   But each to their own.

The OP can certainly afford to buy a €2m PPR.  If he thinks that would add value to his family's lifestyle, well, fire ahead.

It's really a lifestyle choice, nothing more.


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## Gordon Gekko (14 May 2019)

Sarenco said:


> A couple in their 30s with a net worth of almost €3m isn't wealthy?!  Crikey!
> 
> If I was in such a "humble" position, I wouldn't buy a trophy period house.   But each to their own.
> 
> ...



It’s a strong position, but real wealth is intergenerational. Someone can do well but if their wealth is divided between children who have average jobs, it can dissipate pretty quickly.

The main mistake people make is assessing someone’s financial position in terms of capital rather than income. Is the spinster with the small fixed income rattling around the €3m house “wealthy”? I’m not so sure. I’m a strong believer that one should be spending the income from the capital rather than the capital itself. And to my mind, “wealthy” constitutes €5m or more in return-generating assets ex one’s home.


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## NoRegretsCoyote (14 May 2019)

Gordon Gekko said:


> I think that there’s an optimum mix for people like you who are comfortable but not wealthy. Some people might be surprised to hear me describe you as comfortable rather than wealthy, but that’s the reality in my view.



If millions in relatively liquid assets in your late 30s is not wealth, then I am not sure what is.


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## Investadvice (14 May 2019)

Thanks for all of the different points of view, lots to think about.


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## Steven Barrett (14 May 2019)

Gordon Gekko said:


> It’s a strong position, but real wealth is intergenerational. Someone can do well but if their wealth is divided between children who have average jobs, it can dissipate pretty quickly.
> 
> *The main mistake people make is assessing someone’s financial position in terms of capital rather than income*. Is the spinster with the small fixed income rattling around the €3m house “wealthy”? I’m not so sure. I’m a strong believer that one should be spending the income from the capital rather than the capital itself. And to my mind, “wealthy” constitutes €5m or more in return-generating assets ex one’s home.



I see the point you are making but don't agree with it. Where is a spinster on a low income going to get the money for a €3m house? Even if inherited, the tax bill would be unaffordable. 

Lots of people are income statement wealthy but not balance sheet wealthy. Going back to our consultants, they may earn a lot of money but they spend it too, big house, big car, expensive clothes etc. They have certainty in their occupation and can fund everything through their income. But what happens when they want to retire? Either a large drop in income and a lifestyle they aren't used to or they carry on working to fund their lifestyle.

Pat Kenny is a prime example of this. He said in 2013 that he couldn't afford to retire despite earning €950,000 a year at one stage. 

Steven
www.bluewaterfp.ie


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## Sarenco (14 May 2019)

Gordon Gekko said:


> Is the spinster with the small fixed income rattling around the €3m house “wealthy”?


I certainly think so.  She could always trade down to a less expensive property and live the life of Riley on the freed up capital.


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## Investadvice (14 May 2019)

SBarrett said:


> I see the point you are making but don't agree with it. Where is a spinster on a low income going to get the money for a €3m house? Even if inherited, the tax bill would be unaffordable.
> 
> Lots of people are income statement wealthy but not balance sheet wealthy. Going back to our consultants, they may earn a lot of money but they spend it too, big house, big car, expensive clothes etc. They have certainty in their occupation and can fund everything through their income. But what happens when they want to retire? Either a large drop in income and a lifestyle they aren't used to or they carry on working to fund their lifestyle.
> 
> ...



Pay Kenny made terrible investment decisions which were pretty public. Property, bank shares etc

Consultants have DB pensions, circa 100k a year. You would want to have a ridiculous level of lifestyle spending to be hard up in retirement on that kind of money.

In my own case we try and keep our monthly spending at the level of a couple earning 100k gross a year. Not exactly frugal but we know we could easily reduce further if needed.


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## EmmDee (14 May 2019)

Investadvice said:


> This is the one I am finding hard as I don't have experience in owning a 100+ year old house.
> 
> I reckon gas/elec, property tax and insurance will cost an extra 6K net a year in running costs.
> 
> I am hoping a good survey would uncover the underlying issues, am I being a bit optimistic?



My parents have a 150 year old house. Probably a bit like something you might look at. A survey will highlight issues but the fact is that an old house will need on-going maintenance... some predictable and some not.

