Investment property - should I sell & what then?

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sam h

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I've had a read of this key post Should I sell my home or keep it as an investment? and it doesn't really suit my situation.

We have a investment house with no mortgage & I'm seriously considering selling it, but my OH thinks we should keep it as a pension.

The house (along with most, is probably worth about 60% of what we could have sold it for 3 years ago (though probably would have opted for bank shares at the time so no real regrets not selling at the time!!!)

I've had a bad run of tenants over the last few years, the yield is low, the hassle is high, the costs are rising (older house, needs constant maintenance, PRTB, BER, NPPR, and God know what next) and rents are falling.

The house was a PPR for half the time so we'll owe about 11% tax on the gain since it was bought plus outlay costs involved in selling.

We could sell and make a decent gain....but then what do you do with such a significant amount of money?

I also appriciate my figures are not 100% right and would get some professional advice, but would like to have my head somewhat around it first.

We could sit on it for the kids/pension etc - but I worry it will become more of a white elephant than an asset.

I appriciate it's not the worst situation to be in, but I would welcome any advice. Don't think I'm allowed to put in my "fag box" numbers, so sorry if it seems abit vague!
 
"Keeping it as a pension" is not a valid argument. It's better to keep it than to blow the proceeds on your lifestyle. But you can sell it and invest the proceeds better.

It may be worth keeping it for the kids. But is it in the right location for them? Will they want it? Unless it's pretty sure to be the right property for them in the next few years, then this is not a valid argument.

Look at it from the other direction. Let's assume you sell it and you have around €400k after paying all costs and taxes. (You might supply your own estimate of the figure).

Where is the best place to invest €400k?

Would you buy an investment property with it? Probably not.

So that probably suggests that, in principle, you should sell. The timing of the sale would be another issue. You might wait for prices to rise, but if you wait, prices might fall further. That is your call.

If you are not currently contributing the maximum allowed to your pension scheme, then you should probably do that first.

If you have a mortgage on your home, then you should consider paying this off. Don't pay it off if you have a very low tracker.

After that, invest the proceeds in a portfolio of shares. Over the long-term they should beat other asset classes. And they are very liquid. If you need cash you can sell part or all of them. You can't sell part of a property, although you can remortgage it I suppose.

Brendan
 
No surprise that property market is in very bad situation at present, nothing is moving unless its heavily discounted and with flood of properties on market it is a big hassel to sell something.

If you can wait then better wait as you have minimum outgoing on property. By wait now I dont mean that prices will go up but you seems to be in position to wait 3-4 years around rather than selling property now.

Have a think that in Sep 2010 bank gaurantee on deposits will end as well and with share market being over performing at present is due to crash soon (my thinking).

So you have your options unless you have some brilliant idea to put your money into.
 
Billo said:
Which market is over performing ?
Click to expand...

Perhaps this is not the post to discuss shares but in a nutshell if you just overlook world's major indexes they have all doubled since fall last year/early this year. Below are yearly gains quoted in dollar:
S&P 666 to 1,126
Nasdaq 1,265 to 2,295
Dow 6,469 to 10,580

Well it seems a second correction is long due.
 
Thanks Brendan - had a reply ready yesterday & PC crashed (hope thats not a sign!!!)....sorry, i can't seem to multi quote!

Keeping it as a pension" is not a valid argument. It's better to keep it than to blow the proceeds on your lifestyle. But you can sell it and invest the proceeds better.

We're not the type to blow it on lifestyle (could probably do abit more of that though now we have our bases covered!!).

It may be worth keeping it for the kids. But is it in the right location for them? Will they want it? Unless it's pretty sure to be the right property for them in the next few years, then this is not a valid argument.

Re kids - the thinking was seeing so many mid 20's year old struggle to get on the property market we said we'd keep it so they would have a deposit if needed - seemed like a plan when prices were increasing, but may be the time to liquidate. With prices so stagnant/decreasing, there is also the opportunity cost involved of having so much tied up in such an illiquid asset which is not generating much income

Look at it from the other direction. Let's assume you sell it and you have around €400k after paying all costs and taxes. (You might supply your own estimate of the figure).

Rough figures :
Paid 54000
Worth 300000
PPR for half the time so CGT would be about €27k
Last years net rental income about €4k
Selling cost ??
Very roughly should have over €250,000


Where is the best place to invest €400k?

Thats the €250k question!!

Would you buy an investment property with it? Probably not.

Probably not in current market, but may consider somewhere abroad if the OH would take some hols....hol home, not investment !!

If you are not currently contributing the maximum allowed to your pension scheme, then you should probably do that first.
House is in OH name & tax paid at top rate (I'm on lower rate).

If you have a mortgage on your home, then you should consider paying this off. Don't pay it off if you have a very low tracker.
No mortgage

After that, invest the proceeds in a portfolio of shares. Over the long-term they should beat other asset classes. And they are very liquid. If you need cash you can sell part or all of them. You can't sell part of a property, although you can remortgage it I suppose.

I think this is where the OH is not so sure, the bank shares seemed such a safe bet a few years ago & are now worth nothing. At least with property, there is always the bricks and mortar so you can live there, paper is worthless. We have some investments in shares - not a huge amount, but with the mortgage now sorted, we will have extra cash to look at building up a bigger & more diversified portfolio

Anuj21k - we can afford to wait, but if do you really think the property market will be in a better shape in 3 years time ?
I'll do some more research into the indexes
 
sam h said:
Probably not in current market, but may consider somewhere abroad if the OH would take some hols....hol home, not investment !!
Click to expand...
If you put EUR 250,000 in a demand deposit account you could take the OH away for a few weeks a year on the interest. Holiday homes in my opinion are an expensive luxury and a false economy.
 
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