50 income poor asset ok. Expenses Looming

With respect I suggest that those who are advocating that Cremeegg should diversify are missing the point. If the entire property portfolio was owned outright, that would be absolutely the correct strategy. But it isn't. BTL 1 and 5 are owned outright and there's a reasonable argument to sell and possibly switch into a diversified equity portfolio or ETF.
But BTL 2, 3 and 4 are leveraged so it's the bank's money doing the heavy lifting while you, ahem, creme off the profits. Basically, you've got nearly 600k of the bank's money working for YOU. And better still, you're renting that money at an absurdly low interest rate. The going rate for BTL mortgages with your LTV is 5% or so. You have it for less than 1% averaged over the three mortgaged properties. You would be mad to let that go.

If you want to cash in, buy all means sell BTL 1 or 5 and have a bit of fun. But your mortgages are the gift that keeps on giving, a historical anomaly that won't be repeated. We will probably never again see sub 1% IO trackers in our lifetime. Keep her trucking!
 
Because property prices only go up and there are only good tenants out there who always pay their rent.

A single asset class in a single geography with leverage and minimal other income or savings to mop up any issues...what could go wrong?
 
fungie20 said:
I must be showing my relative young age but a couple with 4 children, 1 modest income, a family home and 5 BTL properties; that's wild!!
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Full disclosure. We lived in London in our 30s and we both had very well paid jobs. We moved to Ireland at a very advantageous time.
 
@cremeegg

Is your wife playing Class S PRSI on the rental income? This will help her qualify for a contributory state pension.

Otherwise I haven't looked at the numbers in detail but I would sell one of the mortgage-free BLTs and take advantage of tax relieved pension contributions. As you get older you will want your wealth stress free, and a five-property portfolio is not that.

Borrowing at 6.5% makes no sense either.
 
cremeegg said:
Full disclosure. We lived in London in our 30s and we both had very well paid jobs. We moved to Ireland at a very advantageous time.
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Firstly, well done.
Secondly, that opportunity to earn big bucks isn't going to come around again. You are getting older so you should be slowly de-risking as you have less time to recover from negative events. I've no specific advice as I think you are best placed to make specific decisions but I'd frame those decisions in the broader context of de-risking. You could be mortgage free and still have a good investment income. Sometimes a comfortable easy life is the best option.
 
I knew you'd buy another property. :p I'm trying to do the very same. :D

As you know there is a massive anti property investment vibe on many property investment threads and you've consistently proven the opposite. From the day we bought our first home I turned it into a money making exercise.
 
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cremeegg said:
Rough estimate of value of home €260,000 €400,000
Amount outstanding on your mortgage: €170,000 €103,000
What interest rate are you paying?
ECB plus 1.15% (€10,344 pa) No Change


BLT 1
Value €125,000 €250,000
Mortgage None
Rent €9,000 pa €20,000
Unrealised Capital Gain €120k

BLT 2
Value €160,000 €250,000
Mortgage €200k ECB + 0.75% IO for 18 more years (€2,000 pa) 11 years remaining then capital payable
Rent €8,400 €10,800
Unrealised Capital Gain €100k

BLT 3
Value €95,000 €170,000
Mortgage €208k ECB + 0.75% IO for 18 more years (€2,079 pa) 11 years remaining then capital payable
Rent €8,400 €10,800
Unrealised Capital Loss €70k

BLT 4
Value €170,000 €300,000
Mortgage €175,000 ECB + 1.15% Cap & Int (€13,944 pa) Bal €101,000 8 years remaining
Rent €15,000 pa €33,600
Unrealised Capital Gain €120k

BLT 5 Purchased shortly after the above thread was active.
Value €170,000
Cost €90,000
Mortgage None
Rent €14,600 pa
Unrealised Capital Gain €80k







Any suggestions welcome.
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Questions
How much did college cost
When does employment income end
Have you made sure you both will get the full state contributory pension
How much are you getting from the 90K rent roll
When will the home loan end, is this your forever home
Would need the figures for each property as regards expenses and tax.

Summary

Home: 400K, BTL1 250K BTL2 250K BTL 3 170K BTL 4 300K BTL 5 170K = 1,540,000
Loans: 103K, zero, 200K, 208K, 175K zero = 686,000
Return: 8% 4% 6% 11% 8.5%

Problem is the two mortgages of 408K on interest only. What is your plan for them? They are also the two with the lowest return. If you sold 3 now, you'd have a CGT loss to offset against a CGT gain when selling 2. You'd lose income of 21K (you can figure out the real figure based on expenses and tax). The question is whether you should do that now or in 8 years. You really need to think about that - because as you very well know what goes up can come down. And you don't want that to happen when the loans are called in.

- Home is fine as it is being paid off.
- BTL 1 has a good return and no mortgage
- BTL 2 has the lowest return, and is IO
- BTL 3 is IO, and the second lowest return
- BTL 4 has a fantastic return and is being paid off
- BTL 5 (good buy there, presumably based on you vast experience. You've taken your savings, invested very wisely and it has a great return - this is for the benefit of other would be landlords who lurk here and sometimes here advice not to rent)

Comment

Leper was right. But you should go on Safari, you never get the time back. Do it now while you still can, while you can afford it, and while your kids are free, this will all change faster than you realise.
 
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Gordon Gekko said:
Because property prices only go up and there are only good tenants out there who always pay their rent.

