€35k to invest: 2nd property or something else?

jim

Registered User
Messages
828
Hi All,

I am looking for some investment advice.

I have €35k to invest. My situations is as follows:

1. I have recently bought a house value €215k and am comfortable in making the repayments. I am renting 2 out of the three bedrooms and I am living in the 3rd. Renting the 2 rooms is covering my mortgage repayment.

2. As mentioned, I have €35k in savings after paying the deposit and expenses of buying the new house. This is what I am now looking to invest.

3. My monthly disposable income after mortgage repayment and not including rental income is €1,800. This includes deduction for bills etc. So I possibly could afford a second mortgage.

My questions really is, should I look to get a second property and use the €35k towards a deposit on it or should I look for an alternative way to invest this money given that I have just bought a property?

I am not averse at all to owning a second property but there are possibly other considerations that I should take on board such as tax etc.

Thanks very much in adavnce!
Jim
 
If the house is €215k and you have €35k that is 16% of the value of the house. If you pay that off the mortgage, you may well qualify for a lower Loan to Value rate, either with your lender or with some other lender. This would be by far the best return on your money.

Brendan
 
Brendan,

Why does it make more sense for me to use the 35k to reduce my current mortgage versus use it as a deposit for buying a second property?

My mortgage interest rate is around 4% (its a combination of fixed and variable). I appreciate that my interest repayments would be lower if I were to put it towards my existing mortgage but is there not a good case for getting a second mortgage for another property?

My plan would be to move out of my current 3-bed place and rent all 3 rooms and then move into the new property I buy.

So I suppose what I am trying to decide on is whether I should put the 35k off the mortgage I have or use it as a deposit on a 2nd property.

Thanks again,
Jim
 
If you buy a second property and prices rise and you get good tenants, it could well be a good investment.

But, you seem to have a big mortgage already.
You already have an exposure to the property market.
You should not be borrowing more money to invest - it's just too risky.
Get your current mortgage down. Get your repayments down.

You might then decide that you want to live with only one tenant or with no tenants. If you have a second home, you will be under financial pressure and won't be able to afford it.

Brendan
 
Agree with Brendan, a second mortgage and you're backing the property market big time. If it goes, both your investments go down. Pay off existing one or else diversity investment strategy for next 35k IMO
 
Looks like we like property too much to forget the past. "It's like deja-vu, all over again." to quote Yogi Berra!

However, where have the cute people in Ireland amassed money over last 100 years, answer is Property.

Other than Property, what options for saving or investing that are cost efficient and readily available to people in Ireland? = few.

The problem may be oncoming deflation so Cash is King but having to save for 12 months for 1/2% Nett is hard to swallow!
 
However, where have the cute people in Ireland amassed money over last 100 years, answer is Property.

Just to balance this, where have all those in severe financial difficulties at present "amassed their debts" in recent years, the answer is also, Property.

Property is risky. The OP may well succeed over the next 100 years, but he is taking high risks.

Brendan
 
Just to balance this, where have all those in severe financial difficulties at present "amassed their debts" in recent years, the answer is also, Property. Property is risky. The OP may well succeed over the next 100 years, but he is taking high risks. Brendan

Agreed, property is very risky local asset with the leverage (mortgages) making it worse, so no argument there and I am not suggesting that investing in property is a sensible investment path.

Just making the point that until 2008 the perception of cute people making a lot of money buying and renting property is ingrained into the Irish psyche.
We all know them, people in normal jobs (Gardai, civil servants, carpenters, etc) amassing wealth based on renting bedsits in our cities and we Irish seem to have a preoccupation with the land (property).
 
Thanks for the replies.

I dont think there is a better savings/investment alternative out there unless you can suggest something?

I had'nt thought of your suggestion Brendan re reducing my mortgage balance until you mentioned it. It does also sound like a good idea but I am still leaning towards the 2nd property. I suppose its relying to a large extent on my backing of the property market and yes that is risky but its a calculated risk and one that I think is worth it.

One concern I have though, re the 2nd property, is the income tax implications. I can avail of the rent a room scheme (tax free rental income up to 11 or 12 k) whilst i live there but as soon as I move out i pay income tax at the higher rate on the rent.....so from that point of view its a strong consideration for not getting a 2nd property as my rental income(investment) would be severly eroded. What are your thoughs on this?

Thanks again, appreciate your feedback,
Jim
 
You will only be paying tax on the rental profit. You get tax relief on 75% of the interest you pay on a mortgage for an investment property.

I generally prefer shares to investing in property.

But I would not borrow to invest in either. The risks outweigh the potential returns.

Brendan
 
Back
Top