Rental yield looks good, However this project is more about capital appreciation.
Perhaps I am biased here but I invested €200k in shares in 2008 as a way to diversify out of property , and lets just say that it wasn't a pleasant experience.
Landlord is very exposed to property. Well yes he is and diversification is fine for a risk adverse passive investor.
But this poster knows property and knows Swords, this is his area of expertise, better to invest in yourself than hand your money over to someone else.
Perhaps I am biased here but in invested €200k in shares in 2008 as a way to diversify out of property, and lets just say that it wasn't a pleasant experience.
With a house you can collect the rent, paint the house, and wait. Shares can become worthless as AIB shareholders know.
The OP is extremely over exposed to the property market and even worse he is concentrated on a couple of properties in a single location - this is most definitely not the way to manage financial risk!
The purpose of investment is to maximise return, not to avoid risk.
It's hard to have a full discussion of these questions without speculating on house prices,
Rents may fall
.
- You may have empty periods in your houses
- The tax treatement of landlords may deteriorate further
- House prices may fall further and not recover by the time you have to redeem the mortgage
Hi cremeegg
I don't think that many people would agree with you. The first objective should be to achieve a reasonable standard of living and to avoid going bust. The OP is at serious risk of going bust and should not take any steps which increase this risk.
Diversification could well achieve increasing his returns while reducing risk.
Brendan
the extra years of life insurance we won't have to pay for etc it makse sense.
The purpose of investment is to maximise return, not to avoid risk.
In a perfectly efficient market it would not be possible to get above market return in the long run.
But no market is perfectly efficient, and the present Irish housing market is probably more inefficient than most.
This is because bank lending is not based on market criteria, it is restricted due to the banks own internal weaknesses.
If landlord believes he has identified a superior investment opportunity he may well be right and he should take it.
Furthermore the OPs performance so far would suggest anything but expertise in this area!
By contrast, anyone who invested in say the 'FTSE/EPRA European Property Index Fund' or the 'FTSE EPRA/NAREIT US Property Yield Fund' over the same period would have seen their investment grow by between 25% and 50% depending on how they acquired their position - they are not in negative equity, like so called Irish property investors...
Heck, even an investment in an equity index such as the 'iShares MSCI World' would have easily out performed an investment in Irish property returning anything up to 50% depending on who the position was acquired.
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The rest of your reasoning makes perfect sense Bronte, but this doesn't.
If you die before the mortgage is paid off, the life assurance will pay it for you and you still leave your cash sum as well.
If you pay the cash sum off the mortgage and cancel life assurance then your estate still received an unencumbered house but no cash sum.
Many people have life assurance even without any debts for this reason.
I would be looking at paying down as much mortgage debt as I possibly could,not sure if I understand IO for life,is that for the term of the mortgage or your actual life?
. Furthermore the OPs performance so far would suggest anything but expertise in this area!
If your investment mortgage is capital and interest, then year on year as you pay off the capital your interest payments reduce. Therefore the amount you can offset reduces. (Currently you can offset 75% of the mortgage interest against the tax). So while I am missing out on the opportunity to reduce the size of my mortgage, I am 1. Minimising my tax exposure and 2. Generating an additional income which I have chosen to save not squander!........
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