# Teacher with multiple properties living on the breadline



## Nikephorus

Age: 33
Spouse’s/Partner's age: n/a

Annual gross income from employment or profession: c.€60,000
Annual gross income of spouse: n/a

Type of employment: Public Sector
In general are you:
(a) spending more than you earn, NO
or
(b) saving?  Not really, just maintaining all mortgages and loans

Rough estimate of value of home:  €280,000 
Amount outstanding on your mortgage: €180,000
What interest rate are you paying? Tracker (ECB +1.15%).
Outgoings = €950, Rent ( I have it rented out = €950). 

I currently rent a room from a friend for €300 per month, figured it would be more economical less hassle than living in my own property and letting a room.

Do you own any investment or other property? Yes (and here comes the complicated bit...)

Investment Property #1, Value €280,000 (own 60% of this with business partner A), Mortgage €180,000, Tracker (+0.85%) - Monthly Payments (incl bills etc) = €1000, Rent = €950, VERY STABLE tenants.

Investment Property #2, Value €475,000 (own half of this as co-owner with business partner B), Mortgage €320,000 (only liable for 33% of this, as I provided  the deposit for the property purchase). My monthly payments for this property, including all bills are €627. My friend who co-owns the property currently lives in the apartment and pays me a rent of €500 per month. This situation has worked well for several years. We are overpaying the mortgage to build up a lump sum and reduce the outstanding loan. I was initially unsure about doing this, but my business partner was verty eager to do it, and I agreed to maintain a very cordial partnership.

Investment Property #3 (in Belfast), Value £230,000, Mortgage £190,000. My monthly payments are about £500, Rent should be about £750, but tends to be average at about £300 due to difficulties finding tenants.

Investment Property #4 (also in Belfast, I own 50% of this with business partner A), Value £180,000, Mortgage £145,000. Outgoings = £400, Rent £450. Tenants are stable.

Other borrowings – No car (dispensed with it as a "luxury", but sure miss it...)
Credit Union Loan of €29,000 (6.5%, paying €325 off it per fortnight, will be paid off mid 2013) - this was taken out to finance modernisation/refurbishments to the houses.
Credit Union Savings of €2300 (2%, have been told I can't use this to pay off some of the loan until loan is much smaller)
Nationwide Loan (in UK) of £4000, paying £70 off this per month, will be paid off in 2013.

I have overdrafts with PTSB of about €8,000
I have overdrafts with Nationwide (UK) of about £3,000


Do you pay off your full credit card balance each month? YES
If not, what is the balance on your credit card? Rarely use the credit card.

Do you have a pension scheme? YES - DB scheme through work, plus an AVC scheme, which i have recently frozen to concentrate on reducing debts.

Ages of children: None
Life insurance: YES


What specific question do you have or what issues are of concern to you?

After paying €325 per fortnight to the credit union, rent of €300 per month, subsidising my southern properties by perhaps €200, subsidising my northern properties by perhaps €500, nibbling away at my overdrafts north and south by a few hundred, living expenses of about €400, I have nothing left over. I have absolutely no leeway here. I am very patient and ahve stubbornly dug my heels in to tough it out, but it does bug me from time to time that I have all these properties which are hamstringing my life. I have become quite an expert on living cheaply...
 [FONT=&quot]A major concern is that when interest rate hikes happen (ECB and Bank of England), it’ll push me over the edge.[/FONT] 
I am reasonably happy the way my (very modest) property portfolio in the ROI is going. Rents are basically covering the costs. 
I am fairly unhappy the way my properties in Northern Ireland are faring. However, I would like to tough it out up there, as I would like to build up a portfolio of investment properties over time, both in the UK and Ireland.

I REALLY REALLY don't want to sell. My job is safe and I don't mind a long haul, but would appreciate any help. Suggestions, guffaws or prayers gratefully received!


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## goingforgold

*Re: Sink or swim.....*

Ok,

you have a very substantial property portfolio which is well in positve equity. You have a pretty high paying job and a job for life. You have a rolls royce pension scheme. You are unwilling to sell any of your 5 properties to help clear loans and free up cash for day to day stuff, as "as I would like to build up a portfolio of investment properties over time, both in the UK and Ireland".

 I'm not sure you're going to get much sympathy here!


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## Nikephorus

*Re: Sink or swim.....*

100% fair enough. Not looking for sympathy as such though, just any thoughts outside the box.


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## circle

I'd point out that the first house is not actually your home if you have it rented out and are living elsewhere. Bear in mind that as this is an investment property also now with associated tax, registration and possibly stamp duty responsibilities.


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## Nikephorus

Thanks, have covered those bases. Cute tag-line.


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## Mommah

If you can't reduce your out-goings, can you increase your incomings?
How much extra would you require to be adequately comfortable?

Can you realise that by tutoring/grinds in the evening or weekends?

Go trawler fishing in Alaska for the summer.
Teaching summer school in the middle east????


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## Brendan Burgess

Hi Nike

You have to sit back and think what your financial objective is? 



