4 properties - no other assets

I have two properties in D4 worth in total 2.6mil. Both rented out, earing E3,600 per month. I own my own home in midlands worth 320K, a house in Waterford worth 450K, rental 800 per month and a S. 23 worth 190 with mortgage of 170,000.

I am a single parent of two small children. I work part-time, but only minimal pension, and have been at home for 3 years. No propsect of going back to work until children are older, maybe another three to four years.

Currently live on rental income and small, and reluctant maintenance from ex partner.

I find the cost of maintaing the hosue, particularly as one is a period property very costly, and very stressfull. Has anyone any ideas on a home for this money should I liquidate, or do you think I should liquidate it. The property was inherited.

I would appreciate any advice.

Re: Advice re property assets needed

Hi Elaine

You have around €3.5m in total invested in the property market. That seems to be 100% of your assets. It is not a good idea to have all your eggs in one basket. You should definitely dispose of one property.

The best alternative for your money is the stock market. You are looking for a long term investment and you should probably buy a portfolio of shares with high dividends. This is because you don't have much taxable income and most of the dividends will be received by you tax free An alternative, would be to buy the ISEQ ETF .

I think that you should diversify your assets, irrespective of your views on the property market. But as it happens, the current prices of property generally, and in particular in Dublin 4, suggest that there is a significant risk of a crash. People will argue for and against, and I am not predicting a crash. I am just saying that there is a significant risk of a crash.

Property management is hard work. If you are finding the work too much, then you should sell both properties and invest the money in an easy to manage investment.

Brendan

Re: Advice re property assets needed

if you do sell one of the properties then i think you should clear the loan on the s23 property and any other debts you have ,credit card,credit union etc.

i agree with Brendan above but make sure you get good independent advice but i also see that you depend on income from the rental to live on.
if i was in this position i would not be too worried about the pension side as even keeping one property for sale in 40 years time will/should yield you enough to put into a pension

Re: Advice re property assets needed

I agree that you should sell a house but look at the one in Waterford as well. D4 will always be a desirable area and will therefore command good prices.
I'm not saying don't sell D4, I'm saying look at all the options.
Do bear in mind that your return on equity on the D4 properties is less than 2% and that doesn’t take into account costs. Selling them and putting the money in the bank (but not any bank) would give you a better return.

Re: Advice re property assets needed

elainem said:

I have two properties in D4 worth in total 2.6mil. Both rented out, earing E3,600 per month. I own my own home in midlands worth 320K, a house in Waterford worth 450K, rental 800 per month and a S. 23 worth 190 with mortgage of 170,000.

Click to expand...

You actually own (no mortgage), 2 D4 properties, 1 PPR midlands, 1 Waterford?

Re: Advice re property assets needed

Hi! Yes, I actually own these properties without a mortgage, as I said they were inherited. The one in D4 was my family home for a few years until my mother died. She built a mews house in the garden - that's how come there are two Dublin 4 properties.

Thanks everyone for your advice. I really appreciate it. I agree there is a lost of risk with being so heavily invested in property. One of the houses in D4 needs a new kitchen and damp coursing at the rear of the house before it will be let next time. As it is a top of the range house for letting I am facing about 60k for damp proofing, painiting the entire house and a new top of the range kitechen.

I feel the expenses associated with the houses, particularly the period property are very high. The only thing that is putting me off selling these properties is that I will have to pay a huge capital gain on them, as the period house in Dublin 4 has not been my primary residence since 2002 when it was worth about 800k.

My other thought was to sell the properties in D4 (both on the same Deed) and buy newer and smaller houses or appartments to rent out in Dublin, and then to invest the remainder of the money about 500k.

Any advice on this strategy would be appreciated.

Re: Advice re property assets needed

I would dispose of the properties and follow the advice of Brendan but then I am bearish with regards to property in Ireland. The yield you are receiving is quite poor and could be greatly enhanced by diversifying your investments. The difficulty is where to put your money if you did sell. The stock market is quite hairy at the moment.