For example - it'll need to be painted regularly. Say every 10 years. That'll be 20k / 25k at least. If the roof tiles haven't been changed in the last 20 years - it will be needed at some point. An older house like my parents, if anything goes wrong with the roof requires full scale scaffolding to just get on the roof. So it's 1,000's to fix even a single tile. Even the garden is not manageable realistically - so that needs weekly / fortnightly help (not including the cost of doing it up in the first place). You probably need to think about setting aside 10k / 15k a year for upkeep.

Then, if you think about fitting it out suitably - you don't fit out an old house from Ikea. You're buying furniture from antique shops and drapery from designer / high end suppliers. The dining table for my parents house took about 5 years and 20k / 30k to sort out. They had to clean up and re-do moulding throughout the downstairs - that was three weeks with a team of specialists.

Put it this way - I can't see any of us stepping up to take the house after they are gone.


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## Investadvice (14 May 2019)

EmmDee said:


> My parents have a 150 year old house. Probably a bit like something you might look at. A survey will highlight issues but the fact is that an old house will need on-going maintenance... some predictable and some not.
> 
> For example - it'll need to be painted regularly. Say every 10 years. That'll be 20k / 25k at least. If the roof tiles haven't been changed in the last 20 years - it will be needed at some point. An older house like my parents, if anything goes wrong with the roof requires full scale scaffolding to just get on the roof. So it's 1,000's to fix even a single tile. Even the garden is not manageable realistically - so that needs weekly / fortnightly help (not including the cost of doing it up in the first place). You probably need to think about setting aside 10k / 15k a year for upkeep.
> 
> ...



Good points, thank you.


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## NoRegretsCoyote (14 May 2019)

SBarrett said:


> Pat Kenny is a prime example of this. He said in 2013 that he couldn't afford to retire despite earning €950,000 a year at one stage.



This was a completely absurd claim and I don't know who on earth would believe it.

Pat Kenny is 71, and having seen him up close, looks about ten years younger. He basically loves his job and doesn't want to retire. 

The 'I can't afford to retire' line is just a ruse to deflect attention from the fact that he just really likes his job.


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## Gordon Gekko (14 May 2019)

Never be surprised by the spending habits of the professional classes. There are people who spend €300k a year net and you’d struggle to see where it goes.

Someone like that often “cannot afford to retire”.


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## clueless2019 (14 May 2019)

EmmDee said:


> My parents have a 150 year old house. Probably a bit like something you might look at. A survey will highlight issues but the fact is that an old house will need on-going maintenance... some predictable and some not.
> 
> For example - it'll need to be painted regularly. Say every 10 years. That'll be 20k / 25k at least. If the roof tiles haven't been changed in the last 20 years - it will be needed at some point. An older house like my parents, if anything goes wrong with the roof requires full scale scaffolding to just get on the roof. So it's 1,000's to fix even a single tile. Even the garden is not manageable realistically - so that needs weekly / fortnightly help (not including the cost of doing it up in the first place). You probably need to think about setting aside 10k / 15k a year for upkeep.
> 
> ...



Thanks for that input. i expect moving from a 300k house to a 500k house will cost me an extra 2k a year in outgoings (incl property tax). so i am down 1% a year automatically.

ill keep an eye on the budget and see if there are any tax avoidance measures apart from pensions for investing.


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## clueless2019 (14 May 2019)

Colm Fagan said:


> Don't think of equities as faceless financial assets that fluctuate wildly in value and cause sleepless nights.  Think instead of investing directly in a small number of good quality companies, ideally ones you know already and admire for their values.  They might be in sectors you're familiar with from your work.  Hold them for the long-term, and don't worry too much about short-term price movements, provided that the fundamentals of the businesses remain sound.  Read the chairman's and chief executive's reports every year (not a major overhead to read about four or five pages once a year).  Over time, you will get to know the businesses and their people better.  This will enable you to top up your investments in the better companies from time to time when their values are depressed, so that you're actually happy rather than sad when their prices fall.  Speaking personally, it makes life that bit more interesting.  It can also be profitable.



In theory equities are far better than Principle private residence for investing. i agree, they are better for the common good. sharing your money with companies that need it to provide goods/services. However there is the issue of dividends tax and CGT which dont apply to principle private residence.


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## Gordon Gekko (14 May 2019)

Except one’s PPR doesn’t produce any income ordinarily, and there’s no CGT on an asset (such as a US domiciled MSCI World ETF) on death.


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## RedOnion (14 May 2019)

Gordon Gekko said:


> and there’s no CGT on an asset


People forget about this with estate planning. Or that there is an offset of CGT against CAT if they gift to their children in their lifetime.


