Decision time as leases are expiring on BTL's. should we sell.

jonahmurphy

Registered User
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17
Age: 54
Spouse’s/Partner's age: 54

Annual gross income from employment or profession: €100,000 business owner
Annual gross income of spouse: €90,000 public servant

Monthly take-home pay: €8200
Type of employment: Permanent

In general are you: Saving circa €3000 a month

Rough estimate of value of home: €850,000
Amount outstanding on your mortgage: €140,000, €1200 a month,
What interest rate are you paying? ECB Plus 00.85%,

Other borrowings:
Property 1, Value €420,000. Mortgage €194,000 Interest only @ 00.80% Tracker. Rent €1680/month
Property 2, Value €160,000. Mortgage €120,000 Capital and interest @ 00.80% Tracker. Rent €755/Month
Property 3, Value €130,000. Mortgage €105,000 Capital and interest @ 00.80% Tracker. Rent €680/Month
Property 4, Value €160,00. No Mortgage. Rent €780/Month

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

Savings and investments: €230,000 National solidarity bonds maturing in 2023, €120,000 cash in the bank.

Do you have a pension scheme?
Yes. Maxed out on all fronts.

Do you own any investment or other property? See other borrowing above

Ages of children: 3 Kids aged 21, 19 and 17.

Life insurance: Both of us have life insurance and i believe well insured.

What specific question do you have or what issues are of concern to you?
We have had all 4 rental properties on the RAS scheme with various different local authorities, it seems a good time to sell. local authorities are looking to sign leases for 10 years.
We don't really need to sell for the money, simply to make life easier and not having to deal with tenants and council etc.
Appreciate any views you may have.

Thanks.
 

Brendan Burgess

Founder
Messages
44,172
Property 1, Value €420,000. Mortgage €194,000 Interest only @ 00.80% Tracker. Rent €1680/month

They are clearly very profitable. This one for example

Rent: €20,000
Interest : €2,000
Profit before expenses and tax: €18k

Equity €220k

You certainly won't get a return like that anywhere else.

Only you can judge how much work is involved and what the hassle is.
 

Brendan Burgess

Founder
Messages
44,172
The usual issues about risk and diversification don't really apply to you.

You can handle the risk and the very cheap trackers mitigate the risk.

You have too much invested in cash as it is. So if you sell your properties, you will just have more wasting in cash.

I hate timing the stockmarket, but there is a significant risk that it is overvalued at the moment.

So my conclusion would be
1) If it's not too much work or if you can farm out the work to a letting agent, then hold onto them.
2) Shift some or all of your cash into equities.

Brendan
 

NoRegretsCoyote

Registered User
Messages
2,813
Other borrowings:
Property 1, Value €420,000. Mortgage €194,000 Interest only @ 00.80% Tracker. Rent €1680/month
Property 2, Value €160,000. Mortgage €120,000 Capital and interest @ 00.80% Tracker. Rent €755/Month
Property 3, Value €130,000. Mortgage €105,000 Capital and interest @ 00.80% Tracker. Rent €680/Month
Property 4, Value €160,00. No Mortgage. Rent €780/Month

Have any of the properties increase in value since you bought? CGT might be an issue if so.

Are you thinking about estate planning? With your wealth your kids will have an inheritance tax bill.
 

jonahmurphy

Registered User
Messages
17
What is the current value of your pension and how is it invested?

It's important to look at your asset allocation across all your accounts.
Hi Sarenco

The current value is about 500K, i have only been active in this area for a few years and have been adding the max % in relation to age and income for the past few years, i have also been funding it through my company.

The pension is with Zurich, Prisma 4 from memory.
 

jonahmurphy

Registered User
Messages
17
Have any of the properties increase in value since you bought? CGT might be an issue if so.

Are you thinking about estate planning? With your wealth your kids will have an inheritance tax bill.
Hi Coyote

Property 1 has, its been on interest only for the past 17 years and has been rented for this period. the same tenants for the past 15 years.

Properties 2 & 3 are and negative by 40K each.

Property 4 i have discussed on AAB before, bank offered a deal whereby i settled a mortgage of about €250K for 155K.
The value is probably closer to €175,000 after a brief chat with an EA locally.

Have not really thought about estate management as yet, i do have a business that is very profitable at the moment and am planning to stay at it until at least 60.

Have been around people who are planning for retirement and they feel the max income needed for a couple to retire should be about 75K for tax reasons, not sure it this is the case.
 

Brendan Burgess

Founder
Messages
44,172
Have been around people who are planning for retirement and they feel the max income needed for a couple to retire should be about 75K for tax reasons, not sure it this is the case.

Not sure that makes much sense. People usually think about the minimum income people need in retirement.

What they probably mean is that they pay 20% tax up to about €75k and 40% after that.

So if they have an Approved Retirement Fund, they should draw down up to €75k a year to use up the 20% tax band in full.

