# Sell house or keep as future income?



## Fat Tony (7 Aug 2019)

Age: 42
Spouse’s/Partner's age: same

Annual gross income from employment or profession: 58000 (+10% for health/pension)
Annual gross income of spouse: 0 (now full time at home with kids so no childcare costs)

Monthly take-home pay ~3200

Type of employment: e.g. PAYE

In general are you:
(a) spending more than you earn, or
(b) saving? SAVING

Rough estimate of value of home 320,000
Amount outstanding on your mortgage: 80,000
*What interest rate are you paying? *ECB+ 0.75%

Other borrowings – car loans/personal loans etc - None

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Savings and investments: +100k sitting in bank

Do you have a pension scheme? Yes, PRSA worth ~20k only. Also, another type which was non-contributory from a previous career which I believe is worth ~3k per year (I don’t know what it’s called)

Do you own any investment or other property? Yes, house worth ~130k which is now PPR

Ages of children: 2, under 5
Life insurance: No


*What specific question do you have or what issues are of concern to you?*

We have recently moved from Dublin to a mortgage free home. I need to decide whether to sell the Dublin house (worth ~320k on a tracker) or rent as additional income now and in the medium to long term. I do not want to be a landlord or keep the house but I also do not want to make the mistake of selling if financially it is in our best interests. I am aware my pension is not good, I have savings to topup if recommended(for 2018 now, and then for this year in 2020 at least).

I am assuming that Dublin rents and house prices will be a lot lower in the coming years so unsure how to decide what is the best?

(Apologies if info is too vague, I can provide more detail if requested)
*Edited as interest rate was entered wrong initially


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## Brendan Burgess (7 Aug 2019)

Is this the correct summary?


Investment property€320kLess mortgage(€80k)Home€130kCash€100kNet assets€470k

First of all you should definitely max your pension contributions to use up the 40% tax level.  (Others would argue that you should go further and use up the 20% tax level, but I don't think that this is right.)

You have a net investment in your investment property of €240k.

I would suggest that you should invest in this in a portfolio of shares for the best long-term return. It is also the most liquid and most flexible. It is also the least hassle.

The arguments in favour of keeping your home

Rental yields are very good at the moment. The rent would probably be around €18,000 a year. It would be hard to get a 6% gross yield anywhere else.
You have a cheap tracker.  But as it's small in relation to the value of the property, this is only a minor consideration.
It might be useful to own in future years if your kids are living in or working in Dublin.
How much did you pay for your home initially?
If you paid more than €320k for it, then any increase in value up to the price you paid for it will be exempt from CGT which is an argument for keeping it until its value increases to what you paid for it.  And after that, you will get a reduced rate as it was your PPR for some time.

If you paid less than €320k, you probably should sell it now, as the gain is not subject to CGT. But as it will no longer be your family home, any gain already made, will be subject to some CGT.  

Brendan


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## cremeegg (7 Aug 2019)

We do not speculate on property prices here, but this



Fat Tony said:


> I am assuming that Dublin rents and house prices will be a lot lower in the coming years



is a surprising assumption.



Brendan Burgess said:


> The arguments in favour of keeping your home
> 
> Rental yields are very good at the moment. The rent would probably be around €18,000 a year. It would be hard to get a 6% gross yield anywhere else.
> ...
> It might be useful to own in future years if your kids are living in or working in Dublin.


You will not get 6% anywhere else and many properties achieve more.

If you sell the house, it is likely that your family will never again be able to own a property in Dublin. This is true for most families. This has been true in London for a generation, and its coming to Dublin.


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## Feemar5 (7 Aug 2019)

All the financials say you should keep it but being a landlord particular a remote one is not easy and a lot of existing  accidental landlords seem to be leaving the sector.    Depending on your tax rate you will most likely be paying revenue at least 50% of your profit between tax and USC.    If you decide to keep it might be better to get an Agency to deal with it and that will also be a cost.     If you live down the country and the heating breaks down you need someone in Dublin who can handle the situation for you.


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## Fat Tony (7 Aug 2019)

Thanks for the replies, much appreciated.


Brendan Burgess said:


> Is this the correct summary?


Yes


Brendan Burgess said:


> First of all you should definitely max your pension contributions to use up the 40% tax level.


I'm in the process of organizing this.


Brendan Burgess said:


> I would suggest that you should invest in this in a portfolio of shares for the best long-term return. It is also the most liquid and most flexible. It is also the least hassle.


