Should I sell investment property?

D

dingdong22

Registered User
Messages
23
I have an investment property in Belfast - 2 bedroom terrace.

I was thinking of selling it as capital appreciation has been poor on it. My dilemma is the cost of CGT and whether it's just a better return to keep and renting it. I am 53 ( 3 kids) have other investments and mortgages (at interest rates of 2-3%). I have 50,000 @2.3%int mortgage on my own family home in Dublin. Don't need equity for day-to-day living.

House bought for : 50,000 stg ( mid 90s)

If I sell would get 110,000 stgs , current rent is 475 stg ( after costs deducted per month)

Mortgage -30,000 stg I had remortgaged it for other things over the years.

Equity =80,000 approx .

My simple sums makes me feel i would make less per year if invested the (80,000 - CGT) @4% per anum (3200 ) v renting ( 475 x 12 = 5700 )

Any advice ?
 
Have you a pension? You could feed the gain into your pension ( maximising tax relief every year). this would claw back the CGT you would have paid.

Also, is it much hassle renting and dealing with tenants? I would put a significant value on this so take it into account when doing your calculations.
 
Yes got a pension pot of 250,000
 
How much CGT would you pay if you sell it?
Do you have any CGT losses on other investments you can use to offset these gains?


dingdong22 said:
I have 50,000 @2.3%int mortgage on my own family home in Dublin.
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It is very hard to beat a risk-free, tax-free investment of 2.3% after charges. So it sounds as if you should clear your mortgage.

dingdong22 said:
have other investments and mortgages (at interest rates of 2-3%).
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If the other investments are properties, you are overexposed to property and interest rates.
So you should sell one which is least profitable and most hassle and which is most tax-efficient to sell.

Brendan
 
I have nothing to offset the CGT which will be approx 17000 stg . Your advice does seem sound.
I think selling looks good option hassle free and without ongoing minding of the property.

Thanks Brendan
 
First look at the investment in isolation:


Option 1 - Keep property
Return: £5,700 before tax.
Return: €6,500
After tax: €3,500

Option 2 - Sell property
Proceeds: £110,000
less mortgage £30,000
Les CGT: £17,000
Net proceeds: £63,000
Net proceeds €70,000

Interest saved: €1,100 €50,000 @ 2.3%
After tax return on €20,000: €400
Total return: €1,500

So, you are better off by €2,000 a year if you hold onto it.

You may also get capital appreciation or depreciation.

Is the €2,000 net return worth the work you put into it?

Only you can judge that.
 
Then look at it in the context of your other investments.

If you have other property investments and borrowings, then it seems right to reduce your exposure to property and to interest rates (and maybe exchange rates?)

But if all your other assets are tied up in shares, then maybe a property investment is a good diversification.

Brendan
 
@dingdong22 , have you taken GBP:EUR fx rate when you bought (mid 90's) vs. when you might sell into account for your CGT calculation?
It's easy to mistakenly overlook this & it could have a significant impact on your Go / No Go decision.
 
Brendan Burgess said:
You may also get capital appreciation or depreciation.

Is the €2,000 net return worth the work you put into it?

Only you can judge that.
Click to expand...
A point in regard to the capital appreciation/depreciation which I like to make whenever I get the opportunity.

I would like to claim IP rights in Cremeegg's principle of property investment.

'In property investment, the outcomes associated with capital appreciation and capital depreciation are not symmetrical'.

In this case the OP has an investment yielding €2,000 net (BB's figure) which I make 5.5% after tax.

If capital appreciation at some future point creates an opportunity to sell for an attractive gain, the OP can take that.

If capital depreciation reduces the potential selling price, the OP can continue to collect his 5.5% return.
 
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