What to do - Anyone?

ClubMan said:
Obviously this does not constitute comprehensive tax advice especially since I am not an expert so you should get independent, professional advice yourself.
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Just to expand on this, the vast majority of advice recieved on AAM (or any other forum similiar) is given by people who have no expertise. It is to be taken as guidance to assist you in getting familiar with the terms that are relevant and some of the potential issues.

Where advice is given by a professional (AAM is serviced by many Tax/Accounting/etc professionals) it is still just a glancing overview. Given the limitations on the exact details which can be provided on a public forum, even a professional can't give conclusive advice (we[non professionals]/they[professionals] can point out "not a PPR = CGT due" but can't go into all possible exemptions [secondment etc] relevant to the poster) on individual matters specific to the poster so should only be seen as guidance and not specific advice.
.... Very OT, but relevant so thought I'd throw it up.
 
No offence to all the contributors but if it was my money and there was several grand at stake on a tax matter i'd be getting the best professional advice I could. In the same way that if I was suing someone I wouldn't set out all the details on a public forum and ask how i should do it and then head off to sue them myself. I'd go to a solicitor.
 
I totally agree - no matter what feedback/guidance you get here you should always get independent, professional advice on tax and other (e.g. investment) matters relevant to your specific situation before acting. Especially when the figures or the potential costs of making a mistake are significant.
 
Hi Bop.

This is my advice;

Do not sell it - rent it out. If you sell it you will probably end up with around 150K in your bank(after paying off mortgage and CGT), instead of having an asset worth 330K and rising in value more than the bank is going to pay for your 150K. I know in this scenario, there is still a mortgage on it, but that will be paid by your tennants. You probably have a low enough mortgage that the rent will cover it.Think of 20 years time - the mortgage will be paid off (by someone else) and you will have an income generating asset probably worth a million. Whereas the 150K you would get by selling, is probably gone. It's a no-brainer.

Best of Luck
Johnnie
 
Reading between the lines, I think what the OP really wants to know is if her apartment will continue to increase in value. If it appreciates in the way JohnnieKippe describes and is worth a million in 20 years time then it is a no-brainer.

Of course if its value falls then its a different story!
 
JohnnieKippe said:
Hi Bop.

This is my advice;

Do not sell it - rent it out. If you sell it you will probably end up with around 150K in your bank(after paying off mortgage and CGT), instead of having an asset worth 330K and rising in value more than the bank is going to pay for your 150K. I know in this scenario, there is still a mortgage on it, but that will be paid by your tennants. You probably have a low enough mortgage that the rent will cover it.Think of 20 years time - the mortgage will be paid off (by someone else) and you will have an income generating asset probably worth a million. Whereas the 150K you would get by selling, is probably gone. It's a no-brainer.

Best of Luck
Johnnie
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There's a lot of speculation in your outlook there Johnnie. You have to be careful with the assumptions you're making on both future rental demand as well as future capital appreciation. I think it's anything but a no-brainer under current conditions.
 
Afuera said:
There's a lot of speculation in your outlook there Johnnie. You have to be careful with the assumptions you're making on both future rental demand as well as future capital appreciation. I think it's anything but a no-brainer under current conditions.
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Afuera,

I agree with you,there is a lot of speculation there. I do not have the various figures so I am only dealing in general figures.

Peoples views depend on whether they think property prices will continue to rise (albeit slower than the last decade) or whether they think prices will fall. I think the former will be the case.
 
ClubMan said:
How can a speculative approach based on general figures be a "no-brainer" so? :confused:
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As mentioned above, for people like me that believe that property prices will continue to rise, it is a no-brainer. An income generating asset worth 1 million in 20 years time versus 150K now to me is a no-brainer.
 
I can hear the opening of the "Current market sentiment towards property prices" can of worms...
 
Sorry everyone, didn't mean to open that particular can of worms.
I understand what you're saying Johnnie and your way of thinking was exactly ours until we looked into the whole area of CGT and all that business.
Also, being a landlord is no easy thing. Of course you can luck out and get great tenants and have a hassle-free time with them. Or not. I was a tenant myself and we expected our landlord to come around and fix anything that went wrong at the drop of a hat. And unfortunately it's unlikely that rental income would cover the full amount of the mortgage; it's likely we'd be subsidising around 100euro on top of our new hefty mortgage.

