A home, a buy to let, a commercial property and oil shares....

G

galway_blow_in

Registered User
Messages
1,992
my income is as follows

income from work = 40,000

income from property = 10,000


borrowings = 720 per month on BTL ( income from this is listed above ) due to be paid off january 2023

car loan = 580 per month due to be paid off july 2018

total = 1300 per month
 
according to an american site , my debt ratio is around 32% which they deem as risky

wondering what folks here think
 
I have not seen this system used at all in Ireland. In my view it is too simplistic to reflect repayment capacity. I.e. can you apply the same ratio to a borrower earning net 300k pa as to one earning 30k pa. Not in my experience. Your income is input gross but repayments are from net salary. You could be single, married with zero or 4/5 children. If you are inquiring on a further borrowing proposal you will need to supply more detailed and specific information in order to receive advice.
 
i earn just shy of 50 k per year , my partner earns 30 k pre tax , we have one child on the way

i dont have a mortage on our dwelling

the car will be paid off in june 2018 and currently costs 580 per month

the investment property cost 140 k , produces 12 k per anum and i have a 50 k loan on it over seven years @ 5.74% costing me 723 per month

i might add that 25 k of my income is tax free ( wont go into more detail but its full legit )
 
You own your home mortgage free.
You have a mortgage of €50k on a property which is probably worth around €80k
Your rent covers your full mortgage repayments.
So far, you are doing very well.

You have a joint income of around 65k net - other than your rental income, so that is pretty good for a family of three with no accommodation costs.

You have a car loan of about €30k ? I presume that the car is worth at least that. Seems about ok and easy enough for you to afford.

The investment property mortgage rate seems high for a low loan to value. Could you switch it to a cheaper lender? Could you take out a mortgage on your home to replace the investment property? You might be able to reduce the rate by about 2% which would save you €1,000 a year.

In fact, why not include the car loan in the remortgage and pay off that bit of the loan over the remaining 2.5 years anyway? Check though if there are early repayment penalties on your car loan.

Brendan
 
Brendan Burgess said:
You own your home mortgage free.
You have a mortgage of €50k on a property which is probably worth around €80k
Your rent covers your full mortgage repayments.
So far, you are doing very well.

You have a joint income of around 65k net - other than your rental income, so that is pretty good for a family of three with no accommodation costs.

You have a car loan of about €30k ? I presume that the car is worth at least that. Seems about ok and easy enough for you to afford.

The investment property mortgage rate seems high for a low loan to value. Could you switch it to a cheaper lender? Could you take out a mortgage on your home to replace the investment property? You might be able to reduce the rate by about 2% which would save you €1,000 a year.

In fact, why not include the car loan in the remortgage and pay off that bit of the loan over the remaining 2.5 years anyway? Check though if there are early repayment penalties on your car loan.

Brendan
Click to expand...

Thanks Brendan, the property was only bought recently , its a commercial property worth 120 k , it pays 12 k per annum

5.74% was the best seven year rate I could get , asked for a ten year but they wouldn't lend that amount for that duration ( ten years )
 
If it was me I wouldn't be investing in property and taking out a car loan , if I was going to invest 120k I would make sure I had a lot of savings first and be able to buy stuff like cars outright . But maybe your doing well hard to know , I dislike loans if I had to get a loan for a car I'd probably buy a cheaper car or save and buy it outright.
 
OK, so you had €70k cash.

You borrowed €50k to buy a property and €40k(?) to buy a car?

It seems to me that this was very risky. Borrowing at 5.75% to invest in anything other than a business is probably not a good idea. You will be in trouble if you get a bad tenant.

Given that you needed a car, it would have made more sense to buy the car for cash.

But that is all a bit late now.

Brendan
 
apologies to the room , i was a bit messy in my detail , i listed my income after loans are paid , i will now list gross income before loan payments

my basic income is 35 k per anum

i own two investment properties ( one residential and one commercial )

i only have borrowings on one of them ( the commercial )

i have two and a half years left on a car loan ( its actually for a 4 wd jeep )

my gross income is as follows

35 k from my job ( its secure but little scope for increased wage )

8400 ( 700 per month ) from my two bed apartment ( managment fee is a grand per year , property tax and contents insurance combined is around 250 euro so 8400 - 1250 , tenants are there four years so i dont see them leaving anytime soon or not paying so lets perhaps pretend i dont have a problem with non paying tenants ) property in limerick city

12 k from my commercial property ( in a large town with a population of 25 thousand people ) which is rented to a tenant who is there fifteen years and has another nine years left on their lease

i also have a four k income from dividends as i have fifty grand in a major oil company which i bought when yield is 8% ( i know this is poor diversification but i cant see this company going bust )


i currently pay out 723 per month on the commercial property , the property cost 120 k + vat and i borrowed 50 k of that over seven years @ 5.74% , i only took out this loan in the past month

i currently pay out 580 per month on the jeep which will be paid off in june 2018

if push came to shove i could sell the stock and after paying capital gains , pay off a good bit of the commercial property loan
 
You borrowed 50k @ 5+%
You invested 50k in stock market , you
Should of sold your stock and had no borrowings , this to me is terrible money management , your hoping to beat 5*% after tax in fees in stock market it's a gamble.
 
