# Assessment of Financial Goals with €2m property and  955k Debt



## fonduster (1 Mar 2019)

Hi Guys, A few years ago I created a thread in money makeover section and my situation has changed a good bit since then. I was hoping to pick your brain to see what you think of my situation - https://www.askaboutmoney.com/threads/buy-to-let-mortgage-advice.197693/#post-1461746

Gross Income - Monthly - Yearly
PAYE - 2750 – 33,000*
Rental 1 – 1,100 – 13,200
Rental 2 – 1,075 – 12,900
Rental 3 – 1,500 – 18,000
Rental 4 – 1,400 – 16,800
Rental 5 – 1,220 – 14,640
Rental 6 – 1,350 – 16,200
Rental 7 – 1,350 – 16,200
Rental 8 – 1,350 – 16,200
Total – 13,095 – 157,140


*exclusive of annual bonus  of about 2,000 and BIK health insurance of 230e a month.


Partner PAYE - 1500 – 18,000


Current pension pot – 2,500
Annual Pension contribution – 6,500 +2,300(company contribution) = 8,800



Other Info:
Age: 29/28
I am working on increasing my own PAYE and potentially might be at about 40k in the next 2-3 years.


Generally speaking, my rentals are nearly all close to market rate. At a push I might be able to get an extra 500 per month across all of them but will not be increasing them unless a tenant leaves.


In general are you:
saving

Rough estimate of value of home – 300,000
Amount outstanding on your mortgage: 0

Other borrowings – car loans/personal loans etc - 0

Savings and investments: 10,000


The majority of these are interest only for another 3 years with the exception of rental 3.




Ages of children: n/a. When we do hopefully have children, there is a strong likely hood that my partner would go to part time reducing our wages and affordability.

Life insurance: Yes – Term life insurance for 30 years @700k


Upcoming large expenses:

1-3 Years – Marriage – circa 20k.
3-5 Years – Kids
3-5 Years – Family Car – circa 10-15k
5-8 Years – Family Home – circa 500k


Financial saving objectives:

EOY 2026 having savings of circa 160k @20k per year

EOY 2028 Pension Pot of circa 80k @4pc growth




I hope I was clear with my financial background. Let me know if any of it is unclear.



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



1)Do you think my financial objective and upcoming large expenses are realistic and attainable and is 4pc growth for a pension too high or too low?


2) What are your thoughts on my cashflow, sustainability of debt level etc as rents are at all time highs and wont be like this forever.


3) Over the past few years, I have let my pension and saving go by the way side as I have been aggressively paying down my debt to get the majority of them to 50pc ltv. Right now. My main goal for the future is to save for our final home where it will be costing circa 500k. I would be hoping to refinance my existing portfolio along with saving of circa 160k to buy this final home without selling any of them including my current PPR which I would be hoping to turn into another rental. My current PPR has 0 Debt and could fetch current rent of circa 1500.My intention would be to maximise debt on rentals and minimize debt on PPR in the future to be as tax efficient as possible.


4)My main long term goal is prepping to buy our final home, with this in mind, another option im not too sure if I should go with is to overpay Rental 5 by 30k to bring it down to ltv of 50pc. This would enable me to have a gross saving of 1,800 per year or over 5 years a saving of 9k. Net saving of circa 4.5k is a lot however im not sure if im better leaving this money in my bank account as 30k would be a big dent in my savings for the next 5-8years.


5)I would like to invest in the stock market as well. This will not be happening in the near future as I do feel like I would be entering the market too late with current rates at all time highs. Its just food for thought for something I would like to do. If I was American, I would go with S&P500 or Wrath IRA and leave it there however the complexity of tax in Ireland puts me off them. I was considering investing around 1k per stock and just spreading my purchases across the biggest companies. It would be like a mini s&p 500 but without the extra complexity of having to deal with deemed disposal. – just wondering what peoples thoughts would be on this and what would you recommend for a lay investor. Considering that i will continue to invest in my pension which is invested into stocks and shares, would you also invest in them outside your pension also?


6) Thoughts on my overall financial position.


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## Brendan Burgess (1 Mar 2019)

You have an income of €55k 

You have €2m of property with €1m of mortgages. 

You are doing very well. 

But an unexpected outcome like a 50% fall in property prices would wipe out your wealth.   You should not be taking this risk. 

You have taken huge risks in the past and they have paid off. Take some of your cash off the table. 

As a very minimum, you should not be holding onto your family home as an investment. 

So when you are ready to buy a new home 
1) Sell your family home ahead of time so that you have €300k cash to play with 
2) Sell one or two of the other properties so that you are actually buying your new home with cash. 

3)


fonduster said:


> Current pension pot – 2,500
> Annual Pension contribution – 6,500 +2,300(company contribution) = 8,800



Are you saying that you have only €2,500 in the pot? 

You should be maxing your pension - it's by far the most tax-efficient way of saving for the long term.

4)  You should be getting your exposure to equities via the pension fund.  No need to buy shares directly.


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## Brendan Burgess (1 Mar 2019)

One thing to watch out for. When the interest only periods end, will you be able to afford the full repayments? 

What if a few tenants go rogue? 

Your affairs are quite complex and it's easy to make a mistake.  If you go into arrears, even temporarily, your credit record will be damaged and you can forget about borrowing to buy a home. 

But even with a good credit record, a lender will be wary of lending you 10 times your income to buy a home.  

So get yourself into a good cash position so that you can be ready to buy when the opportunity arises. 

Brendan


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## fonduster (1 Mar 2019)

I spent a lot in 2018 in renovations and i still estimate i had a gross income(income less current expenses and capital allowances) of circa 72k. This should hopefully increase this year with less work to be done.This is a simplistic view i know but just to give you an idea.

You are right, with my current portfolio. It will either do really well or could plummet. This is why i am trying to prepare myself for the next recession as best as possible either by over paying my debt or by building up a saving cushion to protect me.

My current PPR has some family history to it so more than likely will not sell.
To get to where i am now, i did sell one of my previous properties to get liquid cash. I would prefer to try and avoid selling again if i can in the future.

Apologies if my pension aspect wasnt clear. I currently have about 2.5k in it. I had stopped contributing to it for a few years to send the money towards my mortgage overpayments and renovations. Once the dust had settled, i am now re-evaluating my finances to see what i can do. Im Currently trying to fix this by contributing about 20pc along with 7pc company contribution to increase this as much as possible.

I have set my pension scheme to 50pc passive equity fund along with another 40pc in a moderate growth fund which also has 50pc equity with a mix of bonds, alternatives etc balancing out the moderate fund. The remaining 10pc is split between actively managed high risk fund and bonds. In that case, is it more simplistic to continue investing 20pc in my pension that will allow me to invest in shares, and then with my cash outside my pension to just save it and or pay down debt.

What are your thoughts on #4 for overpaying one of my rentals?


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## fonduster (1 Mar 2019)

Situations can change for sure. In relation to interest only payments, I should be able to cover the repayments, it is one of the main reasons i have over paid the majority of my loans during the current interest only period to get my debt and interest rate down to a more affordable level. 

