Advice on situation

[mbsantos]

Hi, I posted this in the wrong sub earlier as I'm looking for Irish responses.

Single male
39
No dependents
Mortgage. 26,000
House value. 400,000
Savings. 26,000
No debts
Pension. C.I.F 40,000

I recently took a job abroad and will stay for a year minimum. I have a friend house sitting but am looking to sell and buy a smaller place ( 200,000 ). This would leave about 200,000 to play around with. What would you do or advise in this situation? I have friends tied down on big mortgages with young families so I know it's a nice situation to be in. Any advice appreciated.

 

[gardenlady]

@mbsantos Usually people downsize to free up cash that they have a use for. Why are you looking to downsize if you don't have a use for the cash?

 

[mbsantos]

@gardenlady Fair point but it's a bit pointless having a 4bed detached house lying there. I know I'd have 200k lying there in account but surely it's better to sell now while the markets good? Or do ppl think it will keep going up!

 

[gardenlady]

@mbsantos Sorry maybe I misread your original post.

So you currently own a 400k house in Ireland.

The 200k property you want to downsize to, would this be in Ireland too or your new location?

 

[mbsantos]

@gardenlady Yes exactly I would sell in Ireland to downsize in Ireland. I wouldn't be buying abroad. That would leave a sizable chunk to invest etc.

 

[gardenlady]

@mbsantos Ok well in that case I don't really see the relevance of the comment:

it's a bit pointless having a 4bed detached house lying there

since you'll have a property "lying there" one way or another. I know there's a housing crisis and all that, but at the end of the day you're not a charity and you have to do what is best for you.

Speaking of what is best for you, that's a bit of a trickier one. If your current home was staying as your PPR then IMO you should keep it. You don't pay tax on gains of value in your PPR, you could Rent a Room and get tax free cashflow if you want, and best of all you get to live in and enjoy your wealth every day. You can't enjoy the view from your stock portfolio.

However since your home may lose PPR status, it makes the case for owning property (either the 400k home or the 200k one) a bit harder to make.

it's better to sell now while the markets good? Or do ppl think it will keep going up!

The thing is, the market for everything is good. All asset prices are near all time highs. So yes you could cash out 200k of equity from your highly-valued Irish property, but you'd be looking at buying some highly valued stocks with that as well. Of course with stocks you can at least diversify more easily than with property.

The global economy is pretty much designed with the premise of "it will keep going up", so while there may be down times, over a long enough period a desirable assets will rise in value.

What is your overall goal? Early retirement? Buy a whopper house in a few years?

 

[mbsantos]

@gardenlady Yes now that I re-read it does look a bit of an odd comment! Early retirement sounds good, defo not a whopper house as the one I own has three bedrooms and two bathrooms locked. Anything can change but I don't envisage a big family now. Rent a room is one option but it says I have to be living there, I'm paying tax and living in another eu country so that would put that option off the table. I could still do it but I'd be taxed and the tenant would be entitled to a lease as he/she would know I'm not there.

 

[resjudicata]

@mbsantos Do you need 200,000 to "play around with"? What are you going to use that 200k for?

 

[mbsantos]

@resjudicata I don't need it to play around with as such but perhaps invest? Would I be better clearing the current mortgage and just sitting on a 4 bed house, I'd be slow to rent it as the tax and hassle associated. If I sold it could I put a lump sum into the CIF pension?

 

[resjudicata]

@mbsantos Unless you can see a very strong reason why the Irish housing market will massively underperform the stock market I absolutely wouldn't do that. The fees associated with selling up will mean you almost certainly end up down if you invest that money vs just keeping the house.

I personally would absolutely clear the mortgage and keep the house, whether I was going to rent it out or not.

 

[kennyjoede]

@mbsantos If you’ve no plans for the cash you are better off leaving it “working for you” in the property.