another accidental landlord query!

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daveyboy31

Registered User
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Folks, I’m hoping to get a bit of advice on managing personal finances when becoming a landlord. My wife and I are living in a 1 bed apartment but with a young child now, it’s time for us to move on.

We’re lucky in that my wife is set to inherit money soon, which, along with our savings of about €70,000 will go a long way towards the purchase price of a family home. We will probably be borrowing about €125,000 which is the max the bank approved us for and will work out at about €570 pm based on current interest rates. I’m the main earner and the repayments at current rates equate to less than 25% of my net earnings.

So far, so good. The question we are asking ourselves is whether to hold on to the apartment and rent it out. We have low interest rate/repayments and I have done the maths on the tax and various expenses and I estimate that we would need to pay in €500 -€1000 euros a year to keep it ticking over. That’s not taking into account the cost of repairs, replacing washing machines and the like however. My wife is a stay at home mother at present and has self-employed income of about €2-3,000 a year which I’m hoping would cover any such expenses.

My concern, particularly after having read numerous horror stories on online forums, is that if we have trouble with a tenant not paying rent and we spend a year or so trying to get them out, we would not be in a position to cover both mortgages. I’m wondering do any of you have advice on the most sensible way to stress test our ability to deal with such situations? Is it generally advised that a landlord should have the ability to service both mortgages if required for a given length of time or is it enough to have a certain amount of money set aside to cover say a year’s mortgage repayments?

Another option that I considered, although I’m not sure if it is still on the go, is to lease the apartment to the local authority. They certainly used to do a scheme where they leased it for 10 years and took over all management. I’d appreciate any advice on the matter. My wife is keen on renting the property as she sees it as a long term investment /pension. I feel it’s a little risky myself but not sure if I’m being over cautious. Thanks
 
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You seem to have your head and your heart pondering this at the same time, which will conflict whatever way you look at it.

I, and its just my opinion, would be holding on to the Apartment with a contingency fund of 6 months mortgage payments ,

Reading between the lines of your question, I would be inclined to only consider this if the Local Auth were to take on the property, and the hassle that will most likely visit you.
I think other that that, you will spend a lot of you time worrying and contemplating the worst ie: non payment of rent, disruptive tenants etc.

I have come to the realization, that your lucky if you get good tenants, but this luck doesn't last, and over time you will meet trouble. They have very little to fear, and unfortunately, as time goes by, more and more of that ilk are prepared to chance their arm.

So, in short, if you could do without grief in your life, sell.
 
Much apreciated. That's kind of the way I'm leaning alright. I have to say it's shocking how little protection landlords appear to have from trouble tenants based on what I've read. It really is a revelation to me what tentants can get away with if they are dishonest enough to go down that road..
 
Having been in the residential letting business for 20+ years, there has been a lot of changes that include tax and legislative amendments that increase the risk, administrative burden and legal responsibilities of the landlord. Coupled with this is the added volatility arising from government policy on taxation and further restrictions concerning not just rent controls but the ability of a landlord to obtain vacant possession when required. The risk exposure for landlords continues to increase with every amendment to the Residential Tenancies Act. These are factors that must form part of your decision which is not just about rent and debt.

My firmly held opinion is that I would advise any new potential landlord not to enter the business. This view is further cemented given the limited information you provided with a young child etc.
 
Thanks Alistair, I think for us it's the case that we don't really know a lot about other alternative investments when thinking ahead to retirement. My wife's family had invested in a property and rented it out over the years which is why she is lucky enough to be receiving inheritance and I can see why she see's it as the natural thing to do. Having done some research on the matter though it would appear to me that, as you appear to be saying, being a landlord now is not the same as it was twenty years. I think it may be a question of looking into other alternative investments before making a decision. Thanks for taking the time to advise.
 
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