Investment strategy for 500k leftover cash after forever home purchase

W

Windsor23

Registered User
Messages
14
Personal details

Age: 50
Spouse’s/Partner's age: 48

Number and age of children: 1. 14yrs


Income and expenditure
Annual gross income from employment or profession: 110k
Annual gross income of spouse: 120k

Monthly take-home pay; 10k approx

Type of employment: Self-employed company directors

In general are you:
(a) spending more than you earn, or
(b) saving? Saving


Summary of Assets and Liabilities
Family home worth €1.5m with a €450k mortgage
Cash of €500k
Defined Contribution pension fund: Executive pensions €200k each (3 yrs old)
Company shares :
Revolut share platform €15k (mostly tech)

Family home mortgage information
Lender BOI
Interest rate 3.4%
Type of interest rate: tracker, variable, fixed. 4 yr fixed
If fixed, what is the term remaining of the fixed rate? 4 years
If tracker, what is the margin e.g. ECB + 1%

Remaining term: 21 years
Monthly repayment: €2450

Other borrowings – car loans/personal loans etc None

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?



Other savings and investments:

Do you have a pension scheme? Yes - executive pension funded yearly by our limited company.

Do you own any investment or other property? Small site with full planning permission valued at circa €130k

Other information which might be relevant

Life insurance: Mortgage protection 500k


What specific question do you have or what issues are of concern to you?

We've just bought our forever home in our preferred destination, so all of the above figures are completely up to date. After the purchase, we now have excess cash of €500k approx which is a combo of careful savings over many years with the dream move in mind and equity from our previous home.

We know we could have bought outright without a mortgage, but we are at the age where this is the last time we'd qualify for one, and are also well capable of paying the monthly amount. Plus I felt leery about throwing every penny we had into one single asset when by rights we should spread things out a lot more investment-wise but I suppose we kept holding off doing anything until the 'dream house' was secured.

Now that this has happened, we have a couple of options available to us. We already own a small site in another town with planning permission and a bigger plot next door has come up for sale which we are considering buying for 200k. This one doesn't have planning permission but by combining both we can add value and due to its favourable location and current zoning rules, have investigated the likelihood of getting permission for up to four houses onto it which appears reasonable. So that's one potential avenue for the extra cash that should offer some growth but also some risk.

Leaving approx 300k, which we'd also like to grow, but because we are self-employed, always like to keep a pot of savings on hand (a habit!) but we know this is too much and are cognisant of inflation eating away at it too. Not keen on the idea of locking it away for too long since we are quite risk averse but again this is likely because of our narrow savings focus for the dream house, so probably safe enough to let go of that mindset now.

Another obvious route is the pensions which we know are small, but we only started these 3 years ago and the plan is to keep putting in bigger lump sums yearly in to keep company profits and tax bills at a minimum. We also have circa €200k cash in the company currently, which is earmarked for the pensions end of year.

I bought a few shares via Revolut last year mostly to watch and learn - primarily tech shares, and while the amount I spent has grown by 40% or so, stockpicking feels a bit like throwing darts at a wall so I'm not sure it's something I'd be comfortable scaling up on in a major way, definitely not in Revolut anyway given the customer service issues.

We'd also like to do something for our child, a savings or investment plan that they could access when older.

While our mortgage is fixed for 4 years, if interest rates started to shoot up again, another obvious solution would be to pay down the mortgage a bit more or altogether, but for reasons outlined above, we don't feel the need to do that just yet.

So were hoping for a fresh take on our situation and any advice posters could offer.
Thank you
 
Do you really want to get into the business of property development? Seems very risky and you are already very exposed to the Irish property market.

In your shoes, I would keep it simple - sell the existing site, pass on the other site, pay off your mortgage and start piling money into your pensions (you are way behind where you should be in this regard).

Tinkering around the edges with random small scale stock picks is not going to move the dial. Focus on repaying debt and growing your pensions.

You could think about starting a bare trust for your child, making use of the annual small gift exemption (x2). Mind you, it might not be worth the effort given that your child is already 14.

Hope that helps.
 
Sarenco said:
Do you really want to get into the business of property development? Seems very risky and you are already very exposed to the Irish property market.
Click to expand...
No, we don't plan to develop ourselves, just subdivide the combined land into 4/5 sites and get requisite planning permission for each to hold or sell off individually in the future whenever we decide. We've already investigated with the council and individual permissions are the most likely outcome than say for a development. So fairly certain we can add value this way and can also keep for child at a later stage either so a bit like killing two birds with one stone.
 
Unless I’m wrong you have no expertise whatsoever in stock-picking or property development. There is lots of downside risk with both activities and you have no insight or skill to leverage.

