Selling and taking cgt hit of 300k or not selling

[elainem]

Hi! I asked a smiliar question before. Now I am just about ready to put my period property on the market, after renovations and much hassle with tenants. I expect to get 1.9 to 2.0 million (according to estate agents and my reading of property pages). However, my extended family and friends think I'm mad to sell, especially since the hit on cgt will be around 240k plus solicitors and estate agent fees. I inherited the property in 2001, value 500k punts, lived there until Summer 2002. Although I do love the house, I am selling because the maintenance costs are so high. Currently 50k to repair burst pipes in kitchen. The architect has told me that other remedial repairs - other damp areas - would be around 60k. I find that I am constantly worried about things going wrong in the house, and whether I can afford to repair them. As mentioned in previous posts I am dependent on the income from this and a smaller mews property in Dublin. I am on my own with 2 young children, and work part-time as a nurse. Further, the costs of painting an 1850 square foot period property every second year, and updating or replacing furnishings so that it appeals to those wising to pay E2300 per year is onerous. As also are the costs of insuring the property 2000k per year. I would just like some opinions on this again. I know the location of the property is great. People keep saying that I would never buy that property again. However, they never look at the cost of maintaining a peirod house. The mews house I own is only 20 years old, so these problems don't arise, and it is relatively inexpensive to refurbish. The problem is, I don't have the trophy salary to go with the trophy house!!

My plan is to use the 1.5 million to buy a nice two bed apartment in Ballsbridge area (to maintain my income and easy maintenance), and to buy a house in Lucan village (nearby the children's father), possibly putting it in their names and mine, so that they would eventually have this house if anything happened to me, and be near their father (he is unlikely to be providing them with this security). The house I have looked at is a nice solidly built 1950's semi in Old Lucan.

Any comments really appreciated.

 

[fatmanknows]

IMO I would sell the house ASAP. I am sure you can elect to have the house nominated as your main home and greatly reduce the CGT - make sure you check this with a practising Tax Consultant.

If as you say the house is 1850 sq ft and valued at approx €2m I doubt if it is capable of generating much more than €2.5k pm gross rent. Net of other rental outgoings and repairs I suspect your net rental is little more than 1% of current house value. It's now possible to obtain over 4% for on demand deposit accounts - Norther Rock currently pays 4.15% on demand with no strings attached. With interest rates currently rising your deposit returns are only likely to get better IMO.

Of course there will be no capital gains to be had on your deposit account going forward - but more importantly IMO there will be no capital losses either and the interest earned is probably 3 times that of current net rents and hassle free. I am also one of those who believe there will be no capital gains on property whatsoever going forward for the next five years at least. I am also one who sold a large red brick last year to do just this and have absolutely no regrets. In fact I am more comtfortable with my decision with each passing week. There will always be another opportunity to enter the prop.market again however I for one have no intention of doing so in Ireland for a very long time.

 

[Elphaba]

Hi! I asked a smiliar question before. Now I am just about ready to put my period property on the market, after renovations and much hassle with tenants. I expect to get 1.9 to 2.0 million (according to estate agents and my reading of property pages). However, my extended family and friends think I'm mad to sell, especially since the hit on cgt will be around 240k plus solicitors and estate agent fees. I inherited the property in 2001, value 500k punts, lived there until Summer 2002. Although I do love the house, I am selling because the maintenance costs are so high. Currently 50k to repair burst pipes in kitchen. The architect has told me that other remedial repairs - other damp areas - would be around 60k. I find that I am constantly worried about things going wrong in the house, and whether I can afford to repair them. As mentioned in previous posts I am dependent on the income from this and a smaller mews property in Dublin. I am on my own with 2 young children, and work part-time as a nurse. Further, the costs of painting an 1850 square foot period property every second year, and updating or replacing furnishings so that it appeals to those wising to pay E2300 per year is onerous. As also are the costs of insuring the property 2000k per year. I would just like some opinions on this again. I know the location of the property is great. People keep saying that I would never buy that property again. However, they never look at the cost of maintaining a peirod house. The mews house I own is only 20 years old, so these problems don't arise, and it is relatively inexpensive to refurbish. The problem is, I don't have the trophy salary to go with the trophy house!!

My plan is to use the 1.5 million to buy a nice two bed apartment in Ballsbridge area (to maintain my income and easy maintenance), and to buy a house in Lucan village (nearby the children's father), possibly putting it in their names and mine, so that they would eventually have this house if anything happened to me, and be near their father (he is unlikely to be providing them with this security). The house I have looked at is a nice solidly built 1950's semi in Old Lucan.

Any comments really appreciated.

Sounds to me like you're heading in the right direction.Your house, beautiful
as it may be is a money pit. You are so right to start considering you and your childrens future now.They grow up so fast. Now is the time to make a move before your children get too settled. Best of luck and have confidence in your future plans which sound well thought out to me.

 

[beattie]

It does seem that the maintenance costs are starting to become particularly onerous for you. As yields in Ireland are pityfully low (far less than can be got with NR as another contributor has mentioned) I would question the wisdom of buying another apartment in D4 with the proceeds of your potential sale. Either way I think you should probably act sooner rather than later. It seems from travelling through the general D4 area that there are more 'For Sale' signs than usual but that is purely my impression.

