Overpay loans or invest in stock market

Hi
I would like some advice on what other members would do in our situation

Married
ages 40 and 41
1 child 7years old

All figures below are Gross
Approx income 150k consisting
Self employed income approx 55-70k per year(commision based so varies)
Spouse 18k
Inflation linked uk investment of 45k returning 5k per year for 22 years
Farm income rental 10k per year.-- farm worth approx 450k no loans.(would love to sell this as it is a very low return on value but it was a gift from parents and would kill them if i sold it.)

House Rental income 60k

Home loan Aib tracker 201k rate +0.6% house value 350k 22 years left
Investment property A mortage 55k @4.85% variable house value 140k rent 750 per month 17 years left
Investment property B mortgage 84k @4.55% variable house value 200k rent 2000 per month 10 years left
Investment property C mortgage 60k @4.85% variable house value 80k rent 400 per month(own 50% )22 years left.
Investment property D no mortgage value 200k rent 1150 per month
investment property E no mortgage value 150k rent 800 per month

No other loans
pay off credit cards in full every month
Pension of 30k with zurich life
Savings of approx 55k in kbc and aib savings accounts

We are in a good place financially as you can see through a combination of very hard work, Luck in selling pre recession and buying over last 5 years . 4 of the buy to let properties were bought with the 7 year capital gains tax deal and are worth significantly more than we bought them for and will probably sell off again starting in 4 years time .We have lived very frugally and intend to start enjoying our money a bit more over the coming years.(disneyland,new cars etc)

Questions:-
we have approx 3k per month extra coming in now that I could pay off mortgage loans on investment properties or invest in stocks and shares/pension.
I have read on his forum a lot about diversifying our portfolio which is mainly in property.(It is what I know and been succesful in for 20 years . )
I have been looking at another house to buy and renovate and rent but My accountant has informed me that my tax allowances , farm drainage/investments are coming to an end and my tax bill will rise significantly this october. He has told me to look seriously at pensions but looking at my pension performance over last ten years it has been approx 3% per year growth.
Any comments or advice would be appreciated. I find any investment advisors I have spoken to have wildly differing views on what to invest in and I leave being more confused than when i went in.

Thanks

undecided said:

We have lived very frugally and intend to start enjoying our money a bit more over the coming years.(disneyland,new cars etc)

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That is crazy. You have property of €113k and €400k of mortgages

You have €150k income

So you do not need to live frugally.

In fact, I would go further and say that you don't need to be working a third job - managing 5 investment properties.

You are overexposed to property. So sell the two properties which are not subject to the CGT exemption.

Your mortgage rate on property B is 4.55%
You get tax relief on this of 1.7% (4.55% .75 * 50%)
So your net interest rate is 2.8%

You are getting a lot less than this from KBC and AIB so you should certainly use this money to pay down your mortgages.

If you buy shares directly, you will need a net return after tax of 2.8% to get a positive return. That is certainly possible, but it's not worth the risk. So pay off your investment property mortgages.

You should maximise your contribution to your pension scheme in such a way as to use up your top rate of tax. Go to a fee based advisor on this. You could be paying very high charges to Zurich Life.

You should invest your pension fund in a 100% equity fund. It is likely to give you the best long term return. There is a small risk of a sustained long term fall in stocks, but you can handle that risk if it materialises. The potential returns outweigh the risks significantly.

Brendan

undecided said:

Married
ages 40 and 41
1 child 7 years old

All figures below are Gross
Approx income 150k consisting
Self employed income approx 55-70k per year
Spouse 18k
Inflation linked uk investment of 45k returning 5k per year for 22 years
Farm income rental 10k per year.-- farm worth approx 450k no loans.(would love to sell this as it is a very low return on value but it was a gift from parents and would kill them if i sold it.)

Home loan Aib tracker 201k rate +0.6% house value 350k 22 years left
Investment property A mortage 55k @4.85% variable house value 140k rent 750 per month 17 years left
Investment property B mortgage 84k @4.55% variable house value 200k rent 2000 per month 10 years left
Investment property C mortgage 60k @4.85% variable house value 80k rent 400 per month(own 50% )22 years left.
Investment property D no mortgage value 200k rent 1150 per month
investment property E no mortgage value 150k rent 800 per month


Pension of 30k with zurich life
Savings of approx 55k in kbc and aib savings accounts


we have approx 3k per month extra coming in now that I could pay off mortgage loans on investment properties or invest in stocks and shares/pension.
I have read on his forum a lot about diversifying our portfolio which is mainly in property.(It is what I know and been succesful in for 20 years . )
I have been looking at another house to buy and renovate and rent but My accountant has informed me that my tax allowances , farm drainage/investments are coming to an end and my tax bill will rise significantly this october. He has told me to look seriously at pensions but looking at my pension performance over last ten years it has been approx 3% per year growth.
Any comments or advice would be appreciated. I find any investment advisors I have spoken to have wildly differing views on what to invest in and I leave being more confused than when i went in.

Thanks

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First thing that strikes me is that you said you're good in property. And quite clearly you've built up a great portfolio and very clever use of the CGT exemption too, and if you're good at something better to stick at it instead of going into something you don't understand.

I assume that after costs your rental income is costing you 50%. But can you do better elsewhere. Million dollar question that

5 Rentals
Value 770K Mortgages 199K
Rent roll: 5100 monthly/ 61K annually
Mortgage costs?

Farm worth 450K

Are your parents alive? Would it not be better that a 'real' farmer bought it instead of you getting back 10K per annum for it.

Pensions

Certainly should be contribution into a good scheme for both of you.

Life insurance

I presume you have this on the 3 mortgaged rentals and your home. But you don't need any more it would seem to me. You need to figure out the income your wife/child would need if you weren't earning anything.

Cars

No idea why you don't buy new cars if your current ones are old, if they are ok than why change.

Disney

Go for it. Why not. Only one child ? we went to Florida with our children recently and it most certainly was a trip of a life time that we'd promised them and while costly it was a big once off for us. I'd also recommend you to go to Efteling in the Netherlands for two nights. That's 'wow' too especially at 7.

Investment C

Why is this 50% owned with someone else, for another 22 years !

Income

It's not really 150K though is it, because you're including the rental without subtracting the costs (tax and mortgages)

3K Extra

So you've basically an extra 36K annually to invest. All the advisors tell you different ideas

How about you tell us each option they suggested and others on here can critique them. It's quite amazing that you leave advisors more confused than when you went in. Not that I blame you, equities and shares and all that I too find confusing. But you would think with assets and income like yours a good advisor might make it simple for you to understand. There are a couple of posters on here that are in this area and they always seem to be very clear on their explanations.

Your goal

What is it you want to achieve? What more do you want to achieve?

Job

Don't agree with Burgess about giving up your job, it's good to have structure in life.

Well, I would definitely hang on to Investment Property B - a €200k house producing €2,000 per month in rent - that's a gross yield of 12%!

Also, could you tell us more about the inflation linked investment - that's also an exceptional return.

Otherwise I would broadly agree with Brendan's advice to rationalise your property portfolio somewhat, pay down your debt and maximise your pension contributions.

undecided said:

Investment property B mortgage 84k @4.55% variable house value 200k rent 2000 per month 10 years left

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Sarenco said:

Well, I would definitely hang on to Investment Property B - a €200k house producing €2,000 per month in rent - that's a gross yield of 12%!

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I missed that. Agree with Sarenco although I suspect that you have the wrong valuation on it.

You should still pay off the mortgage on it. That is a separate decision from whether to hold onto the property or not.

Brendan