Sell family home & Invest?

[DublinHead54]

You also need to look at this in the context of how you will fund your lifestyle pre and post retirement i.e. funding gaps. You've said you can live on 4k per month (72k gross per year).

The only thing that makes the apartment attractive in my opinion is that you can purchase it at discount. If you are after a complete lifestyle change, you are in a position to sell up and secure your retirement income now, but you will need to continue to work. With two children under 2 and 30 years until retirement you have a lot of costs coming down the line. If you want to quit to start up a business that is great, but to go work part time for somebody else, I'd question if that is better. I have family who run their own businesses, and it is extremely tough and in my opinion harder than my stressful corporate job.

You have the potential to meet your goals, but the timeline is probably 7 years plus. Pay of your mortgage, max out your AVCs and save money.


My thought process below

Pre Retirement

• Option 1
  • Do Nothing: Current jobs provide >72k per year in income
• Option 2
  • Sell House, Buy Apartment & Change Jobs:
    • Apartment will generate gross 30k in revenue before costs
    • Invest remaining: A 100k investment will yield 0%+ depending on the risk of the investment.
    • Funding Gap: 42k, you'll need to secure employment the generates 42k
    • Retirement Gap: Apartment + Projected Pension may gross 55k per annum, gap ~17k
• Option 3
  • Sell House, invest proceeds in pension and start employment
    • Funding Gap: Need to find employment of 72k per year
    • Retirement Gap: close to 0 if all house proceeds are invested in pension.

Retirement (Age 68)

• Your Pension Pot (private + state) is projected to be 25,877, based on current 200k pension pot, and €250 monthly contribution
• This is €1,855 net per month
• You need a pension pot of ~1m to provide 4k income in retired
• Funding Gap: ~800k or 1,500 per month

 

[Steven Barrett]

There are two separate issues here. And first, let's look at them separately.



Great idea. You have a home in which you would prefer to live. It's a lifestyle change which is to be commended assuming you have the income to support it.

I assume you have thought of schools, work, business etc. Assuming this all works out, then go for it.




The uni bit is a distraction. Forget about it for the moment. Does this investment stand up on its own merits. You have €700k. Should you invest €400k of it to buy a property worth €600k?

Yes, I think you should. If I were offered a property worth €600k for €400k, would I buy it? Yes, I would although I don't like property investment. If I got tired of the investment, I would sell it off and if house prices don't fall by more than 20%, I will be back to square one. (I am assuming you will have a CAT bill on the purchase.)

Has the property got a tenant? If it has, then you will be unable to charge market rent for it. Just in case that is the reason for the discount. If it has a tenant at a discounted rent, I wouldn't touch it.

I would still sell your current house if it stacks up and invest the proceeds in a diverse portfolio of shares.

Brendan

Buying property at 2/3 the market price is the easy bit Brendan. So is selling a south Dublin home for a cheaper one in another part of the country.

It's the parts that you assume have been thought of that are raising all the questions. The OP and his wife are giving up well paying jobs. What will they do for income?

1. Be professional landlords
2. Start a business
3. Work part time

We have seen some detail on being a landlord but even those figures seem optimistic as they don't seem to account for periods of vacancy and refurbishment costs as well as other costs of being a landlord, just rent = income.
Zero detail on what a new business would look like or what part time work they will have.


Effectively retiring at 40 or 34 for the spouse is the stuff of FIRE people. The assets the OP has accumulated so far aren't jumping out at me. I regularly do work for clients who are in much better position financially but are not contemplating giving up work at that age.




Steven
www.bluewaterfp.ie

 

[goingforgold]

Buying property at 2/3 the market price is the easy bit Brendan. So is selling a south Dublin home for a cheaper one in another part of the country.

It's the parts that you assume have been thought of that are raising all the questions. The OP and his wife are giving up well paying jobs. What will they do for income?

1. Be professional landlords
2. Start a business
3. Work part time

We have seen some detail on being a landlord but even those figures seem optimistic as they don't seem to account for periods of vacancy and refurbishment costs as well as other costs of being a landlord, just rent = income.
Zero detail on what a new business would look like or what part time work they will have.


Effectively retiring at 40 or 34 for the spouse is the stuff of FIRE people. The assets the OP has accumulated so far aren't jumping out at me. I regularly do work for clients who are in much better position financially but are not contemplating giving up work at that age.




