In Ireland, a common question from investors or business people is "when is a good time to sell my property?" If you are fortunate enough to have an investment property which has grown considerably in value, it is tempting to sell it and release the gain, freeing up money for other needs or new investment.

However, if you do sell there are some problems to deal with. Capital gains tax is a big cost. At 20% of the gain, the rate is not unreasonably high.

However, the cash cost could still be large and this is money which the taxpayer might have wanted to reinvest in other property or in his business. There are no "rollover" possibilities anymore to defer paying tax, so this must count as a loss of capital.

This is compounded if the cash freed up is to be reinvested in other properties.

You become liable for an additional cost of 9% stamp duty on the new properties.

So the sale of a property, where the proceeds are reinvested in a new property, generates quite an amount of tax for the exchequer. As well as the tax paid by the vendor, there is also the 9% stamp duty payable by the person he sells to.

This brings us back to the Coca-Cola chief executive.

The simplest way to avoid all the tax leakage is not to sell . . .

and this is how it's done.

Bank interest rates are still close to historic lows, so it should be possible to generate cash for investment in other properties or in a business by borrowing based on the increased value of the existing property. Banks will commonly accept that the security for the loan will be the existing property, and that they cannot have security over or access to other assets of the borrower. This means that the borrower is prespreading risk by investing the newly-borrowed money in other assets.

This procedure avoids triggering capital gains and stamp duty and keeps all of the investor's capital invested.

A further benefit, where the loan is used to acquire other rental properties or for the business of the taxpayer, is that the interest will be taxdeductible. So, for a taxpayer who pays tax at a marginal rate of 47%, this means a significant reduction in real after-tax interest cost.

This will work fine for the first few properties in a portfolio. It is simplest to have all the bank borrowings with one bank. That bank then accepts the first one or two properties as security for loans for the next few properties or investments.

While the principle is to "never sell", ultimately the possible disposal of properties will become a factor which must be included in your financial planning. So, as the portfolio increases, it is generally a good idea to ensure that certain loans are secured only against individual properties.

This is to allow for the eventual sale of individual properties and the related loan to be paid back, ensuring that the sale of one property will not affect the security for loans on other properties.

This gives the borrower more flexibility and independence.

This strategy is particularly for people who are intending to invest and build up wealth for the long term and are not put off by temporary ups and downs in market prices.

One quirk of this approach is that it works even better if tax rates go up. For instance, were the current capital gains tax rate to go up, the strategy would be more beneficial compared to a 'buy and sell' strategy.

Mike Gaffney is a tax partner with KPMG Private Irish Business