Buy A Rental Property With Cash Wise Or Not?

Beef or Salmon

Registered User
Messages
4
Hi all,

Im looking for advice on buying a rental property with spare cash thats sitting in a bank account earning almost no interest & im afraid if inflation takes off again sometime this cash will disappear & also I want to see something for my hard work. I need advice on the tax end of things, I know if there is a mortgage on the property you can write some tax off against it, so if there is no mortgage am I going to pay way more out on tax & so leave it not worth while for me? I want to treat the money I invest as a mortgage to myself if that makes any sence & watch the rent pay it back over 25 years & then hopefully have a property to sell as part of my pension plan! The property in question will cost €100,000 in total & I know will rent for €500 a month easily. Can anyone give me a break down on the tax Il have to pay out, Im familiar on the property tax etc.
 
Hi all,

Im looking for advice on buying a rental property with spare cash thats sitting in a bank account earning almost no interest & im afraid if inflation takes off again sometime this cash will disappear & also I want to see something for my hard work. I need advice on the tax end of things, I know if there is a mortgage on the property you can write some tax off against it, so if there is no mortgage am I going to pay way more out on tax & so leave it not worth while for me? I want to treat the money I invest as a mortgage to myself if that makes any sence & watch the rent pay it back over 25 years & then hopefully have a property to sell as part of my pension plan! The property in question will cost €100,000 in total & I know will rent for €500 a month easily. Can anyone give me a break down on the tax Il have to pay out, Im familiar on the property tax etc.

Dont know if you have a pension owe money on your own property etc but here you go.



Roughly
Purchase price 100k
75% of interest on a loan is allowable as an expense. You seem to want to buy cash.

Rent lets say 11 months per year 5500 per year
Lets just say insurance prtb dep on furniture etc been generous 2500 per year 5500-2500=3000

If your on high rate of tax you will be taxable on 3000 so lets just say you end up with 1500 after tax roughly again.

So on your 5500 rent per year you will have maybe have 4000 per year after tax. You will need to maintain and insure the property.Replace the washer paint the property etc. Make good all repairs and most likely have at least a little hazzle. Money money money.

If you made 2%-3% per year thats about it to me. Hope this helps.

Might suggest property fund with give a better yield and more diversity less hazzle.
If I was you and I am not you equities and property depends where your at. 100k to invest, Good advise is not free but well worth it.
 
Take a break. Have a good think about this - there are plenty of posts here and elsewhere on the ups and downs of such an investment.
Have a cuppa... and a time out literally.

Beware of the punitive tax that comes with "unearned income" as our masters call it. You will pay a marginal rate of 50%+ nett of your rental income as tax before you go anywhere (less some deductions) ,see above. If you earn over a certain amount you will pay preliminary tax in the same year on income you haven't even earned yet .

Now the ? easy bit. Prtb fees, Property Maintenance, Property tax, Insurance, Water charges (jury still out). Repairs. €€€€€€€€

Now the hard bit. Getting paid by tenant, satisfying tenant, being prepared for that text or 'phone call on new year's eve - boiler blew up, leaking roof, cooker broken down, tenant lost job, carpet flooded, etc.

Returns to Revenue. With money, lots of it, every year ..... for 25 years.

And hey, who says that the Government won't introduce more sneaky taxes like the ones we got hammered with to fund the banks - household charge , NPPR, reduction in interest allowable, etc. or worse - rent controls.
Have a look at these useful links:

http://irishlandlord.com/

http://ipoa.ie/

p. s. may I come round? I love time outs......

Good Luck
 
If your on high rate of tax you will be taxable on 3000 so lets just say you end up with 1500 after tax roughly again.

Assuming above is correct and I believe it is optimistic that's a 1.5% return.

My advice .............. run a million miles away from this idea. Keep your 100 grand!

Consider other ways to inflation proof, e.g. mix of equities, bonds, etc. Pay an advisor a fee (not commission) to get their advice. Better again, meet two completely separate advisors - may cost a few hundred extra, but always worth a second opinion. In the long run well worth it!
 
Thanks for the replies,

I like your way of thinking valparaiso but I have being sitting thinking on this for a long time & I feel now is time for action as this money just sitting there. I have other small investments in equities & not comfortable putting any more money in them, I also have a basic pension plan so this property was not going to be my total pension plan.

Am I thinking about this completely wrong because I would of being happy for the property just paying for itself over the term & then I have a house to sell or do whatever with, maybe im missing the bigger picture!!

I guess I need to sit down with a accountant to work out the pro's & cons of this but he will hardly advise on better investments, what other type of advisor should I see? I have no problem paying for good advice but just dont want to meet a sales person who has a product to sell & thats it
 
Thanks for the replies,

I like your way of thinking valparaiso but I have being sitting thinking on this for a long time & I feel now is time for action as this money just sitting there. I have other small investments in equities & not comfortable putting any more money in them, I also have a basic pension plan so this property was not going to be my total pension plan.

Am I thinking about this completely wrong because I would of being happy for the property just paying for itself over the term & then I have a house to sell or do whatever with, maybe im missing the bigger picture!!

I guess I need to sit down with a accountant to work out the pro's & cons of this but he will hardly advise on better investments, what other type of advisor should I see? I have no problem paying for good advice but just dont want to meet a sales person who has a product to sell & thats it

An Post National solidarity bond 10 years AER 2.26%.

This is 50% more than the return you will get on an investment property according to Gerard123 above who estimates that you will get nett 1.5% on property investment.
And all the paraphernalia that goes with renting property .

Property seems like a safe bet ..... ask any of the speculators who over the past 10 years were certain!
 
For clarity, I was basing my comments re the 1.5% return on earlier comments/calculations by DCD. I believe the 1.5% is tops, actual returns net may be less. If you assume the 1.5% is correct, this means that each year after all expenses, taxes, etc paid that there is 1,500 available to repay the capital.

Ignoring time value of money for a second and keeping things very simple, if the 1,500 is used, it would take 67 years for the 100 grand to be recouped. Makes no sense to do it in my opinion. (Make your own mind up on house price increases/decreases).

You mention you have a basic pension. Isn't the answer there? Surely you would prefer an enhanced and quality pension? First advisor I would meet is a pension advisor. Depending on how you are employed (PAYE, self employed, etc) there may be options to put property into a self administered pension scheme, and hence the rent would likely qualify to be tax free on the input side - you would need to have an expert advise on this though).
 
Back
Top