Pension vs Investment property.

Age: 40
Spouse’s/Partner's age: 40

Annual gross income from employment or profession: €85K
Annual gross income of spouse: N/A

Monthly take-home pay: 3,800

Type of employment: e.g. Civil Servant, self-employed: PAYE

In general are you:
(a) spending more than you earn, or
(b) saving?
Breaking even on take-home pay (but saving into pension)

Rough estimate of value of home: €450K
Amount outstanding on your mortgage: €30K, 4 years remaining
What interest rate are you paying? Tracker (ECB + .75)

Other borrowings – car loans/personal loans etc: 0

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? N/A

Savings and investments: 30K cash

Do you have a pension scheme?
Yes, making AVCs, current fund value €330K, in global equity funds
Contributing €20K p.a. approx (employee + employer contributions + AVCs)
Not quite maxing AVC allowance, but putting in as much as is comfortable.

Do you own any investment or other property?
Yes, value €180K, outstanding mortgage €110K.
Rental income more than covers mortgage.

Ages of children: 9 and 6

Life insurance: Yes, on home mortgage, and through work scheme

What specific question do you have or what issues are of concern to you?

Main questions are on pension. Currently pension is made up of pension scheme plus investment property.
Value = €330K + €180K = €510K
Less borrowings (€110K) = €400K

Currently have loan approval to buy another investment property (approx 130K, funded with €40K cash plus €90K mortgage), but would need extra cash to fund deposit.

Options include:
1. Withdraw some AVCs (e.g. €40K of the €330K) and pay 41% income tax to make up the deposit.
Pros:
- Increases the overall value of the pension fund (occupational pension plus 2 properties) from €500K to €600K, while borrowings increase from €110K to €200K.
(Net value of pension fund stays at €400K as both value and borrowings increase by ~ €100K).

Cons:
- Incurs a tax bill of 41% of withdrawn AVCs
- Possible over exposure to property
- Increased borrowings
- Would leave very little rainy day savings - €5K or so.

2. Forget the option of buying another investment property for now, and continue to fund pension through AVCs
Pros:
- Continue to avail of 41% relief on AVCs
- Keepings borrowings lower
- Keeps rainy day cash savings intact

Cons:
- Overall investment value (pension + property) is lower than if I borrow against additional property

3. Wait until PDH mortgage is paid off in 4 years, and re-visit a second investment property at that point.

I'd appreciate any thoughts or advice.

Do you enjoy your job?
Are you comfortable with your current income?
Do you like being a landlord?

Unless you need more income or you badly want to get out of your job in the next 15 years, I wouldn't go down the road of more exposure to property, particularly not if it's leveraged. It sounds like your lifestyle is and will continue to be pretty sweet, and I don't see any great practical upside to taking on extra risk.

Fully agree with Trasneoir.

It is almost impossible to make a leveraged investment property work for an individual at the moment given current mortgage rates, yields and tax treatment. In any event, the OP really doesn't need any more property exposure.

If it was me, I would maintain the cash reserve at its current level, maximise all AVCs and pay off the PDH mortgage. Once the PDH mortgage is paid off, I would direct any excess cash to State savings bonds and maintain a high equity allocation within the retirement accounts.