My intention if the situation remains the same and no recession is come time for buying my final PPR, i would refinance the entire portfolio with another interest only period. Currently ICS have a 15 year interest only with another 20 year payment period. At that stage when i would be looking into something like this, i would have been on standard payments across all my properties for at least 3 years so would have paid the debt down another few thousand. Who know what will happen in 5+ years though so this product might now even be available.


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## cremeegg (1 Mar 2019)

Will you be in trouble with your cashflow when the mortgages go to full repayment?

Income  13,095
Repayments 9,800 (my estimate)
Tax 4,833 (income 13,095 less int 3,428 gives profit 9,667 taxed at 50%)

Monthly shortfall 1,538

Give or take rent increases voids, other expenses, etc.


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## cremeegg (1 Mar 2019)

Brendan Burgess said:


> But an unexpected outcome like a 50% fall in property prices would wipe out your wealth.   You should not be taking this risk.



This is not the risk the OP faces. What difference does it make if property prices fall.

The risk he does face is that he will be unable to cashflow his loans when the IO period ends.


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## fonduster (1 Mar 2019)

cremeegg said:


> Will you be in trouble with your cashflow when the mortgages go to full repayment?
> 
> Income  13,095
> Repayments 9,800 (my estimate)
> ...




Correct me if im wrong but i believe my interest rate will drop to 4.4 once im off interest only. The current variable rate with my provider is 4.4pc for ltv 50pc.

Property - Debt - Monthly payment
Rental 1 - 110k - 690
Rental 2 -  95k - 596
Rental 3 - 175k - 1042
Rental 4 - 120k - 753
Rental 5 - 140k - 913
Rental 6 - 110k -690
Rental 7 - 120k - 753
Rental 8 - 85k - 534
Total = 5971


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## fonduster (1 Mar 2019)

cremeegg said:


> This is not the risk the OP faces. What difference does it make if property prices fall.
> 
> The risk he does face is that he will be unable to cashflow his loans when the IO period ends.



Yep exactly, cashflow is key for me. Thats why im trying to guage if i should over pay Rental 5 to get my cashflow down another 150 a month. Im not sure if i can get the full over payment dont this year based on my estimated tax bill and prelim of 40k this year.

Rental 3 is part of the capital gain exemption which will expire for me in 2020 however i would prefer to keep it if possible. My end game is to keep as many as possible where i wont sell them and use them in my pension years and eventually pass them to my children.


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## Brendan Burgess (1 Mar 2019)

fonduster said:


> The current variable rate with my provider is 4.4pc for ltv 50pc.



Well why don't you organise it so that some of your loans qualify for this rate?


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## Brendan Burgess (1 Mar 2019)

cremeegg said:


> This is not the risk the OP faces. What difference does it make if property prices fall.
> 
> The risk he does face is that he will be unable to cashflow his loans when the IO period ends.



Good point. 

But the two are connected. 

If prices fall and he has cash flow problems he is in deep trouble. 

If he gets into cash flow problems but still has plenty of equity, he can solve them by selling a property or two. 

So if he sells a few properties now while he has plenty of equity, he will solve both problems. 

But from his follow on answers, it looks like he has no intention of reducing his exposure. 

Brendan


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## fonduster (1 Mar 2019)

Brendan Burgess said:


> Well why don't you organise it so that some of your loans qualify for this rate?


Right now when it is on IO, the rate is 4.5 for an ltv of 50pc. The advertised variable rate is 4.4 if you go for a standard mortgage. When i took out the mortgage i never enquired about what rate i will be charged at the end of the IO as they were not at an ltv of 50pc at that point. I assume they will go to the advertised variable rate once IO ends.


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## moneymakeover (1 Mar 2019)

Unfortunate you didn't get any tracker rates when you took out your mortgages

But aside from that it looks like you are well positioned. Fair play for getting the loans down.


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## MrEarl (1 Mar 2019)

Hello, 

I'd definitely cash in on some of the properties ... imho the property market is close to having peaked, residential lending rates are not going to go much lower, legislators are not going to make life any easier for landlords, and may well seek to apply other taxes or pressure on them.

You've a serious concentration risk, with regards to the level of your wealth tied up in property.


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## noproblem (1 Mar 2019)

MrEarl said:


> Hello,
> 
> legislators are not going to make life any easier for landlords, and may well seek to apply other taxes or pressure on them
> 
> I doubt it very much, seeing as landlords are doing a lot of what the goverment should be doing and the persons property portfolio as far as I can see from  the rent he's getting, is split between apartments and houses. That to me is a positive,  apartments haven't realised the same price increases as houses.


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## RETIRED2017 (2 Mar 2019)

I remember the old thread interesting the advice back then and how it has changed in a few years,


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## RedOnion (2 Mar 2019)

RETIRED2017 said:


> I remember the old thread interesting the advice back then and how it has changed in a few years,


The circumstances are completely different.

OP had 3 properties, completely debt free, and he was proposing purchasing 2 properties with 20% gearing.

He now has 9 properties, and 1m of debt.

There'd be something wrong if he was getting the same advice!


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## cremeegg (2 Mar 2019)

fonduster said:


> my interest once im off interest only.
> 
> 
> Total = 5971



Apologies I based my estimate of the repayments on the property values rather than the loan amounts

Income 13,095
Repayments 5,971 (revised)
Tax 4,956 (income 13,095 less int 3,183 gives profit 9,912 taxed at 50%)

Monthly surplus 2,168


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## fonduster (2 Mar 2019)

Just to get back to my questions:
1)Based on my upcoming expenses and my cashflow, do you think im too unrealistic of also trying to save about 20k per year.
2)What is a realistic growth of a pension fund, i know it can vary depending on what funds you put your money in however based on my age, i am investing in mainly equities and somewhat "risky"funds. Would 3/4/5/6pc be more realistic.
3)Based on peoples thoughts so far, it sounds like my debt level may not be sustainable, just looking for more peoples opinions on this
4)From talking to several ll, it is common to refinance properties and i would again be hoping to do this 1-3 years after IO expires. Any thoughts and recommendations on this. I chose IO not to push out my problems but to give me more flexibility and at the same time at a minimum pay  what i would be paying if it wasnt IO and or more if i can afford it.
5) This is one of the main topics that is close on my horizon. Would you over pay Rental 5 by 30k to have a net saving of 75pm or 150gross in extra cashflow pm. By the time i try and buy my final PPR, i would have at least a net saving of 5+k howver i would have 25k less saved for a deposit - just looking for some thoughts on this.
6) Im also looking for other peoples knowledge and experience during the bad times and how cashflow impacted them. I was debt free in the last recession and although i saw rents decrease, it didnt impact as much as others.


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## Purple (7 Mar 2019)

If it was me I'd look to greatly reduce by debt levels by selling off a few of the properties. You could sell four of them and be just about debt free, with good income and no risk. You took a gamble, it paid off, now take your profit before your run ends.


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## Alistair (8 Mar 2019)

Hi Fonduster,

Are these all residential BTLs or are there any commercial units in your portfolio ?  If you claimed VAT relief at purchase on any of these, then you may have a service income VAT liability given your level of rent roll.

Overall, I think you are quite exposed to, what I assume is, the residential market.  If there is a significant downward market adjustment on CMVs,  are you at risk of invalidating any existing banking covenants such as <50% LTV ratios that currently qualify you for a lower rate for your cost of funds.

