Using Shares to buy a Buy2Let

N

nickjohn

Registered User
Messages
9
I am thinking of selling a tranche of shares to partially fund a buy to let property. To do this I will be liable for CGT on transaction. My questions is, would I be better off funding purchase through a bigger mortgage otherwise potentially I will be paying CGT on the double - once when I sell shares now and down the road when I sell the rental house (only looking at 10 to 15 year investment).
 
You are not paying CGT on the double.

If you bought your shares for €50k and they are now worth €150k, you are paying CGT on the gain of €100k.

If you buy a property for €150k and it rises to €200k, you will pay CGT on the €50k.

If you leave your money in shares and they rise to €200k, you will pay CGT on €150k. (€200k - €50k)

You should not take out a mortgage to buy an investment property while you have shares. Otherwise, you are, in effect, borrowing to invest in shares. This is not a good idea.

It might be better just keeping the shares and not bothering with the investment property if you want to avoid the CGT hit now.

Brendan
 
If you can borrow at mortgage rates say 2% on 15 year repayment terms, so no possibility of margin call, why is that not a great opportunity to buy shares.
 
Because after a fall of 30% , you will have a portfolio of €100k and assets of €70k.
Your taxed dividends will not cover your repayments.

You are likely to panic and sell off your shares.

And there are occasions where the net return after 15 years will be negative.

Brendan
 
You must log in or register to reply here.
Back
Top