# Have an investment property, renting my home, should I buy?



## Fancynancy77 (6 Sep 2013)

Age: 35
Spouse’s/Partner's age: N/a

Annual gross income from employment or profession: 53.5K
Annual gross income of spouse:N/A

Monthly take-home pay €3200

Type of employment: e.g. Pharma Compliance
In general are you:Saving
(a) spending more than you earn, or
(b) saving?

Rough estimate of value of home €150k
Amount outstanding on your mortgage: €162
*What interest rate are you paying? 3.5% Fixed - 5 years (2 years left)*

Other borrowings – None
Do you pay off your full credit card balance each month? Paid monthly
Savings and investments:
Company share scheme - 30k but to liquidise would probably get about 20k
An Post - 25k
Std Life - 8 k
AIB - 9K

Do you have a pension scheme? yes - Defined benefit ( the reason I moved job four years ago)

Do you own any investment or other property? The property that is mortgages above is rented out in dublin. I bought in 2003. I have leased to Fingal CO. CO. I've been renting in down the country in my home town since 2008

Ages of children: 1 child aged 5 

Life insurance: through work and the obligatory mortgage protection. 


*What specific question do you have or what issues are of concern to you?*
I've been renting a very nice house for 4 years now. The rent is 550 p/m. The area is good but not very convenient. Maybe 20 mins out of my way but not a huge ordeal.
I've recently been approved for a 90K mortgage.
I'm a single parent. With my savings I could Buy a 3 bed semi D here in my home town.
I'm not sure what the best thing to do is for our future. Stay renting and saving or buy now while prices are low. If I buy I will have 252k of a mortgage altogether.
I understand everyone is in the same pickle but I just don't have another adult to bounce these things off. My sisters are all stay at home mother types that think I should just meet a good farmer to look after us  Maybe they're right but in the mean time I'm not sure what is for the best. I've been saving like goodo. At least 1200 p/m.
I scrimp and save and I almost feel that if I bought I could relax a bit and stop saving every cent for the house.
If I take out the up's and down of the property market and just try to see what makes financial sense I come up with: KEEP SAVING!
Can anyone help


----------



## SarahMc (6 Sep 2013)

My advice is to buy. You seem settled there in your home town, with a good job and familial support around you, your child will be settled in school, so its time to put down roots. I don't think you can count on a farmer coming along on his White steed. Of course that might happen, but you can't defer your plans waiting for it.

What is stopping you from buying?


----------



## Brendan Burgess (6 Sep 2013)

This is not an easy one.  

But let's look at some of the elements 


> Company share scheme - 30k but to liquidise would probably get about 20k


You certainly should not be liquidating this at such a cost,even if the decision to buy a house is correct. 



> An Post - 25k
> Std Life - 8 k


You should avoid saving money anywhere, where there are high initial charges or early repayment penalties. Put your money where it is available immediately. 



> The area is good but not very convenient.
> ...
> Do you have a pension scheme? yes - Defined benefit ( the reason I moved job four years ago)
> ...
> ...



I think you need to be careful that you don't allow your finances to dominate your life. You are comfortably off. But you seem to be making career and home decisions purely on financial grounds. 

You have to strike a balance between beeing reckless with your money and saving so hard that you don't enjoy life.


----------



## Brendan Burgess (6 Sep 2013)

*Now the bigger issue 

*
Rough estimate of value of home €150k



> Amount outstanding on your mortgage: €162
> *What interest rate are you paying? 3.5% Fixed - 5 years (2 years left)*



What rent are you getting on the property? 
When is the RAS lease up? 

It is unlikely that you will ever return to this property as your home. Therefore, I think you should sell it when you are free to do so. 

(However, if you are entitled to a cheap tracker when the fixed period is up, then it is probably a great investment and you should hold onto it)

You have a stake in the housing market of €150k , so I don't think you should increase your stake by buying another property. 

If you sell your investment, your monthly outgoings will reduce and you will probably be able to borrow more than €90k, if you wish to do so. 

*Summary 
*Hold off moving until you have sold the family home. If that is going to be a long-time away, consider renting a different property which meets your needs better.


----------



## Fancynancy77 (6 Sep 2013)

Thank you for the responses.

So in answer to your question.

