Refinancing house

aido79

I have a house which is currently being finished as I bought it half finished. I am hoping to have it finished by the end of the year and then plan on renting it out as I live abroad. I'm not sure of the value of the house when it will be finished but I have seen similar houses in the same estate on sale for 150,000. I do not have a mortgage on this house but am wondering if it is possible to refinance the house in order to buy another rental property(probably in Dublin) and then use the income from both properties to pay the new mortgage. As I am living abroad I can't just go to a bank and ask so just wondered if anyone has had any experience with this.

Eldarion

aido79 wrote: »

I have a house which is currently being finished as I bought it half finished. I am hoping to have it finished by the end of the year and then plan on renting it out as I live abroad. I'm not sure of the value of the house when it will be finished but I have seen similar houses in the same estate on sale for 150,000. I do not have a mortgage on this house but am wondering if it is possible to refinance the house in order to buy another rental property(probably in Dublin) and then use the income from both properties to pay the new mortgage. As I am living abroad I can't just go to a bank and ask so just wondered if anyone has had any experience with this.

Good God, the 2006 mentality is fully back! People leveraging themselves to the max on property investment again.

There are other investment vehicles than just property, and some require a lot less work and risk for better returns.

Please stop scaring me with these posts.

marathonic

Eldarion wrote: »

There are other investment vehicles than just property, and some require a lot less work and risk for better returns.

Investing in property is perfectly acceptable if it fits within the investors risk-profile. I agree that it doesn't offer much in terms of diversification but the original poster may not want to diversify into stocks and other investments as they may feel that property is the only investment that 'allows them to sleep at night'. It's also possible that they already have significant other investments.

Also, the poster is currently living abroad but may have plans to return to Ireland in the future. Having a couple of low-mid end houses in Ireland can serve as protection against property prices rising before their return - at which point, they may plan to sell the investment properties and purchase their own home.

If the OP does their numbers and the returns look worthwhile, I see no problem with their plans.

The mortgage will be a big stumbling block for someone living abroad - I'm not sure of all the banks rules but know that PTSB will only lend to people earning in excess of €100,000 and only at 60%.

To fit PTSB's criteria, the OP would need earn €100k+ and raise enough finance through a mortgage on their mortgage free house to pay a 40% deposit for the second property.

Assuming two €150,000 properties, this would result in a mortgage of €60,000 on one and €90,000 on the other. Personally, I would class such 50% finance that totals 1.5 times annual salary as low-risk.

Of course, the OP may not fit this criteria but you can't just shoot down the idea of property investment with leverage just because you know a few people in dire situations after buying in the boom.

Those that bought in the boom made the mistake (IMO) of chasing capital appreciation. The professional investors of today are looking more at yield and capital appreciation, if achieved, will just be an added bonus.

aido79

Thanks for the replies. I am very open to other ways to invest the equity but to be honest my knowledge of stocks and shares is limited so buying another property just seemed like an easier option. I am open to suggestions from anyone who can offer useful information. Would I be better posting this in the investment section?

marathonic

aido79 wrote: »

Thanks for the replies. I am very open to other ways to invest the equity but to be honest my knowledge of stocks and shares is limited so buying another property just seemed like an easier option. I am open to suggestions from anyone who can offer useful information. Would I be better posting this in the investment section?

It probably would get a better response in the investment section but you'd need to provide a lot more information to get any sort of meaningful response.

For example, if you're in your 20's and see these two properties as a starting point for a portfolio of 5+ properties, it may be a pretty prudent move. There will be risk involved, as with any investment. However, there will also be a signficant potential return.

However, if you are in your mid-40's and have no pension plans except for these properties, it would probably be seen as too risky by most. With 2 properties, you will have inevitable void periods during which one, or both, of the properties is empty. You will also be exposed to maintenance and other costs. Doing this with 2 properties is very risky when you reach retirement as your income will be too unpredictable. Doing it with 5 properties is less risky because there is signficantly less risk that your income will half, or disappear completely, due to void periods.

Even if you are in your 50's, if you have a significant workplace pension pot, investing in property could be seen as a reasonably good move because it will diversify you away from excess equity exposure. In this situation, your pension pot may be enough to retire on and the property could be considered as a supplement. It could also be seen as a hedge agaisnt property prices rising out of reach of your children, if any, over the next 10-20 years.

aido79

marathonic wrote: »

It probably would get a better response in the investment section but you'd need to provide a lot more information to get any sort of meaningful response.

For example, if you're in your 20's and see these two properties as a starting point for a portfolio of 5+ properties, it may be a pretty prudent move. There will be risk involved, as with any investment. However, there will also be a signficant potential return.

However, if you are in your mid-40's and have no pension plans except for these properties, it would probably be seen as too risky by most. With 2 properties, you will have inevitable void periods during which one, or both, of the properties is empty. You will also be exposed to maintenance and other costs. Doing this with 2 properties is very risky when you reach retirement as your income will be too unpredictable. Doing it with 5 properties is less risky because there is signficantly less risk that your income will half, or disappear completely, due to void periods.

Even if you are in your 50's, if you have a significant workplace pension pot, investing in property could be seen as a reasonably good move because it will diversify you away from excess equity exposure. In this situation, your pension pot may be enough to retire on and the property could be considered as a supplement. It could also be seen as a hedge agaisnt property prices rising out of reach of your children, if any, over the next 10-20 years.

I am mid 30's. I have a good income and also own a house abroad with a very managable mortgage. At the minute i am just looking for some pointers in the right direction and not just as a way to make some quick money. Thanks for your input and I will seek more advice in the investment forum.