Buying to let: pay cash, and/or borrow?

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Silica

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My husband recently inherited nearly €300k, and we're in the lucky situation of having no borrowings/loans, and are thinking of using the money to buy an investment property (in his hometown in the UK), maybe spending about €250k.

Given that we have the cash . . . should we use it to buy the property, or is there a good financial / tax argument for borrowing part of the sum used?

(Someone suggested to me that there was an argument for having some borrowings -- even though we could pay cash for the whole thing).

Thanks for any advice.
 
It is better to borrow the money as you will have the interest write off available (check UK rules but similar to Ireland I imagine) against rent. Meanwhile you put the money to better use elsewhere, in savings, be that deposit account of whatever. Meantime house is being bought by the rent.

But you need to understand what being a landlord is about, it is not plain sailing.

The most important thing is the location of the property and the yield you can expect to achieve. I would look at capital appreciation as a bonus, if you buy at the right time (in a sellers market, as we have currently in Ireland) in the right place and have a good yield and know what it takes to be a landlord you can't lose.

Contrary to the 'policy' on AAM of interest only mortgages (due to the tax benefit) I would be for a repayment mortgage of not less than 20 years or less. Basically the mortgage to be paid off on retirement to supplement a loss of income when retiring.

I've been watching investment property in Ireland and yields are quite good now but I'm a bit wary of the Government's plans for property tax and the fact that they've reduced mortgage interest relief to 75% and I wonder what effect emigration will have on the rental rates which have come down in the past year. Buying in the correct location should prevent much of a downward pressure on rents reducing though. Also don't know what the glut of houses and Nama will have. In the UK market I wouldn't be sure what advice on these things you need.
 
Are you really, really sure that residential property is the best investment for you at this stage in your life? What other alternatives have you considered? How will you be managing the property? What kind of yields are you expecting?
 
Thanks @Bronte,@Complainer@Jambo

We are mid-50s, and have some limited experience of renting, having been landlords on and off over the last 20 years, and currently have a couple of properties, both of which were bought for 'cash', with no mortgage.

This latest idea is partly for personal reasons (homesickness), and it's possible we might use it ourselves in 10/15 years on retirement.

So I guess this is really a question about tax efficient ways to buy it, as Bronte suggested.

What I'd love to see is a calculation that explains this -- does anyone know where I can find one? Or maybe it simple enough to do here with pen and paper :)
 
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