# Investment advice



## lonelyplanet (15 Feb 2011)

*Basics*

*Age:* 40
   Spouse’s/Partner's age:37

   Annual gross income from employment or profession: 85K + bonuses (private sector)
   Annual gross income of spouse: 5K (private sector, part-time)


*Rough estimate of value of home*: 350K 
   Amount outstanding on your mortgage: zero
What interest rate    are you paying? zero

   Other borrowings – zero

   Do you pay off your full credit card balance each month? Yes

   Savings and investments:


        45K cash.
10K in shares
 Do you have a pension scheme?
Yes but not many contributions and estimate approx value around €20K. I looked at property as a pension 


   Spouse zero pension (income too low).
 
   Do you own any investment or other property? Yes

Investment Property

*Property 1: *
Current Value (Approx): €165,000          Mortgage: €121,000  Rent : 700
Interest Rate: Tracker 2.5% 

*Property 2: *
Current Value (Approx): €165,000          Mortgage: €61,000   Rent: 650
Interest Rate: Tracker 2.05% 

*Property 3: *
Current Value (Approx): €185,000          Mortgage: €154,000   Rent :750

17 years left on above mortgages

Interest Rate: Tracker 2.5% 

   Ages of children: 4, 7

   Life insurance: Yes

*What specific question do you have or what issues are of concern to you?
*
I am very cautious about the future and a natural worrier. Having grown up with very little I studied and worked hard to pay off my home and financial security is a big thing for  me/family. I am growing through a tough time in my current job and want to leave it. Naturally my wife and I are worried about this decision due to the difficulty to get work. My situation my sound pathetic but both my wife and I have cried at my current situation as I want to leave my job but want to ensure that we can eek some living and hopefully find something that I am happy doing. 

I would like to hear recommendations with respect to what is the best thing to do with the investment property and our cash saving. My wife suggests that I leave current position and use the savings to tide us over for a certain period.

At this stage I dont want to sell any of the properties as I think/hope that we are at the bottom of the current property cycle and prepared to wait for the next 5 to 10 years for these properties to appreciate and get closer to being paid off.

We are in a lucky position to have our own home paid off but due to the dire dissatisfaction in my current career I am trying to figure a way to minimise our outgoings and look at another job to assist in paying off the investment mortgages and hopefully manage to live on the rent in the future.


I am interested in how much an individual requires with respect to cash/property to be independently wealthy ( be able to sustain a regular standard of living without having to work your life in a job you detest)

Thanks
 lonelyplanet


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## niceoneted (15 Feb 2011)

First question I would put to you so as people can help better is what are the exact monthly repayments of the investment mortgages?

Have you gone to your HR dept to discuss the issues you are having at work? Is there a possibility of changes roles to a less stressful one or an area in the company that you may enjoy better?
Is there perhaps the likelihood of voluntary redundancy coming up in your company? 
Have you looked for another job in your sector and what are the chances of getting one? 

Would you like to retrain to do something completely different? 
Would you wife like to work full time if she can get a job in her area of experience/expertise and you mind the kids for a while? Might this be an option?

You will be entitled to JA (or JB I always get the 2 mixed up) for the first 12 months then it would be means tested. U would have to prove some form of constructive dismissal perhaps though in order to get it in the first place.


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## pinkyBear (16 Feb 2011)

> I am growing through a tough time in my current job and want to leave it. Naturally my wife and I are worried about this decision due to the difficulty to get work.



I can only give you some advise in relation to your job, if you are going through a tough time try and ride it out.  The key thing to remember is "Its only a job"! If you are under pressure, you as a person can only do so much, and if the company have other ideas, well you have rights and if they want you gone they must pay you to go.

In relation to finances, you have your home paid for so you are luckier than most. You know you never know what is around the corner, and sometimes change can be a good thing. So don't worry about your job, the thing is I have a few friends looking for jobs at the moment and there are jobs out there, you just need to be more flexible.... The jobs my friends are looking at are somewhat specialized and even they are surprised at how many interviews they are getting.. 

