Property Vs Equity

C

Christy

Guest
Hi all, I would like some advice about investment options open to me.

My current situation is that I live in my own house with a mortgage on it. There is around €100k equity, the mortgage is around 1.5 times our joint earnings. I also have an investment property worth €400k with a mortgage of €220 which is currently on interest only.

I have €40k that I am looking at investing. As I see it I have 3 options:

1) Pay it off one of the mortgages
2) Invest in equities
3) Use it to borrow to buy another investment property.

All sound financial advice would be to pay it off the mortgage, but all I am getting then is a return of 3%.

If I invest in equities I would need to spread the risk and thereby obviously limiting the return.

If I invest in property, say I buy something for €200k, if that increase by say 3% pa after 10 years my basic return would be around €65k ignoring any capital repayments on the mortgage. If I was looking to get a similar return on equities I would need to get a return of around 10%.

Basically would people think that I am over exposed to property and is an average return of 10% pa on equities likely over the next 10 years or is it way off the wall. I appreciate that if we knew what way equities/property was going to go over the next 10 years we would all be rich, just looking for peoples thoughts.

Thanks

Christy
 
I personally would not invest the cash (€40) in another property, simply because you do not need to

There is a conflict of interest I run property investment courses

But if you wanted to make a further investment in property I would sooner go the route of refinancing the existing property to come up with a deposit on another

Or

As an another alternative, have you considered selling the existing property and then re-investing

Capital appreciation means nothing until you sell and you should sell someday

Has the property topped out compared to others which would obtain the same return

I know the entry costs to purchasing properties is the worst part of it but it al depends on the retune you are getting on the €400k property
CGT and stamp duty may cripple the idea but consider it



In relation to investing in equities and the required return you are right that banks are willing to lend for you to invest in property rather than equities and this makes the returns much greater as you are investing much larger amounts
I am not particularly fond of equities so I will leave it at that

If you think of the €40k being paid of your mortgage as reducing it by 5 or 6 years then maybe the return (3.25% mortgage interest saving) does not seem so bad
I would not dream of paying it off the investment property, you get tax relief for the interest ion investment properties and only get a reduced amount on your PPR

I probably have given you more questions than answers

Stu
stuart@buyingtolet.ie
 
You must log in or register to reply here.
Back
Top