Do you have public liability insurance (in addition to landlord buildings insurance) ?   Heaven's forbid, but what happens if you get sued by a tenant (or a tenant's visitor) for damages i.e. slipping on stairs, blown light bulb, CM alarm with batteries removed etc etc etc ?  If you are conducting your BTL business as a sole trader, how do you limit or protect any court claim against your overall assets ?

In my view your free cash flow is razor thin and would be too risky for my book given the level of uncertainty the BTL market is exposed to under current government policy.

While you appear to have built a decent portfolio, there is significant underlying risk based on the limited information you have provided.  I would strongly suggest you obtain qualified legal and financial advice.


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## NoRegretsCoyote (8 Mar 2019)

What is your CGT bill likely to be if you sell up?


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## fonduster (8 Mar 2019)

Alistair said:


> Hi Fonduster,
> 
> Are these all residential BTLs or are there any commercial units in your portfolio ?  If you claimed VAT relief at purchase on any of these, then you may have a service income VAT liability given your level of rent roll.
> 
> ...



All of these are residential. I had looked into commercial at the time however with the money involved and i had no experience in that area, i decided against it. It took me long enough to understand the legal aspect of residential as well and commercial would take me a long time to get up to speed with.

 If the s*** hit the fan similar to the last recession, as a last resort, i could sell my ppr and move into one of my rentals. It wouldnt be my first move however it is there as a backup plan. During the bad times, my current PPR was worth 200k so would be give me circa 3 years cushion.

I do have liability insurance for all of them. i have had to use my solicitor before for them so know i need to protect myself from that aspect. I am not an LTD so the bank can go after all my assets.

Sorry, did quite understand this comment "If there is a significant downward market adjustment on CMVs,  are you at risk of invalidating any existing banking covenants such as <50% LTV ratios that currently qualify you for a lower rate for your cost of funds."- do you mind explaining in layman terms.


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## cremeegg (8 Mar 2019)

Alistair said:


> If you are conducting your BTL business as a sole trader, how do you limit or protect any court claim against your overall assets ?



When this looked like a becoming a pressing question for me in 2009. I put the mortgage free assets in my wife's name as far as possible and took mine off.

My solicitor said that this would be ineffective as a ploy to defeat my creditors. I think he was wrong as I had no unpaid creditors at that time, i.e. there were no mortgage arrears. Fortunately it was never put to the test.


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## lledlledlled (9 Mar 2019)

Fascinating thread.
One thing I didn't get, how do you have so many properties before age 30? Must have had a lump sum to begin with?


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## Bronte (9 Mar 2019)

Always great when a poster comes back. Initial thoughts.

- Don’t buy any more rentals.
- Forget about sentimental in your thoughts on selling PPR
- Sell PPR to buy new home
- No CGT on PPR
- stay as long as possible in PPR to give you time to have paid down more capital on the rentals
- you both are relatively low income, better then not to have a large repayment on your home
- marriage means probably one income
- Marriage means cost of bring up children and having a nice lifestyle
- you won’t have save for education as the rentals will by then pay for that
- Pay as much as you can into your pension. Now.
- Do you really need to spend 20k on one day
- Good you did major renovations on the rentals, don’t let that slide
- you should have separate savings for the rentals, I aim to keep 10k in my rental account for anything unexpected. Keep rental money in a separate account so you really know how you are doing. When you’ve a limit on the account then drip feed the actual income to yourself


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## Bronte (9 Mar 2019)

cremeegg said:


> Will you be in trouble with your cashflow when the mortgages go to full repayment?
> 
> Income  13,095
> Repayments 9,800 (my estimate)
> ...


I’m not able currently to do the figures but that’s not good.
Nor is his suggestion of interest only for 20 years when he’s carrying so much debt.  

I agree that price falls is not his problem. 

He’s also ‘assuming’ it’s easy to get interest only or whatever he might need. That is certainly not always the case as it’s cyclical. NEVER rely on banks,


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## Bronte (9 Mar 2019)

cremeegg said:


> When this looked like a becoming a pressing question for me in 2009. I put the mortgage free assets in my wife's name as far as possible and took mine off.
> 
> My solicitor said that this would be ineffective as a ploy to defeat my creditors. I think he was wrong as I had no unpaid creditors at that time, i.e. there were no mortgage arrears. Fortunately it was never put to the test.


Your solicitor is clearly not the one acting for Ireland richest developer Sean Dunne. 

Over the years from articles I’ve read I noted a load of developers putting assets into their wives names. I wondered how that would work out if they played hookey on the wives.


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## Bronte (9 Mar 2019)

fonduster said:


> 6) Im also looking for other peoples knowledge and experience during the bad times and how cashflow impacted them. I was debt free in the last recession and although i saw rents decrease, it didnt impact as much as others.


I’ve seen rents go up and down, had voids, had major costs, (10k for a roof, 6k to renovate bathrooms, 2k for a boiler, 8k to renovate on tenant leaving etc)bad tenants not so much. Seen banks throwing out money. Seen banks refuse lending. Started at sky high interest by today’s terms. In my case over 9%.  Seen 17 % down to less than 2%. I’ve seen governments change the rules from allowing interest relief, to cutting it entirely (remember Bacon anybody) then allowing it again, then restricting it to 75% and now back to 100%.

My principles are that the rents must cover the costs, that money be set aside for eventualities and that I never took interest only. I fundamentally disagree with interest only. Made no money for the first decades. But I am now. Never cared about property crashes. And I’ll maybe sell at the peak. If I get too old or sick.

Your ltv when good, that’s the time to move everything to one bank who might give you an attractive interest rate to get your business.

I advised you before to educate yourself to a better job, same advise now, and same for your intended.


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## fonduster (9 Mar 2019)

cremeegg said:


> When this looked like a becoming a pressing question for me in 2009. I put the mortgage free assets in my wife's name as far as possible and took mine off.
> 
> My solicitor said that this would be ineffective as a ploy to defeat my creditors. I think he was wrong as I had no unpaid creditors at that time, i.e. there were no mortgage arrears. Fortunately it was never put to the test.



I dont know much about this area and but from the news of developers doing the same, i was under the impression it had to be in your wifes name for a certain period of time before you could protect your assets in that way.


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## fonduster (9 Mar 2019)

lledlledlled said:


> Fascinating thread.
> One thing I didn't get, how do you have so many properties before age 30? Must have had a lump sum to begin with?


I inherited 2 properties when i was 18. I worked part time while i was in college which covered my living expenses while the rental income was saved.
i then bought my 3rd rental at the height of the recession with cash.
Since then, i again saved cash for a few more years and more recently Sold one of the properties to give me liquid cash of circa 500k. This along with refinancing my 3rd property enabled me to be where i am today.


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## mtk (9 Mar 2019)

Very interesting thread and nice to see a risk taker been rewarded . I wish I had had the confidence to invest near bottom but never been a risk taker !

I agree pay down debt

Is there a risk of a sein fein government going after landlords ( even more )? 

Courious ever much hastle getting rent ? Etc


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## fonduster (9 Mar 2019)

Bronte said:


> Always great when a poster comes back. Initial thoughts.
> 
> - Don’t buy any more rentals.
> - Forget about sentimental in your thoughts on selling PPR
> ...



