4 properties - no other assets

Re: Advice re property assets needed

Selling Irish property to buy an ISEQ tracker does not represent significant diversification. Any downturn in the property market will hit the share price of the banks which make up about 40% of the index. I agree you need to reduce your exposure to property. High yielding stocks are a good idea as the dividends will help replace your rental income. Given your situation I think you should put some of the proceeds in cash/Bonds. You definitely need at a minimum an emergency cash fund. You want to avoid becoming a forced seller of either property or stocks if there is a shortfall in your income.

Re: Advice re property assets needed

I would agree with you tyoung
this has been discussed before but consider eem ige vti efa gld djeurostoxx as an etf sample with maybe a hedge fund or options to protect portfolio or at least to reduce volatility and have a look at vig (dividend etf).
my only worry with etfs would be low income and I would personally avoid iseq etf in preference to djeurostoxx
re the stockbroker.....get one on advisory only and set the record straight that you are long term buy to hold and let him know if he attempts to churn you that you will leave.
I just think with an equity portfolio of this size for the sake of a dozen or so commissions it could be worth your while going down the road of a stockbroker rather than discount broker.
This is against my gut feeling on stockbrokers but to go wading in buying stocks with a 7 figure investment at a discount broker is risky in my book unless you are experienced.
avoid at all costs discretionary approach with stockbroker.

Re: Advice re property assets needed

Brendan said:

I would certainly not take advice from a stockbroker. They earn their money from encouraging you to buy shares, then sell them, then buy more. The right strategy is to buy the ISEQ ETF and forget about it.

Brendan

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Why invest in the ISEQ at all? Why not in the equivalent tracker in a country which doesn't have such an exposure to property. Germany is starting to grow again, they have gone through some painful reforms and they have world beating comanies in many industries.

Re: Advice re property assets needed

if you are a little nervous of losing any money then stay away from the shares,they are definately not for the faint hearted.
i'm sure Mr Hobbs would be more than happy to talk to you,considering the position you are in.

Re: Advice re property assets needed

I would think that moving from owning a property to owning shares is a signficant diversification, even if the outcome of both is influenced by similar factors e.g. interest rates and the Irish economy. Irish banks would prefer a soft landing for Irish property prices and a crash won't help them, but it's only a part of their portfolio and so it's an even smaller part of Elaine's overall portfolio.

Elaine is new to this area. She is trying to grapple with some difficult issues. She is not a sophisticated investor. Talking about covered options and foreign investments will likely make the decision so complex, that she does nothing about it.

I would guess that about 50% of the ISEQ ETF's earnings come from overseas? It's easy to understand. The tax implications are easy to understand. It's a simple choice. There might be a marginally better choice, but what is most important is that she diversifies.

Brendan

Re: Advice re property assets needed

I wonder would there be any equity funds that would give her 102%+ allocation and could she negotiate a reduced management fee given the figures involved?

Re: Advice re property assets needed

Hi! everyone,

Thanks again for advice. I'n going to sell the period property which was my private residence. It is not in that bad a shape so I would hope to get 1.9 to 2 mil for it on its own - maybe more. Brendan, with regard to the ISEQ EFT if I invested a large sum of money, would the dividends be likley to provide me with an adequate income for the next couple of years - I am unlikely to work outside the home again until my youngest is in 1st class in four years time. Perhaps you could explain a little bit more about the ISEQ EFT. I am from a family that, like most Irish people, is property mad - and I'm frequently told to buy land/property as they're not making more of it. Any further info./explanatin re. ISEQ EFT would be appreciated.

Re: Advice re property assets needed

Follow the link in my original post to the ISEQ ETF.

I think that the income should be around 2%, so you will be getting around €40k per annum.

Don't worry about the income not being sufficient. You will get income and capital growth. If the income is insufficient in any year, you can sell part of the fund. That is the great attraction of shares and share based investments, when you need part of them, you can access them.

Brendan

Re: Advice re property assets needed

would leaving the cash in the bank at 2% or credit union at 2.5% not be the same as putting it in the ISEQ ETF,whith none of the risk or stress and no fees to pay ?

Re: Advice re property assets needed

would leaving the cash in the bank at 2% or credit union at 2.5% not be the same as putting it in the ISEQ ETF,whith none of the risk or stress and no fees to pay ?

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no potential for capital appreciation with deposit or credit union so in essence you are pretty much going to erode the capital via inflation by leaving money on deposit which is too risky in most investor's eyes unless a very short term time horizon.
Conventional wisdom would say only to have a few months emergency money on deposit for this reason.