In your shoes I would pay down mortgage to maybe €100k, keep a cash buffer in case business turns bad, and stuff your pensions up to tax-relieved limits, perhaps beyond.

Your child doesn’t need an education fund - your income will be more than enough to pay for it.

Good luck!
 
Dr Strangelove said:
Unless I’m wrong you have no expertise whatsoever in stock-picking or property development. There is lots of downside risk with both activities and you have no insight or skill to leverage.

In your shoes I would pay down mortgage to maybe €100k, keep a cash buffer in case business turns bad, and stuff your pensions up to tax-relieved limits, perhaps beyond.

Your child doesn’t need an education fund - your income will be more than enough to pay for it.

Good luck!
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Thank you. No, I wasn't planning on stock picking - as outlined in my post I feel individual stocks are all guesswork and a bit beyond me but thought there might be an easier set and forget it approach for a larger amount outside of Revolut I could consider.

Getting planning permission for the sites doesn't require any skill, just time and paperwork, and it's somewhere I definitely know we can add value and hold onto for a longer period.
We really don't feel any need to pay down the mortgage, otherwise we wouldn't have gotten one in the first place, just hoping to diversify the remaining cash.
University fees are not a consideration either, since there's no guarantee our child will want to do third-level and there are many different routes to an education.
 
Windsor23 said:
We already own a small site in another town with planning permission and a bigger plot next door has come up for sale which we are considering buying for 200k. This one doesn't have planning permission but by combining both we can add value and due to its favourable location and current zoning rules, have investigated the likelihood of getting permission for up to four houses onto it which appears reasonable. So that's one potential avenue for the extra cash that should offer some growth but also some risk.
Click to expand...

In normal circumstances, individuals should not engage in property development.

But your circumstances are not normal.

You have a site with planning permission so you are presumably in a unique position to add value to the €200k site.

You are risking "only" €200k and you can well afford it if it goes wrong.

Buy the site.
Split it up.
Sell the sites.

Yes, there is a risk, but presumably, you have some idea of what the risk involved is and you can handle it.

Developing the houses yourself would be very risky but you don't intend to do that.

Brendan
 
Windsor23 said:
Getting planning permission for the sites doesn't require any skill, just time and paperwork, and it's somewhere I definitely know we can add value and hold onto for a longer period.
Click to expand...

I don't agree with that.
You need to speak to an expert in the area to give you advice on how to maximise the value of the sites.

Brendan
 
Windsor23 said:
I bought a few shares via Revolut last year mostly to watch and learn - primarily tech shares, and while the amount I spent has grown by 40% or so, stockpicking feels a bit like throwing darts at a wall so I'm not sure it's something I'd be comfortable scaling up on in a major way,
Click to expand...

Again, I advocate this strategy to people.

Even if don't like the idea of shares, buy a few shares and see how you handle the ups and downs.

You will learn valuable lessons.

Brendan
 
Windsor23 said:
Getting planning permission for the sites doesn't require any skill, just time and paperwork, and it's somewhere I definitely know we can add value and hold onto for a longer period.
Click to expand...
Getting planning permission to facilitate a quick and hopefully profitable sale is a possible strategy. On the other hand, doing that to retain ownership for a longer period doesn't seem like much of a strategy.

For starters, i expect you'll be exposed to the new annual residential zoned land tax on any uplift in the market value once planning permission is granted.

In addition, the granting of planning permission is in many cases time-limited and the attraction of a particular site to a prospective developer purchaser may in time dwindle if they perceive that renewal of the original permission might entail additional restrictions or costs.
 
Windsor23 said:
No, we don't plan to develop ourselves, just subdivide the combined land into 4/5 sites and get requisite planning permission for each to hold or sell off individually in the future whenever we decide. We've already investigated with the council and individual permissions are the most likely outcome than say for a development. So fairly certain we can add value this way and can also keep for child at a later stage either so a bit like killing two birds with one stone.
Click to expand...
I presume the land is zoned for residential development. Is it serviced by a foul sewer?
 
T McGibney said:
Getting planning permission to facilitate a quick and hopefully profitable sale is a possible strategy. On the other hand, doing that to retain ownership for a longer period doesn't seem like much of a strategy.

For starters, i expect you'll be exposed to the new annual residential zoned land tax on any uplift in the market value once planning permission is granted.

In addition, the granting of planning permission is in many cases time-limited and the attraction of a particular site to a prospective developer purchaser may in time dwindle if they perceive that renewal of the original permission might entail additional restrictions or costs.
Click to expand...
I own a site that had planning permission for many years but didn’t develop. It’s current status is outline planning permission until ready to formalise a fresh application, and it’s my understanding that it’s extremely unlikely the council would refuse it once previously been granted. So the time limit might not be that much of a consideration.
 