The most important thing I can pass on is "family is the most important thing you have", and well a "job is just a job", it does not define who you are as a person at all.. 

P..


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## Greta (16 Feb 2011)

As you currently have a high-paying job, are obviously good at saving (as you paid off the mortgage on your PPR early) and your investment mortgages aren't that high, I'd suggest you stick with your job for a few more years, live frugally and try and pay off your investment mortgages.

Once you are debt-free, those properties will provide nice income for you and your family and you'll be in a much more secure situation than if you give up your job now.

By all means, look around for opportunities for a job change or career change but don't just give up your job until you either secure another one or pay off all your mortgages. Otherwise you'll be setting yourself up for a lot of stress and worry when your savings run out and you have two small children to feed and three mortgages to pay...

Regarding your current work situation. From my own experience, men seem to be able to make their entire family miserable if they are unhappy at work. Just stop it, your wife deserves better than to cry over your (highly-paid) work situation! Get things into perspective, as previous posters suggested - a job is just a job!


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## Bronte (17 Feb 2011)

It's terribly sad to be so unhappy.  You will have to do something about it.  We only live one life.  That said, you will be a lot more miserable if you have no income.  Money is the number one cause of arguments in relationships.  You've done really well so far financially and family wise.  Does this not give you the reassurance and happeness you need?  In this climate it is not the time to live off savings.  You have to tackle what is making you unhappy at work, so bad that you are bringing it home and if you can't solve this try and find a new job while staying in your present job.


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## lonelyplanet (19 Feb 2011)

Thanks to all for the replies. I am sticking with the current job for a bit longer and have some feelers our there for other positions and hopeful that something will turn up. As some of you mentioned its only a job.

I am interested in what you think of my financial situation with respect to the mortgages on investment properties as wondering if rents will drop further with the glut of houses in the country.

Again thanks to all for your encouragement ...


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## Pope John 11 (19 Feb 2011)

lonelyplanet said:


> I am interested in what you think of my financial situation with respect to the mortgages on investment properties as wondering if rents will drop further with the glut of houses in the country.



Are the properties in the city etc - Location, Location, Location?

What are the current rents etc of each?


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## Greta (19 Feb 2011)

OP gives the rents - 700, 650 and 750 per month, but he doesn't give monthly mortgage repayments for the properties.


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## Greta (19 Feb 2011)

lonelyplanet said:


> Thanks to all for the replies. I am sticking with the current job for a bit longer and have some feelers our there for other positions and hopeful that something will turn up. As some of you mentioned its only a job.
> 
> I am interested in what you think of my financial situation with respect to the mortgages on investment properties as wondering if rents will drop further with the glut of houses in the country.
> 
> Again thanks to all for your encouragement ...



Glad you feel better

You don't say what the monthly repayments are and how much you currently have to subsidise them from your income but you'll probably be OK with some rate rises or rent drops, considering your income and ability to save.

You might want to figure out how much money you have left each month out of your salary after all living expenses, and then see how much of a rate rise you'll be able to cope with.

Also I think your current level of cash savings should be increased, considering that you have two kids and four properties. Maybe around 60K or even higher.


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## lonelyplanet (20 Feb 2011)

Greta,
 I have monthly payments hitting around 2K per month which luckily is covered by rent but of course have other costs such as PRTB, NPPR charges,insurance etc...

I know on paper I am not in the worst position possible but hoping that I can pay the properties off and live off the rent with some supplementary income. In life terms more interested in quality life and spending time with kids than amasssing a big amount...at this very minute I want to save as much as possible to try and secure I good standard of living for me and family.
As regards the location of the properties...they are all in towns in West of Ireland..and they are in good locations in the towns which is good.

As regards my cash saving why do you determine it should be around 60K

Thanks
 lonelyplanet


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## mercman (20 Feb 2011)

lonelyplanet said:


> As regards the location of the properties...they are all in towns in West of Ireland..and they are in good locations in the towns which is good.



