Sell for Profit or Restructure & Hold

[NZNiall]

Hello People,

I have spent the last 3 hours searching and reading thru this site and am getting a serious pain in my head with all the info in here. I am glad I have found this forum as I have a situation I would hope some of you would comment on.

It is my brothers present scenario I present below:



He purchased 5yo semi-d in the Midlands for e212k April 2005. Average of similar recent sales value it at e320k
No Stamp Duty Paid as 1st time buyer.

He has also signed to purchase 2 bed corner Apt in North Dublin off the plans for e345k. Settlement in 10 months. No Stamp duty to be paid due to its size. Similar apts in soon to be build neighbouring building selling for e360k.

There is Equity of e108k in the midlands house. I hadn’t realised there is NO CGT if sold in first 12 months after status changed from PPResidence to Investment Property untill I read it here.

It looks like interest rate rises becoming more regular so this means 2 things can happens:
1.Mortgages become too expensive so He may have a problem getting top dollar for the midland house next year so should he sell now?
2.Flip side is that as affordability reduces more people rent and rents go up so the yield on the Midlands house increases so he now has more after tax cash and his pocket.


As for the off the plans Apt in North Dublin
Mortgage will be 1400 pm. He could rent out a room for some tax free income or He could rent the whole apt out for 1200 pm so Im told. Its initial status be owner occupier so no CGT if he sells it soon after settlement, (which is presently an option) But if he sells it just after settlement there are over 100 of these apts in the block so If 10 others decide to do the same then he is competing with them to find a buyer and this could reduce the price of the apt.


As he is unsure where he will be next year he is left at a fork in the Road:

Does he

A: Sell everything at first chance and put the profit in the bank
B: Keep and Transfer the properties into a company structure, thus taking advantage of the rates of depreciation and as one will be Cash Flow positive and the other Cash Flow negative let them even them selves out.


Now from skimming over the Revenue site and this very forum Option B looks to have the most going for it.

However I would appreciate anyone’s take on this scenario and and any advice/observations.

Thanks in Advance,

Niall


To grow you need capital; To survive you need cashflow.

 

[woods]

B: Keep and Transfer the properties into a company structure, thus taking advantage of the rates of depreciation and as one will be Cash Flow positive and the other Cash Flow negative let them even them selves out.
.

A company that derives most of it's income from rental will be subject to surcharge tax.
If he transfers the property in to a company it is treated as a full transfer and stamp duty and tax will come in to play.
I think that a company should be ruled out.

 

[NZNiall]

Thanks for the quick reply Woods,

Could someone clarify that in the HOLD Scenario,, the alternative is to keep the properties in his own name? Are there structures out there that Property Investors are using that he should follow up on.



I could possibly have rephrased the ending of my initial post.

Should He

A: Sell all the properties
B: Keep as rented investment properties ---- if so what are the structures best used and pros/cons of those structures.

Cheers,

Niall