Re: Advice re property assets needed

If you do decide to buy the ISEQ ETF make sure you fully understand it. In particular how your dividends will be paid. They are paid on a twice yearly basis, in July and Jan. This July slightly over 13 euro was paid. In Jan of 05 13.19 was paid. I think it is reasonable to expect an increase this year. I think you can expect a yield of about 1.8%. It is also reasonable (although not certain) to expect an increase in the dividend over time. You can see the dividends for the ISEQ ETF at the Irish Stock exchange, ise.ie. Click on ETF market data and then on dividend data.
I still think you should consider some further diversification. The ISEQ has no energy stocks, very little technology or consumer stocks.
I still think it is a good idea to keep six months living expenses in a cash account. The ISEQ could easily drop by 20% in a year. The cash would act as a cushion and help avoid being a forced seller in a down market.
Good Luck what ever you do. You are actually in a very good spot.
Regards

Re: Advice re property assets needed

i started reading Eddie Hobbs' latest book last night and i think you might find it interesting/informing,as a lot of what people are advising here is also explained in the book.I think it may be worth the money just so you can even familiarize yourself with the terms being used.

Re: Advice re property assets needed

on the subJect of equity ETFs be aware that the ISEQ's dividend yield is pretty poor compared to some of the larger pan-European ETFs - in addition these are also € denominated. For example the DJ Stoxx 50 yields 3.6%; the Stoxx 600 3.5%; the MSCI Pan-Europe Index 3.5%.

Re: Advice re property assets needed

I am almost completely risk averse

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elainem,

Can you live with the fluctuations of equities or is this likely to add to your existing worries?

You are receiving some very contradictory advise you have people telling you to sell D4 properties and invest in ISEQ ETF's. What stocks dominate the ISEQ - Banks! where are banks making their money mortgages What effect will a property crash have on the Banks - very negative i.e ISEQ crash, and equities will have a far quicker correction then Prop.

The D4 properties are like Gold, They should be the last things you sell, I would look at selling the country properties to fund refurbishment & maintaince.

The worst advice you received is not to get financial advise by a professional. I hate the dentist but when a tooth hurts I don't tie a string around a door handle. You really should get professional advise if you are not confident take a relative or trusted friend. Go to your solicter or accountant ( ask them to accompany you to any meetings) and they will point you in the right direction. Bounce the banks off each other you are a high net worth customer let them work for their money let them come back with suggestions. i.e Asset allocation etc.

Also you definetly need tax advise on the property sales.

If you do go into equities split it between passive (index tracking) and active ( managed funds) this will lower stock selection risk. Look at fund of fund structures this will diversify asset manger risk.

Remember you are in control not them.

elainem

The real problem going to an advisor is that you might well get very opinionated advice expressed in broad generalisations with no evidence to support those generaliations. You may also be subjected to totally inappropriate analogies which would lead you to wrong conclusions.

You may also get advice such as fund of fund structures where the advisor gets maximum commission and you pay charges on the double.

Brendan

I would agree with Brendan's earlier point that there is a significant risk of a rise in Capital gains Tax in the medium term . So a coupling of a rise in CGT along with a drop in property values ( and that is the most likely direction of both of these variables) would be a pretty serious double whammy esp. as the two most expensive properties will attract no PPR relief.

If "Bunny" Rabbite and his mates have their way (and they well might in the not too distant future) the CGT could revert to 40% or at least the euro norm of 30% plus.

Thanks, Brendan, and everyone else who replied. I am definielty worried about a rise in CGT. I had the properties valued yesterday, and the value the acutioneer gave me was E3mil for both. I have estimated that I would net E2.6 mil after CGT, if the Auctioneers valuation was correct. They suggested offering the properties as one lot to see what would happen, though I would prefer to retain the mews house. I am contempalting putting the houses on the market in February. Does anyone think this is a good time? One of the properties is still tenanted, and between repainting and getting ready for the market, I migh not be ready for late September/October.

The ECB rate could be up 0.75% by February which would make the properites less attractive to an investor as it is debatable whether there will be any corresponding increase in rents thus reducing the yield. Still as it is D4 there should be no shortage of interest.

we would probably all like to live in D4 (if it were not for all the southsiders) but what is of issue here is not the address but Elainem's financial wellbeing. Irrespective of anyone's views on the futures direction of Irish property prices these D4 properties are not generating adequate income relative to their market values - remember the the gross yield on these two houses is less than 2%. Given that the renovation costs of the larger property would probably consume 2 year's worth of rental income it makes even less sense to hang on to them.