Without my trying to throw a damper to you OP, but in the main a huge amount of the unemployed young people in the West of Ireland, have either emigrated or are contemplating emigration. There is a vast black hole in tourist numbers and property prices are scraping around the bottom. Not much point in having good property in a perfect location but yielding nothing,


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## Greta (21 Feb 2011)

Regarding the prudent level of cash savings it really depends on what you are comfortable with, but I suggested around 60K as it's recommended to have at least 6 months' income. That's for those with just their PPR. Then I'd add at least 5K per investment property on top of that (in my own case I add 10K but I am very cautious), that probably comes out at about 60K in your case, including mortgage payments. 40K would be fine but for investment properties, a lot can go wrong there - voids, repairs, bad tenants, increased interest rates and taxes etc.

Considering that you only get tax relief on 75% of mortgage interest, you do have to subsidise your mortgage payments quite a bit, but with your level income you are sitting pretty and should be able to cope with interest and tax rises.

Your plan to pay off the mortgages early is wise and you should be able to achieve it, giving you and your family a good degree of financial freedom. Keep this goal in mind then hopefully work won't seem as frustrating - it will be just a step on the way to your goal 

PS Another way to calculate the desirable level of cash savings - 10K per child and per property (including your PPR)


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## Bronte (21 Feb 2011)

lonelyplanet said:


> I am interested in what you think of my financial situation with respect to the mortgages on investment properties as wondering if rents will drop further with the glut of houses in the country.


 
Your strategy is what, to pay back asap in order to live off the rent and give up employment ?  

You have not done a full run down of the money you are making on the properties.  But your mortgage rates are the best, you've no negative equity, the properties are performing well.  Change nothing.  Do not repay early, not while you have another income and you are so young.  Slow and steady.  You'll be 57 when they are paid off.  If you paid them off now you'd have to pay full tax on the rent due to your employment income.  Your aim maybe should be to have the rental income when you 'retire' early maximising the tax credits at that time.  You may need the rent also in the future to pay for living expenses and education for your children.  

Will rents drop.  Personally I've seen a drop of about 10 to 15% from peak to bust but none in the last six months.  That's based on good locations.  I understand from some reading and AAM that Section 23's in bad locations are getting zero rent.  Seems to be a steady rental market at present.  As you are still renting seems like you have good locations.  Can't figure out if your rent is good as you've not said location or property type.  There's a hell of a difference between Galway city and Ballyhaunis.  If your rent is servicing your mortgages and paying other outgoings than you oughtn't to worry about it.  Not sure what effect emmigration and the release of property under Nama will have.  Never mind if Labour get in and go after landlords.  

You are contradictory in your remark that you don't want to amass a big amount.  By your actions you are doing the opposite.  

Can you clarify what you mean by spending time with the kids/quality of life?  What does that mean for you.


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## lonelyplanet (21 Feb 2011)

Hi all,

Bronte:
_Your strategy is what, to pay back asap in order to live off the rent and give up employment ?  

You have not done a full run down of the money you are making on the  properties.  But your mortgage rates are the best, you've no negative  equity, the properties are performing well. _ 

Yes this is my strategy but open to advice..My plan was to try and pay off as quickly as possible and use the rent as a large portion of salary and take some parttime work, do some consultancy and be my own boss with the ultimate goal of being able to live a sensible life on a modest salary. I dont understand what you mean about maximising the credits on retirement. Currently I have €50K in a pension fund.

_You are contradictory in your remark that you don't want to amass a big amount.  By your actions you are doing the opposite.  _

I know it sounds contradictory but really what I mean is that I want to work my ass off now so that I could retire around 50 and have decent income from the properties and work part time in consultancy.

Qu_ality of Life/Time with kids: _It means spending as much time with my children in our house, garden, taking part in their hobbies instead of travelling with business every month. 

