Pension property - the sums?

crackcrack30

Hi guys, .....i've got burnt before with saving schemes & shares before, the only good thing I have done finiancialy over the past decade is build and pay off a small mortgage on a gifted site so I'm mortgage free....

My thing is that I have nothing planned for retirement and was thinking of researching and buying a BTL house that could be sold on retirement.

I am almost 40yo, safe job on 42k, wife has received 40k in recent redundancy ( the deposit) and will stay at home with kids for foreseeable future....

Thinking of taking out a 100k mortgage 20-25years to coinside with retirement......rent in this provincial city is 700-850 in the desired areas. hope to buy a semi-d at 50% of peak value. I wouldn't be interested in year on year profit but rather that it would pay its way or wash its own face....
...any advice & how do the sums add up....@ 100k variable morgage with say 750pm rent all declared & above board...

Santa Cruz

Over the period of time you will come out on top. Do everything to minimise any tax liability on the rental income. A good accountant would be worth his/her fee

D3PO

depends on your definition of coming out on top.

The OP has plenty of time to invest in a pension and add big AVC playments into it. The income tax savings alone would make it hard for a BTL to compete and add potential equity gains on top aswell and the maths will say a pension fund is unlikely to be matched by a BTL especially when the OP is talking about selling the BTL when at pensionable age.

at least if they kept it the potential increase in annual rents would act in some way like an annuity. By selling up however (and having to pay CGT on any profit as its BTL) the return wouldn't be so great and to use the return as supplementary income to the Old Age Pension only wouldn't leave a large pot as the years go on.

In summary bricks and mortar as a portfolio diversification policy for retirement is a good idea, but as your only retirement option not so good.

hfallada

OP if you dont know what you are doing, I wont do it. Being a landlord isnt easy and it takes a lot of time to get used to it. As you said yourself you got burnt with shares before as you werent quite sure what you were doing. Why would you do it again? But if you really wanted to buy property. Buy a 1 bed in Dublin city. They are about 80-100k and they rent for 1-1.2k per month. There will always be a demand for rental properties in Dublin. I cant say the same for Galway or Limerick if the multinationals disappeared tomorrow.

MicktheMan

OP, imo, property is still overvalued.

Take your query. Your deposit + mortgage is 140000ísh. In order for property investments to "work" the min gross yield you should be looking for is 8%; so a rent of say 750 means property value would need to be 112500 max. If you can do this then look into it further. Otherwise, forget it for the moment.

Btw, all the above is my opinion and what has worked for me in the past.

MouseTail

D3PO wrote: »

at least if they kept it the potential increase in annual rents would act in some way like an annuity. By selling up however (and having to pay CGT on any profit as its BTL)

CGT exempt if purchased before 31 December, and held for at least 7 years.

D3PO

MouseTail wrote: »

CGT exempt if purchased before 31 December, and held for at least 7 years.

OP hasn't even started the mortgage process, add to that finding the right property , getting sale agreed and then closing before Dec 31st.

That's a tall order to be honest.

crackcrack30

Thanks for all replys, my big concern with purchasing an apt in Dublin is that they can deteoriate very quickly, most of the waterfront apts in limerick which were deemed the next place to live 10 years ago are now somewhat less desirable to be nice and to be avoided if honest.....I had a quick look and couldn't find anything in the city centre (dublin) that was for sale for 80-100 with the 1.2k rpm, batchlors walk 160k maybe...

cson

D3PO wrote: »

OP hasn't even started the mortgage process, add to that finding the right property , getting sale agreed and then closing before Dec 31st.

That's a tall order to be honest.

Economic closing date and actual closing date aren't mutually exclusive.

uncle_mick

crackcrack30 wrote: »

Hi guys, .....i've got burnt before with saving schemes & shares before, the only good thing I have done finiancialy over the past decade is build and pay off a small mortgage on a gifted site so I'm mortgage free....

My thing is that I have nothing planned for retirement and was thinking of researching and buying a BTL house that could be sold on retirement.

I am almost 40yo, safe job on 42k, wife has received 40k in recent redundancy ( the deposit) and will stay at home with kids for foreseeable future....

Thinking of taking out a 100k mortgage 20-25years to coinside with retirement......rent in this provincial city is 700-850 in the desired areas. hope to buy a semi-d at 50% of peak value. I wouldn't be interested in year on year profit but rather that it would pay its way or wash its own face....
...any advice & how do the sums add up....@ 100k variable morgage with say 750pm rent all declared & above board...

banks wont lend for buy to lets right now , they don't count the potential rental income as a means of repaying so unless you have a guaranteed job in the public sector , either buy your house in cash or invest in something else

personally I think property is a pretty average investment , id much prefer stick it in a global index fund , collect around 3% dividend per year and watch it appreciate over time , stocks out perform all other assets for those with enough patience

uncle_mick

MouseTail wrote: »

CGT exempt if purchased before 31 December, and held for at least 7 years.

how come my uncle owns a house in Dublin 9 since 1987 and will have to pay CGT when he sells ?

wowy

MouseTail wrote: »

CGT exempt if purchased before 31 December, and held for at least 7 years.

It's time-apportioned; so if the OP invests before the end of the year and holds for 25 years, he'll only get 7/25ths exemption.

http://www.cooneycarey.ie/blog/irish-capital-gains-tax-relief-land-buildings-eu-eea/

wowy

uncle_mick wrote: »

how come my uncle owns a house in Dublin 9 since 1987 and will have to pay CGT when he sells ?

Applies only to properties (residential or commercial) purchased between 6/12/2011 and 31/12/2013.

D3PO

uncle_mick wrote: »

banks wont lend for buy to lets right now ,

That's not true at all. The conditions to get one are more stringent but you can get BTL mortgages if you meet the criteria.

desertcircus

OP: talk to a pensions adviser. They'll be able to talk you through your options and tell you the kind of return you'll get on different products.