- Don’t buy any more rentals. I wont be until my debt is much lower > I would feel more comfortable with a 25pc gearing.
- Forget about sentimental in your thoughts on selling PPR. > Its harder said that done. I dont think ill be able to sell this unless its a last resort. 
- Sell PPR to buy new home
- No CGT on PPR > In my case i have had my current PPR for over 11 years however i have only lived in it for 1-2 years. I will have a pro rata gain on about 75k from when it was given to me.
- stay as long as possible in PPR to give you time to have paid down more capital on the rentals > Interesting point. I think i have decided to pay down the other rental of 30k to get the ltv down to 50pc. Would you continue to over pay the debt instead of building up cash again in preparation of my final PPR? To do this, i would still need to refinance in 5+ years to get it however i would have a net saving during those years.
- you both are relatively low income, better then not to have a large repayment on your home > your right. I would be hoping to have no debt on PPR and all of the debt on rentals.
- marriage means probably one income > In our case, i think its healthier for both to work even if its 1 day a week to keep you sane and productive.
- Marriage means cost of bring up children and having a nice lifestyle > Yes, to be brutally honest, up until now, i have never had money worries as i always has surplus cashflow, i want that to continue into the future as i can see what that can do to some of cousins.
- you won’t have save for education as the rentals will by then pay for that > You brought up an interesting point. This is one option where i was still considering if its better to open up an investment or saving account for the children where we would deposit child benefit into their name so that money would always be safe for them. The other route is, hopefully in 20 years time, i could cashflow their college.
- Pay as much as you can into your pension. Now. > I am, will commit 20pc of salary along with the companys 7pc going forward. 
- Do you really need to spend 20k on one day > It wouldnt be my first choice for sure as its not my scene however my GF and her mum love weddings and I dont think i could take that away from them. It would be hypocritical of me to do something like that when i know how to spend in my own way as well. Happy wife, happy life so pick your battles wisely. 
- Good you did major renovations on the rentals, don’t let that slide > Yep, i did spend a lot of money over the past few years to most of them in very good condition. One option i had considered and have not seen it be brought up in forums is to do work to a property when it isnt necessary just so you can bring down your tax bill. So lets say you could do work of circa 10k to a property. In essence it will only cost 5k to make this property more attract and/or bring up the value of the property OR i could just pay tax of 5k instead. I have not done this yet, however when i see my yearly tax bill, its painful to let so much go.
- you should have separate savings for the rentals, I aim to keep 10k in my rental account for anything unexpected. Keep rental money in a separate account so you really know how you are doing. When you’ve a limit on the account then drip feed the actual. > 

Right now my current setup is that i have 2 personal accounts for everything. One for income, one for expenses. Its a mental thing for me where for any of my own personal expenses i would always take out a monthly amount in cash to spend as i find it harder to spend that way while for the rentals, i use my card. I know its not as structured as your own and one of my own friends thats an accountant tells me the same however i usually have a good idea of figures and numbers of how i am spending etc.

 i also dont have much in savings right now with how aggressive im trying to pay down my debt however when the time comes when i think i have paid enough(potentially early 2020), i think i will just leave the cash build up in the account. Im not really interested in opening up a saving account as the gains are not there and it requires more admin and paperwork to declare.


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## Gordon Gekko (9 Mar 2019)

We do need to be careful in terms of being overly cautious around debt.

Prudent borrowing is great way to acquire assets and grow wealth.

It is not always the right decision to pay down debt.


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## Bronte (9 Mar 2019)

fonduster said:


> I inherited 2 properties when i was 18. I worked part time while i was in college which covered my living expenses while the rental income was saved.
> i then bought my 3rd rental at the height of the recession with cash.
> Since then, i again saved cash for a few more years and more recently Sold one of the properties to give me liquid cash of circa 500k. This along with refinancing my 3rd property enabled me to be where i am today.


Tell us more about how you borrowed please. I’m interested in seeing how easy it is to borrow. Because I thought your work salary might have prevented all the mortgages.


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## fonduster (9 Mar 2019)

Bronte said:


> I’ve seen rents go up and down, had voids, had major costs, (10k for a roof, 6k to renovate bathrooms, 2k for a boiler, 8k to renovate on tenant leaving etc)bad tenants not so much. Seen banks throwing out money. Seen banks refuse lending. Started at sky high interest by today’s terms. In my case over 9%.  Seen 17 % down to less than 2%. I’ve seen governments change the rules from allowing interest relief, to cutting it entirely (remuneration Bacon anybody) then allowing it again, then restricting it to 75% and now back to 100%.
> 
> My principles are that the rents must cover the costs, that money be set aside for eventualities and that I never took interest only. I fundamentally disagree with interest only. Made no money for the first decades. But I am now. Never cared about property crashes. And I’ll maybe sell at the peak. If I get too old or sick.
> 
> ...



A lot of what you said is what my principles are also.

In relation to my job. The one thing i would say is tax acts as a big disincentive for me. During my working life so far. My PAYE has  always been at 50pc when you include my rental income so for example right now Im netting about 16/17k from my job. Im not trying to get a high flying job as i see how much some of my friends that earn 70/80k work. I know they net more than me however with the extra work i have on the side, i am seeking a work life balance where i can earn as efficiently as possible and i see property as that route for me. Yields are not exceptional however with time, they will help me. My end goal for my PAYE is to gross circa 50k. Im happy with this coupled with a company that i enjoy with good work life balance. It would give me more flexibility if something did happen however at the same time, a job is just a job for me especially when i work for others to make money. I think if the taxation was different, my viewpoint maybe different however right now, i will continue to work but at the same time, i like my personal life as it is at the moment and dont want to increase my workload/stress load for small money.


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## Bronte (9 Mar 2019)

Clever, you say the wedding budget is 20k but know it will be 30k.

You need to keep rental income and expenditure in one account or two, but always separate to your own income from work and your own savings. My accountant told me one account is best and it makes everything much easier to manage.  Like you I do most transactions by card or bank transfer with little cash withdrawals.

Did not see the logic in renovating to reduce tax bills. In general the tax rule is enhancement is for cgt, not income tax.


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## fonduster (9 Mar 2019)

I had one difficult tenant so far. Wont go into specifics but he cost me over 10k. Im more careful since then and lesson learned! Due to odds of how many rentals i have, i will have more difficult tenants in the future.


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## fonduster (9 Mar 2019)

Bronte said:


> Clever, you say the wedding budget is 20k but know it will be 30k.
> 
> You need to keep rental income and expenditure in one account or two, but always separate to your own income from work and your own savings. My accountant told me one account is best and it makes everything much easier to manage.  Like you I do most transactions by card or bank transfer with little cash withdrawals.
> 
> Did not see the logic in renovating to reduce tax bills. In general the tax rule is enhancement is for cgt, not income tax.



Did I. I normally prefer to keep estimates over budget so you have no surprises. We would prefer a smaller more intimate wedding of only people we care about.

My reasoning behind two accounts is so i can ensure the rental income comes in on a timely manor and is easy to read if i ever need to observe cashflow etc. If i have 100 transactions a month on one account, i normally dont review expenses unless high while for income i would.i see both views. I do cash withdrawals every month for my own personal expense. Its more old fashion for sure, but i follow the Dave ramsey approach for this.