Re: Advice re property assets needed

I like hairy stockmarkets.......good time to buy!
seriously you need top notch financial advisor and get on the private banking scene along with tax specialist etc etc

Re: Advice re property assets needed

Assets worth €3 mi & the word 'stressful' should not be in the same post.
Do something. Donate the 'stressful' house to Focus Ireland. I think they'd be happy to look after it.

Re: Advice re property assets needed

you are in a position to live quite comfortably off existing assets - I am envious. You need a good financial advisor to guide you through this process. Reducing your property exposure sounds prudent and your advisor ought to guide your towards other asset classes in order to provide you with some diversification.

I agree with beattie - whilst property has served you well so far, Irish rental yields are not attractive enough to warrant further pruchases (even if the property were mortgage free)

You do mention an ex-partner. I take it that the properties are in your name and that they have no claims.

Re: Advice re property assets needed

elaineM

A local auctioneer has told me that there is a bizarre feature in Dublin 4 property prices now in that houses needing refurbishment are getting ridiculous prices from builders, so it's probably just perfect to sell.

I think you should bite the CGT bullet now. CGT is unlikely to fall and it could rise. You will pay 20% of the adjusted gain. Have you done the calculation? The value of the house in 2002 is irrelevant. It will be the gain from when you acquired it and it will be apportioned over the period during which it was not your PPR.

I think that the ideas you are geting here are excellent, and I don't see the need for a professional adviser who will represent only one point of view.

Brendan

Re: Advice re property assets needed

Have you had these d4 properties values at 2.6M?
Seems incredibly low for the area.
Certainly sell now, eevn if prices go up you still will have sufficient cash to make alternative investments with more access to cash as and when needed. Also agree with Brendan re state of property having little affect on price, as it seems lots of buyers want to have 'their' home.

Re: Advice re property assets needed

elainem,

You haven't disclosed how risk averse you are but, a professional advisor would probably tell you to start some diversification as soon as possible. Whether that is equities, deposits, bonds, syndicated or direct commerical property will be up to you. They would probably even advise you to invest in another 'stable' jurisdiction on the property side.

As it stands, 100% in Residential Property in Ireland looks very risky but a more diversified portfolio would appear a better option. It is hard to make this decision as your existing strategy has served you well, at least for capital appreciation, but I think that your assets are not 'working' for you.

Re: Advice re property assets needed

Hi! Keuger, Bendan and John Boys.

Thanks for all the advice. I am wary of financial advisers. In relation to being risk adverse - I am almost completely risk averse - I have two children under 5 -and a long way to go in terms of supporting them and getting them through college. Father very reluctant about financial obligations so I can't count on this indefinitely. I'm a nurse and unlikley to go back to work full-time until they are a few years older.

I inherited the two D4 properties in 2001. Their total values were 500k and 250k (Irish Pounds). I lived in the 500k house until June 2002. The houses are 1850sq feet and 850 sq feet respectively with off street parking for two cars. A house on the same street with no parking and no mews recently sold for 2.2. million, so maybe my values are a bit low. I got them both valued last year by Lisneys and they suggested 2.4 for both of them. I'm glad to hear that houses needing refurbishment in D4 are getting good prices. I really don't want to refurbish. The larger house is listed and its a huge problem in terms of planning permission and price.

Does anyone think that it would be a good idea to reinvest some of the money in say an appartment for the kids for when or if they go to college, and a house in the Dublin suburbs for myself, if I ever wanted to move back again, say when the children are in college and invest the rest of the money. Probably about a million?

Thanks for all the advice.

