Investing now to help kids get on the property ladder in 10 years

F

figrolls

Registered User
Messages
15
Hello,

We are in a fortunate position to possibly buy a family home, in Dublin.
The price would be approx €430 K.
In order to purchase it we would need a small mortgage of circa €70K. We would be using up all our savings to to fund the remining €360K
We are in late 50's, early 60's.
We own our own home, no mortgage.

Our primary reason would be to help our kids get on the properly ladder in the future, say in 10 years time And until then, to provide us with some income in retirement. We have reasonable personal/private pensions coming down the line (won't be loaded but will be fine).

We are aware there are a lot of downsides to becoming a landlord and that many small landlords leaving the market. But at a glance, it seems a good idea due to the low LTV.

The house is habitable as is, but would need some refreshing before renting.

Any advice please ?
 
figrolls said:
Our primary reason would be to help our kids get on the properly ladder in the future, say in 10 years time And until then, to provide us with some income in retirement.
Click to expand...

I don't think that investing in property is a good vehicle for this.

It does have the advantage of acting as a hedge against the future cost. So if property prices double over the next ten years, while the cost to your children will double, your asset will have doubled.

But apart from that, it's a very bad idea.
  1. Being a landlord in Ireland is just not a good idea - you get a bad tenant and you can do very little about it.
  2. It is an illiquid investment. It could take 6 months to sell and your child might want to move quickly.
  3. It is an all or nothing investment. If you have a property worth €400k and you want to give a child €100k, you have to sell the whole property.
It would be much better to invest in a portfolio of shares.
  1. The return from shares should be better than property over most ten year periods
  2. It is a no hassle investment
  3. It is very liquid. Sell today and you will have the cash in two days.
  4. You can liquidate part of your portfolio if you wish.
The other advantage of shares over property is that you do not have to take out a mortgage.

Brendan
 
Property is always highly in demand
Now more than ever
If you buy, maximise the rent at the start
Don't spend too much on fancy decor but if the tenant asks for something then buy it
 
How many kids do you have and how old are they?

I think it's a good idea, especially if they lived in the house while at college.

They could earn up to €14k a year tax-free by taking in flatmates.

And ultimately you could give them the house using the dwelling home exemption.
 
I wouldn't get into the Irish rental sector, in fact I recently exited, you can find lots of reasons not to be a landlord in Ireland online.
Regaining possession of your property could potentially be a nightmare and who knows what new legislation lies in store.

As Brendan suggested, I would invest in something more liquid, you mention kids plural so ultimately the asset or assets will need to be divided up, lots of siblings fall out over splitting a single property.

As part of your investment strategy you might consider investing extra in your kids education, training, educational trips and work experience opportunities so they might need less help to get on the property ladder. Investing in Tech companies active in AI research might also be a good hedge for risks to the next generations earning potential.
 
Brendan Burgess said:
I don't think that investing in property is a good vehicle for this.

It does have the advantage of acting as a hedge against the future cost. So if property prices double over the next ten years, while the cost to your children will double, your asset will have doubled.

But apart from that, it's a very bad idea.
  1. Being a landlord in Ireland is just not a good idea - you get a bad tenant and you can do very little about it.
  2. It is an illiquid investment. It could take 6 months to sell and your child might want to move quickly.
  3. It is an all or nothing investment. If you have a property worth €400k and you want to give a child €100k, you have to sell the whole property.
It would be much better to invest in a portfolio of shares.
  1. The return from shares should be better than property over most ten year periods
  2. It is a no hassle investment
  3. It is very liquid. Sell today and you will have the cash in two days.
  4. You can liquidate part of your portfolio if you wish.
The other advantage of shares over property is that you do not have to take out a mortgage.

Brendan
Click to expand...
Interesting point Brendan, thanks for replying . A quick google shows me this.
www.irishtimes.com

Which is the best investment – your house or shares?

If you had invested € 10,000 in a house or in shares back in 1990 which would be worth more today? And what if you had waited until 2005 to invest?
www.irishtimes.com www.irishtimes.com

I guess it's a bit of the bricks and mortar feeling, and the absolutely dreaded feeling to be back trying to buy a house again, and even much worse in this climate . Plus I have never had any great returns with managed funds - which is really only my pensions as it's not something I've dabbled in, (on averge they would probably be medium risk funds over the 20 years or so).