> I would like to build up a portfolio of investment properties over time, both in the UK and Ireland.



This sounds more like a fetish to me than to be a well thought out financial objective. 

I would suggest something like the following would be appropriate: 

1) Don't risk going broke
2) Stay solvent
3) Live comfortably
4) Build up wealth

You are well off and should be enjoying life. It's appalling that a well off person can't enjoy life because 





> I have all these properties which are hamstringing my life. I have become quite an expert on living cheaply...



It is also odd that you are renting a room to live in rather than enjoying a home. 

You do face going broke. If property prices fall you would be in trouble. When interest rates rise, you will be in trouble. If rents drop or you get a bad tenant, you will be in trouble.

I suggest the following: 
Try to switch all your mortgages to interest only. 
Use the proceeds released to reduce your expensive loans - e.g. the Credit Union.

Decide what a comfortable level of borrowing is for you. 

I would have thought that around 70% Loan to Value would be the absolute maximum. I think you should aim for 50%, though. 

Put all your properties on the market simultaneously and sell whichever ones get buyers first.


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## circle

Nikephorus said:


> Cute tag-line.


 ??


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## Nikephorus

Thanks for those suggestions. Really appreciated. "Cute tagline" - I just meant your new title for the thread is more eye-catching. And topical...

Yes, it would make sense to increase earnings to generate some extra cash. Will redouble my efforts to find some evening grinds (or anything basically - am not fussy about type of work, don't think anyone can be in current climate).

Interesting suggestion to switch to interest only and then plough money into clearing CU loan. I presume the lenders will then witch me to a standard variable though, which would negate some of the benefits?


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## canicemcavoy

_Canice

I deleted your post 

Please stay on topic. 

Thanks

Brendan_


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## Steve D

You are taking and almighty leveraged bet on one asset class, property, which is totally bombed out and will probably continue to slump for several years. To me this is very much akin to borrowing to gamble and putting all the borrowed money on one horse!

You would be better off getting out now whilst you can and clearing some of your debts or you could end up subsidising your tenants "in the long haul" because rents will continue to fall and eventually when interest rates start to rise you will be squeezed dry like a lemon. 

What is the point of owning several properties which are decreasing in value and where you are actually loosing money each month because the income from the properties does not cover the costs and you have to subsidise them with your salary? Sheer madness in my opinion and in alll likelihood it is going to get worse unless you get out!


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## Brendan Burgess

Steve

There is still a ban on property price discussion. 

It is ok to talk about the risk of price falls, but not to forecast falls or rises.

Brendan


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## canicemcavoy

Brendan said:


> *If* property prices fall you would be in trouble.


 
Er, haven't property prices already fallen?


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## Brendan Burgess

I think it is very clear to most people that I am referring to falls from their current position.

Brendan


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## What Goes Up

Nikephorus said:


> .....
> I REALLY REALLY don't want to sell. ...


You don't own any assets.

The bank owns the assets.

You have debt.

Best case you owe debts of €689,500. Worst case you owe debts of €1,059,000.

You have to service this debt - either by finding renters to help pay your debt, part funded by renters and part funded by you or, worst case, fully funded by you.

Sell.


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## Puesyo

Steve D said:


> You are taking and almighty leveraged bet on one asset class, property, which is totally bombed out and will probably continue to slump for several years. To me this is very much akin to borrowing to gamble and putting all the borrowed money on one horse!
> 
> You would be better off getting out now whilst you can and clearing some of your debts or you could end up subsidising your tenants "in the long haul" because rents will continue to fall and eventually when interest rates start to rise you will be squeezed dry like a lemon.
> 
> What is the point of owning several properties which are decreasing in value and where you are actually loosing money each month because the income from the properties does not cover the costs and you have to subsidise them with your salary? Sheer madness in my opinion and in alll likelihood it is going to get worse unless you get out!



100% agree with the above. Also agree with the "fetish" thing. Do you really want to be "rich" that badly to take up such a huge risk? Leaving life right now has to be worth something... or a lot...

I myself know what it is to be "obsessed" with something or to be overly-driven in one particular direction in such a way that you really loose the north cos you can't see anything else than your goal... I know you were not looking for "psychological" help here but I would really really try to think what is the reason for your wanting to build a property port-folio so badly.

Edited to add: i did not intend to agree or deny with the part in the post above where Steve speculates above property prices


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## Nikephorus

Thanks guys for the inputs so far. You have certainly got me thinking. Just wondering, is there ANYONE (obviously not so far!) who thinks that what I am doing, i.e. toughing it out is not a crazy thing to do and is a valid way to achieve things....


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## Steve D

Nikephorus said:


> Thanks guys for the inputs so far. You have certainly got me thinking. Just wondering, is there ANYONE (obviously not so far!) who thinks that what I am doing, i.e. toughing it out is not a crazy thing to do and is a valid way to achieve things....


 
It is certainly a valid way to loose money...which appears to be your ultimate goal!


