Wisdom of buy to let

Centless said:
Time is not the issue - I actually should have jumped a while back - I view this as a long term thing (at least 15 years) and the intention is to evaluate what to do at this time. Pension has been pretty well sussed out and I view this as a very real potential.
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Hi Centless, I'm not suggesting that you haven't taken time over it. However, the numbers you present do not add up to a low risk investment. You are going to be losing money every month in the hope that the cap appreciation makes up the difference over time. Maybe it will, maybe it won't. My point is not to take that risk at all. Why even risk it? There are infinite investment possibilities around that will make your money work harder without risking a family home on it.
Is there something else that you really like about this property?
I only buy property based on numbers - i have no emotional attachment whatsoever to them. So maybe there is another element to your decision making process that I do not understand. If so, fair enough, each to their own. But my opinion is still to stay away from that property you describe - on a purely financial basis, it makes absolutely no sense to buy it.
 
If, as you say, this is a long-term investment, do you suppose that rents will have increased substantially by the time the interest-only period of the mortgage is over such that at that stage the shortfall will be manageable?
 
Thanks for all the good advice - food for thought indeed.
However, over the next couple of years I am looking at realising nearly 80k through maturing with profits policies, SSIA's and Standard Life demutualisation and in the same period will be freeing up about €1300 per month of an expense I currently have (childcare). I know that realistically it won't all be freed up as kids don't come with zero running costs after all!! Some of this cash will be used to pay capital costs off primary residence. Also, at the moment I am pretty confident that cost of remortgaging can be met. The structure of the mortgages would be such that there is not a cross charge on the other.
 
Centless said:
The structure of the mortgages would be such that there is not a cross charge on the other.
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I believe that this is a common mistake made by investors. While the loan might be secured on the investment property it remains an obligation of yours even if the property value falls. The bank can and will go after you for any shortfall if they believe you have other assets.

You appear to be using short term interest rates (variable) for an asset you plan to hold for a number of years. I think you need to use a 5 year fixed loan as a minimum therefore increasing monthly interest only payments to €1260. Also remember to factor in the additional life assurance, house insurance etc. etc.

One additional point to consider - you will pay tax on the increase in house prices (if any) but will not be able to offset the loss on monthly rentals.....

John
 
Centless said:
Thanks for all the good advice - food for thought indeed.
However, over the next couple of years I am looking at realising nearly 80k through maturing with profits policies, SSIA's and Standard Life demutualisation and in the same period will be freeing up about €1300 per month of an expense I currently have (childcare). I know that realistically it won't all be freed up as kids don't come with zero running costs after all!! Some of this cash will be used to pay capital costs off primary residence. Also, at the moment I am pretty confident that cost of remortgaging can be met. The structure of the mortgages would be such that there is not a cross charge on the other.
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Centless, when I started reading the thread as a fellow landlord I would have strongly advised against the proposal however you seem that have covered most of the risks and have cushion through the €80k and you €1300 per month so risk is minimal in the event of a large blip. So if you taking a long term view - go for it!

Roy
 
I'm in a similar-ish situation as Centless.

I'm living in Galway city and have 140k mortgage on a house worth approx. 425k.

I am currently looking at buying an apt to let for 175k. The rental income would be approx. 500 pm and the mortgage (180K) on the buy to let would be approx 830 pm, so it would cost me 330 pm. Given 2 months downtime + management fees, I would have to spend 4800 per year on the apt.

I have a good pension and my SSIA matures next year. I see this investment as longterm - 10 years or more.

I consider myself lucky to have bought my house when I did. Am I completely crazy to be risking this? If yes, what low risk investment could I make with approximately 500 per month which I will well be able to afford, certainly after the SSIA scheme ends?

Would welcome any opinions....
 
lucyg said:
I'm in a similar-ish situation as Centless.

I'm living in Galway city and have 140k mortgage on a house worth approx. 425k.

I am currently looking at buying an apt to let for 175k. The rental income would be approx. 500 pm and the mortgage (180K) on the buy to let would be approx 830 pm, so it would cost me 330 pm. Given 2 months downtime + management fees, I would have to spend 4800 per year on the apt.

I have a good pension and my SSIA matures next year. I see this investment as longterm - 10 years or more.

I consider myself lucky to have bought my house when I did. Am I completely crazy to be risking this? If yes, what low risk investment could I make with approximately 500 per month which I will well be able to afford, certainly after the SSIA scheme ends?

Would welcome any opinions....
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why not make avc's to your pension and have an even better pension fund.
 
thanks
might sound like a dumb question but what kind of return do avcs make?
 
Sound advice about tying any element to the existing family home- and I have decided against. I still do not want to use any current existing cash on deposit for buying a rental property as this will act as a cushion should the event arise.
Instead I intend to source another loan to put with the 92% investment loan. This will be indeoendant of and not tied to any of the properties. This loan can easily be cleared from SSIA cash later this year. Any other incoming cash will be used to reduce the outstanding capital on the family home only.
As already suggested I also will be contributing more to AVC's - current contribution is 10% of salary added to a DB scheme.

Thanks again ........
 
lucyg said:
thanks
might sound like a dumb question but what kind of return do avcs make?
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have a look under pensions section here. you get very good tax relief through avc's which close to doubles your contribution from net income as soon as you pay it in and then pension returns average around 10% per annum,you can put at least 15% of your income into your pension per year and this increases with your age.
 
Centless said:
This will be independant of and not tied to any of the properties.
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Centless,

Just in case you misunderstood my point. When you borrow money from a bank, be it secured or unsecured, that bank is entitled to go after you for the repayments. If you have assets or the potential ability to repay then they will certainly go to the trouble and expense of taking you to court if necessary.

John
 
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