You should never borrow to invest - even in property

[fistophobia]

Because yields after tax are not worth the risk of a dud tenant, particularly given very expensive BTL finance, CGT @33%, and pretty heavy rent controls.

Classic rookie mistake made by a lot of small-time landlords.
You never borrow to invest.

I know a guy who has 5 properties, a few are flats in Limerick, think Gardiner Street type of location.
He bought for 40K each, does all the letting, maintenance himself, and has done well, income and capital appreciation.
One was bought at auction, without being able to view - he found tenants in the basement. I wont go into the gory details.

 

[Thirsty]

You never borrow to invest.

So in your view, companies who borrow money to, say, purchase new machinery to speed up production are making a mistake?

 

[fistophobia]

Yes, he bought at BidX1 website auction, ended up with a bargain.
The tenants were persuaded to leave.

 

[fistophobia]

I am solely referring to personal investing.
I have never borrowed any money, would cause me sleepless nights.
I have seen fortunes lost in CFD trading, on my watch.

 

[PebbleBeach2020]

I have never borrowed any money, would cause me sleepless nights.

Did you never have a mortgage? Do you own a house?

 

[fistophobia]

Yes, bought and paid for in my 20s.

 

[fistophobia]

Personal savings and family funds.

 

[NoRegretsCoyote]

You never borrow to invest.

I think leverage of 30% or so across a BTL portfolio is fine, both for the investor and the lender.

IO mortgages at 100% for BTL as given out in 2006 were crazy both for borrower and lender.

But finance is basically very expensive now. BTL rates of 4%-5% are now basically double owner occupier rates. Also not much below gross rental yields.

If you could get 2% BTL finance of up to 50% LTV you would see a lot of small-time landlords returning.

 

[Jim2007]

Classic rookie mistake made by a lot of small-time landlords.
You never borrow to invest.

I know a guy who has 5 properties, a few are flats in Limerick, think Gardiner Street type of location.
He bought for 40K each, does all the letting, maintenance himself, and has done well, income and capital appreciation.
One was bought at auction, without being able to view - he found tenants in the basement. I wont go into the gory details.

Except landlords are running a business and the advice relates to investors not business people.

 

[PebbleBeach2020]

If ou could get 2% BTL finance of up to 50% LTV you would see a lot of small-time landlords returning.

I disagree. The uncertainty and potential massive reduction in asset selling price if SF bring in a policy whereby landlords cannot sell a property with vacant possession, that overrides a 2% BTL rate.

 

[NoRegretsCoyote]

that overrides a 2% BTL rate.

If I had €200k and say borrowed €200k more at 2%, bought two apartments yielding 10% (achievable).

Gross rent €40k, less interest of €4k other expenses maybe another €4k. Rental profits €32k, after tax €16k so a net return on equity of 8%.

With interest rates of 4.5% these numbers change to rental profits €27k, after tax €13.5k so a net return on equity of 6.75%.

I take your point it's not a huge difference, but it would help a bit.

 

[joe sod]

I have seen fortunes lost in CFD trading, on my watch.

Were these losses made by "financial professionals" in the IFSC by any chance.

 

[Gordon Gekko]

Denouncing borrowing because of CFDs is a little like denouncing coffee because of heroin.