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## Nikephorus

Fair enough! Anyone else...?


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## lightswitch

Sorry Nikephorus,  I reckon you should sell too.  

I know several people in a similar position to you but with a very different view on things, in fact they are pretty much tearing their hair out.  

Even if you do see these properties as an investment what is the point in having them if you have no money to enjoy your life with?

The way I see it you have 5 substantial mortgages not 5 investment properties.  If you look at them this way maybe it will help you to part with them


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## Carolina

I have converted the sterling amounts roughly into euro for simplicity:

You have: 44k in short term debt
684K in mortgage debt
Your partners owe an additional 359K on these mortgages
You have 200K equity in your investment properties
You have 100K equity in your home that you are renting out

You face a number of risks:
*salary reduction*: If your salary reduces on december 9th will you be able to meet your commitments? What if it reduces again next year?

*Interest rates* in UK and eurozone are at historic lows (.5 and 1%). Each 1% rise will cost you 6.8K annually. You don't have 6.8K to spare

*falling rents* If rents fall by 10%, how will you possibly meet your obligations?

*partner risk* if one of your two partners stops making mortgage payments for any reason, then you may be liable for that partners debt. What would you do then as you can't afford to cover for them?

*neg equity risk* Your valuations may be over optimistic. If prices fall 15% for two years running you will be in negative equity and unable to sell up and escape. You have no PPR so all of your properties are easily repossessed.

You seem to have a lot of avenues heading towards catastrophic financial failure. You are living on a knife edge with no room for a minor mishap.

You have a salary of 60k and you live in a rented room and have no car. You are massively exposed in a single asset class. Your investment is geared to multiply risk and return. What investments are you making in your own education and personal development?

Answer: sell up. pay off debts. put money in safe boring investment that make a +ve return. Buy a car. Live a little. Learn something new.

 You will need to find out how to extricate yourself from your partner arrangements. Have you even got legal agreements to cover your exit strategy? If in negative equity, there is no exit of course.


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## plant43

Also hasn't been mentioned what will happen if you stable tenants leave one or more of the properties - it looks like you don't have any savings to cover any shortfall.

Back of the envelope figures say you can sell all your properties and have 225,000 euro + 57,500 GBP profit (subject to CGT) - that's a no brainer to anyone. (this assumes they are accurately valued though). This profit would be enough to buy a decent house for cash in most parts of the country.

For an individual, you have an extensive property portfolio which you are struggling to maintain. It's madness for an individual to have all their investment in one asset class like this.


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## diarmuidc

sell. you are way over exposed to one asset. You have debts of €650 on a salary of €60k. You are really on the edge each month, a drop in rental (very likely imho) and/or an increase in ECB are you are in trouble.

Can you fill in a few blanks? What are the lengths of each mortgage? Are all trackers to the ECB and finally Investment property #1 has a mortgage of 180k which you owe 60% but your monthly costs of €1000 seem very high? Do you have a very short mortgage on that?

EDIT: Are the incomings and outgoings for the properties you partly own adjusted to reflect that fact? ie invest prop #4 : is the 450 your half of the rent or to full rent


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## Howitzer

I don't believe you when you say you have your bases covered with regards to tax.



Nikephorus said:


> Investment Property #1, Value €280,000 (own 60% of this with business partner A), Mortgage €180,000, Tracker (+0.85%) - Monthly Payments *(incl bills etc)* = €1000, Rent = €950, VERY STABLE tenants.



You don't pay the bills unless you're trying to hide the income.

Also, only 75% of interest can now be offset against rental income. The (your) Unions are agitating for this to be reduced in the budget. The NPPR property tax of 200 Euro is only going in 1 direction.

With a moving tax basis no investor has their bases covered, even if they are currently compliant.


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## Carolina

Also missing are building and contents insurance on 5 houses, depreciation of furniture, fixtures and fittings, cost of day-to-day property management, vacant periods, cost of finding new tenants.


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## UptheDeise

I keep a very close eye on interest rates in the near future. They can only go one way and that's up.


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## sadie

I don't understand your philosophy. 

You are renting a room from a friend because it's "more economical less hassle than living in my own property and letting a room".

So - you have 4 investment properties. Which are providing you with stress, worry, mounting debts, etc. 

You are 33yrs of age, yet you don't even have the luxury of living in your own home because you need to fund your 'investment'.

Are you hoping to amass a vast fortune for something in the future? 

Life is for living NOW not some time in 20yrs when all your ships come in.


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## Pope John 11

Nikephorus said:


> I would like to tough it out up there, as I would like to build up a portfolio of investment properties over time, both in the UK and Ireland.


 
Isn't that whats life is all about, buying property & building up a property portifolio. Now is the best time to invest further.

Do you plan to marry your business partner in investment prop. No. 2. Will he/she ever plan to get married?

What do you mean by stable tenants? In the current climate stable tenants can easily turn into stale tenants.

I would have a word with your mathematics teacher in your school in connection with say a further 10% drop in your asset prices, an increase of 1% on all your variable interest rates & a further 10% drop in your rent intake.