Seems reasonable, property speculation is not where I want to be but I've been burnt before with investments so wary.


Brendan Burgess said:


> The arguments in favour of keeping your home
> 
> Rental yields are very good at the moment. The rent would probably be around €18,000 a year. It would be hard to get a 6% gross yield anywhere else.
> You have a cheap tracker.  But as it's small in relation to the value of the property, this is only a minor consideration.
> It might be useful to own in future years if your kids are living in or working in Dublin.



Rents are currently 2k or more in my area, I'm guess this will drop to something more reasonable like 1500 in the future.
I was wondering how much bearing the tracker should have on the decision.
Have considered this alright, seems a long way down to road to factor in the decision making now though



Brendan Burgess said:


> How much did you pay for your home initially?
> ...
> If you paid less than €320k, you probably should sell it now, as the gain is not subject to CGT. But as it will no longer be your family home, any gain already made, will be subject to some CGT.


~290k and as we are still officially residing in it for another few weeks while finishing renovations in the new place, we are not subject to CGT.


cremeegg said:


> We do not speculate on property prices here, but this [...]is a surprising assumption.


I'm basing this on the fact that prices seem to have peaked now and if/when supply meets demand I assume prices will drop, possibly significantly based on the amount of proposed development in our area.


cremeegg said:


> You will not get 6% anywhere else and many properties achieve more.


So the best investment of my €€€ is the current house?


cremeegg said:


> If you sell the house, it is likely that your family will never again be able to own a property in Dublin. This is true for most families. This has been true in London for a generation, and its coming to Dublin.


Good point, have considered this.


Feemar5 said:


> All the financials say you should keep it but being a landlord particular a remote one is not easy and a lot of existing  accidental landlords seem to be leaving the sector.    Depending on your tax rate you will most likely be paying revenue at least 50% of your profit between tax and USC.    If you decide to keep it might be better to get an Agency to deal with it and that will also be a cost.     If you live down the country and the heating breaks down you need someone in Dublin who can handle the situation for you.


Have considered all of this, someone mentioned to me that there's a possibility that only lower rate of tax may apply if my wife rents the house not me? (House is in my name only however)

All very confusing, I'm risk averse and I neither want to be a landlord, property speculator or be subject to stock market fluctuations however I'm in the lucky position that I have choices to make after 2 decades of hard work and I'm trying to do what's best long term for my family...


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## niceoneted (8 Aug 2019)

my first instinct was given your in a good financial situation what if your kids decided to go to college or to work in Dublin? I think the house would be so worth having then. we are reluctant landlords and our thinking of it is that while it is hassle free and cost free now ( we are prtb registered and tax compliant) we will stick with it.


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## NoRegretsCoyote (8 Aug 2019)

If you want a high-yielding property investment and/or place for your kids to eventually live in Dublin then buy an apartment.

Don't be sentimental about the house just because you lived there.


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## Brendan Burgess (8 Aug 2019)

cremeegg said:


> If you sell the house, it is likely that your family will never again be able to own a property in Dublin



While this is possible, it is not "likely."

If he sells the house and blows the money, then it is likely.

But if he sells the house and invests the money in shares, it is quite likely that he will be able to buy a house in Dublin, or as NRC points out, an apartment.  



NoRegretsCoyote said:


> If you want a high-yielding property investment and/or place for your kids to eventually live in Dublin then buy an apartment.



But don't buy it until you know where they are studying so you can buy it in a suitable location.   A three bed house in Dublin won't be much good if your kids decide to study in Galway or Athlone.

Brendan


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## cremeegg (8 Aug 2019)

cremeegg said:


> If you sell the house, it is likely that your family will never again be able to own a property in Dublin.





Brendan Burgess said:


> While this is possible, it is not "likely."



Neither you nor I have a crystal ball Brendan, however in quoting me here you omitted what I consider a key sentence.



cremeegg said:


> If you sell the house, it is likely that your family will never again be able to own a property in Dublin. This is true for most families. *This has been true in London for a generation*, and its coming to Dublin.



Indeed some people suggest that it is true already, that the average family cannot afford a house in Dublin.


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## Sarenco (8 Aug 2019)

@Fat Tony

If I was in your shoes, I would definitely keep the property.

