This may seem off thread, but I suggest not.
22.5 years ago I invested €13,000 in an investment property, borrowing €115k. Since then I made repayments of €150k (it was a 15 year mortgage) and collected rent of €211k. The property today is worth €250 approx. I am still collecting rent on it.
Sounds like it is only relevant, when the taxes, due on the rent are factored in, plus the other running costs, (LPT, maintenance, Insurance etc)which in many cases is up to circa 50%+of the rents received, as it appears the mortgage paid off, so no interest to write off against gross rents.
Others may argue the CGT due on the sale of the property may also relevant.
But to give you a real life example, a client of mine invested €30,000 24.75 years ago. It's worth just over €100,000 when I did the review for him last week.
22.5 years ago I invested €13,000 in an investment property, borrowing €115k. Since then I made repayments of €150k (it was a 15 year mortgage) and collected rent of €211k. The property today is worth €250 approx. I am still collecting rent on it.
There's a higher risk factor here, as when you borrowed your €115k, you had a liability of €115k and a potential loss of €128k; it was a leveraged investment. Investing €13k in a pension instead would mean a potential loss of €13k.
The projected fund value is a useful figure for comparing with other types of investment. It depends on some assumptions, but so does any projection.What my Statement of Reasonable Projection shows should I continue to contribute at the same level between now and retirement:
Projected Fund Value €738k
Projected Monthly Income for Life €2300
Projected Montly Income in today's prices assuming inflation of 2.5% €1310
Concern:
I think the key figure here is Projected Montly Income in today's prices assuming inflation of 2.5% which works out at €1310. It seems incredibly low considering the large amount of money I will have contributed up to my retirement date.
If the value of your asset somehow dropped to zero, you would be out-of-pocket by €128k (less the 'dividend' of rental income or accommodation), right?This is how most people think of leverage, but in the case of a mortgage for a fixed number of years it is quite simply incorrect.
...The capital value of the property had no effect on my liability, nor could it ever have done...
If the value of your asset somehow dropped to zero, you would be out-of-pocket by €128k (less the 'dividend' of rental income or accommodation), right?
Under any circumstances I was committed to spending €150k over 15 years plus the deposit at the beginning. That was the case no matter what the value of the asset did, there was no connection between the two.
Another real life example is,
I purchased a property for €30000 24 years ago, and I just let it run its course also, its value is €240k.
Just saying.
Just because it's mandated by the Central bank does not make it less misleading. Or the industry that produces this stuff more respectable. In 24 years time if annuity rates are 1% and the OP says to his provider "you projected 3.7% back in 2019" he will be met with a shrug of the shoulders.
This may seem off thread, but I suggest not.
22.5 years ago I invested €13,000 in an investment property, borrowing €115k. Since then I made repayments of €150k (it was a 15 year mortgage) and collected rent of €211k. The property today is worth €250 approx. I am still collecting rent on it.
The example I gave, the client got a refund of €12,000 on his initial investment and then did absolutely nothing.
It is the Central Bank requirements that make them misleading!
That's not plausible.
Unless you made serious renovations, there isn't a house that increased at double the rate of the market over the period.
Clearly paying a negative pension would never happen - even in this country - but the point is annuities as a product only make sense if the annuity pays out more than simply taking the total pot and paying it out in installments.
I realize they're two different strategies.They are quite different investment strategies.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?