And please, do not turn round & tell us you are the mathematics teacher!


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## cancan

You are waaaay overexposed to one asset class.
This is a highly dangerous way to achieve the goals you have set yourself.

You have very little room to work with if things start to go wrong, be it with one of the partners having financial issues, of unforseen issues that you have not encountered to date, interest rates rising and what not.

You have some highly leveraged bets made that could sour very easily, if circumstances do not go your way.

While I would hope that the valuations you have set for your portfolios are true, assuming that current asking prices are the same thing as selling prices is a big mistake.

If you liquidate the properties as the rates you have mentioned at, you would be 300K up. So you made a bet, could be up 300k, yet you still want to stay at the table and continue gambling?

Not a very wise move IMHO.

You're not frank fahey by any chance? 

Reduce your property exposure and use whatever gains you have to build a more diversified portfolio of investment vehicles to reduce the huge risk levels that you currently maintain.

I think you should be thankful thus far that you are not financially wiped out, and make a bee line for the door.

Sell what you can and use any profit to pay off the mortgage on the ones you own on your own.


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## coleen

Let me focus on the other issue not your *death*(debt) but your life which seems to me to be passing you by. You have a nice house but you cant afford to live in it you have a good salary but are so broke you cant enjoy it. You are young fit and healthy and what are your hobbies and what are you doing in your spare time? In 20 more short years you will be on the slippery slope down hill and most of us have the satisfaction that we have made the most of what we had but will you have that ! Life is for living now. Do you want to die and leave all you have accumalated to some one else to enjoy. I hope I will have spent every penny and gone everywhere I wanted to go and fullfilled all my dreams and I have children to leave my money to but I hope to spend as much as possible first.


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## dereko1969

For me one of the best things about being a teacher would seem to be the long holidays, it seems from your post that while you have 4 properties you've no quality of life and certainly no money to use those long holidays for anything except worrying about your 'investments', pointless.


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## PaddyBloggit

Madness .... 

you can't afford your property portfolio .... sell. sell. sell!

Keep one .... live in it and live life!


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## BoscoTalking

dereko1969 said:


> For me one of the best things about being a teacher would seem to be the long holidays, it seems from your post that while you have 4 properties you've no quality of life and certainly no money to use those long holidays for anything except worrying about your 'investments', pointless.


I would go so far as to say OP has been blinded by a greed and at this point in time I cannot understand how he thinks there can be anyone in the world never mind the country who offer him encouragement to stay on the path his is on. its truly astonishing.
Honestly OP - get yourself a life - cut a few losses -


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## Nikephorus

Ok guys. Thanks again for all the posts. Appreciate the honesty.


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## bluemac

[FONT=Verdana, Helvetica, Arial]Id say stick with it, an old friend had 10 houses in Yorkshire at the time (1980) he bough them worth about 10k+ each he was just a plumber, he and the wife kept them going then the recession hit in the 80's properties fell off the wall (same as happened in Ireland now).. the banks closed in on him gave him not time and took them all back.. had they gave him 2 years paying as much as he could he would now  own 10 properties worth 140k upwards banks would have go there money. He has a nice house in a nice village but now about 60 and him and the wife will have to work on, I think until the end... 

you are lucky with a secure job, and pension.

Keep them, work at it, when you are 60 you will appreciate the sacrifice you made at this time, and the next 5 years will feel like nothing when your 60.. do it while you can while your young.

 Id say you need to look at some other way of making an income OUTSIDE OF PROPERTY  a few hundred a month when the interest rates go up in 12 months, will keep you going a lot longer. Maybe find a partner with a good job! ( I assume you havent got one)

Can you go interest only on all the loans, put the money aside for when interest rates go up, have the money to spend then and WHEN the property market gets back on its feet look at selling one or two of your assets and diversifying.
[/FONT]


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## Pope John 11

bluemac said:


> [FONT=Verdana, Helvetica, Arial]Id say stick with it, an old friend had 10 houses in Yorkshire at the time (1980) he bough them worth about 10k+ each he was just a plumber, he and the wife kept them going then the recession hit in the 80's properties fell off the wall (same as happened in Ireland now).. the banks closed in on him gave him not time and took them all back.. had they gave him 2 years paying as much as he could he would now own 10 properties worth 140k upwards banks would have go there money. He has a nice house in a nice village but now about 60 and him and the wife will have to work on, I think until the end... [/FONT]
> 
> [FONT=Verdana, Helvetica, Arial]you are lucky with a secure job, and pension.[/FONT]
> 
> [FONT=Verdana, Helvetica, Arial]
> 
> 
> 
> 
> 
> bluemac said:
> 
> 
> 
> Keep them, work at it, when you are 60 you will appreciate the sacrifice you made at this time, and the next 5 years will feel like nothing when your 60.. do it while you can while your young.
> 
> 
> 
> This goes against your opening statement in connection with the banks taking over the couples properties. Its difficult to compare house prices from the 1980's to house prices now, I would assume that the ratio of house price to salary rates for both 1980's & now would not be similar.[/FONT]
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> [FONT=Verdana, Helvetica, Arial]
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> bluemac said:
> 
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> 
> Id say you need to look at some other way of making an income OUTSIDE OF PROPERTY[/FONT]
> 
> Click to expand...
> 
> Who says property is making the OP an income, as far as I see it the OP is making a loss.
> 
> 
> 
> bluemac said:
> 
> 
> 
> [FONT=Verdana, Helvetica, Arial]Can you go interest only on all the loans, put the money aside for when interest rates go up, have the money to spend then and WHEN the property market gets back on its feet
> 
> Click to expand...
> 
> Is this such a good idea[/FONT]
> [FONT=Verdana, Helvetica, Arial][/FONT]
> [FONT=Verdana, Helvetica, Arial]
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> bluemac said:
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> look at selling one or two of your assets and diversifying.[/FONT]
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> Click to expand...
> 
> Perhaps this should be done now, say , within one year sell the 2 properties in the north, has the OP any idea what their value is at present? Alternatively cut all your ties with your partners & sell those 2 properties.
> 
> Peoples lives & circumstances will change (get married, kids,even divorce) you may find your partners are cordial now bu that may change too.
Click to expand...


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## Pope John 11

Carolina said:


> Answer: sell up. pay off debts. put money in safe boring investment that make a +ve return. Buy a car. Live a little. Learn something new.
> 
> You will need to find out how to extricate yourself from your partner arrangements. Have you even got legal agreements to cover your exit strategy? If in negative equity, there is no exit of course.


 
Very good points above. 

What is the situation with your two partners? 

Have they ever thought about selling or even talked to you about selling?

Have they also got a property portifolio similar to yourselve?

Are they financially secure?

Are their jobs secure for the foreseeable future?

What is their life situation, married, single etc?

What if you were told by one of your partners that he could not contribute any further on his side of the repayments, due to illness, loss of job etc?


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## Nikephorus

To answer some of your questions...
Both partners are in secure employment. 
Partner A (who co-owns a property in ROI and one in the North with me) will not be in a position to buy independently for a while and seems committed to keeping the investment properties on the go.
Partner B is engaged and is getting married mid 2010, but plans to keep the inv. property going as a sideline.
Property values mentioned are fairly accurate and up-to-date. Makes painful enough reading though!
Thanks for all the discussion BTW.


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## diarmuidc

So what are you going to do?


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## Bronte

I would sell investment property 2 which you own on your own as it is performing poorly and it's 85% value to mortgage ratio. Then with the profit pay off your highest interest rate loans first. Use the spare cash you free up (the money subsidising the mortgage on this property) as quickly as possible on repaying the other loans. Aim for no loans. Next buy out your partners one by one. You need to fix your interest rates as you will be crippled if interest rates rise (I think they will) and rents decrease (I think they will). I personally don't agree with interest only mortgages for investment property.  I also think that the 75% mortgage relief may go down in the next budget and the property tax will go up.  

Have you considered what will happen if property falls any further?

Where did you get the valuations from?

Your first property is not your home. You have no home and 5 investment properties. 

Very, very messy with partners etc. 

It would be easier to give advice if you did the sums in one currency and also did the mortgage terms.  You have very little leeway here and you're tied with 2 different people on 3 properties.  Too much can go wrong.


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## Bronte

Howitzer said:


> I don't believe you when you say you have your bases covered with regards to tax.
> 
> 
> 
> You don't pay the bills unless you're trying to hide the income.


 
H, I don't get your second point here?


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## spursman

_Folks

Stay on thread here. Please don't bring up irrelvant, or vaguely relevant points. 

Thanks

Brendan_


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## Howitzer

Bronte said:


> H, I don't get your second point here?


I may have a Pat Kenny moment if someone tries to tell me this isn't so. I've heard it all before; "see I have to have the bills in my name because a previous tenant didn't pay / paid too much / ran away with the spoon"

There may be legitimate reasons for having the bills in the Landlords name but, from my experience, by far and away the most prevalent is to (naively) try and prevent a paper trail and evade tax on the income.

The scenario in this thread leeps out at me as one of non tax compliance. 5 properties with 3 seperate individuals across 2 tax boundaries. One of the properties used to be a PPR. 

The OP has stated the he/she has their bases covered. That's a different thing altogether from being tax compliant. The complexity alone leads me to believe it is not so.


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## Pope John 11

*I disagree with Bronte on this one. In no circumstances would I be buying out all your partners, see below*



Nikephorus said:


> Rough estimate of value of home: €280,000
> Amount outstanding on your mortgage: €180,000
> What interest rate are you paying? Tracker (ECB +1.15%).
> Outgoings = €950, Rent ( I have it rented out = €950).


