# 2nd property or trade-up?



## BritLad (2 Nov 2006)

I'm keen to invest in property.  I'm reading lots about buying buy-to-let in Ireland or overseas, but I don't see much discussion about just putting the money to invest into our own home, trading up, and not exposing myself to Capital Gains Tax.

Any thoughts?


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## conor_mc (6 Nov 2006)

You want to own a bigger/better house - whats that got to do with property investment?


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## DoctorEvil (6 Nov 2006)

Are you talking in the Sarah Beeny - "Property Ladder" sense?


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## BritLad (8 Nov 2006)

conor_mc said:


> You want to own a bigger/better house - whats that got to do with property investment?


 
I am considering buy-to-let or trading-up for investment purposes, not simply for the desire of a larger house.  That's why I asked for advice, do you have anything useful to say or not?


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## BritLad (8 Nov 2006)

DoctorEvil said:


> Are you talking in the Sarah Beeny - "Property Ladder" sense?


 
Well I haven't watched that series.  But I'm talking about leveraging equity in current PPR, and salaries, and trading-up during any slowdown in the market.

I'm intersted to find out whether that's considered a good route to take, avoiding CGT, or investing in a 2nd proprty here or overseas.


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## Sarsfield (8 Nov 2006)

What you're describing sounds like just trading up rather than investing in property. Unless you consider your PPR to be an investment. In which case, how do you plan on realising the gain on your investment? Trading down at some point in the future?

Or by trading up, do you mean buying a bigger home, holding on to your current one and letting it?


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## BritLad (8 Nov 2006)

Sarsfield said:


> What you're describing sounds like just trading up rather than investing in property. Unless you consider your PPR to be an investment. In which case, how do you plan on realising the gain on your investment? Trading down at some point in the future?
> 
> Or by trading up, do you mean buying a bigger home, holding on to your current one and letting it?


 
I'm looking to invest in property. My target is to have a certain amount of passive income from 2015. If I invest in my PPR now, then I am expecting to release that equity around 2015 (by trading down) to put into some form of income generating investment, perhaps buy-to-let properties.

The question is, would I be in a better position by trading up and avoiding CGT along the way, or invest in buy-to-let properties now.  This thread has turned iinto the spanish inquisition, with nobody offering any viewpoint, and mostly just sarcasm.  And having discovered this forum last week I thought it might be useful.


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## liteweight (8 Nov 2006)

I'm not sure what you expect people to say. You don't give any details of your financial position so it's hard to make a judgement. For example would you be raising the money on your PPR to buy here or abroad? Do you have a family and if so would a bigger PPR be best in the short term? All anyone can say is that you won't pay CGT on the sale of a PPR at the moment, who knows about 2015? You could sell your PPR and buy a smaller place, pocket/invest the profit. No one can say with any surety where the property market is going at the moment. A buy to let with about 5% yield which you can afford if you allow 2% increase in interest rates, is a good bet but there aren't too many of those around anymore.

In fairness to the other posters here, asking if trading up i.e. investing money in your PPR is not really a property investment question. There are too many personal variables involved in the answer.


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## makindye (8 Nov 2006)

BritLad said:


> I'm keen to invest in property. I'm reading lots about buying buy-to-let in Ireland or overseas, but I don't see much discussion about just putting the money to invest into our own home, trading up, and not exposing myself to Capital Gains Tax.
> 
> Any thoughts?


 
Hi BritLad. I think its nearly always a good idea to invest in your own home.  However if your home is in ireland you are taking a serious risk with your money. Values are already falling and supply is rising - the herd has arrived at the cliff and the guys at the back - the banks and vested interests are still pushing - they will claim they didnt know the cliff was there - but it is.


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## sport (9 Nov 2006)

Britlad - as I understand you, the options that you are considering are as follows:

1.  Trade up your PPR now, trade it down in 2015 and invest in some "income generation investment perhaps buy-to-let properties".

2.  Buy a buy-to-let now instead.

My comments are on option 1 versus option 2, they are not a recommendation over any other options (including investing elsewhere)!!  Remember the property market will invariably affect all property prices regardless if they are buy-to-let or PPRs!!  

Option 1:  You will probably pay stamp duty on trading up.  In any event I see a PPR as a liability as it takes money from your bank account, and you must pay all of that money yourself.  If you trade down in 2015 you will possibly pay stamp duty again on your new PPR.  You will also pay solicitors fees and auctioneers fees.  You may not want to trade down in 2015.

Option 2:  If you buy now, why would you sell in 2015 if option 1 entails buying a buy-to-let in 2015 anyway.  I make this point because if this is what you are going to do then CGT is not a factor - simply buy now and dont sell.  If you do this you will also get some rental return until (and after) 2015 which you will not get with option 1.


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## ClubMan (9 Nov 2006)

sport said:


> In any event I see a PPR as a liability as it takes money from your bank account


This makes no sense. Most people own more than 0% of their _PPR _even on day one (closing/getting the keys) so at least that part is an asset. And the money going out of their bank account is going to buy further equity in the property.


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## sport (9 Nov 2006)

Clubman,

Dare I try to convince you?  No, but let me explain myself anyway.

I did say "*I see* a PPR as a liability".  I accept that that is not the view of most.  The reason I view it this way is that, until you own your PPR outright it is costing you money (in interest or paying the principal sum).
I view an asset as "something that generates net income" but I wont even try to go any further.  Its just my humble way of seeing things.
Ta


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## liteweight (9 Nov 2006)

sport said:


> Clubman,
> 
> Dare I try to convince you?  No, but let me explain myself anyway.
> 
> ...