Steven
www.bluewaterfp.ie

The assets jump out at me for a 40 year old and a 34 year old.

They have a PPR with 700k equity. They have a 250k mortgage free second property. They have 30k in cash and option to buy another property with 200k equity. That all adds up to 1.18m of assets before pension taken into account!

I get you may have wealthier clients but I sometimes feel people lose perspective here a little. If they are not wealthy given their ages then the rest of us are in big trouble!

 

[Cervelo]

I sometimes feel people lose perspective here a little. If they are not wealthy given their ages then the rest of us are in big trouble!

They are rich but not wealthy and then don't forget to factor in the two kid's!!

 

[Ronaldo9]

There are two separate issues here. And first, let's look at them separately.



Great idea. You have a home in which you would prefer to live. It's a lifestyle change which is to be commended assuming you have the income to support it.

I assume you have thought of schools, work, business etc. Assuming this all works out, then go for it.

@Brendan Burgess - It's what we are considering for sure but we won't rush it, this is all part of the planning process.

The uni bit is a distraction. Forget about it for the moment. Does this investment stand up on its own merits. You have €700k. Should you invest €400k of it to buy a property worth €600k?

Yes, I think you should. If I were offered a property worth €600k for €400k, would I buy it? Yes, I would although I don't like property investment. If I got tired of the investment, I would sell it off and if house prices don't fall by more than 20%, I will be back to square one. (I am assuming you will have a CAT bill on the purchase.)

This is what we were thinking, it's in a super popular location and we know the location really well and all there is to know about the maintenance of the property etc i.e. annual fees, maintenance etc.

Has the property got a tenant? If it has, then you will be unable to charge market rent for it. Just in case that is the reason for the discount. If it has a tenant at a discounted rent, I wouldn't touch it.

No it's not on the market for rent. It's being lived in so this thankfully wouldn't impact us.

I would still sell your current house if it stacks up and invest the proceeds in a diverse portfolio of shares.

Brendan

To be totally honest, the fact our house price has risen so much is what started this whole thought process off. Thanks for your thoughts, it's appreciated!

Buying property at 2/3 the market price is the easy bit Brendan. So is selling a south Dublin home for a cheaper one in another part of the country.

It's the parts that you assume have been thought of that are raising all the questions. The OP and his wife are giving up well paying jobs. What will they do for income?

1. Be professional landlords
2. Start a business
3. Work part time

@Steven Barrett - It would be Option 1 AND (not just Option 1!) Part 2 is an option but I'd say Option 3 would be most likely. One of us may retain our full time jobs also, nothing is ruled out. There are remote work opportunities in our industries.

We have seen some detail on being a landlord but even those figures seem optimistic as they don't seem to account for periods of vacancy and refurbishment costs as well as other costs of being a landlord, just rent = income.
Zero detail on what a new business would look like or what part time work they will have.

Is 6% rental yield for a property with expenses and fees deducted not a decent return for a property? I was always told it was.

Effectively retiring at 40 or 34 for the spouse is the stuff of FIRE people. The assets the OP has accumulated so far aren't jumping out at me. I regularly do work for clients who are in much better position financially but are not contemplating giving up work at that age.

But we wouldn't be retiring at 40. We both intend on working to ensure we have a cumulative income of ~4K per month. We've looked at our expenses and honestly, 4,000 Euro works.

I've absolutely no doubt you've wealthier clients but I can assure you, for our ages, we're in a good position (not that it's a competition) amongst our peers/similarly aged individuals but we don't consider ourselves wealthy, just fortunate.

They are rich but not wealthy and then don't forget to factor in the two kid's!!

@Cervelo - please, we don't consider ourselves rich or wealthy, not at all. We're in a fortunate position and just trying to make the most out of it. We do have two kids but by moving we'd also save 100,000 Euro on private secondary school fees. Another option we're considering! Plus where we would move to, it's a lot cheaper than Dublin!

Thanks to all for suggestions and food for thought, it's greatly appreciated.

 

[DublinHead54]

Aren't the costs of goods the same across the country? I wouldn't expect there to material cost of living differences across Ireland when you exclude housing in your case.