And finally we have to consider that the appt might not get any more valuable than current estimates.

Oh decisons decisions!!
 
Let me comment on a few of the issues you raised (just to confuse your decision process further :) )

I understand what you're saying Johnnie and your way of thinking was exactly ours until we looked into the whole area of CGT and all that business.
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Surely if you sell now you have to pay CGT. If you sell down the line you have to pay CGT. So I don't see any reason why that would make you want to sell.

Also, being a landlord is no easy thing.
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You can get an agent to manage it for you. Thats what I do with my properties. It means there is not as much hassle involved. They get new tennants when required. Yes you pay for the service but it is deductable from your rental tax bill.

Of course you can luck out and get great tenants and have a hassle-free time with them.
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Thats right and remember there are a lot more decent tennants out there than dodgy ones. I have never had a major bad experience with tennants (over a few properties over a few years). You do get the odd issue, but nothing major. Probably the main issue you will get is the odd month where you do not have a tennant and you have to pay the mortgage.

And unfortunately it's unlikely that rental income would cover the full amount of the mortgage; it's likely we'd be subsidising around 100euro on top of our new hefty mortgage
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.
You could switch it to interest only for a few years and then the rent would cover the mortgage with a bit left over. After a few years, rents will have gone up so you can then switch back.

And finally we have to consider that the appt might not get any more valuable than current estimates.
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Unlikely I think. At the very least they will increase at the inflation level.

Johnnie
 
JohnnieKippe said:
Surely if you sell now you have to pay CGT.
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No - since (as far as I can tell from the original post) the property in question is their PPR and they are not yet a year out of it so any resale gain would be CGT exempt right now.
You could switch it to interest only for a few years and then the rent would cover the mortgage with a bit left over.
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Do you know this for a fact in this specific case?
After a few years, rents will have gone up so you can then switch back.
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"Will"? You mean "may" surely?
Unlikely I think. At the very least they will increase at the inflation level.
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Pure speculation.
 
JohnnieKippe said:
They are living there over a year.
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So what? That's irrelevant to what I was saying. As long as it has always been their PPR as long as they have owned it and they sell it within a year of vacating it as their PPR then any gain is exempt from CGT.
 
ClubMan said:
So what? That's irrelevant to what I was saying. As long as it has always been their PPR as long as they have owned it and they sell it within a year of vacating it as their PPR then any gain is exempt from CGT.
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Fine. I bow to your superior knowledge Clubman. The potential gains still outweigh any potential CGT (you could hold onto it, get income for your whole life from it and pass it on to your kids) - yes Clubman I know there would be inheritance taxes then, and yes I am using pure speculation as to whether they have kids or not (or will in the future).

Nobody knows the future, so any decision is based on speculation of what might happen in the future.
 
Just to clear up the CGT issue there lads. I've been living here for three years as my PPR so i won't be paying CGT if i sell now.

THe property was purchased for 180,000. Then i remortgaged to 220,000 a year ago. There is about 208,000 remaining now with approx a 28 year term left.

The way i see it is that the current mortgage payments of about 1066 will rise to approx 1200 without mortgage interest relief so maybe an interest only mortgage might be ok but then if i hang onto it as a landlord, i would be liable for 20% on any gain from 180,000 euro up.

Am i right?
 
thebop said:
The way i see it is that the current mortgage payments of about 1066 will rise to approx 1200 without mortgage interest relief so maybe an interest only mortgage might be ok but then if i hang onto it as a landlord, i would be liable for 20% on any gain from 180,000 euro up.

Am i right?
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Only if you sell it - you can keep it forever. What rental income would it get ?
 
It would make 1000 - 1200 monthly.

If i keep onto it, i would have to remortgage another 20K to fit out new house i'd imagine.

I checked online rates and an interest only mortgage for 228K would be about 970 per month.

Would i break even after paying taxes then perhaps if i rented it out. I'd love to keep onto it and if i could break even, i probably would
 
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