*Is this the same property as Investment Property #1? If so see below.*



Nikephorus said:


> Investment Property #1, Value €280,000 (own 60% of this with business partner A), Mortgage €180,000, Tracker (+0.85%) - Monthly Payments (incl bills etc) = €1000, Rent = €950, VERY STABLE tenants.


* Buy out Partner A's 40%. I have assumed that this could be your future home & is perhaps close to your work, perhaps you could comment. You could set this up & rent out rooms under the rent-a-room scheme for a temporary period.*



Nikephorus said:


> Investment Property #2, Value €475,000 (own half of this as co-owner with business partner B), Mortgage €320,000 (only liable for 33% of this, as I provided the deposit for the property purchase).


* Let Partner B buy you out. From its value it sounds like a 2 bed apartment or a 3 bedroom house. Partner B is looking to get married in 2010, it may suit him/her too. This could be his future home.*



Nikephorus said:


> Investment Property #3 (in Belfast), Value £230,000, Mortgage £190,000. My monthly payments are about £500, Rent should be about £750, but tends to be average at about £300 due to difficulties finding tenants.


* Sell this within the 6 months while interest rates are still low. *



Nikephorus said:


> Investment Property #4 (also in Belfast, I own 50% of this with business partner A), Value £180,000, Mortgage £145,000. Outgoings = £400, Rent £450. Tenants are stable.


* Sell you share in this property to Partner A. Its like exchanging his 40% in Property #1 for your 50% in Property #4.*



Nikephorus said:


> Credit Union Loan of €29,000 (6.5%, paying €325 off it per fortnight, will be paid off mid 2013) - this was taken out to finance modernisation/refurbishments to the houses.
> Credit Union Savings of €2300 (2%, have been told I can't use this to pay off some of the loan until loan is much smaller)
> Nationwide Loan (in UK) of £4000, paying £70 off this per month, will be paid off in 2013.
> I have overdrafts with PTSB of about €8,000
> I have overdrafts with Nationwide (UK) of about £3,000


*Pay off any debts using any profits made from disposing of Property #2 to Partner B & selling of Property #3 *

*There may be an option for you to hold onto Property #3. Perhaps follow the steps below:*

*1. Buy out Partner A - Investment Prop #1 & sell out to Partner A - Investment Prop #4. Ties cut with Partner A.*
*2. Sell out to Partner B - Investment Prop #2. Ties cut with Partner B.*
*3. Any profits - Pay off your loans.*
*4. Investment Property #1 - Your home - Set up a rent a room scheme - Pay remainder of your mortgage - approx. €500/month.*
*5. You will be in a better position if 1-4 are complete, so you could pay off mortgage to Investment Property #3 where its required out of your salary, or sell within the next year.*


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## Tailspin

..leaving the prospect of negative equity out ,
...assuming rents stay where they are, 
..even leaving out the likely introduction of a property tax of up to 1k a year
..and forgetting completely the income levy on gross rental income..

In my opinion 0% mortgage interest relief will be phase in over the next 3 years. 

Have you worked out what that will mean to you for tax, in an environment of increasing interest rates?  Taking 700k debts at an interest rate of, say 4%, which is probably likely over the medium term, means you will lose annual interest relief of 28k.  At a marginal tax rate of say 45%, that means your tax will rise by over 12k a year - that's 1k a month.  I think many people have not done their sums here - it has the potential to wreak havoc to highly geared landlords.


If you think they won't pull interest relief, then just imagine what will politically the easiest - you're unlikely to see landlords marching down O'Connell St - not much public sympathy there!

by the way I'm in a not too dissimilar position myself - and I'm expecting the worst here and battening down the hatches.  If I were you and I had the opportunity to sell, deleverage and still come out with cash - I would bite their arm off.


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## Arch2

I agree with a lot of what is been said. But.

If 0% interest deductibility becomes the norm. I have little doubt in time this will result in rent increase as landlord decide it is not worth renting.
Some one mentioned above the OP does not have 5 investment properties but rather five mortgages and saw this as a major disadvantage. But looking deeper the OP has borrowed money at rates from banks which from now on people will never be able to access so cheaply again. So why rush to give away this benefit?
I fully agree it appears the OP has stretched to much but I dont see it as bad as some. Some one mentioned €650K debt on €60 income but is the rent not also an income?
No body knows the direction of future house prices, in the short term econmist might predict further falls but who is going to predict with accuracy a 10-20 year forecast.

Perhaps the OP should consider selling a portion of one or more of the property to some one, hence get some cash to reduce loans and still retaining an interest in the properties?

I do agree the OP need to release some cash reduce the short term debt and some how but aside some cash for the interest rate rise on the way.


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## Tailspin

Arch2 said:


> If 0% interest deductibility becomes the norm. I have little doubt in time this will result in rent increase as landlord decide it is not worth renting.


 
I agree to a certain degree, but the decision to hold out for these higher rents will be driven very much by the extent of your borrowings.  

