# Too much held in euro savings



## sunnygirl (13 Jun 2012)

Was hoping someone with more expert knowledge could give some advice. We are a mid 40's couple married with 3 children, I was made redundant and am not overly confident of finding work in the near future given the current jobs market and my age. One of us still working for multinational but would not be unrealistic to think this may not be the case in 12 months from now as the industry involved in quite volatile at the moment.
Everything we have is held in euro bank a/c's in Ireland (Rabo, EBS and PTSB) also some in P.O. savings bonds. We also have 2 smallish pension funds. We have a very small mortgage on our home equating to 10-15% of current value.
We are just a regular couple hoping to have enough money in the future to pay our childrens college fees and have a bit left over for retirement. But our worse fear is to lose money due to euro breakup/devaluation etc.,
Would it be wise to spend some cash buying a 2nd property to rent out? I would only envisage using half of our savings approx to fund this. 
All advice greatfully accepted.


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## AlbacoreA (13 Jun 2012)

Have you considered what would happen if you both end up unemployed with two properties? I assume you don't plan on a mortgage on the second property.


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## sunnygirl (13 Jun 2012)

As I stated in my post above, it is quite possible that both of us could be unemployed in the future. I also mentioned that if we were to consider buying a 2nd property to rent, we would fund this from savings.
Brendan could I ask you for your comments?


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## AlbacoreA (13 Jun 2012)

I wasn't sure if that meant you fund it entirely from savings, or half of it from savings. Because you didn't mention clearing the existing mortgage. Also I would assume in the event of something happening to the euro, buying the property with another currency at that point would get more for your money than buying it now.


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## TomPetty (13 Jun 2012)

Hi Sunnygirl - Your plan makes perfect sense to me - You are better off using you money to purchase "bricks and mortar", which can continue to earn you money if the unthinkable occurs. ( And in the long term, will appreciate ) 
How about taking out for example a KBC mortgage for a large part of the purchase price of the house, then if you see trouble around the corner and you fear for your deposits, simply walk in and pay off your mortgage in full !!
Thats my thoughts for what its worth - Hope that helps. 
Tom.


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## bullworth (14 Jun 2012)

TomPetty said:


> hen if you see trouble around the corner and you fear for your deposits, simply walk in and pay off your mortgage in full !!



Gambling everything upon ones perception of trouble before it arrives seems risky to me unless sunnygirl has superior perceptions and understandings to the rest of us (and to the EU bigwigs) who do not have a clue whats going on. If everyone else sees trouble at the same time then you won't be simply able to ''walk in'' to a bank. The queues will probably go around the block and they will probably close for half the day. IT systems could also become overloaded (or this used as an excuse) making electronic transfers impossible.
 Just bear that in mind. A state of hypervigilance and accepting panic as  a normal emotion is the only way anyone could prepare for detecting the signs of when to ''walk in'' with the money and even then there is no guarantee that
 you will react in time or will not over react. My view when it comes to buying a property would be to diversify away from Ireland. An apartment in Berlin or Frankfurt/Munich is extremely rentable with a fantastic yield and hence a good dependable income. Apartments in Germany also do not require furnishing when being rented. It also will be in the part of the world where a strong currency and strong economy is inevitable if anything does happen to the Euro.  It also leaves you with accomodation options if you decide to emigrate there in future. Thats' the kind of risk I would be willing to diversify into if my heart was set on property.


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## sunnygirl (14 Jun 2012)

Many thanks Bullworth and Tom Petty for your replies. My fear in relation to buying property abroad is my lack of knowledge on foreign property. I was tending to think along the lines of Tom Petty, buy a reasonable property, definitely not an apartment, from cash savings in my locality. Hopefully I could rent out, cover all expenses associated with having a 2nd property and still make a small income. Also this would give me another fixed asset rather than everything being tied up in cash (euros).
I don't think emigration is an option for us but if it were Germany would not be our choice. My heart is not totally set on property, my problem is I know I should do something to diversify risk but I dont know what!
And yes Bullworth you are right, if the experts havent a clue what is going on, how on earth can ordinary people like me safeguard what we have built up over years of being prudent with our finances.


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## bullworth (14 Jun 2012)

sunnygirl said:


> My fear in relation to buying property abroad is my lack of knowledge on foreign property.



Hi Sunny.  I think Ireland is very risky. And risk is something you appear to wish to avoid. On the other hand , Germany seems to have the lowest risk and unlike here they have a culture of long term renting. I have no doubts you can improve your knowledge quickly. What is there to know really ? We cannot know where prices will be but we can look at the economic stats of the counties and compare them. Even if this federal EU thing gets sorted we might end up with prices on a very low base similar to other backwaters of the USA where houses go for a song.  Federalize or not , German rentals in their big cities will be in demand because thats where the hard money and jobs will be. And then there is the unpredictable nature of the property tax in Ireland. And unless something radical changes, every stat which should put upward pressure on rents and asset values is going pear shaped from incomes to welfare to taxes to employment and emigration. Just be mindful of putting all your eggs in one basket since you already own a home in Ireland and that's a big investment in itself.


