120 thousand euros in savings and not sure what to do

Retweet89

Hi, this might be an unusual one but all advice is welcome.

As a result of hard saving and a large redundancy I have 120k to do something with in property. Thats if I choose property for it all, I might travel with some of it and leave 100k to invest.

But let's say 120k. Now here's the thing, Im currently out of work and have been for nearly a year but hope to be returning soon. So Im not sure if a bank will lend me 100k or so based on the following idea I have:

Will they give me a mortgage based on me buying a 3 bed in Dublin and renting the other two rooms, thus having the mortgage covered? Ive worked it out and this is very viable.

But has anyone on here ever got a mortgage based on this kind of premise? And did you do it when out of work?

I was also thinking that another option would be to outright buy an apartment in somewhere like Drogheda for circa 60k and rent it out, at least that way my savings are in use.

Im single with no kids so thats how I can rent out any other surples rooms.

Feedback appreciated.

Speedwell

Please don't leave yourself cashless, whatever you decide. You will need a pot of money to take care of the inevitable maintenance and repair costs, landlord taxes, and other incidentals.

pwurple

Why property? Why not a decent yielding savings account, or stocks?

With property, the return is poor, the hassle is high, the legal protection for landlords is grim. You can rent a place out, the tenant decides not to pay the rent, and you're left trying to evict them for a year. You will need to do a tax return, and pay ~50% of the rent in a tax bill to the govt. Plus property tax, PRTB fees, etc.

Or, you can rent a place out, they can damage it, and you're left with huge bills. And , you're the evil landlord. Zero sympathy from any quarter when you're getting ripped off.

If going into property at all, I'd advise commercial over residential. I get better return from commercial, and in my experience you're less likely to be messed about. Longer leases too. But I'd say with that small a fund to start with, stick it in savings, stocks and bonds, or feed it into a pension.

Speedwell

I'm assuming all of your debt is paid off, especially credit cards that carry high interest rates? Paying off a debt at 10 percent is a better investment than getting 5 percent on savings.

Retweet89

pwurple wrote: »

Why property? .

Im not going to go into the circumstances of why Im back living at the parent's home, but I am at the moment and I now need my own space.

I cant rent at the moment with no job but a 3 bed house at 220k for example with the other two rooms rented out would cover the mortgage and give me my own place.

Speedwell wrote: »

I'm assuming all of your debt is paid off

It is thankfully.

Carawaystick

Retweet89 wrote: »

I cant rent at the moment with no job

If you have EUR120k in cash, you can afford to rent somewhere.

pwurple

So, you need someplace to live, rather than an investment. That's a different story.

Without a permanent job, you're unlikely to be able to get a mortgage. Most mortgage lenders expect at least 6 months of employment payslips, and a letter from your employer confirming that you are permanent.

So, you could hold off another year until you are in that position, or buy for cash now.

Carawaystick

Carawaystick wrote: »

If you have EUR120k in cash, you can afford to rent somewhere.

Wasting savings on rent is hardly a wise course of action.

If you could buy somewhere and live there while letting rooms under the rent a room scheme I think that would be a wise course of action you wont get a mortgage unless you are working though.

P. Breathnach

Speedwell wrote: »

... Paying off a debt at 10 percent is a better investment than getting 5 percent on savings.

That's true. Even more valid when you consider that the typical rate on debts other than mortgages is over 10%, and that it is just about impossible to get a secure investment for a €120k sum that pays as much as 2%, let alone 5%.

OP, are you committed to Dublin?

RasTa

I can't see a bank lending you 120k with no job on the basis of renting out other 2 rooms. However I could be wrong

MouseTail

pwurple wrote: »

Why property? Why not a decent yielding savings account, or stocks?.

Savings and stocks are means when it comes to calculating JSA, whereas a persons PPR is not. I don't think you will get a mortgage OP without an income, the choice is to buy with cash outside Dublin, or wait to buy until you have built up an employment record.

Retweet89

Carawaystick wrote: »

If you have EUR120k in cash, you can afford to rent somewhere.

I was waiting for something like this to pop up

Renting with no income is a stupid choice when your parents are ok with you staying with them for the moment, I have looked after them and then some over the years.

draiochtanois

This post has been deleted.

gaius c

Yo want to move out of your parents to get your own space which you would then share with two total strangers?

I think you should hold off on all decisions until your employment situation becomes clearer. The money in the bank isn't running away so take your time and don't be rushed.