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## lledlledlled (14 May 2019)

EmmDee said:


> My parents have a 150 year old house. Probably a bit like something you might look at. A survey will highlight issues but the fact is that an old house will need on-going maintenance... some predictable and some not.
> 
> For example - it'll need to be painted regularly. Say every 10 years. That'll be 20k / 25k at least. If the roof tiles haven't been changed in the last 20 years - it will be needed at some point. An older house like my parents, if anything goes wrong with the roof requires full scale scaffolding to just get on the roof. So it's 1,000's to fix even a single tile. Even the garden is not manageable realistically - so that needs weekly / fortnightly help (not including the cost of doing it up in the first place). You probably need to think about setting aside 10k / 15k a year for upkeep.
> 
> ...



This post alone should be a sticky to warn anyone against buying an old expensive house!
15k per year for the garden?! This post will be deleted if not edited immediately wept.


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## mtk (14 May 2019)

EmmDee said:


> My parents have a 150 year old house. Probably a bit like something you might look at. A survey will highlight issues but the fact is that an old house will need on-going maintenance... some predictable and some not.
> 
> For example - it'll need to be painted regularly. Say every 10 years. That'll be 20k / 25k at least. If the roof tiles haven't been changed in the last 20 years - it will be needed at some point. An older house like my parents, if anything goes wrong with the roof requires full scale scaffolding to just get on the roof. So it's 1,000's to fix even a single tile. Even the garden is not manageable realistically - so that needs weekly / fortnightly help (not including the cost of doing it up in the first place). You probably need to think about setting aside 10k / 15k a year for upkeep.
> 
> ...


My brother got caught with that scaffolding problem too health and safety etc


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## joe sod (14 May 2019)

Investadvice said:


> Pay Kenny made terrible investment decisions which were pretty public. Property, bank shares etc



but pat kenny is a smart man, an engineer by training but he still made bad investment decisions like lots of other people at the time. Smart professional people like yourself can still make bad investment decisions. The bad investment decision wasn't the bank shares per se but it was putting all his eggs in the one basket, just like you want to do now by ploughing all your money into an expensive house. It was only in hindsight that the bank shares became a bad investment, it wasnt obvious in the early 2000s.


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## clueless2019 (15 May 2019)

Thanks again. So to sum up to invest in a more expensive principle private residence::

Reasons  for

1. Arguably there is less tax (PPR tax exemption)
2. Historical data- there is some evidence that historically property has beaten equities. Land is limited and is likely to match inflation

Reason against

1. Lacks the diversification that can be achieved with equities - eggs in one basket. thanks Joe sod.
2. Potentially high maintenance costs and property tax - Thanks Emm Dee for your post above
3. Delay in liquidising the asset.


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## EmmDee (15 May 2019)

clueless2019 said:


> 2. Potentially high maintenance costs and property tax - Thanks Emm Dee for your post above



Well - HIGHER costs. All property requires on-going maintenance (second law of thermodynamics and all that). You just need to factor it in. An older house does have a lot more character and you need to choose whether you get enough enjoyment from it (you forgot to add "utility" to your "reasons for").

It's not a completely rationale decision - if we all made purely rational decisions we would all be driving Micra's (or whatever)


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## presidenttttt (13 May 2021)

The proposition could probably be separated into upsizing into a more expensive home, and upsizing into an older room likely to need work. The running cost numbers are likely to be vastly difference between a £2M modern home, and a £2M old property with an overgrown garden and roof which has seen its best days pass. 

Large older homes can easily become money pits with some unsurprising numbers quoted already, and I am not sure their price typically reflects the risk, compared to the modern alternative in the same location. I suspect there are few cases where the older option represents a solid investment unless an extremely detailed inspection is done to unearth all possible problems? Personally, while I might aspire to a larger residence, I wouldn't touch such an older home if there was any risk of it becoming "an ongoing project" and the associated uncertainty. 

Has anyone been through this thought process in terms of upsizing as an investment into a "low maintenance" property?


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## Jazz01 (13 May 2021)

presidenttttt said:


> Has anyone been through this thought process in terms of upsizing as an investment into a "low maintenance" property?


I've moved from a modest house to a much larger (new build) home - with rooms that are not utilised, so to speak. Although the prime reason was for my young kids "social life", better comfort within the home, less work commute and more of a community around - I was thinking that it would be an ideal investment in (many) years down the road when I would downsize. Mortgage is planned to be paid on this new place in a relatively short number of years, so hoping that once the kids move out (I KNOW - might never happen  ) and this current place becomes too big for the two of us, a sale & purchase of something smaller, should help bolster the finances.


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