Read Rich Dad Poor Dad, did we?


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## ClubMan (9 Nov 2006)

sport said:


> Clubman,
> 
> Dare I try to convince you?  No, but let me explain myself anyway.
> 
> ...


If you see a _PPR _as a liability then surely it is incumbent on the owner occupier to turn that liability into an asset as a matter of urgency by clearing the mortgage ASAP?


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## sport (9 Nov 2006)

ClubMan said:


> If you see a _PPR _as a liability then surely it is incumbent on the owner occupier to turn that liability into an asset as a matter of urgency by clearing the mortgage ASAP?


 
PPRs, in general, will never generate income themselves, therefore, in my interpretation, they will never become (what I consider to be) a true asset in this sense.  I accept that having equity is desirable and is very useful but it does not independently generate income itself.  Paying off a mortgage on a PPR asap is also desirable but this should be weighted up against other options such as investments which may, some day, become income generating assets.


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## macbri (9 Nov 2006)

Sport,your missing a fundamental point-if u have a ppr then you are not paying rental income on a property which will be cash flow positive if u haven't a mortgage
If your mortgage (interest only) is costing u more than rental on same property then its' cash flow negative until rental costs equate to mortgage.

I'm not saying buying a ppr is preferable to renting,like anything it comes down to costs on both sides.


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## BritLad (9 Nov 2006)

sport said:


> Britlad - as I understand you, the options that you are considering are as follows:
> 
> 1. Trade up your PPR now, trade it down in 2015 and invest in some "income generation investment perhaps buy-to-let properties".
> 
> ...


 
Thank you - a very helpful reply.  To add to my situation, I have moved here from UK, sold up in UK and am living in house for whom the mortgage is covered by wife's income.  So I have two things to address now:

1.  I have about €100 released from UK house to invest somewhere
2. When I get a job, shouldn't I leverage the ability to get a higher mortgage and trade-up - getting access to a more valuable PPR, which even if I have only a 20% equity - that 20% will most probably grow over the next 10 years.

All thoughts welcome


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## sport (10 Nov 2006)

Liteweight - Yes I did read rich Dad Poor dad and I must admit this part of his reasoning makes sense to me (whatever about other stories in the book).

Macbri - I'm afraid I don’t understand your point. Perhaps a little more punctuation or a re-phrasal would help. I'm all ears to any discussion on the matter. I think you jumped to the conclusion that I am not advocating buying a PPR at all - if so, this is certainly not the case. Please read my posts again.

Britlad - you should probably provide more detail when asking a question e.g. how much equity already exists in the house you are now living in- how much debt is the remaining mortgage? etc

My thoughts on PPRs are this - if you are happy where you are, why trade up? If your answer is to invest then I refer back to my first post on this thread.
You have 100k to invest - there is no reason you have to put this into 1 single avenue. You could use some of it (as little as is necessary) to get a mortgage for a buy-to-let investment property. You could then put the rest towards your PPR mortgage. This scenario will mean that your borrowings are on a buy-to-let mortgage as much as possible whereby you can avail of tax relief, and your PPR mortgage is reduced (which should be priority over any investment mortgage)

I wish to stress that I am not advocating property investment. Im merely trying to assist with the possible options you asked about.


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## liteweight (10 Nov 2006)

A PPR might not be seen as an asset in your interpretation Sport and I understand where you're coming from. However, to all intents and purposes, it can be 'used' as an asset if the need should arise e.g. leverage for whatever reason. As Macabri says, if you don't live in a PPR then you pay rent. The difference between renting and paying off a mortgage is that equity is rising with each mortgage payment, whereas rent is paid to a landlord. There have been other arguments/debates on AAM about the pros and cons of this. Personally I think to own the property is best as if hard times hit one can at least rent a room out. Failing that one can sell and hopefully make enough profit to start again. Anyway I think Macabri's point is that while rent might even be slightly lower, there's nothing at the end of it.

Many people believe that investing money into one's PPR significantly raises it's value. This can't be relied upon although it may help secure a sale.


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## sport (10 Nov 2006)

Liteweight,
As my previous post states, I NEVER said or intimated that one should not buy a PPR - I totally agree that everyone should have a PPR.  My comments are simply my thoughts on the queries that were posted i.e.  using 100k to trade up a PPR, but with the intention of trading down in about 9 years (to invest in buy-to-let) *or* buying a buy-to-let now.  I simply think that the latter option is better than the first


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## DonKing (11 Nov 2006)

sport said:


> Liteweight,
> As my previous post states, I NEVER said or intimated that one should not buy a PPR - I totally agree that everyone should have a PPR.  My comments are simply my thoughts on the queries that were posted i.e.  using 100k to trade up a PPR, but with the intention of trading down in about 9 years (to invest in buy-to-let) *or* buying a buy-to-let now.  I simply think that the latter option is better than the first



I agree, better to use the 100k to purchase an income generating asset(property or shares) rather than trading up on your PPR which generates no income. (Unless of course you need the extra space).


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## liteweight (11 Nov 2006)

sport said:


> Liteweight,
> As my previous post states, I NEVER said or intimated that one should not buy a PPR - I totally agree that everyone should have a PPR.  My comments are simply my thoughts on the queries that were posted i.e.  using 100k to trade up a PPR, but with the intention of trading down in about 9 years (to invest in buy-to-let) *or* buying a buy-to-let now.  I simply think that the latter option is better than the first



Yes given the two options I agree.


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