A rent of €2,000pm on a property with a fair market value of €320k represents a gross yield of 7.5% - that's excellent.
A tracker rate of ECB+0.25% really is exceptionally cheap money and the interest payments are now fully deductible for income tax purposes.
You have plenty of savings to deal with any bad times (defaulting tenants, etc.).
You have a relatively high base cost for CGT purposes and the fact that the property was your PPR for an extended period means that you would also have a good tax "shield" in the future.
I'm not a tax expert but I wonder could you transfer the beneficial interest in the property (and hence to right to receive the rental income) to your wife by way of a declaration of trust?  Perhaps one of our resident tax gurus might offer a view on the viability of that tax planning strategy.

I think you should probably hire a reputable agent in Dublin to manage the rental.

You should definitely think about maximising your pension contributions - both for 2018 and going forward - and you could contribute everything to a global equity fund in your circumstances.

I would put at least half of your €100k cash savings in (tax-free) 5 Year State Savings Certificates.

Hope that helps.


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## Fat Tony (8 Aug 2019)

Sarenco said:


> @Fat Tony
> ...
> 
> A tracker rate of ECB+0.25% really is exceptionally cheap money and the interest payments are now fully deductible for income tax purposes...


Rate is actually ECB + 0.75%, original post updated.


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## NoRegretsCoyote (8 Aug 2019)

Fat Tony said:


> Rate is actually ECB + 0.75%, original post updated.



Even if it was a non-tracker and 200bp higher the extra cost would be only €1600 a year and reducing rapidly.

I don't think this is the material issue given your full set of circumstances.

I would make my choices based on the whole picture. Best of luck!


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## Brendan Burgess (8 Aug 2019)

cremeegg said:


> Indeed some people suggest that it is true already, that the average family cannot afford a house in Dublin.



You are missing the point completely. 

The average family in Dublin or London does not have €320k! 

If the OP invests the proceeds in the stockmarket, it is very likely that he will be able to afford to buy a house in Dublin when he needs it.

Brendan


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## NoRegretsCoyote (8 Aug 2019)

Brendan Burgess said:


> If the OP invests the proceeds in the stockmarket, it is very likely that he will be able to afford to buy a house in Dublin when he needs it.



I think you might be missing the point.

Suppose you both a) own a house in Dublin now but don't need it; b) want the use of a house in Dublin in ten years.

Which makes more sense?
1) sell the house, put the proceeds in a risky asset. If the asset declines you may not be able to afford a house in Dublin, while any increase will be taxed. Also pay transaction costs twice.
2) hold on to the property and let it until you need it for your own purpose.

I think the obvious answer is 2). Whatever happens to house prices in Dublin or equity prices globally, you will still have a house in Dublin.


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## Leo (8 Aug 2019)

NoRegretsCoyote said:


> I think the obvious answer is 2).



Letting isn't without risk and overheads.


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## NoRegretsCoyote (8 Aug 2019)

Leo said:


> Letting isn't without risk and overheads.



True. But suppose you have an equity fund today, and will want one in ten years time.

Would you sell up today, buy a house and hold on to it for ten years, and then sell the house again to buy equities?

For most investment strategies you do best by holding for long and avoiding transaction costs.


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## Leo (8 Aug 2019)

NoRegretsCoyote said:


> For most investment strategies you do best by holding for long and avoiding transaction costs.



The relative costs of property ownership and maintenance are significantly higher than those involved in holding equities, particularly in a market that is eroding your rights as a landlord. 

If the OP absolutely wants to own that particular house in 10 years, then they are best hold on to it regardless of cost. If however in 10 years they want to buy a house that suits their needs at the time, then it's best look at all the options and figure out what will give you the best return on the resources available, factoring in all costs and potential risk/reward. 

Let's face it, with the current prices of property in Dublin, a house valued at €320k is ~20% below average so factors like size, condition, area, facilities all need to be considered. The value of that property and may not follow the overall housing market. Some of the developments of recent years built at high density with little or no facilities could become the next ghettos, the boom in build-to-rent might significantly diminish the rental yield over the 10 years, etc...

The best investment strategies are where you realise gains before the inevitable pull backs that affect pretty much every asset class. But hey, if I could do that I'd be sitting with a very different view writing this.


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## Brendan Burgess (8 Aug 2019)

NoRegretsCoyote said:


> Which makes more sense?
> 1) sell the house, put the proceeds in a risky asset. If the asset declines you may not be able to afford a house in Dublin, while any increase will be taxed. Also pay transaction costs twice.
> 2) hold on to the property and let it until you need it for your own purpose.



That is a good point.  By holding onto the house now, it doesn't matter what happens house prices.  It's a sort of hedge against house prices. 