Fair point.


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## fonduster (9 Mar 2019)

ill check other comments later, just need to head out now.


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## fonduster (9 Mar 2019)

Gordon Gekko said:


> We do need to be careful in terms of being overly cautious around debt.
> 
> Prudent borrowing is great way to acquire assets and grow wealth.
> 
> It is not always the right decision to pay down debt.


Gordon, What are your thoughts on my debt to income level etc?


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## fonduster (9 Mar 2019)

Bronte said:


> Tell us more about how you borrowed please. I’m interested in seeing how easy it is to borrow. Because I thought your work salary might have prevented all the mortgages.



The amounts banks were willing to let to me varied massively from about 150k to 1.25m. I tried every bank directly to see what they would give me.
Banks policies on rental income vary massively. Like you have mentioned before, my PAYE income is small and the bank i went with even said it to me. They gave this loan based on my total assets combined with expected income vs debt i was taking out. I could have taken out more however i chose not to in the end.


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## Bronte (9 Mar 2019)

Wise not to take as much as they are willing. As I suspected they are willing to lash it out. Are you willing to divulge which bank offered the most. If not, pm me in total confidence. Also would like details on your tenancy 10k problems, in public or pm. Want to always understand the mistakes us landlords make and how to not make them. Like everybody I was too naive originally. 

Can you check if moving your business to one bank will get you a better interest rate. Owing 1 mill gives you leverage.


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## moneymakeover (10 Mar 2019)

I would suggest reducing LTV on rental 3 and rental 5
Which you give as 80pc and 70pc respectively

But by my calculations they are actually 70pc and 63pc

So to reduce to 50pc only requires repaying 50k
And 30k

Then over time, with capital appreciation if you keep paying interest only and if the properties appreciate by 100% (10 years time)
The LTV will then be 25%


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## galway_blow_in (10 Mar 2019)

Gordon Gekko said:


> We do need to be careful in terms of being overly cautious around debt.
> 
> Prudent borrowing is great way to acquire assets and grow wealth.
> 
> It is not always the right decision to pay down debt.



Amen to that, I got such a strong reaction on this site two years ago to a 50 k ten year mortgage ( 540 per month repayments ) @5.7% I had on a property bringing in 12k per annum NET, that I paid it off less than a year into the term.

Had I instead not been fickle and swayed by ultra cautious opinion, I could have bought a brand new three bed house in castletroy Limerick for 220 k cash, I paid off that loan and put the money in European equities and I'm down about 5% today and let's just say houses in Limerick are in a different place to 2017

Some people believe unless your borrowing at below 3%,its a disaster


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## fonduster (10 Mar 2019)

Bronte said:


> Wise not to take as much as they are willing. As I suspected they are willing to lash it out. Are you willing to divulge which bank offered the most. If not, pm me in total confidence. Also would like details on your tenancy 10k problems, in public or pm. Want to always understand the mistakes us landlords make and how to not make them. Like everybody I was too naive originally.
> 
> Can you check if moving your business to one bank will get you a better interest rate. Owing 1 mill gives you leverage.



How do i PM, potentially as im not an active user, i may not have permission. If you PM me, i might be able to respond maybe?

Going back to a previous comment you said, I would never assume the banks will give me a refi especially with the level of debt we are talking about. Everyone is in it for them self and depending on financial confidence at the time i look for it, they may not give me anything. Thats why im trying to position myself as best as possible. I thought having 1m in debt is the opposite of leverage and is coming from a point of weakness?


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## fonduster (10 Mar 2019)

moneymakeover said:


> I would suggest reducing LTV on rental 3 and rental 5
> Which you give as 80pc and 70pc respectively
> 
> But by my calculations they are actually 70pc and 63pc
> ...


Your right with the LTV's i set it at that based on the LTV interest rate rather than what my exact LTV is right now. I have some 50pc LTV where it might be closer to 40-45pc as well. Its just easier to read i think. 

I think im going to to ahead with rental 5 and pay down the 30k. Im not so sure about rental 3. Although i would save a decent amount of money as it would drop to an interest rate of 4.4pc. I would be afraid when it comes to me trying to get my PPR, i wont have enough liquid cash. If i was living in my final PPR right now. That would be my next plan, however i just need to balance all angles im going for.


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## fonduster (10 Mar 2019)

galway_blow_in said:


> Amen to that, I got such a strong reaction on this site two years ago to a 50 k ten year mortgage ( 540 per month repayments ) @5.7% I had on a property bringing in 12k per annum NET, that I paid it off less than a year into the term.
> 
> Had I instead not been fickle and swayed by ultra cautious opinion, I could have bought a brand new three bed house in castletroy Limerick for 220 k cash, I paid off that loan and put the money in European equities and I'm down about 5% today and let's just say houses in Limerick are in a different place to 2017
> 
> Some people believe unless your borrowing at below 3%,its a disaster



I think hindsight is 20/20. Luck plays a major role and i try to learn from your mistakes as best as you can however in your case its impossible to time it. At the time when i bought my 3rd property i had the opportunity to get a loan then as well where i could have got another property and made 100+k net profit on it. I choose not.  It can go the other way as well. I do know of people over leveraged who have lost everything close to retirement and that is a position i want to avoid. Likewise if you bought equities at the bottom, you could have trebled or quadrupled your principle. As long as your finances are in the positive and growing im happy .

Depending on your attitude to risk, you need to play to your strengths and to some 5pc is too high and to others its acceptable. Both are ok depending on the person and you have ensure you did your best in ensuring your affordability.


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## galway_blow_in (10 Mar 2019)

fonduster said:


> I think hindsight is 20/20. Luck plays a major role and i try to learn from your mistakes as best as you can however in your case its impossible to time it. At the time when i bought my 3rd property i had the opportunity to get a loan then as well where i could have got another property and made 100+k net profit on it. I choose not.  It can go the other way as well. I do know of people over leveraged who have lost everything close to retirement and that is a position i want to avoid. Likewise if you bought equities at the bottom, you could have trebled or quadrupled your principle. As long as your finances are in the positive and growing im happy .
> 
> Depending on your attitude to risk, you need to play to your strengths and to some 5pc is too high and to others its acceptable. Both are ok depending on the person and you have ensure you did your best in ensuring your affordability.



It's a mistake to only focus on interest rates, paying off debt means having less cash to buy other things


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## Sarenco (10 Mar 2019)

It’s a far bigger mistake to confuse outcome with strategy - hindsight is always 20/20 vision.

I would join the chorus here - the risks taken by the OP have paid off so far, time to consider cashing in some chips.


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## moneymakeover (10 Mar 2019)

I don't think 4.5 versus 4.4 makes much odds
And not suggesting you rush into paying down the 30k and 50k
If you gradually pay down those amounts then you're in fairly secure position
And my other point was the LTV will naturally reduce all by itself as the properties appreciate. Even if you just pay interest only.


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## Sarenco (10 Mar 2019)

moneymakeover said:


> And my other point was the LTV will naturally reduce all by itself as the properties appreciate. Even if you just pay interest only.


