What Should I Do With 800k?

J

Jamesg90

New Member
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1
Hello everyone,

I've recently inherited €800,000 and am seeking advice on how to manage it.

**Personal Details**
- Married: 34 (me), 29 (spouse)
- No children yet, but we plan to start a family within the next 1-2 years.

**Income and Expenditure**
- My Annual Gross Income: €90,000 (self-employed, business generates ~€150,000/year)
- Spouse's Annual Gross Income: €42,000 (PAYE)
- Combined Monthly Take-Home Pay: ~€6,800 (roughly)

**Savings and Assets**
- €800,000 in liquid cash (after tax)
- €50,000 in company funds (pre-tax)
- €50,000 in a pension (contributing €2,083/month from the business account)
- €25,000 (roughly) Spouse’s public pension
- €100/month in stocks for the past 1.5 years
- €30,000 Emergency fund

**Loans (planning to pay all off in full soon)**
- Home improvement loan: €65,000
- Other loans €80,000
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### Key Concerns and Questions

1. **Home Purchase**
- We are planning to buy a new home (not close enough to work). The current home we live in, which we’ve renovated, is owned by my parents and I will eventually inherit it. However, if we move out, we won’t generate rental income from it.
- Our dream home costs about €700,000+, but we want to take advantage of the Help-to-Buy scheme, which limits the purchase price to under €500,000. This means sacrificing our dream home for now.
- We plan to live in the new house for at least five years (the minimum required by the Help-to-Buy scheme before we can rent/sell).
- **Question:** How much of our savings should we use for the down payment on the new home to maximize the €30,000 from the Help-to-Buy scheme?

2. **Investing**
- Instead of investing heavily in stocks (due to high taxes in Ireland), we’re considering buying investment properties. Landlords are hated but I don't see any other option to generate wealth in this country!
- **Question:** What percentage of our savings should we use for a down payment? Should we purchase an investment property outright, or should we leverage a mortgage and let the bank pay?

3. **Pension Contributions / Entrepreneur Relief**
- I'm unsure how to balance pension contributions, and Entrepreneur Relief, paying myself and property investments.
- **Question:** How do I strike the right balance between these?

4. **Forever Home**
- Should we say “feck it” and buy our forever home now for €700,000+ and forget about investment properties? I will eventually inherit two-family homes, and we both have stable jobs.

I know an investment property(s) would leave us in good stead in later years!!!
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I realize we're in a fortunate position, but these future decisions are still challenging. I’d love some advice from those with experience! Im worried if we went down the road of buying the home for under 500k that we would not be able to move out of it in 5/6/7 years and into the home we want for 700k+.
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Any advice welcomed outside of what we are thinking in regards on what to do with our savings.

Thanks in advance for any recommendations
 
Jamesg90 said:
- Instead of investing heavily in stocks (due to high taxes in Ireland), we’re considering buying investment properties.
Click to expand...
Concentrating on one asset class and geographic region isn't a good idea from a diversification point of view. Investing in a diversified basket of shares or even one or two conglomerate companies is a much better idea from a diversification perspective. Taxation of equities held directly is the same as investment property - CGT.
 
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a) you don't need help to buy, go buy your forever home mortgage-free
b) if you plan to keep those two inherited properties as a landlord, then buying another one now would be madness, you'd be totally over-exposed to Irish property. Maximise your employer pension contributions and invest in world equities. I think you're overstating the benefit of property investment right now - you'd be buying at market highs in a booming economy. Throw your mind back to 2008 when both prices and rents collapsed due to the GFC, yes because house prices were a bubble, but rents collapsed because of huge net migration outflows as jobs disappeared.
 
You are worth about 800k nett, you have a good income and you expect to inherit 2 houses in the future. It's a false economy to allow the Help to Buy scheme influence your decision.

If it were me, I would put aside a sufficient emergency fund, then buy the house that I want even if it required a small mortgage. Once all that is sorted, I would look at maximising my pension contributions in a well diversified equity based fund with low charges while saving for the kids education.

Hope this helps...
 
How much would it cost to buy house, then sell it in 5 years and buy another, all to get 30k in HTB grant?
Would you have other expenses in having a 2 hop strategy to your dream home, if it were me I'd buy where you want to live and if that's more than 500k so be it, why would you want 2 moves in 5 years, the unrest in maybe not being able to buy dream home without selling existing home,
If your dream home in dream location is over 500k, forget about HTB and buy from your existing resources.
 
3CC said:
Once all that is sorted, I would look at maximising my pension contributions in a well diversified equity based fund with low charges while saving for the kids education.
Click to expand...
I agree with all of your points but one pedantic point on the last bit - don't think of the "college fund" as a separate silo but deal with the finances in a more holistic manner:

Late 30s Couple, 2 kids, Seeking Guidance to Optimise Family Finances

Long time reader of the forum and would be very interested in people’s thoughts about our own situation. In the last 3 years my wife and I got married, had a baby, bought our first home, and replaced one car, so our savings have taken a huge hit. We also have a second baby on the way early next...
www.askaboutmoney.com
 
Reactions: 3CC
Remember that moving house costs money too. I'm not sure what help to buy gets you but my last house move cost a minimum of 13k in fees and even more in hassle, time and stress.

Consider also that as a cash buyer you might well negotiate a lower price on your dream house than if you sell on in a chain for your next place.

Furthermore if you feel you are in your 'second last' house you won't invest in it the way you really want to and what will await you is a nightmare if stress between getting a new mortgage, another bidding war, fear of exiting the market at the wrong time. OK you might end up a few grand better off if the cards fall correctly for you but it's not certain. My vote is for you to go straight in on the dream house with the cash and then you can spend the rest of your financial bandwidth on the retirement plan.
 
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Also, you should consider transferring standard rate cut-off point to yourself, then maxing out your spouse’s AVC’s at 40%, asap to get 2023 claim by end Oct as well as 2024 - subject to what they can do in a public service pension, which I’m not overly familiar with. But this would get you guys two tax-free lump sums on retirement, as well as more flexibility as to when different pension pots can be drawn down.
 
It's difficult to understand the thinking or logic of the house purchase under Help to buy and defer buying the dream home. You already know what your dream home is, so buy it and enjoy it.
 
To qualify for Help-to-buy you need to have a mortgage on the property of at least 70%. So a €500,000 property requires a €350,000 mortgage which will cost you about €61,000 in interest over the 5 years you need to keep it. That makes no sense when you’ll have cash sitting there earning half that.

Buy the home of your dreams.
 
The OP doesn't make any sense to me.

Having lots of money but forgoing your dream home to save €30k, even given the cost of stamp duty, legal fees, moving fees, loan interest.

Entrepreneur relief doesn't apply to assets of the company. You can't just build up large cash reserves, liquidate the company and take the cash out at 10% CGT. It's intended for the sale of the business. Build up the value of the business, not the cash reserves.

Rental income is taxed at income, so you will be paying 52% tax on rent. Tenants have all the rights in Ireland, so don't think it is just a case of money hitting your account every month. If there's any issues, you could go years with getting no rent. That's a real risk that you take in being a landlord in Ireland. Meanwhile, you can invest in stocks and just forget about it.

You may inherit two houses eventually but it may be in decades. You should be in control of your own financial future and any future inheritance is a bonus.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
They don’t need to keep the mortgage for 5 years. They can get a variable rate mortgage and pay it off the day after they buy the house.

Still daft to buy the house they don’t want for only 5 years just to get the Help to Buy.
 
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