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To buy investment property or not

  • 17-10-2021 1:40pm
    #1
    Registered Users Posts: 466 ✭✭ DulchieLaois


    People thoughts please and thank you.

    My wife and I are in early 40s, no kids unfortunately we have savings to buy an investment property for the long term with no mortgage, however rent is fixed atm.

    We are also planning to get mortgage for a new build in the next year which we hope that the investment can pay for each year.

    what do people think ?



Comments

  • Posts: 0 ✭✭ [Deleted User]


    Don’t buy anything before you get planning. It can be grounds for refusal as you have no housing need



  • Registered Users Posts: 466 ✭✭ DulchieLaois


    Thanks, I have planning already so that angle is closed off.



  • Registered Users Posts: 21,972 ✭✭✭✭ AndrewJRenko


    Why would you want to have your family home mortaged to a bank, paying interest on an unnecessary loan? Why not just use your savings to build your own home?



  • Registered Users Posts: 466 ✭✭ DulchieLaois


    I agree Andrewrenko…I understand what you saying…I did the maths and investment can offset against the house in the long term in terms of using the money



  • Posts: 0 ✭✭ [Deleted User]


    @AndrewJRenko i’d agree and build your house outright. Then you are free to build up savings again debt free. Not many people have that opportunity. It depends what your interests are. If you are going to have kids you’ll have time to bring them up rather than looking after tenants. If not looking to have kids or as well you can focus on your interests and reduce your working week. With no mortage both of ye could work part-time and have no childcare to pay or work on a side business without the management duties of a second property. Depends on your interests, grow you own veg, cycling, fishing, sailing, woodworking, music or whatever you’re into. You would have a lot of freedom being debt free with no second property to manage in my opinion. Ideal situation OP.

    If you like DIY, painting, paperwork and property maintenance maybe buying the second property is for you ? It will impact on your free time however.



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  • Registered Users Posts: 311 ✭✭ SmokyMo


    Thats is terrible decision from financial stand point.

    You better off using your capital as leverage to create income.



  • Registered Users Posts: 9,775 ✭✭✭ Effects


    Why wouldn't you want to be able to write off interest payments from a mortgage on the rental property, rather than use the mortgage for your home?



  • Registered Users Posts: 21,972 ✭✭✭✭ AndrewJRenko


    Your home isn't 'capital'. It is your home. If you're happy to risk your family's future security on the ups and downs of the Irish property market, by all means, be my guest. If you're happy to have ALL of your investment eggs in one basket (Irish residential property), breaking the basic investment risk management rule of diversification, be my guest.

    But do us a favour, and don't come back here complaining about the nasty banks when they eventually repossess your house after your investment goes bad.



  • Registered Users Posts: 9,775 ✭✭✭ Effects


    So what are you saying? That he shouldn't bother buying an investment house at all?


    I pay less off my "investment mortgage", so I can pay more off my home mortgage each month. Am I doing it wrong?



  • Registered Users Posts: 1,266 ✭✭✭ TheW1zard


    Wow that didnt take long to get snarky



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  • Registered Users Posts: 21,972 ✭✭✭✭ AndrewJRenko


    I'm suggesting that he should be fully aware of the risks he's taking if he goes down this road. Two big risks in particular:

    1) He's putting his family home into the hands of a financial institution, who may well come looking for it back if his other investment goes tits up. There's lots of people going through the Courts at present who were absolutely certain that their investments could never go wrong. But they did.

    2) He's putting ALL his investment eggs into the Irish residential property market. Rule 1 of derisking investments is diversification - spread your bets across different sectors, different regions, different markets. His home and his investment will be dependent on the same market, and if we do have another property bust, he's going to be in serious trouble.



  • Registered Users Posts: 9,775 ✭✭✭ Effects


    Ah I get you now, in relation to having his home and his investment tied to the same market. Thanks for clarifying it for me.



  • Registered Users Posts: 5,255 ✭✭✭ The J Stands for Jay


    Wouldnt it be better not to have an interest expense at all?



  • Registered Users Posts: 5,255 ✭✭✭ The J Stands for Jay


    Does this hold true of all investments, or just residential property?



  • Registered Users Posts: 9,775 ✭✭✭ Effects


    Yes, but banks aren't offering 0% mortgages at the moment. Whether it's for an investment property, or your home.



  • Moderators, Business & Finance Moderators Posts: 17,106 Mod ✭✭✭✭ Henry Ford III


    Get proper advice OP.

    An investment property might be a good idea or it might not be - it depends on your overall financial position.



  • Registered Users Posts: 5,255 ✭✭✭ The J Stands for Jay


    They have the funds to purchase one property without a mortgage.



  • Registered Users Posts: 398 ✭✭ TheWonderLlama


    If rent is fixed (not sure why?) then its a depreciating income stream.

    Unless the investment property is going to create a substantial income compared to the family home mortgage, then it doesn't make sense.

    For the investment property, you have to think of the following:

    agents fees

    RPT

    insurance

    repairs and maintenance

    void periods

    service charges

    then there's income tax at your marginal rate and PRSI and USC on the after expenses rent.

    I can't see it as being in any way viable to cover the mortgage on a PPR.



  • Registered Users Posts: 9,775 ✭✭✭ Effects




  • Registered Users Posts: 311 ✭✭ SmokyMo


    I shouldn't used the word 'income' as that was confusing.

    My point was, if you have a pot of money, you use 100% of this pot to buy a house for cash you incurring an opportunity cost. In addition mortgage allows to you incorporate real terms discount of currency. There also other factors to consider.



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  • Registered Users Posts: 15,223 ✭✭✭✭ Donald Trump



    That may be a point. But there is also the point that the interest rate will be higher on an investment property to begin with.


    That said, I'd probably rather a lien against an investment property than my actual house if it was me.



  • Registered Users Posts: 15,223 ✭✭✭✭ Donald Trump


    If you are checking whether you can do it or not, consider whether you would be able to manage repayments in the event that you have no tenant, or a non-paying tenant. If you can do that then it is less of a risk overall. If you will be dependent on that income coming in to balance the books then you are leaving your own fate in the hands of others.



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