Shouldn’t that read _if_ the properties appreciate...


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## RedOnion (10 Mar 2019)

LTV on individual properties is kind of irrelevant on a portfolio of this size. The entire is under 50% LTV.


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## fonduster (10 Mar 2019)

galway_blow_in said:


> It's a mistake to only focus on interest rates, paying off debt means having less cash to buy other things



Having liquidity is very important i agree. Im not quite focusing on the interest rate per se. I'm more focusing on what the net difference is if i get it down to x rate which can be quite a bit over a few years. Another aspect im considering is if house prices slump. I wouldnt be able to get it down to that rate however if its at 4.5 right now banks are not likely to revalue it in the future to increase the rate.


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## fonduster (10 Mar 2019)

moneymakeover said:


> I don't think 4.5 versus 4.4 makes much odds
> And not suggesting you rush into paying down the 30k and 50k
> If you gradually pay down those amounts then you're in fairly secure position
> And my other point was the LTV will naturally reduce all by itself as the properties appreciate. Even if you just pay interest only.


Over the long run, they will appreciate. In the short to medium(5-10yrs) i expect we will have some form of recession. No facts to back that up. Its just my gut feeling and i hope im wrong.


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## Gordon Gekko (10 Mar 2019)

fonduster said:


> Gordon, What are your thoughts on my debt to income level etc?



Am I right in saying that you owe €1m on properties worth €2m that generate €160k a year of rental income?

I think you’re in excellent shape.


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## RedOnion (10 Mar 2019)

I'd tend to agree with @Gordon Gekko 

Even stress testing your scenario (sadly I've played around with a few scenarios over the weekend to see when it becomes worrying);
if you convert these to P&I mortgage over 20 years, interest rates increase to 6.5% and a 20% drop in Rent, they're still cash flow positive (after tax).  They're the kind of scenarios you need to be looking at so you're not forced into a sale if you can't meet repayments.

But that doesn't get away from the fact that you are highly concentrated in a single asset class.


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## RETIRED2017 (10 Mar 2019)

RedOnion said:


> I'd tend to agree with @Gordon Gekko
> 
> Even stress testing your scenario (sadly I've played around with a few scenarios over the weekend to see when it becomes worrying);
> if you convert these to P&I mortgage over 20 years, interest rates increase to 6.5% and a 20% drop in Rent, they're still cash flow positive (after tax).  They're the kind of scenarios you need to be looking at so you're not forced into a sale if you can't meet repayments.
> ...



out of interest lots of assets classes appear to drop around the same time as property ,if you leave cash out of it ,

Just putting it out there very interested in others posters views,


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## Bronte (11 Mar 2019)

Value, Loan, LTV, Gross Income - Monthly - Yearly - mortgage
PAYE - 2750 – 33,000*
300K 0K Home
220K 110K Rental 1 – 1,100 – 13,200 -413 should be 690
180K   95K Rental 2 – 1,075 – 12,900- 357 should be 596
250K 175K Rental 3 – 1,500 – 18,000 - 1042 should be 1042
240K 120K Rental 4 – 1,400 – 16,800 - 450 should be 753
220K 140K Rental 5 – 1,220 – 14,640 - 566 should be 913
240K 110K Rental 6 – 1,350 – 16,200 - 413 should be 690
240 K 120K Rental 7 – 1,350 – 16,200- 450 should be 753
190K,  85K Rental 8 – 1,350 – 16,200 - 319 should be 534
2080K Value
Loans 955K
Total rents – 13,095 – 157,140

Question 1. Rent total is not 13095  monthly? It's 10345?
Question 2. What are the figures in the next post
Question 3. What is your annual tax bill on rental income (40K mentioned)

Income 124K, Unless income is 160K.(157K)
Mortage repayments 48K (or 72K if C&I I think)
Tax of 20K I think
10K, 3K, ????


*Deductions for tax*
10K management fee.
W&T
Insurances 3K
RTB
Interest 43K


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## Bronte (11 Mar 2019)

error


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## NoRegretsCoyote (11 Mar 2019)

RedOnion said:


> I'd tend to agree with @Gordon Gekko
> 
> Even stress testing your scenario (sadly I've played around with a few scenarios over the weekend to see when it becomes worrying);
> if you convert these to P&I mortgage over 20 years, interest rates increase to 6.5% and a 20% drop in Rent, they're still cash flow positive (after tax).  They're the kind of scenarios you need to be looking at so you're not forced into a sale if you can't meet repayments.
> ...



I think the OP needs to bear in mind that Irish house prices can fall *a lot*, but they can only fall *so fast*. Even at worst it was never really more than 15% per annum. The same goes for rents.

The OP will have plenty of warning if he is going to face cash-flow issues. That said, selling with tenants in situ means a big discount, and giving them notice of termination if you want to sell is now up to six months for long-standing tenancies. The CGT situation is also pertinent.



Personally I think the level of leverage is probably right for the portfolio overall. If I had this amount of net wealth I would diversify I bit though.


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## moneymakeover (11 Mar 2019)

Rental income: 125k

Interest: 43k


Question: how much time do you allocate weekly or monthly to managing this portfolio?


And when you said you only increase rent when tenants move.... Is that policy to keep them happy?


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## fonduster (11 Mar 2019)

NoRegretsCoyote said:


> I think the OP needs to bear in mind that Irish house prices can fall *a lot*, but they can only fall *so fast*. Even at worst it was never really more than 15% per annum. The same goes for rents.
> 
> The OP will have plenty of warning if he is going to face cash-flow issues. That said, selling with tenants in situ means a big discount, and giving them notice of termination if you want to sell is now up to six months for long-standing tenancies. The CGT situation is also pertinent.
> 
> ...



I hope your right. 
Its not a requirement yet/ confirmed that you have to sell with tenants in situ. I do think if this is enforced someone will dispute this in court.


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## Sarenco (11 Mar 2019)

Looking at this afresh, I think if I was in the OP's shoes I would do the following:-

I would sell two of the rentals and bring the aggregate LTV on the rental portfolio as a whole down to 50%.  That would have a positive impact on the overall blended cost of credit and would materially reduce the risk profile of the portfolio;
I would keep at least €25k on deposit at all times as a reserve fund to address any unexpected repairs, voids, etc.; and
I would maximise all tax-relieved pension contributions and would the invest the lot in a global equity fund for the time being.



fonduster said:


> I have set my pension scheme to 50pc passive equity fund along with another 40pc in a moderate growth fund which also has 50pc equity with a mix of bonds, alternatives etc balancing out the moderate fund. The remaining 10pc is split between actively managed high risk fund and bonds.


There's really not much point investing in bonds with low yields while carrying debt (effectively a "negative bond") at a much higher interest rate.  Also, remember that paying down debt  is highly efficient from a tax perspective - there's no point using up valuable tax advantaged space in a pension vehicle when you can achieve a better result elsewhere.


fonduster said:


> I would be hoping to refinance my existing portfolio along with saving of circa 160k to buy this final home without selling any of them including my current PPR


I don't think it's a good idea to re-finance your existing rental portfolio to buy a family home.  Just sell your existing home and, if necessary, take out a (low LTV) PPR mortgage to meet the balance.