Re: Advice re property assets needed

i think you need to be careful in what you diversify into,shares are all over place and the price of oil is having a big affect on so many areas.
personally i don't see it as a bad thing that you have all your funds in property.If i had a choice i would sell the big house and keep the mews,paying the CGT and paying the legals to sort out the deed.If somebody wants the house that bad they will be willing to put up with you in the garden.
clear all of your loans with the money and maybe think about buying a house/apartment in Cork or Limerick,the kids may not go to college in Dublin.based on the money left over i would then serioulsy consider retiring for a few years until the kids were a little more self sufficent.this would also give you time to deal with your properties i needs be.. but those are my thoughts.obvioulsy the more money you make the easier you can make your life with regards to work. adn as they say in the ads the value of your investments can rise as well as fall

Re: Advice re property assets needed

I'd be careful what you diversify into also, however that doesn't mean I wouldn't diversify out of property. Even if you put a large sum on deposit for a year or two while the markets stabilise, it's less risky than leaving all of your eggs in the one basket(-case?) i.e. Irish property. I'm sure you could negotiate a very favourable deposit rate for a fixed term of 1-2 years if you're sticking a cool million in the bank! Besides which, you have a lifestyle change to consider also as you are obviously not enjoying the stress of being a landlord.

I'm not sure about the idea of buying an apartment for the kids. Whatever about a property bust, even estate agents see house price growth rates adjusting to ~3% next year, which is just over inflation. If you're a cynic, as I am, then you'll believe that the vested interests are over-stating the case. So while a crash may not occur, house prices look likely to fall in real terms (i.e. house price growth < inflation) at some stage between now and 2019, when your nippers head off to college. That's when you should buy an apartment for them.

Re a house for yourself, why not hang onto the mews? Are you currently renting it seperate to the main house? What is it's yield like? More importantly, would you like to live in it yourself at some point?

By the way, since you've mentioned your pension, it's obviously something you feel may need addressing. I think you should do so, if you do decide to sell some of your property portfolio, but do so in such a way as to take bets advantage of the tax treatment available.

Re: Advice re property assets needed

selling one Dublin property to buy another does not make a huge amount of financial sense given high property transaction costs. Moreover, given current low rental yields the income from the property is not going to generate much more than a high interest bank account. the problem with Irish residential property is that if you are dependent upon the investment income - property currently represents a poor trade-off between risk and return. (your €3,600 in monthly rent represents an annual retun of just 1.7% on assets valued at €2.6m - you would get more on deposit with much less risk and hassle).

buying an appt. for the kids for 3rd level does make some sense but then what if they decide not to study in Dublin (if at all). if this is a consideration then keep the smaller of the dublin properties.

selling at least one of your properties would free up capital and allow you to cash in after one hell of a ride thanks to the Irish property market.

getting exposure to other asset classes can be done in a fairly straight forward and cost effective manner via index funds.

even by having some of your assets in cash you will have achieved a degree of diversification.

Re: Advice re property assets needed

If you want to stay in property you can sell the larger house and invest the money in stocks, bonds and a property fund that own property in Ireland and abroad, as well as having a commercial and residential mix. This will allow you to track the market without the high entry costs.
Considering your personal circumstances you would be mad to keep going as you are. You are asset rich and cash poor and your lifestyle does not match your worth. If for no other reason you should sell.

Re: Advice re property assets needed

i think if you are risk adverse and want to invest for income you need to outpace inflation.
Would agree with high yielding stocks for income.
My worry is that can you psychologically deal with the potential for significant volatility and losses in the stock market.
Without an advisor who can help you allocate and rebalance I sense this could be a very stressful experience for you.
Hedging your position also would be of help.
Consider commodities or covering options etc.
It would cost you damn all to get advice from a number of advisors or stockbrokers in this regard.
If you are wary of the financial advisors AAM can help with a suggested allocation or maybe someone like Eddie Hobbs could help?

Re: Advice re property assets needed

Your main problem is that you are overexposed to property. Selling D4 to buy in some other area doesn't address that problem and will be costly in terms of Stamp Duty, CGT and transaction costs.

You get tax relief on the interest paid on your mortgage, but you should consider paying off the mortgage with any proceeds.

Another advantage of investing in equities is that you can convert them into cash in whole or in part as you need it.

Investing in equities fits in with a risk averse approach. The long term risk of investing in equities is very small. Putting the money on deposit has a huge risk that you will lose a substantial part of it due to inflation.

I would certainly not take advice from a stockbroker. They earn their money from encouraging you to buy shares, then sell them, then buy more. The right strategy is to buy the ISEQ ETF and forget about it.

Brendan