What about capital gains on shares vs increase in houe price ? Are they taxed the same.

Also, if you want an income over say the next 10 years, is there any advantage/disadvantage 'using' dividends, as opposed to rent ? Not sure how this works - no experience of it
 
Calico said:
How many kids do you have and how old are they?

I think it's a good idea, especially if they lived in the house while at college.

They could earn up to €14k a year tax-free by taking in flatmates.

And ultimately you could give them the house using the dwelling home exemption.
Click to expand...

2 kids, age 18 and 22 . We live in Dublin ourselves, and the eldest goes to college in Dublin, and probably the youngest will too. Very interesting idea re the €14K , and the dwelling home exemption thanks
 
Just to be clear that it would be your adult dependent that would be applying for the max 14k rent a room and would have to be living in the property.
Its quite a large responsibility to put in an 18 or 21 year old to police roommates in such a situation.
You are also constraining their options in some ways. What if they want to do a particular degree or masters vourse and modt suitable is run out of say cork?
Are you planning to potentially sell the property in the future or give ownership to adult dependents?

Are you set up yourselves in case of sny issue or change of circumstances in your own situation? Say if one person needs nursing home care years down the road?
 
dubdub123 said:
Just to be clear that it would be your adult dependent that would be applying for the max 14k rent a room and would have to be living in the property.
Its quite a large responsibility to put in an 18 or 21 year old to police roommates in such a situation.
You are also constraining their options in some ways. What if they want to do a particular degree or masters vourse and modt suitable is run out of say cork?
Are you planning to potentially sell the property in the future or give ownership to adult dependents?

Are you set up yourselves in case of sny issue or change of circumstances in your own situation? Say if one person needs nursing home care years down the road?
Click to expand...
Yes I agree... Wouldnt think of it at the minute , but it's an interesting idea for when when they are older. re Are you planning to potentially sell the property in the future or give ownership to adult dependents" Nothing concrete in mind, more just to have options


Are you set up yourselves in case of sny issue or change of circumstances in your own situation? Say if one person needs nursing home care years down the road? Havent given it any thought at all :rolleyes:, but a quick answer would be that we would (have to and be happy to) avail of the Fair Deal scheme.
 
figrolls said:
Yes I agree... Wouldnt think of it at the minute , but it's an interesting idea for when when they are older. re Are you planning to potentially sell the property in the future or give ownership to adult dependents" Nothing concrete in mind, more just to have options


Are you set up yourselves in case of sny issue or change of circumstances in your own situation? Say if one person needs nursing home care years down the road? Havent given it any thought at all :rolleyes:, but a quick answer would be that we would (have to and be happy to) avail of the Fair Deal scheme.
Click to expand...

And would other spouse have sufficient income if that situation did arise?
Personally i think you should keep your assets liquid.
If you really want to help your adult dependant save for house maybe start availing of 3k pa gift from each parent.
I think your intent is good here but you are now taking on more debt and tying up your savings. "We would be using up all our savings to to fund the remining €360K"
Honestly this is a bit of a mad situation to put yourself and family in. It could get very messy and costly.
Is there a specific reason that you feel the need to fund this? Is there some likelihood that they msy not be able to.support themselves? If so you may want to look at other options.
 
It’s difficult to plan ahead with certainty on either suggestions. Property could go down in price. Prices look to be remaining very high despite interest rates. Tenants might not want to leave plus rules around RPZ are unattractive. Plus we might have a new government who could further strengthen tenants right. But the stock market could also drop. Many are saying it’s due a correction. Not sure I’d opt for either at present. Don’t rush into it.
 
figrolls said:
We live in Dublin ourselves, and the eldest goes to college in Dublin, and probably the youngest will too.
Click to expand...

If the kids can live with you while going to college, there isn't much of a reason to buy a property.

However, if your kids are going to a college far away from you and they would have to rent, then buying a property for them might well make sense.

But for all the other reasons, stick to shares and avoid property.
 
figrolls said:
A quick google shows me this.
Click to expand...

I am not too sure how this was compiled. So what do they mean by Irish shares? The Irish stockmarket has underperformed because it a big part of it was invested in a few financial stocks - AIB, BoI and Anglo.

A well diversified fund should do better than property over the longer term, but no one really knows.

