Is it mad to invest in rentals now?

Maya22 · 12-12-2018 9:08am #1

I am in a fortunate position at the moment in that I have two rental properties with no mortgages and have been lucky with good tenants over the years. In a years time I will have paid off the mortgage on my PPR so will have that extra cash every month that I want to put to use.

With the new mortgage interest relief for landlords at 100% I wondered if I would be best off getting a small buy to let mortgage and purchasing a one bed apartment in the city centre. Would I be right in saying that I would be able to write off all of the interest on the mortgage so would only be paying ‘cost’. I’m familiar with the maintenance and expenses required, management fees and the tax situation and will have the spare cash every month to pay off the mortgage if the rent didn’t cover it. I’m also already managing two properties so don’t see much extra hassle adding another one to the mix (although I realise this depends on tenants)

I’ll be sitting tight to see what happens with Brexit and the property market here and won’t be making any moves in the short term. Is this a mad move? Just not sure what to do with the extra cash flow I’ll have every month when I clear my mortgage. Interest rates aren’t great so savings options aren’t appealing

12-12-2018 9:10am

spend it?

L1011 · 12-12-2018 9:11am

You will need 40-50% deposit to get a BTL mortgage these days. Interest will all be valid as an expense by the time you buy in this scenario

aristotle25 · 12-12-2018 9:13am

Diversify if you have all your wealth in property, in Ireland.

Also, have you a pension, maybe contribute more to that?

Depends on your overall position, you might be some better responses in the "money makeover" section of askaboutmoney.com

Fol20 · 12-12-2018 9:14am

L1011 wrote: »

You will need 40-50% deposit to get a BTL mortgage these days. Interest will all be valid as an expense by the time you buy in this scenario

30pc.

cruizer101 · 12-12-2018 9:15am

From an investment point of view you would be far safer investing in something else. Having so much money tied up in one type of asset isn't ideal as if the arse falls out of the property market you are very exposed.
Far better to try diversify your portfolio, ideally in something that wouldn't be effected by drop in property. What that is I couldn't tell you mind, but definitely good to diversify.

Caranica · 12-12-2018 9:20am

Banks weren't giving mortgages for 1 bed properties. Not sure if that's changed?

Maya22 · 12-12-2018 9:28am

L1011 wrote: »

You will need 40-50% deposit to get a BTL mortgage these days. Interest will all be valid as an expense by the time you buy in this scenario

Thanks yea, I have the deposit for the BTL

Maya22 · 12-12-2018 9:31am

Thanks for all the replies, much appreciated. I suppose I was drawn to the rental property as it’s ‘what I know’ and the added advantage of 100% mortgage relief. Im just not sure what else I’d invest in really as I’m unsure, diversifying would probably be less risky alright. I might pop over to ask about money and see what they say.

Fol20 · 12-12-2018 9:59am

Maya22 wrote: »

Thanks for all the replies, much appreciated. I suppose I was drawn to the rental property as it’s ‘what I know’ and the added advantage of 100% mortgage relief. Im just not sure what else I’d invest in really as I’m unsure, diversifying would probably be less risky alright. I might pop over to ask about money and see what they say.

Im very much like yourself and dont know enough about equities etc to make a large enough investment to make it impact my net worth. Shares are volatile at the moment and on their longest bull in history so thats something to take on board. Personally i would be careful roght now with brexit on the horizon. Who knows what will happen with that. And it could be something that you capitalize on if its a hard brexit. Or it could go the reverse. Sometimes the smartest move is to hold liquid cash in preparation for a bear

Lux23 · 12-12-2018 11:31am

I would put it in some kind of deposit account linked to Euribor that has a set rate of return - low risk, and you don't have more tenants to look after.

Amirani · 12-12-2018 12:24pm

Fol20 wrote: »

Shares are volatile at the moment and on their longest bull in history so thats something to take on board.

Shares ain't on any bull run at the moment, pretty much all major share indices are down year-to-date (and some of them are in bear market territory)!

Fol20 · 12-12-2018 12:57pm

Amirani wrote: »

Shares ain't on any bull run at the moment, pretty much all major share indices are down year-to-date (and some of them are in bear market territory)!

Apologies for my lack of knowledge. They are still priced highly compared to a few years ago.

ShaneC93 · 12-12-2018 2:25pm

Might be best holding off at least for a few months though I doubt you would get a BTL mortagage for a 1-bed anyway.

The property market seems to be rapidly cooling off despite reports of predicted 7-8% growth each year until 2021. For example, Daft.ie traffic is down nearly 32% in the last 5 months meanwhile MyHome.ie traffic is down 16%! While most analysts seem to be forcasting a global recession starting 2021-2023 now, the fact is that we are overdue one now, the GDP growth of many countries is already fast slowing and consumer spending growth is leveling off. It's always when the analysts seem to say we've a few years left that the market starts to falter.

I'm thinking a late-2019 down-turn for a 2020 recession is more likely based on those metrics and have been planning my own investments accordingly especially with Brexit, US trade war etc. so I think holding off until there's more confirmation of growth heading into 2019 would be no bad idea!

Baby01032012 · 12-12-2018 2:33pm

I wouldnt base it off having 100% interest relief....this is generally minimal effect on your tax situation unless you have huge mortgage.

If determined to stick to property reduce your risk by buying shares in a REIT so that your investment is invested in a portfolio of managed properties rather than a single property.

I dont know your work situation..maybe you have the time to commit. I would caution though...property management can be hands off if youre lucky...or you can have nightmare tenants not paying rent overholding or carrying our illegal activity which require your time between them the guards and courts...maintenace issues etc. I have experience of the good and bad of managing property.

Is it mad to invest in rentals now?

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