Sell one house or 2? Need advice.

Hi,
I am living in London 4 years and have just moved into a new pad. I needed 100k deposit which was lent to me by my brother. I have one year to pay him back. I have a property in Dublin that I will sell-
Value: 300000
Mortgage: 0
Profit liable for cgt: 150000
Net amount available to me 250000

However...
I have a mortgage based on an investment property in a town 1 hour from Dublin
Mortgage 300k
Current value 150k(purchase price 350000)
Loss in terms of CGT 200000

If i sold this first I could offset gain on other so I would end up with 200000k.
Does this make economic sense?
You may require further information.
Current mortgage on this property in negative equity is interest only tracker Permtsb- 1%
Mortgage monthly payment E300 Rental income E1000
(and a final point is that this mortgage is in fact secured on 2 identical 3 bed semis - I bought each for 175000k and they are each valued at 75000k currently :-( )
Would very much value your opinion
nbc

Hi nbc

Is the following summary correct



You shouldn't sell the property with the very cheap tracker mortgage as it's so profitable for you.

Would it be possible to get a mortgage on property 1, the €300k loan.


Brendan

Hi Brendan
Thanks for such a prompt response.
No- There is one property debt free values at 300k and another mortgage of 300k secured on 2 identical properties each worth 75000.
I guess I've had my fill of property and favoured selling outright as opposed to getting a mortgage- Do you think the latter is a better option?(I have one other investment property in Dublin if I sold all the others this would remain- its valued at 250k and has a 125 mortgage at 5% outstanding- I could pay off this and still have my 100k or close to it for my brother)
Nbc

I have edited the earlier post with what I think you mean?

What is the story on the UK property? How much is it and how much is the mortgage?

I don't think you should sell Property 3 as it's a huge earner for you.



Mortgage monthly payment E300

That seems very low, but in any event, the interest is what matters, and it's only €250 a month.

At the moment, you are making a profit of around €7,000 a year.

If you sell it, you will lose this profit and have to pay, say €6,000 interest on the €150,000 you would need to borrow to pay off the shortfall. So selling it would leave you worse off by €13,000 a year.

Let's say you sell Property 4
You pay less CGT, and keep the CGT losses available on Properties 2&3 against number 4.
You lose your cheap tracker, but it's €125k compared to €300k.

Let's say you sell Property no 1, but keep all the others
At the moment you have unrealised losses on these of €125k. The properties are worth €400k. So the properties have to rise by 30% to wipe out the unrealised CGT losses.

You keep your really cheap trackers.

You will have €250k cash.

You will reduce your exposure to property.

You will reduce your borrowing and vulnerability to interest rate rises.

This amount of cash will probably let you get a cheaper LTV mortgage in the UK, so you gain there as well.

On reflection, with all the information now to hand, I would say that you should sell Property no 1 and hold onto the others.

Thanks Brendan- Interesting. Property 4 which is the one i had planned to hold on and clear mortgage from the sale of 1 is not a tracker- EBS 5% aprox.
I purchased this for 200k and its worth 250 k.
The other info is all correct

Then Property 4 is clearly the one to sell.

You will only be "wasting" €50k of Capital Gains.

You are getting rid of an expensive loan, instead of a cheap tracker.

You are reducing your exposure to property.

Brendan

Thanks Brendan,

If I sell the house with no mortgage, sell off the property in negative equity and so save 50k in tax and then from the funds left over(200k aprox) more or less pay off the one remaining mortgage at 5% doesn't this also reduce my property risk and get rid off an expensive mortgage. Yes I no longer make the 7k profit that the tracker mortgage is providing but the rate on this may go up in time.
nbc

nbc said:

If I sell the house with no mortgage, sell off the property in negative equity and so save 50k in tax

Click to expand...

The €50k in tax saved is an illusion. You don't need to sell that now. In reality, you would be delighted to be paying CGT because all your properties shoot up in value.

Selling Properties 2&3 would be a big mistake.

Brendan

Ok
I will have to give that serious consideration. Many thanks for the advice!
N