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Thoughts on using a home as an investment?

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  • 15-12-2020 9:43pm
    #1
    Mickey_James
    Site Banned Posts: 74 ✭✭


    I'm single, currently house sharing. I've thought for a few years now it would make sense if I bought a 2 bed apt and rented out a room. Could get 14k tax free a year but with rates where I'm looking I'd probably be currently looking at 6k a year, possibly even more.

    Mortgage would be about 11k in total a year

    Of course I'd have higher expenses in bills as I'd be paying them on my own as opposed to 1/4.

    I wouldn't live long term, but if prices dropped I wouldn't need to sell to move as I could move in with parents or rent somewhere else.

    Thoughts? My head says it's a great move.

    Even if prices dropped, I still think I'd make enough in the tax free rent to offset the drop so even if they did drop, I'd look at it as the house price staying the same and me just paying the rent all by myself, which I'd still have equity in that case..


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    #2
    cronos
    Registered Users Posts: 2,717 ✭✭✭cronos


    Houses sell easier than apartments, especially in down markets.

    It's difficult to predict the housing market. Personally surprised it's continued going up during Covid, even though the rises have been quite normal in percentage terms.

    Any reason you could not get a 3 bed house and rent two rooms instead of one? Also if you rented one of the rooms to a couple you could probably come close to the 14k.


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    #3
    Mickey_James
    Site Banned Posts: 74 ✭✭Mickey_James


    cronos wrote: »
    Houses sell easier than apartments, especially in down markets.

    It's difficult to predict the housing market. Personally surprised it's continued going up during Covid, even though the rises have been quite normal in percentage terms.

    Any reason you could not get a 3 bed house and rent two rooms instead of one? Also if you rented one of the rooms to a couple you could probably come close to the 14k.

    3 bed would be out of my mortgage range I think. Would be looking at probably close to 280-300k and 3.5x my salary and deposit would only get me around 230-240k.

    I'm also quite pessimistic and anxious about messing up the good financial position I'm in now and think if things went tits up and I had to pay the mortgage by myself, the 2 bed would still be about 33% of my take home pay.

    Also finding and sharing 1 good tenant is easier than finding and dealing with 2. There is student rental demand so I could even just rent out Mon-Fri if I felt like having the place to myself at weekends, easier doing that with 1 than 2 I think.

    It's so tricky to know. I've been thinking about this for a couple years now, if I had gone through 2/3 years ago I'd be laughing. But knowing my luck the minute I buy the market would tank. haha


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    #4
    Supercell
    Registered Users Posts: 15,335 ✭✭✭✭Supercell


    I think its not a bad idea if you are single and have the cash, its one of the things the "Fire" people do. If you are Dublin based you could try and find something out near Maynooth for example and rent to students Mon-Fri (would definitely try and rent to older ones that are interested in actually studying). Dublin Technical University has a branch in Blanchardstown too so that area might be another option that may be in your budget range.
    https://www.loughlinstown.ie

    Have a weather station?, why not join the Ireland Weather Network - http://irelandweather.eu/



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    #5
    dubrov
    Registered Users Posts: 3,556 ✭✭✭dubrov


    It makes massive sense if the other option is to rent.
    Not only will you earn tax free rental income, you can also avoid capital gains tax.

    Right now, rents are nearly twice what a mortgage is even though a proportion of a mortgage pays down the debt.

    I'd just buy somewhere that you are happy to live in for at least 5 years and 10 years at a push.


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    #6
    cronos
    Registered Users Posts: 2,717 ✭✭✭cronos


    Personally I'd consider a nice part of Finglas near Glassnevin. Try find somewhere that will be near Metro North. Also would be handy if you could do some of the work to fix it up yourself. Depends how much effort you want to put in.


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    #7
    Bawa
    Registered Users Posts: 10 ✭Bawa


    Also remember, it's probably not actually 'tax free' as you are probably still technically liable for the taxes. If you were ever audited you could have a problem, but that's probably a low risk.


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    #8
    dubrov
    Registered Users Posts: 3,556 ✭✭✭dubrov


    Bawa wrote: »
    Also remember, it's probably not actually 'tax free' as you are probably still technically liable for the taxes. If you were ever audited you could have a problem, but that's probably a low risk.

    You can declare rent a room income up to 14k and pay no tax. Just make sure to not go a penny over as otherwise the full amount is liable for income tax.


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    #9
    lobaszewski
    Registered Users Posts: 2 ✭lobaszewski


    Same here, looking for a house for buyer who think now is a good time to buy, rent for a while, and then sell. How its gonna end, we'll see.


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    #10
    md23040
    Registered Users Posts: 482 ✭✭md23040


    I have a number of properties and consider myself to have a professional business attitude as a landlord and keep things totally correct and dont sweat the assets. Based on the maths of having the opportunity loss of rent that you must pay and paying someone elses mortgage, and opportunity gain of €14,000 TFA from rental income, then it is a no brainer.

    Even if the asset falls in value, and you have someone covering 50% of the cost, the investment would be cash positive. As after 20 years the asset will be owned outright by you and exempt from income tax and CGT, if it is still your principle private residence.


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