Best of luck with your decision

 

[nbc]

Hi Elaine,
I actually remember reading your question a year or maybe 2 ago? Fo what it's worth this is my opinion. This house is causing you to worry. It was causing you to worry 2 years ago. Life is too short. Sell the bloody thing. Put a big chunk in the bank where you'll earn loads more in interest with not a penny going in paint or pipes and go out on the rip! Enjoy!!
nbc

 

[RainyDay]

My plan is to use the 1.5 million to buy a nice two bed apartment in Ballsbridge area (to maintain my income and easy maintenance), and to buy a house in Lucan village (nearby the children's father), possibly putting it in their names and mine, so that they would eventually have this house if anything happened to me, and be near their father (he is unlikely to be providing them with this security). The house I have looked at is a nice solidly built 1950's semi in Old Lucan.
.

Two quick comments;

- Apartment living is very different to house living - maybe consider trying it out by renting before making a large purchase
- Get professional advice on your plan to provide for your children - There may well be better ways of doing this other than buying the property up-front now.

 

[sport]

I totally agree with the last 2 contributors. I too believe that you are on the right track in deciding to sell - for peace of mind (priceless) more than anything else. However, just because you may decide to sell does not mean you have to take any further action immediately. You will have ample time to decide on further options..... treat these decisions as stand alone issues.

 

[Satanta]

I am sure you can elect to have the house nominated as your main home and greatly reduce the CGT - make sure you check this with a practising Tax Consultant.

Not too sure about this one.

You can't elect to have a house nominated as your PPR, it either is or it is not (as you were renting in this case it clearly is not). As you get an exemption for the final twelve months of ownership, the only way to decrease the amount of CGT payable (in relation to PPR status) is to live in it for a period of over a year (making the "non PPR period of ownership/total period of ownership" a smaller fraction of the total CGT), which would probably (almost certainly) prove counter productive given the costs involved in the upkeep.

 

[auto320]

Agree with all previous posters -- get out of this money pit and get your life back!

 

[elainem]

Hi! everyone, thanks a mil for all your replies. I'm definitely going to put it on the market in first week of April when work is done. I don't want the expense and worry of a period house anymore. As I mentioned before I'm hoping to buy a house for my children in Lucan/cellbridge/leixlip area (feel Lucan has gone downhill quite a lot), and another property to get some income for myself. I was thinking of an apartment in Ballsbridge, but a friend has suggested something in Drumcondra, or even a house in Beaumond Woods beside Beaumont Hospital, as the yield would be much better. Any advice, again mcuh appreciated. Thanks. Elaine.

 

[robd]

Hi! everyone, thanks a mil for all your replies. I'm definitely going to put it on the market in first week of April when work is done. I don't want the expense and worry of a period house anymore. As I mentioned before I'm hoping to buy a house for my children in Lucan/cellbridge/leixlip area (feel Lucan has gone downhill quite a lot), and another property to get some income for myself. I was thinking of an apartment in Ballsbridge, but a friend has suggested something in Drumcondra, or even a house in Beaumond Woods beside Beaumont Hospital, as the yield would be much better. Any advice, again mcuh appreciated. Thanks. Elaine.

Good decision to sell IMO. I dumped a period property a couple of years ago for similar reasons. It was a nightmare doing up but I walked away happy.

Based on what you said in your first mail, you seemed to suggest that you'd walk away with about 1.5 million + in you hand. At 3.5% (and you could prob get better with ECB rates going up and some of the banks competitive offers) that's 42k per year income (net of 20% DIRT). A house in Beamount Woods or Apt in Drumcondra would set you back 450k to 500k and generate about 1400 per month rent. That's about 3.4% gross yield (ignoring rent voids, maintenance or Management fees). Ballsbridge is even dearer with a worse return. I think 42k cash from deposit interest is a very good income. Very safe. Personally I'd also diversify into some equity funds (I wouldn't recommend indivdual funds due to you lack of experience). I'd recommend the safer European Funds rather than Irish funds which are heavily weighted towards banking and construction or Asian funds which carry alot of risk, or US funds which carry a great dollar currency risk. Possibley also some difersified funds with bond and cash holdings could over reasonable returns with low risk. Property has signficant risks built up at the moment (due to ubber high growth over last 10 years, high prices, low rental return/yeilds and rising ECB interest rates) so I'd personally hold off in the short term.

With the type of money you're talking about you would be well adviced getting professional advice and diversifying where you put you money. Most people here (including myself) are only amateurs and only recommend where they have their money so the advice is somewhat tainted. Property is in general a very popular investment for people here and indeed in Ireland so most people recommend it. I however don't in the short term.

 

[ClubMan]

Most people here (including myself) are only amateurs and only recommend where they have their money so the advice is somewhat tainted.

I agree with the first point but definitely not with the second!

 

[Bob_tg]

Why wait til April to put it on the market? Consider two options:
1) Put it on now, and adjust your price in April once the repairs are complete;
2) Hold on repairs and see if anyone bites - whoever buys it will probably want to do their own renovations anyway.

Good decision to sell, though!

 

[gonk]

I think 42k cash from deposit interest is a very good income. Very safe.

Not really safe at all. You're taking no account of the effect of inflation on the real value of the capital.