Brendan
 
You mentioned that your timeline is 10 years renting before helping the children. The eldest is 22. If the investment is to provide accommodation, I would expect the eldest to need it in less than 10 years. If it is to provide money for a deposit, perhaps too. But most of all, a property is not a great liquidity.
The 2k rent you mentioned is very low and would make a low return for risk and work involved in such an investment. And with the rpz, you have very little prospect for rent increase. My children are younger, we live in Dublin and have a rental locally. I am currently keeping the rental property because I would expect my eldest to need accommodation in the next 4 years and perhaps before as we have a smallish standard house and personally I don't want to live with adult children. However I don't think it's a brilliant financial idea and find it harder and harder to justify it to myself in a rpz world.
 
There's a lot of negative responses to the idea of buying property

The idea i think is to hedge against rises in property prices which on basic level makes sense to me

The specifics are more for the OP to decide
Eg to let to his kids
Or to sell for deposit
Or combination of the two
 
Last edited:
There are good reasons why so many small landlords have recently exited and continue to exit the Irish market. I am such a landlord (with 25+ experience years in the Irish BTL market). It is a business, it must be run as a business and as with any business it is not hands off. There will always be challenges arising, issues to contend with and risk exposure with BTLs. However, the single biggest adverse factor to contend with is the amount of volatility with market regulations introduced by the government. Your ability to liquidate the investment at a time and in a manner of your chosing is continuously being eroded by government changes to regulation. This business is not investor friendly. Unless you have prior experience being a landlord in Ireland, I suggest you avoid.
 
Thank you everyone for taking the time to give your advice here :)

We've beeen doing a bit of thinking.

I'll reply to previous posts now.
 
dubdub123 said:
And would other spouse have sufficient income if that situation did arise?
Personally i think you should keep your assets liquid.
If you really want to help your adult dependant save for house maybe start availing of 3k pa gift from each parent.
I think your intent is good here but you are now taking on more debt and tying up your savings. "We would be using up all our savings to to fund the remining €360K"
Honestly this is a bit of a mad situation to put yourself and family in. It could get very messy and costly.
Is there a specific reason that you feel the need to fund this? Is there some likelihood that they msy not be able to.support themselves? If so you may want to look at other options.
Click to expand...
dubdub123 said:
And would other spouse have sufficient income if that situation did arise?
Personally i think you should keep your assets liquid.
If you really want to help your adult dependant save for house maybe start availing of 3k pa gift from each parent.
I think your intent is good here but you are now taking on more debt and tying up your savings. "We would be using up all our savings to to fund the remining €360K"
Honestly this is a bit of a mad situation to put yourself and family in. It could get very messy and costly.
Is there a specific reason that you feel the need to fund this? Is there some likelihood that they msy not be able to.support themselves? If so you may want to look at other options.
Click to expand...

Yes it's a reality check that it could be a mad situation to get into . Thank you Dubdub123


First of all, what triggered is that my husband's parents kept a small investment property. Over the years it gave them some income. And when the time came they sold it and gave the proceeds to my husband and his sibling. It was an a huge help to get us to when we were tying to buy a family home , and also a huge help to sibling when they needed somewhere to live . As this was invaluable to us , I’d like to think we could help our kids similarly, this is the main reason for the idea behind this.


Just to fill in some info :
My in laws have now passed, and it is there family home that we have a chance to now buy. So it will either be sold, or we could buy.
When I refer to savings, it is actually the inheritance my husband will receive that would we would put towards it (I was just simplifying original post saying it was our savings).

Given these, the revised figures are
The price would be approx €430 K.

With the inheritance, we would need approx €70K mortgage.

We would most likely get more rent than 2K a month , but don’t want to overstate it


We are in late 50's, early 60's.
We own our own home, no mortgage.

My husband is retired and gets a DB pension (about 50K) – so a guaranteed income. (And half for me if he passes).

We will both get the state pension.

And I will have a private pension income of approx. 10K annually

I am still working.

With the above, we should be fine. But not a massive amount for unforeseen health/carer situations. College fees are in taken care of.

Until we need to sell house, I would expect we would have a net income of 1K from the house rent (possibly more with interest relief)



Also, there is a strong possibility I will be coming into some money myself within the next few years –about 130K . So, this should allow us to pay off the 70K mortgage early, plus have approx. €50K savings. I didn’t want to state this in original post as it’s not 100% certainty, but it’s highly likely
 
You must log in or register to reply here.
Back
Top