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## fonduster (11 Mar 2019)

moneymakeover said:


> Rental income: 125k
> 
> Interest: 43k
> 
> ...



Its in swings and roundabouts, The only job that is consistent is i log onto my banking app regularly to check if i receive rental income coupled with reviewing expenses etc. One month, i could have a lot of work if a tenant moves out or if something major comes up and other months, i wont have a single call from them.

I have learned through experience that if you charge the absolute top market rate, tenants are more likely to move on quicker. Normally i charge just under market rate so hopefully tenants that are up in the air about moving will stay that bit longer. On top of it the devil you know is better that the devil you dont. As long as i have a good relationship with the tenant, im more reluctant to increase rent. I have increased it for good tenants in the past however as it was too much below market rate however im much slower to do it. On the opposite end of the spectrum, if i have a bad relationship with a tenant or he is calling too much for small things , i have increased to market rate to pay for the extra work they causes and/or hopefully moving them on.


Dust is only starting to settle in 2019 for the quantity of work i have done on my rentals. I dont break my properties down individually like this unless i feel like too much maintenance is being done on one. It might be laziness on my part to not break it down that much as you can more easily identify marigins however all i do is put all current expenses  and capital allowances together vs all income.

Bear in mind the figures i present below are subject to change particularly maintenance as i have done a lot over the past 2 years and my rents have increased since last year.

My PAYE tax is already deducted at source through the company i work for, and since my wage is borderline the higher tax bracket, virtually all of my rental income is at the higher rate. My tax bill that i will pay in October is circa 20k. I will also pay another prelim of about 20k for 2019. I always just go for 100pc of previous year. I expect my maintenance costs to go down substantially this year so my tax bill may go up when i review my tax bill for 2019 in 2020.

Costs that are going to be set for me will be mortgage interest circa 42k and block management fees of circa 10k along with tax.


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## fonduster (11 Mar 2019)

Sarenco said:


> Looking at this afresh, I think if I was in the OP's shoes I would do the following:-
> 
> I would sell two of the rentals and bring the aggregate LTV on the rental portfolio as a whole down to 50%.  That would have a positive impact on the overall blended cost of credit and would materially reduce the risk profile of the portfolio;
> I would keep at least €25k on deposit at all times as a reserve fund to address any unexpected repairs, voids, etc.; and
> ...



1. Right now my entire portfolio is less than 50pc gearing including my PPR. Taking the PPR out of it i am around 80k away from 50pc and i will over pay one rental this year by 30k leaving 7 Rentals at 50pc and 1 at 70-80pc ltv. I dont really see the major difference in terms of gearing if i sell other than the fact i will have circa 200k liquid cash.
2. Yes this is something i intend to do after the 30k over payment.
3.Fair point, currently i divided my pension into a few different areas for diversification but personally i think a passive world equity fund would be better. Interested to see other peoples thoughts on this

How can i achieve better results by over paying btl mortgage vs pension. Anything i pay on the mortgage is only costing me 50pc. Are you saying i should stop contributing to pension and divert funds to BTL mortgage?


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## moneymakeover (11 Mar 2019)

Do you have a good accountant?

20k tax seems about right amount.

If you pay down the capital  the tax could rise and how would you feel giving the taxman more 20k each year?


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## fonduster (11 Mar 2019)

moneymakeover said:


> Do you have a good accountant?
> 
> 20k tax seems about right tax.
> 
> If you pay down the capital  the tax could rise and how would you feel giving the taxman more 20k each year?



Hes fine.

Like everyone, i prefer keeping as much of it for myself as possible. If i pay down the 30k capital, it gives me an extra cashflow of 150 pm. The taxman will get 75, i get 75. Its a net saving of 4.5k over years so i think i will do it. Have not done the calculation for the other rental however i dont think i am in a position to do that given my goals.


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## moneymakeover (11 Mar 2019)

Is there an optimum debt that creates tax deduction?

It's a question I ask myself

Perhaps in retirement when income low the debt can be cleared


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## Sarenco (12 Mar 2019)

fonduster said:


> 1. Right now my entire portfolio is less than 50pc gearing including my PPR.


Your PPR is your home, whereas your rental portfolio is your business.   I don't think it's wise to confuse the two.

If you sell a couple of rentals you will:-

Reduce the blended cost of credit applicable to your entire rental business;
Reduce the interest rate risk associated with that business;
Give you an appropriate cash reserve to meet any unexpected expenses related to that business; and
Put yourself in a position to buy your "forever house" once you liquidate your home equity.





fonduster said:


> Are you saying i should stop contributing to pension and divert funds to BTL mortgage?


No.  I'm saying if I was in your position I would invest the entirety of your pension in global equity fund for the time being.  There's no point holding a debt instrument that pays less than 1%, while simultaneously carrying debt that costs over 4%.
That's what I would do in your shoes - you will obviously have to take your own view.


----------



## Bronte (12 Mar 2019)

My advice to OP is

Pay Capital and Interest, I don't think it's important to focus on the two properties that are more than 50% LTV, could focus on paying down the one that costs the most in interest. No need to sell anything, I'd try to get a better deal with the interest rates by shopping around. If he'd borrowed on one of the properties as his PPR he might have got a better rate there.  House drops don't affect him. Interest rates really do though.  But he's equity is currently 50% which is excellent.  He should stress test himself on C&I of say 2%.  Should see which of the properties is performing best versus one that is not to see if it should be offloaded, but I suspect not.  Needs to build up a good sum for all rental issues (major work/repairs/voids). I agree with the rental below market strategy.  It works.  Keep the properties in good nick.   

Should pay as much pension in work as possible.  He'll be glad he did in decades to come.


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## Bronte (12 Mar 2019)

Marriage

OP didn't ask.  But a pre nup might be advisable, unfortunately, or fortunately, in Ireland it's not worth the paper it's written on.


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## Alistair (12 Mar 2019)

fonduster said:


> All of these are residential. I had looked into commercial at the time however with the money involved and i had no experience in that area, i decided against it. It took me long enough to understand the legal aspect of residential as well and commercial would take me a long time to get up to speed with.
> 
> If the s*** hit the fan similar to the last recession, as a last resort, i could sell my ppr and move into one of my rentals. It wouldnt be my first move however it is there as a backup plan. During the bad times, my current PPR was worth 200k so would be give me circa 3 years cushion.
> 
> ...



My apologies for only getting to respond now...
CMV = Current Market Value.
The question I was asking relates to the interest rate deal you have negotiated with your lending institution and whether the interest rate is based on an LTV threshold that is dependent on market value of each property.  If the value of a property was to drop by 50%, does this adversely impact the LTV threshold and give the bank grounds to revise the interest rate being charged.

I would suggest you do not conflate your PPR with your business.  They should continue to be treated as mutually exclusive endeavors.

Would you consider putting the question of service income threshold to your accountant to ensure you are not liable for VAT on your rental portfolio.  Given the size of the rent roll, it may be deemed by Revenue to be your primary source of income.