Retweet89

gaius c wrote: »

Yo want to move out of your parents to get your own space which you would then share with two total strangers?

Im 31 and Im not getting on with my parents so yes I need to move out

I would of course interview any tennants to make sure they're on my wavelength.

the_syco

Retweet89 wrote: »

But let's say 120k. Now here's the thing, Im currently out of work and have been for nearly a year but hope to be returning soon. So Im not sure if a bank will lend me 100k or so based on the following idea I have

Can't see a bank giving you a mortgage with no history of earning income to pay back the mortgage.

Buy a house for less than a hundred when you come back, so you don't have to spend money fixing it, nor spend money fixing stuff that brakes whilst you're away.

Finally, buy when you come back, in case you decide to get a job not in Dublin.

gaius c

Retweet89 wrote: »

Im 31 and Im not getting on with my parents so yes I need to move out

I would of course interview any tennants to make sure they're on my wavelength.

The second part of my post contained my considered advice.:P

maggiepip

If I had 120,000 I would buy outright a house outside dublin for around 70,000. Plenty of good houses for that price down the country. I would then rent it out, rental income being mine with no mortgage. Would give me the security that whatever happens I fully own a house and would always have a rent/mortgage free place to live if I choose. Spend the leftover cash wisely!

lima

Ignore grumpy landlords who have been burned in the boom and find somewhere to live in and rent out. You will have to get a job first though if you want to live in Dublin.

best of luck!

dubrov

What happens when interest rates go up but rent stays the same?

newacc2015

maggiepip wrote: »

If I had 120,000 I would buy outright a house outside dublin for around 70,000. Plenty of good houses for that price down the country. I would then rent it out, rental income being mine with no mortgage. Would give me the security that whatever happens I fully own a house and would always have a rent/mortgage free place to live if I choose. Spend the leftover cash wisely!

I totally disagree. Only buy in areas with a large amount of different industries and organisations. There is no point buying in a town reliant on one American Multinational, who decides to move the factory to a low wage countries on extremely short notice. Limerick was badly effected when Dell closed down.

OP you can buy a 2 bed apartment for around 90-100k in Ballymun. Its close to the DCU end and you can rent out the 2nd room for 12k a year tax free. Parts of Ballymun are fine. If they ever build the metro/luas to the airport, the apartment will rise in value from that

alastair

newacc2015 wrote: »

I totally disagree. Only buy in areas with a large amount of different industries and organisations. There is no point buying in a town reliant on one American Multinational, who decides to move the factory to a low wage countries on extremely short notice. Limerick was badly effected when Dell closed down.

OP you can buy a 2 bed apartment for around 90-100k in Ballymun. Its close to the DCU end and you can rent out the 2nd room for 12k a year tax free. Parts of Ballymun are fine. If they ever build the metro/luas to the airport, the apartment will rise in value from that

Good advice imo.

Retweet89

dubrov wrote: »

What happens when interest rates go up but rent stays the same?

Rent has been on the increase year on year with no end in sight. Im sure there's a ceiling but I sure cant see it hitting it yet.

athtrasna

draiochtanois wrote: »

This post has been deleted.

AirBnB is subject to income tax

maggiepip wrote: »

If I had 120,000 I would buy outright a house outside dublin for around 70,000. Plenty of good houses for that price down the country. I would then rent it out, rental income being mine with no mortgage. Would give me the security that whatever happens I fully own a house and would always have a rent/mortgage free place to live if I choose. Spend the leftover cash wisely!

Without mortgage interest to write off the OP could face a large tax bill when they start to work with a fully rented property.

dubrov

dubrov wrote: »

What happens when interest rates go up but rent stays the same?

If interest rates go up (there is no sign of it happening anytime soon) rent will be increased also and even if it wasn't it just means a bigger write off against tax if the interest is higher.

newacc2015

Madalynn Fluffy Comics wrote: »

If interest rates go up (there is no sign of it happening anytime soon) rent will be increased also and even if it wasn't it just means a bigger write off against tax if the interest is higher.