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## kerbs (15 Jun 2012)

Hi there, as someone who currently owns a number of rental properties I would def advise you do not go down this route. 
There are a significant number of costs involved; NPRR, rising house insurance not to mention the property taxes which are coming into play next year. From everything I have heard these are going to be significant! Also you will have to pay tax on any earnings etc.. and if these do provide you with an income you may find that comes against you if you needed to claim social welfare down the line.... 
If you are concerned re: amount of euro savings suggest putting money in sterling. We have done this ourselves just for peace of mind- Ulster Bank in Newry will facilitate this or even your ROI bank will open a sterling account if you ask them... 
Think in many ways you are in a good position financially so you are obviously smart people. I think to say in your 40s you may never work again is crazy though. That is far too young to say something like that! 
I would take the money you have and invest it in your own retraining/ education... Suggest speaking to recruitments agencies as to where the jobs are and retrain accordingly. I know in IT there is a skills shortage at the moment.. IT doesnt have to mean programming there are lots of different areas you could work in.. obviously it is hard to start again but a job is a much better source of stable income then a rental propetry IMO. 
Good luck with it.


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## TomPetty (15 Jun 2012)

kerbs said:


> There are a significant number of costs involved; NPRR, rising house insurance not to mention the property taxes which are coming into play next year. From everything I have heard these are going to be significant!




I was thinking that myself - But I was also thinking about the savings there are at the moment, buying a house as opposed to a few years ago - Virtually no stamp duty is a big saving, and house price probably half of what it was a few years ago. This puts a big hole in the costs mentioned above ...
Rental incomes are still pretty strong also. 
Tom.


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## micheller (15 Jun 2012)

Am I correct in saying that the costs on buying a rental are:
Stamp duty on purchase 1% of price, yearly NPPR cost €200, yearly Household charge €100, and tax on income which can be offset against all costs in repairing and upgrading?
So around €300 euro a year+Insurance + tax liabilities?

So, in buying a cheap doer upper in a good renting location you can offset repairing it against tax on income when it becomes rented, in that tax year?


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## AlbacoreA (15 Jun 2012)

... and PRTB €90 per tenancy. Expect costs in cleaning and repairs during the year, and there maybe be vacant periods. In general a rented property get much more wear and tear, so expect to put some money aside to bigger jobs every few years. If you have a bad tenant it could cost you thousands, so you need to choose tenants very carefully.


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## Slim (15 Jun 2012)

micheller said:


> Am I correct in saying that the costs on buying a rental are:
> Stamp duty on purchase 1% of price, yearly NPPR cost €200, yearly Household charge €100, and tax on income which can be offset against all costs in repairing and upgrading?
> So around €300 euro a year+Insurance + tax liabilities?
> 
> So, in buying a cheap doer upper in a good renting location you can offset repairing it against tax on income when it becomes rented, in that tax year?


 
I don't think you can offset costs in doing up the house against rental income before your first tenant! Only repairs and maintenance between tenancies.


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## micheller (15 Jun 2012)

Ahhh, it did seem to good to be true! But there is this: 
*Allowable Expenses Allowed over 8 Tax Years*

 The cost of the fitout of the property e.g. furniture, electrics etc.  etc. is allowed for tax purposes over a period of eight years at a rate  of 12.5% per annum. This is known as a Wear & Tear Allowance. 

There is more at thislink: [broken link removed]


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## Greta (12 Jul 2012)

Sunnygirl, seriously consider putting some of your savings in gold (and maybe some in silver), gold and silver never go down to zero unlike paper currencies. It would also be prudent to keep some gold offshore, outside Ireland, in a safe location, like Switzerland, Singapore, Hong Kong, Channel Islands. 

I am not suggesting you put everything in gold, but the money that you can afford to keep invested medium to long term.

Other than that, diversifying into different currencies and jurisdictions is a good idea. Sterling account as suggested here, is the easiest option. If you could open a bank account in Germany, that would be better than Ireland.


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## so-crates (13 Jul 2012)

Why are only considering foreign property investment? Have you looked at other (perhaps more liquid) investment opportunities already?


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## so-crates (14 Jul 2012)

Dunno if I would agree with Greta on the gold. Given the rush to gold over the last few years the cost of purchasing is pretty high, it may not (historically at least) drop to zero but even if you assume the price of gold was depressed prior to the most recent inflation it represents an expensive "safe haven" at the moment http://www.nma.org/pdf/gold/his_gold_prices.pdf


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## Greta (14 Jul 2012)

Gold can be considered as another currency to diversify into, and actually easier than opening many foreign bank accounts.
As to it being expensive, judging by how little awareness of gold there is, it's very far from the top, but that's my opinion, of course. I have lived through several bubbles already, particularly the housing market bubble, and gold is nowhere near those levels in terms of every Tom, Dick and Harry jumping into it, like they did into the housing market. It reminds me the situation regarding housing around 1998 - housing in Ireland had already gone up a lot at that stage, and when we were looking to buy a house, nearly everybody was screaming "house prices are so high, they have to come down". We bought, and house prices went up several fold from there. Near the top those who were warning us against buying bought themselves. Then housing crashed, but not to 1998 levels yet.

I think the gold story is something similar. I am not urging anybody to just buy, but at least consider it and do their own research into gold as an investment, and then decide once they are informed.

A piece of advice I have come across regarding gold is to put 10% of your assets into it. The reasoning is that if you are wrong and gold halves, then the rest of your investments ought to perform well, as gold is a hedge against other investments crashing. So you only lose 5% in this scenario. But if you are right and other investments crash, at least you will have 10% in gold saved rather than nothing left.

Another saying is that gold is a hedge against stupidity of government, and we certainly have plenty of that in Ireland and in the world, so until that changes, I'll personally think gold will do fine.


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