I recently sold a 2 bed apartment in a really popular area and development in D4, I did not achieve 550-600k and others that sold in the last year did not either. Maybe in the last quarter things have further increase, however my main driver was that the in the second half of 2021 I found rents reducing in the area and yields dropping.

Your real yield is likely to be closer to 3% and you'll only net ~18k per year from the property in your pocket.

• Rental Income 30k (2500 pcm)
• Costs
  • Property Tax - 525
  • Apartment Management fees - 1900
  • RTB Registration - 90
  • Property Management / Tenant Finder 10% - 3,000
  • Accountant - 750
  • Insurance - 250
  • Misc Costs - 500
• Tax @20% = 4600
• Net = 18,385 / Net Yield 4.5% (3% against 600k valuation)

 

[Rasputin]

You are in a very envious position. Most of us, if we are lucky, have between 60-80 years on this planet - between school and work, how much of it do we spend on our own ticket. Mine, and a lot of my friends parents never made it to retirement, or if they did, they were in absolute tatters from a long life of work and have no energy, health or will left to enjoy it.

Go for it, and make the most of it - 4k a month with no mortgage is a great position that very few people would ever find themselves in. Worst case scenario, you can just get a job when you need to... if I had your assets, my main goal would be to use it to reduce my stress and working hours as much as I could, otherwise, what's the point of the luck that has come your way.

 

[T McGibney]

• Rental Income 30k (2500 pcm)
• Costs
  • Property Tax - 525
  • Apartment Management fees - 1900
  • RTB Registration - 90
  • Property Management / Tenant Finder 10% - 3,000
  • Accountant - 750
  • Insurance - 250
  • Misc Costs - 500
• Tax @20% = 4600
• Net = 18,385 / Net Yield 4.5% (3% against 600k valuation)

20% tax is sadly a pipedream. It will be closer to 30% as long as rental income remains subject to USC and PRSI.

 

[Cavanbhoy]

4k a month debt free would definitely provide a very adequate lifestyle.
With rent of 30k would only need to provide 30k a year from work.
Plus you would still have a very strong nest egg of 300k.
Comes's down to what is best from a lifestyle point of veiw for your family

 

[Ronaldo9]

Aren't the costs of goods the same across the country? I wouldn't expect there to material cost of living differences across Ireland when you exclude housing in your case.

I recently sold a 2 bed apartment in a really popular area and development in D4, I did not achieve 550-600k and others that sold in the last year did not either. Maybe in the last quarter things have further increase, however my main driver was that the in the second half of 2021 I found rents reducing in the area and yields dropping.

Your real yield is likely to be closer to 3% and you'll only net ~18k per year from the property in your pocket.

• Rental Income 30k (2500 pcm)
• Costs
  • Property Tax - 525
  • Apartment Management fees - 1900
  • RTB Registration - 90
  • Property Management / Tenant Finder 10% - 3,000
  • Accountant - 750
  • Insurance - 250
  • Misc Costs - 500
• Tax @20% = 4600
• Net = 18,385 / Net Yield 4.5% (3% against 600k valuation)

Costs for groceries etc can be for sure. There's definitely a big difference in costs associated with eating out etc.

Oh wow so you sold up? Would you not be interested in doing the tenant finding yourself? Or has experience taught you otherwise? I guess you'd want the right people in on a multi year contract ideally. Thanks for the breakdown.

You are in a very envious position. Most of us, if we are lucky, have between 60-80 years on this planet - between school and work, how much of it do we spend on our own ticket. Mine, and a lot of my friends parents never made it to retirement, or if they did, they were in absolute tatters from a long life of work and have no energy, health or will left to enjoy it.

Go for it, and make the most of it - 4k a month with no mortgage is a great position that very few people would ever find themselves in. Worst case scenario, you can just get a job when you need to... if I had your assets, my main goal would be to use it to reduce my stress and working hours as much as I could, otherwise, what's the point of the luck that has come your way.

Thanks man, I'm with you, life is short and it's there to be enjoyed. There's some who think our situation isn't anything special at all and that's the beauty of it I guess, people have different points of view. Obviously, we know our level, we're not going to be buying a new car every three years etc if we made the move, yes our incomes will come down but quality of life would go up and we've a great life as it is but isn't it about trying to make things better where you can ? But as I keep saying, nothing is decided yet. This is all part of the planning.