The ECB increased interest rates when the Eurozone Economy was flat lining around 08/09. The ECB are so afraid of inflation, they dont care if they destroy economic growth. They were incredible slow to engage with QE

The Fed in the US, are increasing rates. I would expect interest rate hikes in the Eurozone within 3-4 years. Germany is doing well, Spain is improving, France is France. But if there is a hint of 2-3% inflation, you should start to worried about interest rate hikes.

jester77

newacc2015 wrote: »

The ECB increased interest rates when the Eurozone Economy was flat lining around 08/09. The ECB are so afraid of inflation, they dont care if they destroy economic growth. They were incredible slow to engage with QE

The Fed in the US, are increasing rates. I would expect interest rate hikes in the Eurozone within 3-4 years. Germany is doing well, Spain is improving, France is France. But if there is a hint of 2-3% inflation, you should start to worried about interest rate hikes.

If you are getting a mortgage now, then it would be wise to fix for at least 15 years, if not full term, given how low rates are. Not sure what the rates in Ireland are like, but you can fix for 15 years here for under 2%. It is not going to get much better and even so, being fixed at least gives you peace of mind.

newacc2015

jester77 wrote: »

If you are getting a mortgage now, then it would be wise to fix for at least 15 years, if not full term, given how low rates are. Not sure what the rates in Ireland are like, but you can fix for 15 years here for under 2%. It is not going to get much better and even so, being fixed at least gives you peace of mind.

Max fixed you can get is 10 years at 4.5%. Its a horrific rates, when the ECB baselines is 0.05% and the banks aim for around a 2% margin on mortgages

Elliottsmum79

maggiepip wrote: »

If I had 120,000 I would buy outright a house outside dublin for around 70,000. Plenty of good houses for that price down the country. I would then rent it out, rental income being mine with no mortgage. Would give me the security that whatever happens I fully own a house and would always have a rent/mortgage free place to live if I choose. Spend the leftover cash wisely!

Becoming a landlord to a property at a distance is a v tricky game. Replace a gas boiler at a weekend/bad tenants/ registration fees/tax on income. caveat emptor...

Elliottsmum79

If/when you are back working in Dublin with 6 months of permanent employment approach the bank for mortgage. You will probably need to demonstrate the ability to pay your mortgage independent of tenants rent. But then, you will be a 50% LTV mortgage bracket which would be fine with the bank once you meet the rest of the income criteria ( can cover full mortgage repayments, in full time permanant employment, good credit rating, deposit -which you obviously have)....

Just keep in mind if you buy a property, rent it out and are not living there yourself the tenants may well be very destructive, may end up refusing to pay the rent and may well end up refusing to leave until you have gone through legal loopholes... You are also responsible for their safety and well being..... if I remember correctly a prosecution for manslaughter was taken against a couple of doctors who rented a house. the gas was faulty and killed the tenant I think.........

Damiencm

I'm afraid you have zero chance of receiving a mortgage without a permanent full time job.

On the plus side you do have €120k in the bank

You havent stated whereabouts in the country your based..obviously this will have a big influence on what property you could buy (once you have a job)

bobdillon

I would almost get a financial advisor for a sum like that - for the simple reason that it involves a few different factors, your own plans over the next few years, how much of a rainy day fund you need to keep just in a deposit, pensions plans etc etc. There are a lot of things to consider.

Be careful about living in a house and renting rooms, it's very different to being a landlord that rents out a separate house. It can be difficult to vet people based on one meeting and you are then living with them. Also bear in mind the amount of work and/or money involved just in maintaining a house regardless of whether you're living there or not...

If you were able to get a job that would allow you to rent and move out from home (which never works anyway for most people ) - that would give you a bit of time to think it over

maggiepip

Elliottsmum79 wrote: »

Becoming a landlord to a property at a distance is a v tricky game. Replace a gas boiler at a weekend/bad tenants/ registration fees/tax on income. caveat emptor...

I know all about that trust me. For me it would be all about having a mortgage free house in my pocket and the security that brings, the rental income even when taxed would just be a bonus. With no mortgage you shouldn't be relying on the rent.

blindside88

If I were in your position op I would buy a house outside of dublin. I'm living in carlow town at the minute and if I had the money I'd buy another house here to rent out. There are a couple of 2/3 bed houses for sale around the town for between 60-100k that can easily be let out for 550-750 per month. That's not a bad ROI and there are relatively few houses for rent in the town. I would stay away from buying an apartment as there are management fees that you cannot control and you are more limited with who you can let it to.

Damiencm

Damiencm wrote: »

I'm afraid you have zero chance of receiving a mortgage without a permanent full time job.

As an aside this is not fully true. In many careers the nature of the work means you are often on contracts rather than permanent and you can get a mortgage particularly if you have a hefty deposit.