*Greta*
_PS Another way to calculate the desirable level of cash savings - 10K per child and per property (including your PPR)_

Do you mean that I should work to have 60K in savings, then use the remainder to pay off the properties and then work to ensure that I have approx 60K in savings at all times (incl inflation) 

*Greta,Bronte*: Not sure if either of you are Financial Advisors but really appreciate your help. If not I would appreciate if you can PM me details of any financial adviser that you think would be helpful. No worries if you dont want to as I do appreciate your help.

Thanks


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## mum2009 (21 Feb 2011)

Something to consider is given the gloomy economic clouds ahead tenants are likely to default on paying rent - can you be guaranteed of rent being paid or would a property not rented or no revenue from it influence your decision. We all know how things have radically changed in the past years. Be cautious


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## Greta (22 Feb 2011)

I am not a financial adviser and I don't know any in Ireland, I can recommend the TAB (Taxation Advice Bureau) guide as a starting point as I have always found it really useful. You could then just learn about finance yourself bit by bit.



> Do you mean that I should work to have 60K in savings, then use the remainder to pay off the properties and then work to ensure that I have approx 60K in savings at all times (incl inflation)



Yes, I basically mean that, but the exact amount of emergency fund depends on your circumstances - level of risk, fixed expenses, the condition of your properties (how likely they are to need repairs) etc.

When you pay off your mortgages, your fixed costs will reduce significantly as no more repayments will be needed, so you'll need less of a cash cushion. Also if your wife starts earning decent money once the kids are older, you may do with less of a cash fund.

On the other side, when you get older, you may not want to take much risk with your money, so may prefer to keep more in cash.

So all in all it depends on your circumstances, but should be enough to allow yourself to sleep well at nights

I also think it is prudent for you to learn more about finance and consider diversifying your assets a bit in future, perhaps building a larger pension fund with equity-based investments, funds, shares, also bonds etc. As at the moment you are very heavily invested in one asset class only, i.e. property.

I am not necessarily suggesting selling one of your properties, but maybe balance overpaying the mortgages and investing into your pension. OK, you'll then pay off your mortgages a bit later but will reduce the overall risk to your wealth by diversification.


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## Bronte (22 Feb 2011)

Not a financial advisor except to myself.  Give advice based on life experiences to those on AAM and family but not sure anyone is interested. Only person I know is LD Ferguson as a financial advisor here on AAM who knows his stuff on pensions etc.  Though he and I would disagree on pensions (I think they're for the birds unless defined benefit via a company)

Re travelling, my other half travels and both of us would both agree that it's good for a marriage.  You know it can be quite boring stuck in an office and doing the mundane family life things everyday.  When stuck in a job and hotel it can seem like you are missing it at home but are you really?  Far away hills etc  Saying that my other half hates hotels, planes, airports and certain countries at this stage.  But it's always great getting home.  

Re tax on rent.  If you had full rent now while you are earning a salary you will pay full tax.  So currently it's better to have mortgages and get the tax relief and later in life when your earnings are lower the rent would kick in as your salary and be taxed less as you would be earning less in salary.  

I agree with Greta, start with the TAB book and say Colm Rapple's book.  Not a fan of that other guy, the money doctor too wishy washy for me, that's a personal opinion.  My other advice learnt from my parents is the glossier the brochure (from a bank/institution) avoid at all costs.  Also as Greta suggested you need to diversify, as in you have a lot in one asset class - property.  Currently I'm a fan of cash.  And as I consider bonds and shares to be equal to betting on the horses and as I will never understand it I've stayed well away (except for Eircom) but some posters on AAM seem to know their stuff on this.  

If you do find the elusive good financial advisor then you should be willing to pay for good advice.  Eddie Hobbs provides this service as far as I know.  He has a lot of detractors but so far I've not seen him be anything other than honest.  You could ask a separate question on AAM on who people would recommend as a financial advisor.  

Based on what you've achieved so far do you really need financial advice, don't underestimate yourself.


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