should we release the equity to invest

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schoodles

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not sure if this is posted somewhere else but

we are based in Cork, hubby is very talented at home improvements etc,

current mortgage is 270,000 with BOI.

House valued at 630,000

would it be a wise move to invest in a property for rental income which will pay the mortgage.
 
I think it would be a good idea, if you where to release cash and bought a house for say 300K in Cork get an interest only mortgage, in 5 yrs that house in my opinion will be worth no less than 450K nice profit dont you think after all is paid off
 
In my opinion it would be worth no more than E300K with E300K still owed, but there you go. Pretty hard to 2nd guess the Irish property market.
 
schoodles said:
would it be a wise move to invest in a property for rental income which will pay the mortgage.
Click to expand...

At this point in the property market, it is as wise a releasing equity to buy shares in a company, say for example, Eircon.
 
Stilll waiting for house prices to fall in Ireland, this is a strong great Ireland lets believe in ourselves a little more, we are no longer the laugh of Europe rathar than the envy
 
Hi Schoodles,

You haven't given enough information for anyone to work out if property is the right investment for you.

You need to identify the likely purchase price of the investment property - say €300,000.

You need to add the costs involved in buying the house (legal, stamp etc) and the cost of furniture / decoration etc - say €25,000

You need to estimate the rent you might get. At this stage a typical rental yield is about 3.5% of the purchase price - say €900 per month.

You then need to factor in annual costs and a provision for vacant periods. This adds up to say €1,800.

This gives you a total annual income of €9,000

An interest only loan over 5 years will cost €16,250 per year.

Therefore you need to be happy that you can contribure the €7,250 shortfall each year (this amount will be higher is you have a repayment mortgage)

At the end of 5 years your total investment will be €361,250 (€300,000 + 25,000 + 7,250x5)

If you assume 2.5% selling costs (legal / auctioneer etc), and 20% CGT you would need to sell the house for €386,100 to get this amount back.

Based on these figures and assumptions you would need house prices to increase by 5.2% each year over 5 years to break-even. Obviously if you hold the house for 10 years the required increase to break-even reduces to 4.1% per annum.

It is up to you to decide on these numbers and make up your own mind. Make sure however that you can afford the monthly/annual cash losses while you hold the investment.

John.
 
schoodles said:
would it be a wise move to invest in a property for rental income which will pay the mortgage.
Click to expand...
Not unless you consider all the options first (e.g. equities etc.) and determine what sort of investment is most suitable for your specific needs at this point in time. Note if you own your own home then investing further in Irish property is putting most or all of your eggs in one basket (i.e. a single asset class, risk/reward profile, geographic region etc.) and, as such, implies more risk than spreading your investments across a more diversified portfolio of assets.
 
thanks for the replies. especially John, very well detailed. We need to do a lot more research before all the eggs go in together.
 
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