Moneymakeover Next Steps - Looking at BTL , looking for advice and opinions

F

Familyman77

Registered User
Messages
169
Age:47
Spouse's age:41
Partner's age if not married:

Number and age of children:
9 and 12

Income and expenditure
Annual gross income from employment or profession:
Annual gross income of spouse/partner: n/a

Monthly take-home pay: €5650 ( plus mileage allowance - €10k net )

Type of employment - e.g. Employee or self-employed. Employee
Employer type: e.g. public servant, private company. Private

In general are you:
(a) spending more than you earn, or
(b) saving?

Need to save now after overpaying mortgage


Summary of Assets and Liabilities
Family home value: €400k
Mortgage on family home: N/A
Net equity: 400k

Cash: €50k
Defined Contribution pension fund:
Company shares : N/a
Buy to Let Property value: N/a
Buy to let Mortgage: N/a

Total net assets:


Family home mortgage information
Lender N/a
Interest rate
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate?
If tracker, what is the margin e.g. ECB + 1%

Remaining term: (Original term is not relevant)
Monthly repayment: N/a

Other borrowings – car loans/personal loans etc - no other borrowings will need about 20k for a car in a year or 2

Do you pay off your full credit card balance each month? No credit card
If not, what is the balance on your credit card?

Pension information

Value of pension fund: €650k

Executive pension fund with contribution expectations of 30k per annum in addition to wage

Buy to let properties
Value: 0
Rental income per year:
Rough annual expenses other than mortgage interest :
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:


Other information which might be relevant

Life insurance: Term policy from old mortgage €275k until 2039, €100k death in service policy


What specific question do you have or what issues are of concern to you?

We are looking at the future and the pension is pretty well taken care of each year through the executive pension fund so looking into a BTL property .

We are looking at spending approx €200 - €225K and availing of the 10year LTL scheme ( we have seen a couple of 3bed properties with BER rating over C and think they would achieve approx €950 - €1050 per month

the big question though comes down to tax liability on the rental income ? would we be able to avail of the 20% tax for my wife or the €35k increase on the band - we are currently on 40% after 53K

any advice / thoughts would be much appreciated
 
For a buy to let, a deposit of 30 per cent would be needed which means 60 to 67.5K, which you don't currently have and would leave you with no rainy day fund. That's before costs and any refurbishment or furnishing that might be needed (perhaps another 10 to 15 k if you are lucky). So before starting, you are missing 25k.
 
Ok so based on that then these plans will wait until November ( bonus from work - will assume 75k plus available then at that point ) .
 
Im not massively worried about the rainy day fund and would the mortgage liability be much of a concern if the council took the property for 10 years at €950 per month . Its certainly more of a concern if we are taxed at the high rate as opposed to the 20% band
 
ClubMan said:
Why do you think that this is the most appropriate investment for your circumstances
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Clubman , im happy with the way my pension pot is growing so dont really want to add more than the current level so was just looking into this option . Hadn't really considered much other investment avenues tbh. My experiences would be far more aligned to building / trades than shares and investments. Maybe in 10 years I could renovate / upgrade and sell on . That is the thoughts at the moment anyway. Im.certainly open to opinions / ideas anyway
 
Purchase price 225k / Rent 1050pm
Gross yield 5.6% gross.

Not even deducting mortgage payments.

Taxes and expenses etc divide by 2 for circa 3% yield.

Given the ever changing regulatory environment and risk of getting a tenant that stops paying , I wouldn't pursue this.

Too much risk for little reward.
 
If you borrow 150k, your btl interests would be 7.5k. Add another 1.5k for miscellaneous expenses (insurance, property tax, maintenance, service...), that means an income of 2.5k before tax if everything goes according to plan and the property is constantly occupied. That's with the time at work and the risk involved.
 
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Familyman77 said:
Im.certainly open to opinions / ideas anyway
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You need to do the sort of number crunching that @Persia has outlined above to figure out if it's likely to be an appropriate investment. And then compare that to the likely returns from alternatives - such as equities. Obviously some assumptions about worst/likely/best case returns/scenarios need to be made when doing such an exercise.
 
I am looking into it to try to find the exact information. I had a small income at some point and was also claiming the home cater tax credit, which I suppose your spouse does. It meant that I was actually taxed at 40 per cent on that small income. So your spouse could also be taxed at 40 per cent.
 
Persia said:
risk of getting a tenant that stops paying , I wouldn't pursue this
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Plan would be to offer the property to the local authority and they then deal with the tenants etc .the LA would pay the rent . If we rented out privately the rent would be higher but we wouldn't want the risk of tenants or the ongoing maintenance charges
 
I get the 40% tax rate now so thats effecting decisions . Is there a mechanism then to transfer ownership of property to wife and have us assessed separately so shes at the 20% band .
 
I just looked up there so i would be taxed 40% after 44k so the gains aren't there either are they so now it's a case of weighing up having the asset over the risk of equities . I feel im.already exposed a fair bit to the markets
 
As a general principle, it's a good idea to have investments in the name of a wife who is not earning so that the income can use up the extra 20% tax band.

But will the bank lend to your wife on her own? Or can the house be in her name while the mortgage is in both names?

It is a good idea to look at structuring an investment from a tax point of view.

But the more fundamental question is whether you want this investment or not. Doesn't seem like a good idea to me. Buy to let loans are expensive and you would be borrowing too much.

It just seems far more efficient to max your pension contributions.
 
Familyman77 said:
the big question though comes down to tax liability on the rental income ? would we be able to avail of the 20% tax for my wife or the €35k increase on the band - we are currently on 40% after 53K
Click to expand...
You are currently on the high rate?
Not sure if you are saying your wife is not working?

You are joint assessed currently? Any extra income you get will of course be taxed at the high rate
Your proposed investment is not going to yield much profit especially at the start with big mortgage... Therefore you don't have a tax liability to worry about which for you is a good thing?
What I mean you'll have the full interest deductions. Second hand property, probably repairs to be deducted from any profit.

Also it's a fact of life the more you earn, the more tax you pay. You only pay it on the extra income. Not on the entire income. I never understand people who don't want an increase in income in case they pay more tax.

You are more aiming for capital growth, eventually sell for a profit or pass on to your children.

With population growth 30% over past 20 years and low interest rates, property investment here in Ireland makes perfect sense.

Lots of negativity on this website. Best to ignore them.
 
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LTL is the Long Term Leasing Scheme. the rental is slightly lower but the council become the landlord in effect and therefore have all the running and maintenance costs
 
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