No! No! No! No!
I will have to do a Key Post on this issue as most people don't understand this at all. The asset cost is €100k in today's money. We can assess the profitability of the investment this year based on income and expenditure. He can make an assumption about the future price of property.
He should compare this to the risk/return on deposit accounts.
That is the only correct way to assess an investment proposition.
You are kidding me on property investment being incentivised, it's the exact opposite. If it were, there probably wouldn't be chaos in the Dublin rental market.dub_nerd said:However, for myself I've decided that I wouldn't touch Irish property with a forty foot pole. Anything that is so highly incentivised by the government has got a major chance of going wrong.
Well, maybe they have found a rare property with 10-15% gross yield, which is what I would consider the absolute bare minimum to cover the growing list of costs and compensate you for the headache of property management.
Investors look at the last couple of years and see a tax free capital gain looming. They are not concerned with income
The cost of borrowing to invest, while he has money on deposit is €2,800 a year per €100,000 borrowed.
So the answer is very clear - do not borrow to invest at 5.5% if you have the cash available.
75% of interest write-off of a BTL mortgage looks attractive in offsetting at least 52% tax (41% income tax, 4% PRSI, 7% USC etc). I’m also assuming that life assurance associated with the mortgage is also an allowable expense. The alternative is to purchase with savings - and pay full tax liability on any rental income.
Moral of story: you must speculate to accumulate debt.
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