My apartment was bought in 2003 for €255k. In a very good area and have never had trouble renting it but I decided to do the RAS because I needed a break from tenants moving in and out every year. I had a baby, getting divorced Bla Bla.
It ends in November of 2014. I get €750 per month. My mortgage repayment is €942 p/m but there is also a rather hefty €1800+ management fee every year. Similar properties are getting 1000 p/m rent. Although an agent told me I'd get 1200 p/m (gangster)

If I hold off buying now I could see out the end of the lease with Fingal and then have some money to repair anything that's wrong with the apartment (my tenant is not em the keenest Domestic Goddess) 
So I imagine paint and plain carpeting will be needed to make it presentable. And I will defo need a sludge fund of 5K for any repairs before selling
I will prob lose 100k when I sell but I'll recoup it on the savings I make on my house in ballybackwater!!!

What do you think. Have I answered my own question. I never actually though of selling the Dublin property. I thought I would just slog on with it. But it's a total drain - financially and mentally.


----------



## Brendan Burgess (6 Sep 2013)

Rental income| €9,000 | €750 per month
Interest on loan| €5,700|€162k @3.5%
Management fee|€1,800
Profit before repairs|€1,500 So this is ok for the moment. But it all depends on what happens when the fixed rate is up. If you are entitled to a cheap tracker, then it will be a profitable investment.  If you have to pay the Standard Variable Rate, it will be a loss maker. 

Overall, even if you are entitled to a tracker, I think you should probably plan to sell it.


You will be freer to borrow more for your home
You will have lower actual cash repayments
You will have lower exposure to interest rates
You will have lower exposure to property prices
You will not have the hassle of being a landlord
If you decide on this, then you should probably defer purchasing a home now.  The risk is that property prices rise in your home area and fall in Fingal.  I think you can live with that risk. 


> My apartment was bought in 2003 for €255k.




This is no longer relevant. 

Brendan


----------



## Jim2007 (6 Sep 2013)

Brendan Burgess said:


> You certainly should not be liquidating this at such a cost,even if the decision to buy a house is correct.



Given that equities have long since recovered from the low values of 2007/8 I'd want to understand the reasons why this investment remains 50% down before advising the OP to continue holding this position.  I would be concerned at this stage that the devaluation is deep rooted and as this appears to be an employee scheme it represents a double risk - salary and savings are exposed to the same risk, I'd want to see some very good reasons over staying invested.


----------



## Brendan Burgess (6 Sep 2013)

> Company share scheme - 30k but to liquidise would probably get about 20k



Hi Nancy 

Could you clarify what this means please? 

I took it to mean that the market value is €30k but that if you sell them now, you will face some penalty. 

Jim is interpreting it that you have paid €30k for them, but that they are now worth only €20k. 

If Jim is correct, then the decision is more complicated.


----------



## Fancynancy77 (6 Sep 2013)

Hello
I said 20k because wouldn't I need to pay tax etc. on them if I liquidise them before I've held them for three years. 
I'm not up to speed with it really.Sorry I hate to sound dozy and i need to become more informed. And by god I will now given your advice.
All I can say is that i sold my first amount (they had matured to three year point) recently and made a nice few bob on it when you think I would have paid the higher rate of tax etc. It was certainly worth the 3 year sacrifice
I'm always over cautious when it comes to money and bank on things being less than more. 

Brendan - I never had a tracker and it's unlikely AIB will be gift wrapping one for me now  
I imagine I'll be jumping up 1.5 - 2% when my Fixed rate ends in Jan 2015.

A generous 3 bed semi D in my town in a decent area is about 139k brand new. (I'm not speculating prices here just merely giving figures)

Genuinely appreciate the sounding board here. I don't care to discuss my finances with friends so this has been a huge help.

Thank you so much


----------



## Brendan Burgess (6 Sep 2013)

Fancynancy77 said:


> I said 20k because wouldn't I need to pay tax etc. on them if I liquidise them before I've held them for three years.



Keep your share certs well away from the liquidser 

OK, that is what I had assumed you meant.  

You should check out the consequences of selling the shares and sell them at the earliest tax-efficient opportunity.  Jim's overall point of not having investments in your employer is a good one. And, in general, when you are looking at buying a house, you should avoid the volaitity of shares. 

The fact that it will take some time to sell these shares tax-efficiently is another argument for deferring the decision to buy another house.

Brendan


----------