4k a month debt free would definitely provide a very adequate lifestyle.
Comes's down to what is best from a lifestyle point of veiw for your family

Listen I completely agree. If you look at the average wage in the country and the small % of people (I believe it's 5%) who earn over 75K Euro. Yes, you can definitely earn more money in Dublin but you can spend a hell of a lot more too.

 

[DublinHead54]

Costs for groceries etc can be for sure. There's definitely a big difference in costs associated with eating out etc.

Oh wow so you sold up? Would you not be interested in doing the tenant finding yourself? Or has experience taught you otherwise? I guess you'd want the right people in on a multi year contract ideally. Thanks for the breakdown.

I didn't consider that because I'd still have to pay to advertise the property, hold viewings, get references etc. In the end I sold because I was becoming an accidental landlord and in a post pandemic world I couldn't get the rent I wanted. For reference we advertised at 2,300 (would have been 2,500 pre pandemic) and we're getting offers of 2,000. In the end I sold.

 

[Clamball]

I think you are in a great position financially. Assets of 1.18M. I would sell and make the move to the country. Your transport costs will go up but your other costs should go down, commuting, dressing up for the job, eating out, groceries. Sending you kids back to Dublin for secondary is not something I would consider, mainly because I want to be the main influence on my children, not a boarding school.

You have done what others have being saying on here, focus on reducing your mortgage and then concentrate on a pension. If you or your spouse can move to remote work then that would allow an easy transition to the country while maintaining income levels.

Once you move and have that €4K per month income then focus on pension growth. I would put that before saving for school or university for the kids.

I think you are emotionally attached to the area of Dublin where the apartment is and it is preventing you from doing what Brendan suggests. Either buy for €400K and then flip, or else take the €200K as a gift. Your kids may never go to college in Dublin, so be happy if they do but otherwise let them make their own path in life.

 

[Ronaldo9]

I think you are in a great position financially. Assets of 1.18M. I would sell and make the move to the country. Your transport costs will go up but your other costs should go down, commuting, dressing up for the job, eating out, groceries. Sending you kids back to Dublin for secondary is not something I would consider, mainly because I want to be the main influence on my children, not a boarding school.

Thanks for this, if we made the move it wouldn't be sending them back to Dublin for secondary, it would be more just for University but I'm just assuming they'd go back to Dublin as both my wife and I are from south dub so that's just a biased assumption on our parts, more so mine to be honest but I agree with you.

You have done what others have being saying on here, focus on reducing your mortgage and then concentrate on a pension. If you or your spouse can move to remote work then that would allow an easy transition to the country while maintaining income levels.

Yes I agree with you. This is the bit we will figure out over the coming months.

Once you move and have that €4K per month income then focus on pension growth. I would put that before saving for school or university for the kids.

Thanks for this. What makes you say that?

I think you are emotionally attached to the area of Dublin where the apartment is and it is preventing you from doing what Brendan suggests. Either buy for €400K and then flip, or else take the €200K as a gift. Your kids may never go to college in Dublin, so be happy if they do but otherwise let them make their own path in life.

This is a great point and you're completely right, I am. It's where we grew up and know it very well if we became landlords but the more I think it through, the less sense it makes to actually own it tbh so we have decided to park that idea. You're totally right though, it's emotional.

 

[Clamball]

Thanks for this. What makes you say that?

You talk of wanting to retire so the more you can fund your retirement pot now the better off you will be on retirement. You want a less stressful lifestyle so you may transition into a less affluent lifestyle so you may not have the money later to fund your retirement.

And your kids should not be raised in the expectation that you can fund their way through college, great if you have the income then but I would not save in anticipation. There are many reasons why a kid does not end up in university so you might be saving for something that may never happen. Your retirement should take priority over their third level education.

 

[Gordon Gekko]

OP, why do you want to leave your jobs?

In relation to your €1.18m net worth, it’s income that’s relevant and your €250k home wouldn’t be income generating. So we’re talking about €930k, which at 5% would generate a return of €47k a year.

That’s with all the hassle and political risk associated with being a landlord, and in a world where Scum Fein/IRA are in the ascendancy.

This plan is madness. You have two young children, i.e. responsibilities.