Need some advice: investments, property and borrowing

A

abc05

Guest
Hi, Im a new reader on the board & would appreciate some advice. My own situation is as follows,

I keep approx 50K in my current account in AIB
I have AIB PIP/PEP accounts to the value of approx 40k (neg return)
I have my own PPR
I have 1 investment property (fully let)
I have 1 holiday property (Will not consider letting)
I am due to close another investment property soon (Will be let on closing)
I have placed a deposit on an apartment in Sofia (Complete Jan'06 & hope to let)

All the mortgages are with ICS & all my banking is with AIB, I am self employed so enjoy good cashflow position.
I would like some advice on what to do with the 40K in the current account & the 40k in my PIP/PEP accounts ? I have started looking at current account mortgages & am onsidering changing banks. I am also considering buying another property as I have enough savings and/or equity in existing property to do this.

Thanks in advance.

title edited slightly by ajapale
 
Re: Need some advice

I would like some advice on what to do with the 40K in the current account & the 40k in my PIP/PEP accounts ?

Have you considered reducing the debts that I presume you have?

I am also considering buying another property as I have enough savings and/or equity in existing property to do this.

Are you happy that concentrating so much on a single asset class (property) and undertaking the associated risks inherent with putting most (all?) of your eggs in one basked are implied by this investment strategy? Why not diversify a bit more - e.g. equities etc.?
 
Re: Need some advice

Hi abc

considering you seem to know a fair bit about the property game and have been looking at investments outside ireland i would keep going

a chap i know is in the property letting game and he just keeps leveraging and buying more places,

i suppose it's better the devil you know

is the investment property in ireland?
 
Re: Need some advice

Hi, Thanks for the reply,
I would rather not use the money to pay off a chunk of my mortgages, as I intend to continue investing in property anyway at some stage over the next few years (maybe after my SSIA matures).
I am not too worried (hopefully will not regret this statement) about having all my eggs in 1 basket as I just had my 31st b-day last week & I am looking at the property investments as long term. I will not become a millionaire with the difference between rent & mortgage on investment property but hopefully in 20yrs time I might be able sell up & retire early etc etc ...
I would prefer to stay away from managed funds as the AIB PIP/PEPS are at a loss of about 2k at the moment & regret not getting out earlier & putting this money to better use.
All properties with the exception of Sofia are in Ireland.
 
Re: Need some advice

Gar123 - on what basis, other than your friend's experience, do you consider a strategy that concentrates mainly or fully in property suitable (a) in general and (b) in this specific case? I personally would be wary of concentrating so much in any single asset class, geographic region (mainly Irish property in this case) and risk/reward profile. Most objective commentators would also recommend that, in most cases, people would be better to diversify across different investments with different risk/reward profiles in order to spread their risk. In some cases a concentrated investment strategy, and the potential risks that come with that, may well be justified but the individual would ideally want to understand the risks and why they are acceptable in their specific situation.
 
Re: Need some advice

im not far off the same boat, except im 26 and only one house, but rapidly working on the second

another option might be to have a look at the current account mortgages ( first active have one )

as far as i understand any cash you have in the current account is allowed against the mortgage amount and you only pay mortgage interest on the sum left

basically of you have 100k mortgage and have 50 k in current account oyu pay interest on 50k
 
Re: Need some advice

First thing I would look at is the rate you are getting (if any) on the €50k you hold in the current account. Surely you would be better off placing this in a Northern Rock/Anglo Irish 7 day/30 day deposit account?

Secondly, if your PIP is showing a negative return, could you perhaps encash the plan and make a series of €5-€10 investments in equities by buying the shares directly?

I am only suggesting these options on the basis that you don't want to reduce any of the property related debt.
 
Re: Need some advice

Thanks for reply,

I have just had a look at First Active Website & the current account mortgage seems very interesting. Does anyone have any experience of this product ?
 
Re: Need some advice

on current account mortgages might be of interest to you. If I recall correctly there are other similar discussion on current account/offset mortgages elsewhere in the same forum.
 
Re: Need some advice

abc,
I think you might be in a strong position to look at a pension mortgage. I dont know if you are aware of them, but for someone who is self employed/business owner they are a usefull tool. I have a good article about them if you are interested. (It is quite long, so I havnt pasted it here)
Also, it seems to me that you are doing quite well, and you might look at a slightly different method of adding more properties in the future. You might consider getting a commercial loan to tidy up all your mortgages, and give you a lot more flexibility for the future. Whilst commercial loans can be a little bit more expensive than investment mortgages, their key advantage is flexibility. If you want to have this expalined more just ask! ( I am a broker)
 
Re: Need some advice

abc05,

I think Clubmans advice is valid and sound - it is worthwhile to diversify your investments across investment types and risk profiles.

You don't mention a pension - One option is to take the 50k and the 40k and invest in equities through your pension - thus giving you tax deferment / reduction and spreading your risk.

Even though individual shares are not discussed on AAM there are many good sites around that will give good & straightforward analysis of different shares - you could look at an index tracker with 0% management fees to track the Dow or NASDAQ or the Euro stoxx.

efm
 
Commercial Mortgage

Hi Munsterdude,
I would be grateful if you could elaborate on the commercial mortgage. Have 4 mortgages in Ireland with same bank but would be interested in your proposal.
Thanks
 
Re: Commercial Mortgage

ABC,
Commercial mortgage is a different type of loan - you effectively become a "business" as opposed to just a person who owns a bit of property. Banks that deal with business loans are Bank of Scotland, Anglo Irish Bank, ACC, and all the high street banks have business sections. I am sure there are a few other banks I have forgotten! Anyway, the main thing is that the loan is secured on all the properties at the same time. This gives the freedom to use the total equity when you intend a new purchase. When you purchase, the purchase becomes part of the existing loan, and the property is added to the security. Does this help? feel free to pm with specific questions if you want, or ask away on the forum!
 
what rates ?

Munsterdude, what rates would be typically available on a commercial mortgage ?
would you have to set up a company and return accounts on a yearly basis ? Accountant audited a/c s ?

If for example a person had 4 properties. Valued at over 1 million and owed mortgages of 600 K. What would be repayment on the commercial mortgage on a monthly basis ??

thanks.
Dave
 
For what it's worth there are some buy to let rates listed in the best buys but I'm not sure if these are the same or comparable to commercial rates?
 
Clubman, No, commercial loans are fundamentally different from Buy to let, or that style of thing.
Commerical loan rates are generally quoted as a margin over EURIBOR, as opposed to ECB rate. Typically, a commercial loan might be quoted at a margin of 1.5% plus EURIBOR. The commercial rate is normally slightly higher than ECB, but not much. A typical commerical rate today might be in the region of 3.5% (very broadly speaking) This is obviously more expensive than morgtage rates for your typical home loan, but a home loan doesnt have a fraction of the flexibility of a commercial loan. You pay for flexibility. For example I have sourced funds for clients on a commerical basis, which included an interest roll up. (This is where for a time period no payments at all have to be made).
Generally commercial loans dont need life assurance, or various other bits.
You dont need to ser up a company - many people have both businesse s (property investment) whilst also have a PAYE job.
Any other specific queries guys?
 
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