Mid forties couple, with Family looking for guidance

[Dermob]

yes, that was the initial plan, but we are just trying to look at what the potential finances look like down the line

 

[Luternau]

@Dermob your longer commute may end up being less stressful if you avoid Dublin traffic/M50 (from D14).
I rented our my PPR when I worked abroad, and then bought something else when I returned. A very nice house was wrecked by tenants when I finally got them out (almost 3 yr process). They were no trouble but the cost to do up the house to sell it now are significant. If you do go the rental route you need to bear this in mind.

With the new rules and that rights (as linked by @Greenbook earlier), becoming a landlord for the 1st time is not very attractive. The return you get will reduce year on year, while your maintenance costs will increase. The net profits after tax are not great if you consider/contrast the risk free benefits you can get from lower mortgage repayments.

 

[Dermob]

Hoping that's going to be the case luternau, The house isn't going to be profitable to rent out, (its a 2 bed with a GF office that could be 3, its more having it for future requirements for college for our children, and possibly a future nest egg for our family. My pension isn't where it should be, and I'm maxing it out currently outside of AVCs. we carried out considerable renovations on it when we bought it 8 years ago. when you say the return will be reduced, can you explain that further?

 

[Luternau]

when you say the return will be reduced, can you explain that further?

Sure. Your rent increases are capped by legislation to inflation or 2% (whichever is lowest) for 6 years, after which you can reset the rent to market rent (which will not be a true market rent because of the caps). Resetting it is a convoluted process now, which can be challenged by your tenants. There are threads on this here.
Your costs (eg. repairs, maintenance, decorating) will not be capped at 2% annual increases. All in, you are guaranteed to have a lower pre-tax return year on year.

 

[Dermob]

Thanks Luternau.
I'm going to look at the impacts of student rentals and short term accommodation options.

 

[Luternau]

I don't know much about student rentals. Others here may be of assistance. For short term let's, there will also be new legislation introduced. See here. It's difficult to know what this will look like.

Best wishes if you decide to go ahead with renting. I have done well out private rentals, but I am exiting now. I would not recommend it to anyone that was considering doing it now.

 

[Greenbook]

@Dermob do take a look at the other threads on renting, they cover all of the problems and risks of the PRS now

There is a separate set of rules for Student Specific Accommodation, but I think that only applies to purpose built blocks for students and not students who are just renting a house (open to correction on this).

The advantages of you renting your house to students are that they leave every May and you can reset the rent for the next group. You will also not be stuck with a fixed 6 year tenancy.

There are disadvantages though. They can be hard on the house, first years in particular who are away from home for the first time. Rent tends to be lower as there is only so much most parents can afford and you will only be renting for 9 months of the year.

 

[Bronte]

Rental

2 bed with a GF office that could be 3, its more having it for future requirements for college for our children, and possibly a future nest egg for our family

Rent

2700-3000per month

Rough estimate of value of home
E650,000
Mortgage on home
E245,000
Mortgage provider:
BOI
Type of mortgage: Tracker, interest only, fixed rate
Fixed from 2022 for 5 years, approx 21 years left on Mortgage, monthly payments of 1510€,
3%

First you need to look at whether you'd buy the property tomorrow based on those figures.
Secondly we need to know this

Have you actually calculated your income and taxes if you were renting your current property?

Thirdly can you afford it at the same time as buying your next home, bringing up children and renovating.

Annual rent 2700 X 12 = 32400. Value X 12 388K or 15 = 400K. So that's no good. Buying it would be stupid.

yield 650000 is a low 5%. Before costs and taxes. So a miserable 2.5% after taxes/ costs. Taxes will be 50%. So not a hope on that score either, and no point working out the third question.

 

[Greenbook]

yield 650000 is a low 5%. Before costs and taxes. So a miserable 2.5%. Taxes will be 50%. So not a hope on that score either, and no point

On those figures, a lot of risk is being taken on for a very low yield, and that 2.5% yield is before expenses, future reburbishments etc. are taken into account.

 

[Raskolnikov]

So you're going to have property assets worth €1.15M, but cash/investments of just €90k? Seems like you are putting your eggs into one basket.

What if property prices fell 20%? A significant amount of your equity would be wiped out.

What happens if your kids don't go to university?

What happens if they go to university but the location of the house doesn't suit?

You are 46, do you really want to have two mortgages with 20+ years outstanding? Do you really see yourself working up to 67?

If I wanted to sleep easier at night, I would be selling the first house, rolling the equity into the new one with the aim of getting mortgage free as soon as possible.