Here's our situation, married couple both 34, one baby. Have a house which we like, but which is ultimately too small for our needs. Net income of €7,600 p/m (excl. annual bonus), mortgage of €1,250 p/m (155k equity / €275k remaining @ 3.1% over 28 yrs), no other borrowings, only other major expense is childcare @ €1,000 p/m. 90k in savings & liquid investments. We're considering moving to another house close by.
Want to explore some options, one of which is to keep and let our current house. A neighbour did similarly and achieves a rent of €2,300 p/m on their identical house. Would require a second mortgage of 500k for the new house, with payments of €2,300 p/m.
There's a lot of hassle with being a landlord, which is well documented on this forum, so I'd to focus on the financial side of this.
Over 10 years, my calculations show a potential return of €150k, based on the following assumptions:
The alternatives would return the following:
Want to explore some options, one of which is to keep and let our current house. A neighbour did similarly and achieves a rent of €2,300 p/m on their identical house. Would require a second mortgage of 500k for the new house, with payments of €2,300 p/m.
There's a lot of hassle with being a landlord, which is well documented on this forum, so I'd to focus on the financial side of this.
Over 10 years, my calculations show a potential return of €150k, based on the following assumptions:
- Income tax @52%
- Interest relief @80%
- CGT @33%
- No other changes to reliefs available (eg: allowance of property tax)
- Average rental increases of 2% p/a
- Average expense increases of 2% p/a
- Average property appreciation of 2% p/a
- 90% occupancy rate
The alternatives would return the following:
- Sell current house, use capital towards new house and over-pay the mortgage to a similar level as the second mortgage above = €100k in interest savings / additional capital, with no risk but illiquid capital
- Sell current house, invest equivalent amount annually in a liquid investment portfolio with 4% ROI after taxes, charges & dividends = €100k with some stock market risk but liquid capital
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