Selling Investment Property

I am considering selling my investment property (summer home).

I paid 235K for it about a year and a half ago, stamp duty of 9.4K (4%), 1K solicitor fees, paid about 5k on physical building work, and about 3k on carpets / beds / kitchen ware etc. I would look to sell the property with all contents included.

When selling, I presume you would have to pay about 1-1.5% to your friendly auctioneer (I might try to sell privately) and another 1K on solicitor fees.

Which of these extra costs, beyond the 235K purchase price, can I offset towards the sale price to keep the payment of capital gains tax at a minimum?

Also, if I was to rent for some time, would that help in anyway when selling?

On a seperate note, when i bought the property I took a fixed three year fixed rate from NIB @ 4.18%. I will obviously be breaking that contract if I sell. I am awaiting feedback from NIB as to what will happen....anyone know what fines might occur?

Thanks.

Jugovic said:

Which of these extra costs, beyond the 235K purchase price, can I offset towards the sale price to keep the payment of capital gains tax at a minimum?

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You can add some capital expenditure to the acquisition cost when calculating CGT. You should get professional advice on the specifics.

Also, if I was to rent for some time, would that help in anyway when selling?

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Why?

On a seperate note, when i bought the property I took a fixed three year fixed rate from NIB @ 4.18%. I will obviously be breaking that contract if I sell. I am awaiting feedback from NIB as to what will happen....anyone know what fines might occur?

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Your loan agreement will probably have something on the fixed rate period breakage penalty.

Jugovic said:

Which of these extra costs, beyond the 235K purchase price, can I offset towards the sale price to keep the payment of capital gains tax at a minimum?

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If you purchased 18 months I doubt you will have to worry about capital gains tax.

Is your "investment property" in Ireland or in another country?

If it is in Ireland, Spain or the UK you are likely to have made a capital loss and not a capital gain because property prices are falling in these countries, particularly in Ireland because there is a huge number (and growing) of properties for sale that are just not moving. It seems very odd that you are thinking about selling within such a short time of buying it, especially into a falling market. Is this because you are afraid that property prices may fall further?

Jugovic said:

I paid 235K for it about a year and a half ago, stamp duty of 9.4K (4%), 1K solicitor fees,

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Sorry to go off on a side issue but how did you get to pay only 1 k on solr fees ? I thought most solicitors would have charged at least 1% for that....and the same if you sell ? Something to bear in mind anyway.... I know some solicitors who would charge 2350 plus vat in selling fees alone.

A few solicitors are offering fixed rate fees. I have seen €995 plus VAT a few places, and have used one if these and got a great service.

Re: Domo - Selling Investment Property

Hi domo

Are we allowed request a PM of name of solicitor at reasonable rate that provided a good service?

tks

Here is a link to the solicitors that I used - I have no connection to them, but just received good and reasonable service.

I used Edmund Allen in the Dalkey office.

[broken link removed]

Thanks for the replies from all

ClubMan - Have received info back from NIB and there is no penalty for breakage of my fixed rate mortgage. Currently deciding what to do to be honest...

Steve D - the reason I am looking to sell is mainly due to personal circumstances changing (my girlfriend and I are looking at purchasing a property together next year, which would be our joint PPR). So I would look to sell either this summer or put on the market next spring (obviously best time to sell, its a summer home, close to a beach in Clare).

The current value is about 20K beyond all the costs of the house (purchase price / stamp duty etc.) so I could possibly make a small profit. To be honest, as long as I broke even, I'd be happy!

I also have tenants in at the moment which is covering the mortgage, and is being rented most of the year.

My decision is to either sell this year or next year - and who knows what way the market will go in the next year!!!?? Any genies out there to give me some advice?!!

PS I bought originally as I worked in County Clare, with my PPR in Limerick. The plan was to spend most of the summer in the investment property, but a new job took me to a Cork at the end of last year...

Jugovic said:

ClubMan - Have received info back from NIB and there is no penalty for breakage of my fixed rate mortgage.

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Did you get that in writing? Sounds unusual unless you are almost finished the fixed rate term anyway.

ClubMan said:

Did you get that in writing? Sounds unusual unless you are almost finished the fixed rate term anyway.

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Potentially, bank happy to clear a mortgage at such a low rate (4.18%)?

ClubMan said:

Did you get that in writing? Sounds unusual unless you are almost finished the fixed rate term anyway.

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This is quite possible. What could be happening is that, effectively, you are repaying the bank you loan "at par", but the bank will buy back their funding at a now discount marked-to-market price. They pocket a nice capital gain.

What can happen is that if you have a fixed rate mortgage (say 2 years) and 2 year rates subsequently rise (or 1 year depending on you term remaining), your mortgage is in fact worth less than the capital outstanding. If the bank tried to sell it on (e.g. as a mortgage back security) the buyer would not be willing to pay as muich as the outstanding principle in order to achieve the now higher interest rate from the asset.

What that means for you is that you are jumping of a rate of interest that you won't be able to get back.

Of course, that doesn't mean you shouldn't end the contract early (for one reason you are thinking in decades, you mortgage is priced in months). But be clear about the benefit you will get in return to offset the value you are gifting to the bank.

Put yourself in the position of the bank. Imagine you lent someone 100k at 3% for 2 years. Then interest rates went up to 5%. What would you do if they came to you and said they wanted to repay the loan at its face value (principle outstanding)?

Fair enough. Thanks for the explanations. I would still get it in writing though.