But I was primarily responding to this point. 



cremeegg said:


> If you sell the house, it is likely that your family will never again be able to own a property in Dublin.



This is just not correct.  If he buys a portfolio of shares, he is very likely to have enough to buy an equivalent house in Dublin in 10 years.  There is a risk that he won't.  

But, as you point out, by keeping the house, he has a hedge against house prices in Dublin.  

Brendan


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## NoRegretsCoyote (8 Aug 2019)

Leo said:


> Let's face it, with the current prices of property in Dublin, a house valued at €320k is ~20% below average so factors like size, condition, area, facilities all need to be considered. *The value of that property and may not follow the overall housing market. *



Perhaps, but not by very much. The Dublin property market is pretty liquid and neighbourhoods don't shift in relative value very rapidly. When there's a boom all prices go up, opposite for a bust.

If you want a hedge against Dublin property, the only way is to hold Dublin property!


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## Leo (8 Aug 2019)

NoRegretsCoyote said:


> Perhaps, but not by very much. The Dublin property market is pretty liquid and neighbourhoods don't shift in relative value very rapidly. When there's a boom all prices go up, opposite for a bust.
> 
> If you want a hedge against Dublin property, the only way is to hold Dublin property!



There are more a few developments around Dublin that started off as nice upcoming areas only to take a dip due to anti-social behaviour and drug dealing. Some of the folks I was working with ~20 years ago were buying in these areas, some got out close to even, others lost out. There has been a significant variance in the market prices in these areas and the overall Dublin market. 

The Dublin property market is a reflection of the overall economy, it isn't uncorrelated and there are significant anomalies within it. Even over the last 12 months, house prices in DLR have dropped 2.6% while they are up 4% in South Dublin. Within those administrative ares there will be similar variance.

Besides, is tracking a section of the Dublin housing market the goal, or maximising returns?


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## Bronte (9 Aug 2019)

Brendan Burgess said:


> If the OP invests the proceeds in the stockmarket, it is very likely that he will be able to afford to buy a house in Dublin when he needs it.



That's very much a glowing crystal ball BB.  OP mentioned he already lost on "investment's."


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## Bronte (9 Aug 2019)

cremeegg said:


> You will not get 6% anywhere else and many properties achieve more.
> 
> If you sell the house, it is likely that your family will never again be able to own a property in Dublin. This is true for most families. This has been true in London for a generation, and its coming to Dublin.



What I wouldn't give to have a property in Dublin right now as I watch the prices for rents to students in Dublin right now. I'm hedged against two other university cities thank goodness.  And hopefully it won't even be Ireland at all as the rents for students are astronomical.  

Ironically Minister Murphys plan to cap rents caused the exact opposite as the university accommodation providers hiked their rents massively this week in response.  Which is what I should have done when he brought in rent caps.


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## Brendan Burgess (9 Aug 2019)

Bronte said:


> That's very much a glowing crystal ball BB.



Hi Bronte

He has two children under 5. 

His investment horizon is about 14 years. 

He has a house worth €320k , an €80k mortgage and €100k in the bank. 

There are many possible  outcomes. 

House prices  might outperform equities over the next 14 years to such an extent that he will not be able to afford to buy a house in Dublin.  
Equities might outperform house prices over the next 14 years. 

Based on history, equities outperform house prices over the long-term, so it's the most likely outcome but no one knows. 

But lets say that house prices go mad and equities slump over the next 14 years.  He will still have plenty of money to rent an appropriate place for his children. 

So the right thing to do is to sell the property and invest in equities.
When the time comes, he can rent or buy a suitable place in a suitable location near the children's college.

Brendan


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## NoRegretsCoyote (9 Aug 2019)

Brendan Burgess said:


> House prices  might outperform equities over the next 14 years to such an extent that he will not be able to afford to buy a house in Dublin.
> Equities might outperform house prices over the next 14 years.
> 
> .......
> ...




But it is far, far more tax efficient to own a property and let your children live in it rent free.

Say you have two children about to do four-year degrees one after the other. You have €80k in cash to spend on rent for the eight years.

It would be much cheaper to buy a €160k apartment with a 50% mortgage and pay the interest. Yes, property prices can go down, but there are very few scenarios where you would be left with less than if you had just spent the €80k on rent.


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## elcato (9 Aug 2019)

NoRegretsCoyote said:


> It would be much cheaper to buy a €160k apartment with a 50% mortgage and pay the interest.


Apples and Oranges. What about maintenance, property tax, insurance, management fees ?


