What to do invest or buy?

I

Ian McGuffin

Guest
My wife and I are in our early forties, childless and (intending to stay that way) mortgageless. Our property has a market value of approx 230k. We are both working and earn approx 46k pa in total together. We are thinking of our future in relation to our retirement. We have thought about buying a second property but it's a lot of hassle and in the end it's only the banks that make money. Is there anything we can invest approx 12k pa in that we will get a better return on that property or is a second property the way to go? The danger of the second property and taking out a new mortgage is that if the current property isn't always rented we would be strapped from time to time
financially. At the moment we would be able to get approx 700pm to rent the property. What are the tax implications re a second property?
 
Hi Ian,

If you're considering your retirement, have you investigated your options regarding maximising your pension contributions? You get tax relief on contributions and the investments themselves are a tax-exempt environment.

Tax on a rental property works as follows: - you pay Income Tax on rent, less certain allowable expenses (mortgage interest, letting agent fees, ongoing bills for the property etc.) and when you sell the property, you pay Capital Gains Tax on the profit you have made.
 
Also bear in mind that building a diversified portfolio comprising a mix of investments, asset classes, risk/reward profiles, geographic regions etc. is normally a prudent approach. Concentrating on a single asset class, risk/reward profile and geographic region (e.g. investing in domestic Irish property by owning your own home and an investment property) involves risks not associated with a diversified approach. The tax treatment of rental properties is covered in detail elsewhere including in the Property Investment forum and FAQ. If in doubt about what's the most appropriate investment strategy for your specific circumstances then get independent, professional advice.
 
Hi Guys.
Thanks for replying. From the replies it seems that a pension would be the best option. I haven't actually started one yet and I don't know if having a diversified portfolio would be too complicated. I don't know if you can give recommendations on the site or not but who or where could I go to get proper advice? I find pensions a bit complicated and I just want someone to explain it to me in simple terms who doesn't have vested interests and isn't trying to sell me something. Thanks.
 
Ian , you should check out the option of AVC's ( Additional Voluntary Contrbutions) to a pension plan that you might start. You say your in your 40's , for your age you will be able to put 25% of your salary. Any AVCs you make will be eligible to full income tax and prsi relief .
 
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