Over the medium term (3-5 years), rents may increase as highly borrowed landlords realise the impact of 0% investor interest relief and dump property at a loss as they will be subsidising their investment and paying very high Case V taxes too.  They will be selling into a market with only owner occupiers or investors with cash, as no one is going to borrow money ever again to buy residential investment properties with borrowed money if there is no relief.  I imagine this will decrease the supply of rental properties, and increase the supply of new homes for sale.New FTBs who hold out for this (in 3-5 years) are in for a treat, although their interest rates may be higher.  

So existing wealthy investors who have no borrowings and spare cash will be the winners, as they will be able to pick properties up very cheaply that will provide very high yields, as long as they pay cash.  The smaller more recent landlords are going to be in serious trouble, unless they are willing to subsidise through the nose, and hold out for the long term.


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## The5acre

In my opinion, if you feel you can tough it out you should.... 

however, it would seem you are significantly overexposed to one asset class (too late to do anything about that now though)

Nobody knows where property prices will be the next 5-10 years.

Consensus appears to be against property as an asset class at present, a la England in the late 80's 90's - however, 10 years later property prices  in England began increasing dramatically again.  If prices increase in the future, you never know, in 5-10 years you may be extremely happy that you toughed it out.

Crystallising losses at the bottom of the market never made sense to me - property should be a long term investment - in general, Irish people seem to have forgotten that in the heady days


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## canicemcavoy

The5acre said:


> Crystallising losses at the bottom of the market never made sense to me -


 
Very true, but that assumes we are now at the bottom of the market.

If I had a penny for every time someone said we were at the bottom of the market, I wouldn't be worrying about property prices.


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## The5acre

Hi Canice

I never suggested we are at the bottom of the market now - it's obvious nobody knows, including you ....

My primary point was made earlier in the reply ....


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## smiley

canice..you implied we are at the bottom of the market..


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## Billo

smiley said:


> canice..you implied we are at the bottom of the market..



Where ?


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## mainasia

The5acre said:


> In my opinion, if you feel you can tough it out you should....
> 
> however, it would seem you are significantly overexposed to one asset class (too late to do anything about that now though)
> 
> Nobody knows where property prices will be the next 5-10 years.
> 
> Consensus appears to be against property as an asset class at present, a la England in the late 80's 90's - however, 10 years later property prices  in England began increasing dramatically again.  If prices increase in the future, you never know, in 5-10 years you may be extremely happy that you toughed it out.
> 
> Crystallising losses at the bottom of the market never made sense to me - property should be a long term investment - in general, Irish people seem to have forgotten that in the heady days



A statement like 'Nobody knows where property prices will be the next 5-10 years' is very misleading and shows a vacuousness of thought. While one doesn't know for certain one can make a very reasonable assumption. The likelihood of property prices increasing is very remote as unemployment will remain high without significant investment or new industry emerging in Ireland (no growth drivers apparent as Ireland has done aswell as it could out of the US gravy train and our industry is still in retreat). You've got further severe tax hikes and job cuts coming down the line for at least the next two years! Things are already rough in Ireland but unemployment could easily hit 15% next year along with further wage reductions amid increased competitiveness for jobs.
Ireland is not England and does not have a very powerful financial sector (which was the driver for increased prices in UK which then spread to other parts of the country). Plus UK has it's own currency, Ireland doesn't.

Use *common sense* to figure it out. Prices are most likely to be less or the equivalent to today's prices. To be equivalent to today's prices we will probably have to had come up with a whole new economic model in the meantime. It's all about *prices to personal income *when credit is pulled.... From my reading of the situation you don't have a hope in hell of staying solvent with the current portfolio in a 10 year period...to many variables to knock you sideways during that time. 
I'll keep my personal thoughts to myself...


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## mtk

I diagree completely with the last post
There is no way to predict 5 years ahead full stop let alone 10.
In addition Extreme events are much more common then percieved in every day life .......
Think of 10 "unthinkable" things that could "never happen" in the next 10 years and i guarantee 3 or 4 will actually happen!


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## Fatphrog

mtk said:


> Think of 10 "unthinkable" things that could "never happen" in the next 10 years and i guarantee  3/4 will actually happen!



You guarantee than 7 and a half things will happen. How does that work?


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## mainasia

mtk said:


> I diagree completely with the last post
> There is no way to predict 5 years ahead full stop let alone 10.
> In addition Extreme events are much more common then percieved in every day life .......
> Think of 10 "unthinkable" things that could "never happen" in the next 10 years and i guarantee  3/4 will actually happen!



Yes you can predict 5 years ahead with relative accuracy about many things. Education system will still be broadly the same in Ireland except you'll be paying more for it and no free fees. Greece will still be a mess, French people will still be eating baguettes  . If you have high blood pressure and keep eating a bacon and eggs every morning and burger for dinner you will almost certainly be in a worst state 5 years later. You owe money now and somebody will be looking for it 5 years later if it is not paid up...

Sure extreme events happen but just what extreme event can solve the issue of bank debt or personal debt in Ireland? Leave the euro, okay and the country will put through massive chaos, it won't solve problems of unemployment because nobody would loan us any money after defaulting our debts! 