A single asset class in a single geography with leverage and minimal other income or savings to mop up any issues...what could go wrong?
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With respect Creme Egg has been a landlord for years so he knows all about good and bad tenants. He's also seen property collapse and rise. So he also knows that propety does not always rise but that it doesn't matter if you don't have to pay back loans. Once your rent is covering everything and you're getting a good return there is no problem. As regards, geography, as a person living abroad who manages Irish property I'm glad I only have property in one country. Knowing your market, the rules all in English, being able to keep up with Irish tax laws is the right way to go instead of taking risks of the unknown in Croatia - (Bulgaria, Spain and Dubai - we had all those horror stories on here over the years)
 
With respect Bronte, you mention selling Property 3 but don’t mention the fact that there’s €38,000 of negative equity to be dealt with. Cremeegg doesn’t have the cash to deal with that and in fact has expensive non-mortgage debt.

I’m delighted for Cremeegg, but let’s not mislead other people and bang the drum that buying a single asset class in a single geography with leverage is a sensible strategy.

Picking up pennies in front of a steamroller can be quite profitable too if you time it right.
 
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Gordon Gekko said:
Picking up pennies in front of a steamroller
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That's not a good analogy. OP has scale, seems to be able to deal with tenants and repairs directly which keeps down costs. There are some good gross yields as it's more than likely apartments in non-prime locations. This is the model of how to make money as a landlord.

This business model would not stack up if the properties were in Ballsbridge and managed by an agent, but I suspect they're not.

Otherwise I agree he's had a run of good luck and it's time to de-risk.
 
NoRegretsCoyote said:
That's not a good analogy. OP has scale, seems to be able to deal with tenants and repairs directly which keeps down costs. There are some good gross yields as it's more than likely apartments in non-prime locations. This is the model of how to make money as a landlord.

This business model would not stack up if the properties were in Ballsbridge and managed by an agent, but I suspect they're not.

Otherwise I agree he's had a run of good luck and it's time to de-risk.
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Which is my entire point!

It worked out, great, but it could quite easily not have worked out.

The yield on these assets probably reflects the risk. And there are borrowings in there.

This was/is high risk activity.
 
Gordon Gekko said:
It worked out, great, but it could quite easily not have worked out.
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There is a strain of thought on AAM that no one should ever be a residential landlord. I know all the downsides and arguments why.

But I think there is point where the return justifies the risk, and the OP is in that space. Especially with the cheap funding.
 
Gordon Gekko said:
With respect Bronte, you mention selling Property 3 but don’t mention the fact that there’s €38,000 of negative equity to be dealt with. Cremeegg doesn’t have the cash to deal with that and in fact has expensive non-mortgage debt.

I’m delighted for Cremeegg, but let’s not mislead other people and bang the drum that buying a single asset class in a single geography with leverage is a sensible strategy.

Picking up pennies in front of a steamroller can be quite profitable too if you time it right.
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But I said sell both leaving a positive 12K. I don't see an issue with the NE on No 3, if the bank allows him to sell they will presumably give him the time to sell property 2. Or he can borrow the NE. But he needs to time it so the NE is sold first to avail of the CGT loss. (I didn't do the calculation on the worth of that)

A person on income of 45K with rental roll of 90K and mortgages nearing end with current values of 1.5 million owing 700K is not in a bad position.

I'm not misleading anybody. I've made money on property and I think Creme Egg has made excellent decisios which is why he's worth so much today. So I think his strategy is very sensible indeed. Tell me which 5 blue chips would you have advised him to buy in 2014 that would have resulted in him now being in the position he's in.

Also you'd swear 6.5% was actually expensive. When people have overdrafts at 20% plus or credit card debt. He's paying less than 2K for that annually. That's pennies.
 
Bronte said:
But he needs to time it so the NE is sold first to avail of the CGT loss
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Exactly but Cremeegg doesn't have the cash to make up the shortfall on the mortgage and hence the problem.

Personally, I would sell one of the un-mortgaged rentals, plus both BTLs on the IO mortgages (making sure to sell the property with the capital loss first). I would then use any remaining equity (having paid the CGT) to clear the car loan and the mortgage on the PPR.
 
Home loan is costing him less than 3K annually. What's the benefit of paying that off, when he's paying it off anyway.

He'd lose 41K of income if he sold properties 1, 2 & 3. Without full figures including tax on rentals it's hard to calculate properly.
 
Sarenco said:
Exactly but Cremeegg doesn't have the cash to make up the shortfall on the mortgage and hence the problem.

Personally, I would sell one of the un-mortgaged rentals, plus both BTLs on the IO mortgages (making sure to sell the property with the capital loss first). I would then use any remaining equity (having paid the CGT) to clear the car loan and the mortgage on the PPR.
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I agree with this analysis.
 
Some of those properties have doubled in value in 7 years. Can't see that happening in the next 7 years. Peaks and troughs, you get lucky or unlucky. If unlucky, can get stuck in that cycle. Almost like a sinewave.
This sounds similar to back in celtic tiger times and we all know what happened then.

I'd sell up before times get bad.
 
Not really meepman

There just been huge injection of money into the system both Europe and USA

Assets will increase in price
 
meepman said:
Some of those properties have doubled in value in 7 years. Can't see that happening in the next 7 years. Peaks and troughs, you get lucky or unlucky. If unlucky, can get stuck in that cycle. Almost like a sinewave.
This sounds similar to back in celtic tiger times and we all know what happened then.

I'd sell up before times get bad.
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Creme Egg came through the Celtic tiger, up and crash didn’t he. He knows what crashes are. If he encounters another crash so what, for him. He’s also older than that, so has seen a lot including actual massive interest rates which makes 6.5% nothing. Particularly in real terms.
 
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