The only reason that you are in a strong financial position today is because you did not invest in property so far. When it comes to investing, property is a high risk investment with a very average return when compared to other alternatives. Look at the facts and not the Irish sentiment that property is a good investment...
Before you make this move be aware that by investing in property Irish people, break every rule in the book:
- A low risk portfolio should have no more than about 6% in property! No we'll go for 100%
This is not relevant to some one starting a business
- Do not borrow to invest, No we'll borrow 100% if we can
Borrowing to invest in a new business can be very useful. In property you can borrow over an extremely long term at very attractive rates.
- Diversify your holdings to reduce risk, no we'll concentrate everything in one location and in a single property in that location
Would you advise a business person to keep away from opening a shop because everything would be in one location
- invest in liquid assets for an easy exit strategy, no we'll invest in something that will be really hard to dispose off
This is absolutely true and any one getting into the rental business should recognise it. As long as you are comfortable with that whats the problem.
- and on we go....
Anyone who thinks they are making a wise financial decision when they buy a house are only fooling themselves - they are actually entering into a very risky investment where they are ignoring all the best advice going.
Most of my Swiss neighbors and colleagues consider buying a house to be akin to financial recklessness and boy have we proved them right!
People buying property in the hope of selling it later for a profit with no economic reason for them to make a profit may have proved your Swiss friends case, however a there is no reason why a landlord renting property in Ireland should not have a successful business.
The other thing to keep in mind is that most money lost during a bubble is not lost when the bubble burst, but in the aftermath, when "the smart people" try to get in on the ground floor for the next ride...
Can you expand on this. I don't follow your point.
The other thing to keep in mind is your age - you've got about 10 or 12 years in which you can be fully invested, after that you need to start reducing risk big time to safe guard your assets for retirement, that means government bonds, AAA corporate bonds and blue chips and a house does not even fall into that category!
Renting is a long term business, I agree that the OP at 46 would need to consider that aspect.
Jim, here you are again looking at buying property to rent through your asset management glasses.
The asset management perspective has little to say to the buy to let landlord.
Renting out property is a business not an investment portfolio.
To give a concrete example, from my own experience. I purchased a property in 1999 with a 90% mortgage, and have rented it out continually since. Each year since 1999, the rent has exceeded the interest on the mortgage. I have been able to make capital repayments and I now own well in excess of 10% of the property.
The gyrations in the value of the property over that time are irrelevant to my property rental business. The value will of course be relevant when I decide to retire from the rental business.
I have today, what I purchased nearly 15 years ago, a property that provides good living accommodation for a family, in a central location.
The market value (rental income) of this has fluctuated by no more than 10% from the average over those 15 years. By the way I consider this a disappointing performance.
The rental business is inherently stable. When there was a huge increase in the demand for property there was a corresponding increase in supply, keeping rents stable. Looking forward from the present time, I foresee inflation (good) and higher interest rates (bad).
Of course there are risks to buying property on borrowed money to rent out. It is essential that the net rental yield exceeds the borrowing cost.
Since 1999 this has become much more difficult to achieve, property taxes, restricted tax-deduction of interest, USC on rental income.