New industry or changes in society take time, Ireland's not setup to capitalise as much as it can on rapid changes in the world. Not saying that unlikely events couldn't happen but by their very nature they are 'extremely rare' and it would take a convergence of rare events to suddenly solve Ireland's structural economic problems...making it even more unlikely.  I have read the Black Swan too you know. Depending on the hand of God to solve your problems is a fool-hardy method and not practical.

Things like industrial development are usually built on a solid base and take time to ramp up. For any industry or service you have to work from that through increments as the knowledge base and reputation in that industry builds over time. Designing and building and selling a car or airplane for instance, it takes a huge amount of experience and teamwork to make it happen. Building an international reputation in education like UK, US and Australia didn't happen overnight but took co-ordination from their government promotion bodies and a history of achievement over decades or centuries.


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## mtk

mainasia said:


> I have read the Black Swan too you know.
> 
> 
> mainasia said:
> 
> 
> 
> I was thinking this way well before this book which i have not read
Click to expand...


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## jambo.ie

Nikephorus said:


> Investment Property #3 (in Belfast), Value £230,000, Mortgage £190,000. My monthly payments are about £500, Rent should be about £750, but tends to be average at about £300 due to difficulties finding tenants.


This segment has struck a chord with me. If the property will only let for 300 GBP then surely that is the market price/value. Or am I missing something here?


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## Nikephorus

Hello to all. 

I've a few updates for anyone who is interested. Thankyou for your comments on my situation. All were thought-provoking, some were very useful.

I decided to tough it out and have done reasonably well over the last few months. By developing some free or very inexpensive hobbies (walking, galleries, museums, reading, online gaming, studying... if that qualifies as a pastime!, eating in with friends and family, digital photography, gardening) I've had a frugal but very enjoyable time of it. Christmas was difficult to negotiate, but I managed to spend modestly and make some of the pressies myself.

I have started giving grinds and taken on another job part-time. These net me about €50 per week - not a huge amount, but vital in my constrained situation.

I now have both houses in the North let out longterm to reliable tenants and am happy to say that I have all but cleared my overdraft debts up there.

Meanwhile I have reduced my southern overdrafts from €8,000 to €6,500. My plan is keep my head firmly down until the summer. By summer I would hope to have my overdrafts reduced to about €2,500. Then a cheap backpacking holiday somewhere sunny and interesting will be mine! 

By the time interest rates change, I should be on steadier ground. Fingers crossed.


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## Pope John 11

Nikephorus said:


> Hello to all. I've a few updates for anyone who is interested. Thankyou for your comments on my situation. All were thought-provoking, some were very useful.
> I decided to tough it out and have done reasonably well over the last few months. By developing some free or very inexpensive hobbies (walking, galleries, museums, reading, online gaming, studying... if that qualifies as a pastime!, eating in with friends and family, digital photography, gardening) I've had a frugal but very enjoyable time of it.
> Christmas was difficult to negotiate, but I managed to spend modestly and make some of the pressies myself.
> 
> I have started giving grinds and taken on another job part-time. These net me about €50 per week - not a huge amount, but vital in my constrained situation.
> 
> I now have both houses in the North let out longterm to reliable tenants and am happy to say that I have all but cleared my overdraft debts up there.
> 
> Meanwhile I have reduced my southern overdrafts from €8,000 to €6,500. My plan is keep my head firmly down until the summer. By summer I would hope to have my overdrafts reduced to about €2,500. Then a cheap backpacking holiday somewhere sunny and interesting will be mine! By the time interest rates change, I should be on steadier ground. Fingers crossed.


 
Good for you mate, fair play to you, yes we are all in the same boat, trying to keep our heads above the water, well done


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## circle

Nikephorus said:


> Meanwhile I have reduced my southern overdrafts from €8,000 to €6,500. My plan is keep my head firmly down until the summer. By summer I would hope to have my overdrafts reduced to about €2,500..


 
Good for you, glad things are moving in the right direction.

Remember that some landlord related costs have increased this year; only 75% of interest now allowable against tax, second home tax. Make sure you're budgeting for these on a monthly basis so you don't see your overdraft grow when the bills come in!


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## Arch2

Well done. you appear to be on the right track and hopefully something will start to pick up. 
At least all your property in not in the republic as your sterling exposure may prove the thing that gets you through.


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## PaddyBloggit

Just wondering how you've been getting on *Nikephorus*?


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## Nikephorus

Good, Paddybloggit. The longer than expected low tracker rates have been a godsend and I've managed to increase my earned income by about €8,000 pa also. That has allowed me to make further inroads into the debt mountain - won't be comfortably clear of the woods for another year or so but have managed to hold things together and relax my expenditure (on things like real life!) as I've went along. Am glad thus far that I have done the right thing hanging on to my properties. And yes, I do realise that prices may well fall another while yet...


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## PaddyBloggit

Excellent .... best of luck with it! 

(Thanks for the update - it's much appreciated)


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