Brendan Burgess said:
I don't agree with that.
You need to speak to an expert in the area to give you advice on how to maximise the value of the sites.

Brendan
Click to expand...
Yes, we've already done this, plus had a pre-planning meeting with the council in advance of any purchase so we know the lay of the land so to speak and the risks involved. It feels like a great opportunity since we are best placed to maximise value of the overall sites combined.

The bigger site is zoned residential close to the town centre and sewer access would be via the site we own currently.
 
LLB123 said:
I own a site that had planning permission for many years but didn’t develop. It’s current status is outline planning permission until ready to formalise a fresh application, and it’s my understanding that it’s extremely unlikely the council would refuse it once previously been granted. So the time limit might not be that much of a consideration.
Click to expand...
That may well be true, but during the celtic tiger bubble there was often talk of a rush in certain areas to complete developments before planning permission ran out.
 
In the OP's case, he should buy the land, get the permissions and then immediately sell the sites.

As the time for completing the developments runs down, the sites become less valuable and more difficult to sell as any buyer might have to make a fresh application.

Brendan
 
Brendan Burgess said:
In the OP's case, he should buy the land, get the permissions and then immediately sell the sites.
Click to expand...
Hi Brendan,

I still think it's mad to gamble a significant proportion of one's wealth on a property development venture.

My guess is that the likelihood of planning permission has already been fully priced into the asking price for the site.

The OP should ask themselves why this opportunity hasn't already been snapped up by a professional property developer.
 
Sarenco said:
Do you really want to get into the business of property development? Seems very risky and you are already very exposed to the Irish property market.

In your shoes, I would keep it simple - sell the existing site, pass on the other site, pay off your mortgage and start piling money into your pensions (you are way behind where you should be in this regard).

Tinkering around the edges with random small scale stock picks is not going to move the dial. Focus on repaying debt and growing your pensions.

You could think about starting a bare trust for your child, making use of the annual small gift exemption (x2). Mind you, it might not be worth the effort given that your child is already 14.

Hope that helps.
Click to expand...
Agree with all of this.

Just on the trust bit, if using a life company they have pro forma trust documents, so it isn't that much extra hassle. The trust just falls away at 18 and the parents can continue contributing for as long as they want. If you are getting a solicitor to set up the trust, it may not be as cost effective.


The OP should transfer benefits to a PRSA (it has to go to one soon anyway) and just load up on it, even if they need to reduce their salaries (assuming they have no contracts of employment for their own company).

Steven
www.bluewaterfp.ie
 
Hi Tommy

I would always advise people against engaging in property development as it is very risky. But look at the numbers.

Windsor23 said:
Annual gross income from employment or profession: 110k
Annual gross income of spouse: 120k
Click to expand...

Windsor23 said:
Family home worth €1.5m with a €450k mortgage
Cash of €500k
Click to expand...

Windsor23 said:
Executive pensions €200k each
Click to expand...

Windsor23 said:
We already own a small site in another town with planning permission and a bigger plot next door has come up for sale which we are considering buying for 200k.
Click to expand...

They have €1.7m in net assets + a site.
They have very big incomes.

If they buy the site for €200k and the local authority says that it is a green belt and is never to be built on so it becomes worth zero, their wealth has declined by about 11%.

It is a risk well worth taking.

I will say again, that as soon as they get planning permission, they should sell it. They should not build the houses themselves as that is too risky.

Brendan
 
T McGibney said:
Hi Brendan,

I still think it's mad to gamble a significant proportion of one's wealth on a property development venture.

My guess is that the likelihood of planning permission has already been fully priced into the asking price for the site.

The OP should ask themselves why this opportunity hasn't already been snapped up by a professional property developer.
Click to expand...
All things being equal that's correct, but in this case it's the strategic nature of the site we already own that makes us uniquely positioned to add/confer value to the bigger one. Hence our interest. Though the land tax element is definitely a fly in the ointment of our hold-for-longer plan to be fair.
 
Brendan Burgess said:
Hi Tommy

I would always advise people against engaging in property development as it is very risky. But look at the numbers.









They have €1.7m in net assets + a site.
They have very big incomes.

If they buy the site for €200k and the local authority says that it is a green belt and is never to be built on so it becomes worth zero, their wealth has declined by about 11%.

It is a risk well worth taking.

I will say again, that as soon as they get planning permission, they should sell it. They should not build the houses themselves as that is too risky.

Brendan
Click to expand...
Sorry Brendan, does the 1.7m net asset figure you calculated here include the pensions and/or business cash?
 
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