The bank told me they have no issue granting mortgages to people in my area of work and very few people have anything more than 2 year contracts at most with most on year to year contracts.

blindside88

Something like these:

www.daft.ie/11097737
Most likely go for over 100 but you never know

www.daft.ie/11092008

www.daft.ie/11086263

draiochtanois

This post has been deleted.

annoyedgal

Had a lump sum not far off yours in 2011 to put towards house in dublin. Despite lump sum and a permanent job banks went through savings and rents I had paid with fine tooth comb. They world not take into account that I would be renting out a room.
Got mortgage approval from two banks but without the job and proof of regular savings /rent wouldn't have got either regardless of lump sum. May be different now though.

newacc2015

blindside88 wrote: »

If I were in your position op I would buy a house outside of dublin. I'm living in carlow town at the minute and if I had the money I'd buy another house here to rent out. There are a couple of 2/3 bed houses for sale around the town for between 60-100k that can easily be let out for 550-750 per month. That's not a bad ROI and there are relatively few houses for rent in the town. I would stay away from buying an apartment as there are management fees that you cannot control and you are more limited with who you can let it to.

Buying in the country is too risky. Small towns are too reliant on a single industry or large employer. Plus there is no real chance of strong appreciation in asset value versus Dublin

Where as you can buy a 2 bed duplex in Dublin for €95,000. Literally beside DCU and only about 20-30 mins max to the city centre on one of the several bus routes to town. You could easily let this is to students for around €1600 during the academic year and slightly less during the summer. Its still double what you would get from a property in Carlow. Plus there is no risk of not being able to let it, as there is a college beside it. Plus Dublin weathered the recession pretty well

http://www.daft.ie/sales/34-gateway-view-ballymun-dublin/1088397/#img=11

blindside88

newacc2015 wrote: »

Buying in the country is too risky. Small towns are too reliant on a single industry or large employer. Plus there is no real chance of strong appreciation in asset value versus Dublin

Where as you can buy a 2 bed duplex in Dublin for €95,000. Literally beside DCU and only about 20-30 mins max to the city centre on one of the several bus routes to town. You could easily let this is to students for around €1600 during the academic year and slightly less during the summer. Its still double what you would get from a property in Carlow. Plus there is no risk of not being able to let it, as there is a college beside it. Plus Dublin weathered the recession pretty well

http://www.daft.ie/sales/34-gateway-view-ballymun-dublin/1088397/#img=11

That would be a very good price for something in Dublin. In relation to towns like carlow, it isn't reliant on a single industry (because there is none)it is made up of people working in small local businesses and commuters. There is also a large enough college in the town so there is very little risk of the property being left empty. I personally wouldn't rent to students unless I had a lot of money spare to re decorate

desertcircus

A 31-year-old can put up to 20% of their gross salary into their pension each year without paying income tax - if you earn 50k, for example, you can put 10k a year into a pension while only losing 6k from your net salary. 120k may allow you to pump funds into your pension over time without taking a hit in your earnings.

Depending on your circumstances, this may be the most financially beneficial approach to take, rather than buying a property to live in. Alternatively, you could aim to save the money you'd have spent on rent and put it towards a pension in the manner described.

mel123

You havnt a chance of getting a mortgage without full time permanent employment and i know this from experience as i am going through the mortgage process and i have a job! The banks dont care if youve got bunk beds in every corner of the house and plan to fill it with renters, they simply wont accept this means as a way to pay your mortgage. They used to in the good aul days but things are totally different now.

pwurple

Also, with cash, consider auctions.

JohnBee

Retweet89 wrote: »

Now here's the thing, Im currently out of work and have been for nearly a year but hope to be returning soon.

This, and only this. Part of the reason for the property crisis was home buyers not being properly stress assessed and lenient lending policies.

You are planning on purchasing a property based on a number of assumptions: that you will get a job, that the salary will be sufficient, that you will get tenants.

Unless these assumptions are satisfied then you will be in trouble. People see rent as dead money, that is an Irish fallacy. It is not. Having a place to live is a living expense. Many countries around the world rent lifelong. Spending to rent for a year while finding a job is money well spent if it ensures that 1-2 years down the road you are not in a situation where you have no job, no tenants and cannot pay mortgage.

All of this is speculative of course as the bank is likely to have the same view and not offer a mortgage. Be patient. If you need your own space go rent for now. When you are financially stable then go buy your house.