Brendan
 

jonahmurphy

Registered User
Messages
17
Not sure that makes much sense. People usually think about the minimum income people need in retirement.

What they probably mean is that they pay 20% tax up to about €75k and 40% after that.

So if they have an Approved Retirement Fund, they should draw down up to €75k a year to use up the 20% tax band in full.

Brendan
Apologies, that is what i meant. saying that €75K would probably be enough for us.

My wife will receive 50% of final salary and i as a minimum should at least get the state pension.
 

NoRegretsCoyote

Registered User
Messages
2,813
Property 1 has, its been on interest only for the past 17 years and has been rented for this period. the same tenants for the past 15 years.

Properties 2 & 3 are and negative by 40K each.

Property 4 i have discussed on AAB before, bank offered a deal whereby i settled a mortgage of about €250K for 155K.
The value is probably closer to €175,000 after a brief chat with an EA locally.
Well then CGT isn't going to be a material consideration in the scheme of things.

You and spouse can make gifts of up to €3000 each per annum to each child without impacting lifetime CAT thresholds. With your wealth I would already start thinking about it.
 

jonahmurphy

Registered User
Messages
17
Well then CGT isn't going to be a material consideration in the scheme of things.

You and spouse can make gifts of up to €3000 each per annum to each child without impacting lifetime CAT thresholds. With your wealth I would already start thinking about it.
Thanks Coyote

not sure i like the idea of giving the kids money even for tax reasons. all three have good work ethics and have had some form or paid work from around the age of 15 or so.

is there a method of gifting them money but they have on access until they are finished college and have full time jobs etc. (deposit for a house)

i not trying to sound mean i just don't believe is giving money to them as it may stop them for getting of their arses and working for it.
 

NoRegretsCoyote

Registered User
Messages
2,813
is there a method of gifting them money but they have on access until they are finished college and have full time jobs etc. (deposit for a house)
There may be some kind of product that can only be accessed after a certain age. Not sure myself.

If you want to gift them a house deposit it is much more tax efficient to build it up over time.
 

jonahmurphy

Registered User
Messages
17
Yes, it seems to have deviated. back to my original topic.

if i was to sell property 2 and 3 realising the capital loss and then look to sell property 1 would this mitigate the capital gain so as leaving we with potentially no or very little tax owing.

I'm looking to see the best way forward before signing up to long term leases again.
 

Brendan Burgess

Founder
Messages
44,172
You can carry capital losses forward but not backwards.
So if you make a loss of €30k in 2021 and a gain of €50k in 2022, you can reduce the €50k gain in 2022 by the €30k loss forward.

However, if you realise a gain of €50k in 2021 and a loss of €30k in 2022, you must pay the CGT on the €50k gain. You can't set the later loss against it.

Brendan
 

Sarenco

Registered User
Messages
6,782
The pension is with Zurich, Prisma 4 from memory.
Prisma 4 is a multi-asset fund that invests in equities, bonds, property and alternatives. Nothing wrong with that but you obviously have significant investments outside your pension that should be taken into account in determining your overall asset allocation.

Also, your spouse will have a significant State pension, which could be considered somewhat "bond-like".

In your shoes, I would transfer your pension to Zurich's indexed global equity fund (managed by BlackRock). And you should definitely keep maximising your pension contributions.

As regards your investment properties, I would be inclined to sell Property 4 (which I understand will generate a capital loss that you can carry forward) and I would use the net proceeds to pay off your PPR mortgage.

Otherwise, I would be inclined to hang onto the other three rental properties for the time being - they are clearly very profitable with no large latent capital gains to worry about.

Your €120k cash deposit is earning approximately zero interest so you could use some of the cash to pay down one of the mortgages on the rental properties. Alternatively, you could buy another term State savings product if you want to retain liquidity.

Hope that helps.
 

jonahmurphy

Registered User
Messages
17
Prisma 4 is a multi-asset fund that invests in equities, bonds, property and alternatives. Nothing wrong with that but you obviously have significant investments outside your pension that should be taken into account in determining your overall asset allocation.

Also, your spouse will have a significant State pension, which could be considered somewhat "bond-like".

In your shoes, I would transfer your pension to Zurich's indexed global equity fund (managed by BlackRock). And you should definitely keep maximising your pension contributions.

As regards your investment properties, I would be inclined to sell Property 4 (which I understand will generate a capital loss that you can carry forward) and I would use the net proceeds to pay off your PPR mortgage.

Otherwise, I would be inclined to hang onto the other three rental properties for the time being - they are clearly very profitable with no large latent capital gains to worry about.

Your €120k cash deposit is earning approximately zero interest so you could use some of the cash to pay down one of the mortgages on the rental properties. Alternatively, you could buy another term State savings product if you want to retain liquidity.

Hope that helps.
Really helpful, thanks you.
 
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