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## Bronte (9 Aug 2019)

NoRegretsCoyote said:


> But it is far, far more tax efficient to own a property and let your children live in it rent free.
> 
> Say you have two children about to do four-year degrees one after the other. You have €80k in cash to spend on rent for the eight years.
> 
> It would be much cheaper to buy a €160k apartment with a 50% mortgage and pay the interest. Yes, property prices can go down, but there are very few scenarios where you would be left with less than if you had just spent the €80k on rent.


In order to have €80K the OP has to earn double that if he's in the top income tax bracket.  The OP would have zero costs for renting, only have to pay the property tax and insurance.  And he has his property well looked after by his children.  

As regards buying a 160K apartment, at least you're getting something rather than spending 80K.  Many parents do this no doubt.  Back in my day I know one guy whose parents had a house in D4 and rented all the rooms out to students because that house was their Dublin base but they actually lived elsewhere.  Bet anything no rent was declared anywhere too.


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## Brendan Burgess (9 Aug 2019)

NoRegretsCoyote said:


> But it is far, far more tax efficient to own a property and let your children live in it rent free.



Hi NRC 

That is a very interesting way of looking at it. But it's a different question. 

Question 1 -  I have two children about to go to college in Dublin. I have the cash - should I buy a place for them or rent?   
I will start a separate thread on this as it's very interesting. 

Question 2 - I have a house and two kids about to start college. Should I keep it or sell it? 

Question 3ish - I have a house and two kids who will start in College in 5 years? 

Question 4 - The OP's question. I have a house and my kids won't be starting in college for 14 years. Should I keep it? 

Brendan


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## Fat Tony (9 Aug 2019)

Thanks for all the responses folks, lot of food for thought!
I don't think I'll be making decision based on possible future colleges as it's too much of an unknown and the house isn't particularly convenient for any Dublin college. Courses could be all online in 20 years time the way technology is going...


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## Brendan Burgess (9 Aug 2019)

Fat Tony said:


> the house isn't particularly convenient for any Dublin college.



Ah Tony! You could have told us that up front to save all the arguing.  

Brendan


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## Fat Tony (9 Aug 2019)

Ah ye love a good argument!

(What i mean is it's a bus journey into town or a drive to the suburban ITs.)


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## wheeler dealer (21 Sep 2019)

I can not believe that this is not an open and shut case!!!
OP has a valuable appreciating asset and some posters are arguing that he should get rid and start gambling on the stock exchange .House prices will rise and fall but share prices can dwindle to next to nothing even the Euro stock50 has gained nothing in 19 years and this is the the top 50 shares in Europe .Maybe an odd share will strike it lucky but one horse has to win the race


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## Daddy Ireland (21 Sep 2019)

Just wondering about the references to buying an apartment for 160k.  Where are they in Dublin ?


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## NoRegretsCoyote (22 Sep 2019)

Daddy Ireland said:


> Just wondering about the references to buying an apartment for 160k.  Where are they in Dublin ?



It's a thought experiment. It also works at €200k.


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## lledlledlled (22 Sep 2019)

Fat Tony said:


> Ah ye love a good argument!
> 
> (What i mean is it's a bus journey into town or a drive to the suburban ITs.)



Suburban ITs will quite possibly all be in Grangegorman by then. 

I wouldn't underestimate the hassles of being a landlord. I have very limited personal experience of this but have looked into it having considered buying an apartment to let. Too much hassle and too much tax persuaded me to go a different route.

I think Brendan's advice is the most suitable option in your circumstances.
As you are already aware, you need to address your pension situation. 

As long as you are confident you'll be staying in your new house for the foreseeable future, I'd sell the Dublin property & invest in a basket of global equities. Personally I think equities look due for a correction but trying to time the market is almost impossible.  
When the kids are going to college,  you can then look at the Dublin property market again and consider selling the equities to fund a suitable property. You have no idea if your kids will ever want to live in Dublin.  Also,  you get to pick a property closer to their college if that's what they want it for.


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## cremeegg (22 Sep 2019)

So one poster thinks, you should go with property because equities have done badly.



wheeler dealer said:


> House prices will rise and fall but share prices can dwindle to next to nothing even the Euro stock50 has gained nothing in 19 years and this is the the top 50 shares in Europe.



Another poster thinks you should go with equities even though he thinks they are overvalued at present



lledlledlled said:


> Personally I think equities look due for a correction



Not easy to make sense of these things.


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