Is there better low risk investments than owning your own house

J

jakearmitage

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I turn 45 next year. I've been thinking of buying a house in the city I live / work in for the past 2 years. However now I'm not so sure. I'm not really happy in my current role and would be open to moving . I'd even be open to contract work and moving around Ireland and main land Europe. However there is the lingering thought in the back of my head that if I don't buy soon I never will. I'm single with no dependents and I don't want kids now at this stage of my life so I am basically asking would it be a good idea to get on the property market before it's too late or is there alternative and better investment strategies I could implement
 
Hi Jake

A very difficult problem.

To answer the question in your heading, your first financial priority should be to buy you own home. It gives you great financial and other security. The benefit in terms of saved rent is not taxed. Any capital appreciation is exempt from CGT. It's ignored in means tests for social welfare benefits. And generally, the cost of renting money is lower than the cost of renting property.

But the costs and risks of buying and selling property are quite high.

So, I would suggest that you prepare to buy a house, but don't buy it until you know or reasonably expect to be living in the place for the next 5 years or so.

If you expect to wander around, you could buy a property as an investment to give you a hedge against rising rents. But it's not a great idea. Tenants are difficult. And if you subsequently do settle in one place and want to buy a home, your potential will be greatly reduced as you will have your funds and mortgage tied up in an investment property.

Brendan
 
The thing is if I buy it needs to be now as I'm in a permanent job but If I go contracting the banks would be reluctant to give me a mortgage. Let me put it to you this way. I won't be staying in my current role so it means I won't be living in this city . Bearing that in mind do you think I should still buy . The scope to make very good money is there with contracting so I am wondering if there is better options of investing a few grand a month as opposed to paying 1000k a month on a mortgage and hoping I at least get it back on rental income
 
When you invest in a property you break every rule of investing:
- You invest in a risk asset class with a low return
- You fail to diversify your risk
- You borrow to invest
- The rate of return does not match the risk
- etc
Although it you are Irish you many not think the rules don't apply, but still struggle to explain why Irish household lost more wealth in the last recession that most other countries - they like to blame everyone and everything than the fact that they were invested in a high risk asset class.
 
jakearmitage said:
Bearing that in mind do you think I should still buy .
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No, for the reasons in Jim's post, you should not buy as an investment.

But if you choose to contract, you may not be able to get a mortgage.

You should invest in a diversified equity portfolio or fund as an alternative.

Brendan
 
This is what you would have TODAY if you had saved €2000 pm over the LAST 10 YEARS from a Global index. less charges and taxes
 
Jake, you going on 45. The older you get the shorter your mortgage term from the bank. Do you relish the thoughts of renting well into your retirement years?
 
I think for most people owning your own home can be seen as a form of investment; or at least as much as an investment as paying off your mortgage early / investing in solar panels to reduce energy bills. Notwithstanding furnishing costs, trapped equity etc ... when most people buy their own home they're saving themselves the costs they otherwise would have incurred by being in the private rental market. I think interest rates would have to be fairly astronomical to outweigh the financial benefits.
 
Suppose you and your next-door neighbour swapped houses and charged each other market rent. You'd both pay income tax on the rent and CGT on any increase in values.

It is very, very tax efficient to live in your wealth as it is untaxed compared to the alternative things you could do with it.

You can overdo it of course, there are plenty of elderly people living alone in 4-bed houses. But when you have a family it makes financial sense to live in as big a house as you can afford.
 
Look ahead said:
Jake, you going on 45. The older you get the shorter your mortgage term from the bank. Do you relish the thoughts of renting well into your retirement years?
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There is nothing wrong with renting, especially in retirement when you can pick the location independent of work and other requirements. In early retirement he, like many Europeans, would be free to live in say Portugal and enjoy the low tax breaks, move close to two or large city later to have easier access to medical service, hospital etc....

There are alternatives to being stuck in a single location in a damp, wet climate all of your retirement...
 
Relative to what though?

It’s generally preferable to own your own home.
 
Why not think about a small house in an area that you might like to retire to eventually? A holiday house that would give you a base to return to during contract breaks or in case work dried up for a few months. Maybe for friends or family to holiday in when you're not there. Something small with a low enough mortgage that you could keep paying in the background while contracting/renting elsewhere and safe enough to lock up and go for a few months.
 
If you are planning on contracting in your next job does your profession allow you to work from home? If it does maybe the location of your home is not so important?
 
Marc said:
This is what you would have TODAY if you had saved €2000 pm over the LAST 10 YEARS from a Global index. less charges and taxesView attachment 6732
Click to expand...
I presume that is in an etf or fund that does not have deemed disposal and exit tax every 8 years. I think the main thing from an Irish perspective is to find an investment that is outside that onerous taxation regime. I know you have bespoke investments that get around this

I would love to see a similar graph showing this index with 2 lump sum investments , one showing returns for a European investor and the other showing the same investment for an Irish investor after deemed disposal tax at 41% has been lopped off at year 8
 
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That’s the FTSE all world index. An ETF is just a fund that tracks an index.

Yes our most popular service is investment consulting and getting Irish investors a tax efficient portfolio
 
Why would you want to explore paying more tax than you need to?
 
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