Fella said:
You borrowed 50k @ 5+%
You invested 50k in stock market , you
Should of sold your stock and had no borrowings , this to me is terrible money management , your hoping to beat 5*% after tax in fees in stock market it's a gamble.
Click to expand...

i see the stock as a pension plan who,s capital can grow over time while at the same time paying me a solid dividend , is the concept of good debt v bad debt no applicable here ? , 100% of mortgage interest on commercial property is tax deductible

unfortunately i was unable to get a lower rate than 5.74% on the commercial property , thats with BOI , none of the other banks were interested at all , KBC said they dont even lend of those kind of investment properties , ive been with BOI my entire life
 
Last edited:
Borrowing @ 5.74% to purchase shares in a single energy stock certainly wouldn't be my idea of "good debt".

It's an expensive, high-risk, leveraged bet - what's "good" about it? The fact that the interest payments may be deductible for income tax purposes doesn't transform the leveraged bet into a sensible decision.
 
You own your own home mortgage free. You also have a residential investment mortgage free. You have €70k of equity in a commercial investment property. You have a big car loan.

galway_blow_in said:
i also have a four k income from dividends as i have fifty grand in a major oil company which i bought when yield is 8% ( i know this is poor diversification but i cant see this company going bust )
Click to expand...

I wouldn't be terribly worried about diversification. It seems to be about 10% of your total assets. If the company went bust tomorrow, and you lost €50k, you would be sore but not wiped out.

What interest rate are you paying on the car loan? Probably around 10%. So you are borrowing at 10% to invest in shares. The dividend yield is 4% net. The company doesn't have to go bust. The stock market may simply revalue it downwards to make this a terrible investment. Sell the oil shares and pay off the car loan assuming that the net interest rate is much higher than the net interest rate on the commercial property.

Brendan
 
Sarenco said:
Borrowing @ 5.74% to purchase shares in a single energy stock certainly wouldn't be my idea of "good debt".

It's an expensive, high-risk, leveraged bet - what's "good" about it? The fact that the interest payments may be deductible for income tax purposes doesn't transform the leveraged bet into a sensible decision.
Click to expand...

who said anything about borrowing money to buy shares ? , i didnt even know it was possible to do so
 
Brendan Burgess said:
You own your own home mortgage free. You also have a residential investment mortgage free. You have €70k of equity in a commercial investment property. You have a big car loan.



I wouldn't be terribly worried about diversification. It seems to be about 10% of your total assets. If the company went bust tomorrow, and you lost €50k, you would be sore but not wiped out.

What interest rate are you paying on the car loan? Probably around 10%. So you are borrowing at 10% to invest in shares. The dividend yield is 4% net. The company doesn't have to go bust. The stock market may simply revalue it downwards to make this a terrible investment. Sell the oil shares and pay off the car loan assuming that the net interest rate is much higher than the net interest rate on the commercial property.

Brendan
Click to expand...


brendan , im paying 6.75% on the jeep loan , it will be paid off in june 2018 , dividend yield on the stock is 8%
 
galway_blow_in said:
who said anything about borrowing money to buy shares ? , i didnt even know it was possible to do so
Click to expand...

You had shares which you could have sold when you borrowed the money, so in effect, you are borrowing money at 6.75% to buy shares.

You should sell them promptly and pay off the Jeep loan at least.

Brendan
 
Brendan Burgess said:
You had shares which you could have sold when you borrowed the money, so in effect, you are borrowing money at 6.75% to buy shares.

You should sell them promptly and pay off the Jeep loan at least.

Brendan
Click to expand...

do you not see any merit at all in putting debt on the commercial property ? , 100% of the interest on the loan is tax deductible
 
The net interest rate on the commercial property is 3%. So maybe the net return will exceed that. But you have plenty of property already, so you are over concentrated in it. If you pay off the loan on the commercial property, you will save 3%. If you pay off the loan on the Jeep you will save 6.75%.

Brendan
 
You must log in or register to reply here.
Back
Top