My own personal experience with a similar portfolio in terms of value (but not as healthy a rent roll as yours), was that after 20 years with BTLs, we decided last year to exit the Irish BTL market as government policy is too volatile. In my view, BTL is a long term business, but with the volume, severity and impact of regulatory, legal and tax changes over recent years, its impossible to measure the return long term with such a high degree of short term volatility.  For us, it simply introduced too much of different types of risk into the BTL business model in Ireland.  My view is that a dribble of cash form BLT investors exiting the market has already started to leave Ireland for investment abroad and this will continue to increase to chase less risky yield.


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## fonduster (12 Mar 2019)

Sarenco said:


> Your PPR is your home, whereas your rental portfolio is your business.   I don't think it's wise to confuse the two.
> 
> If you sell a couple of rentals you will:-
> 
> ...




I think i include my PPR in the total, as it gives me the ability to leverage this coupled with the fact that banks can put a lean on the property so it is part of my business even if only used for personal use.

These are the two funds that currently have 90pc of the fund. In terms of what they offer, they hold several of the same stuff. The moderate fund is safer with 40pc more alternatives. If you were in my situation with circa 30 years left on the pension, would you just go 50/50 with two of these or focus more on the passive equities fund.

https://www.ilim.com/fund-fact-shee...Fund_Fact_Sheets/+++-Moderate_Growth_Fund.pdf

https://www.ilim.com/fund-fact-shee...+++-Indexed_All_Country_World_Equity_Fund.pdf

Dont quite understand this: 
"
There's no point holding a debt instrument that pays less than 1%, while simultaneously carrying debt that costs over 4%.
"
Do you mind explaining this further. What is my debt instrument with a yeild of 1pc.


----------



## fonduster (12 Mar 2019)

Bronte said:


> My advice to OP is
> 
> Pay Capital and Interest, I don't think it's important to focus on the two properties that are more than 50% LTV, could focus on paying down the one that costs the most in interest. No need to sell anything, I'd try to get a better deal with the interest rates by shopping around. If he'd borrowed on one of the properties as his PPR he might have got a better rate there.  House drops don't affect him. Interest rates really do though.  But he's equity is currently 50% which is excellent.  He should stress test himself on C&I of say 2%.  Should see which of the properties is performing best versus one that is not to see if it should be offloaded, but I suspect not.  Needs to build up a good sum for all rental issues (major work/repairs/voids). I agree with the rental below market strategy.  It works.  Keep the properties in good nick.
> 
> Should pay as much pension in work as possible.  He'll be glad he did in decades to come.



I dont think it would have been better to borrow against my PPR. Yes the interest rate on my PPR would be circa 3pc however when you account for the fact that i expense BTl rates, it is really only costing me half the rate they are charging so about 2.4pc at my current highest rate.


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## RedOnion (12 Mar 2019)

fonduster said:


> Do you mind explaining this further. What is my debt instrument with a yeild of 1pc.


The 20% bond allocation within the first pension fund.


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## RedOnion (12 Mar 2019)

fonduster said:


> however when you account for the fact that i expense BTl rates


You could also expense the interest on PPR, since the purpose of the funds was to fund your BTL...


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## fonduster (12 Mar 2019)

Alistair said:


> My apologies for only getting to respond now...
> CMV = Current Market Value.
> The question I was asking relates to the interest rate deal you have negotiated with your lending institution and whether the interest rate is based on an LTV threshold that is dependent on market value of each property.  If the value of a property was to drop by 50%, does this adversely impact the LTV threshold and give the bank grounds to revise the interest rate being charged.
> 
> ...





Alistair said:


> My apologies for only getting to respond now...
> CMV = Current Market Value.
> The question I was asking relates to the interest rate deal you have negotiated with your lending institution and whether the interest rate is based on an LTV threshold that is dependent on market value of each property.  If the value of a property was to drop by 50%, does this adversely impact the LTV threshold and give the bank grounds to revise the interest rate being charged.
> 
> ...



LTV is per property, not portfolio. In theory, they could revalue the property and increase the interest rate again however i have not heard of banks doing this. Normally once you have the rate at a certain rate and your paying your bills. the bank is happy.

Good questions in relations to service income threshold. Rental income is unreckonable unearned income so i would have thought this would fall outside the realms of service/goods. I will reach their threshold this year if it is however this in effect would mean ill pay another 17k in tax before i even make it to paying 50pc in tax. Edit: just found the following from revenue: "The letting of a property is exempt from Value-Added Tax (VAT)"

Your right, i have already noticed this. On the other end of the spectrum, i have noticed that rental prices are still continuing to increase even though houses prices have plateaued.


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## fonduster (12 Mar 2019)

RedOnion said:


> You could also expense the interest on PPR, since the purpose of the funds was to fund your BTL...



Hmm interesting, that is something i didnt think of. Has this been done before and is it allowable?


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## RedOnion (12 Mar 2019)

fonduster said:


> LTV is per property, not portfolio. In theory, they could revalue the property and increase the interest rate again however i have not heard of banks doing this.


Its common in commercial mortgages. In fact you'll often see covenants that could put you in default if they are breached. Probably not on RIPs.



fonduster said:


> Hmm interesting, that is something i didnt think of. Has this been done before and is it allowable?


Yep. 
This is why you need a good accountant...


fonduster said:


> Hes fine.
> 
> Like everyone, i prefer keeping as much of it for myself as possible.




"For interest to be deductible under section 97, it is not necessary for the loan to be
secured on the premises in question. For example, in the case of interest on a loan
that is secured on an individual’s principal private residence and used for the
purchase, improvement or repair of a rented premises, the interest is deductible
under section 97 in the normal manner. "
https://www.revenue.ie/en/tax-profe...ains-tax-corporation-tax/part-04/04-08-06.pdf


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## Sarenco (12 Mar 2019)

fonduster said:


> If you were in my situation with circa 30 years left on the pension, would you just go 50/50 with two of these or focus more on the passive equities fund.


I would contribute 100% to the global equity fund.


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## fonduster (12 Mar 2019)

Sarenco said:


> I would contribute 100% to the global equity fund.


Thanks, i wanted to do that but was worried i should invest 100pc in one fund even if it is spread over several equities.


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## Sarenco (12 Mar 2019)

fonduster said:


> Thanks, i wanted to do that but was worried i should invest 100pc in one fund even if it is spread over several equities.


The last time I checked, the MSCI World Index has over 1,500 constituents and represents approximately 85% by capitalisation of developed world equity markets.  That's a pretty slice of global capitalism in a single fund.


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## RedOnion (12 Mar 2019)

fonduster said:


> Thanks, i wanted to do that but was worried i should invest 100pc in one fund even if it is spread over several equities.


You're worried about diversification in a pension that you're just starting and adding 10k per annum, but have a 2m exposure to Irish residential property, that you're not worrying about?


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## fonduster (12 Mar 2019)

RedOnion said:


> You're worried about diversification in a pension that you're just starting and adding 10k per annum, but have a 2m exposure to Irish residential property, that you're not worrying about?



if only i knew about the PPR mortgage, i could have saved a small fortune. Maybe worried was an overstatement. I think anxiousness might be more accurate. I do not know funds, equities, bonds etc so and even though 10k is small relative to the portfolio. It is still a lot of money that i would prefer to invest wisely in.


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## fonduster (16 Mar 2019)

Thanks guys for all the feedback. Ill report back how im doing again in the future. Hopefully ill be doing better but life has its way of throwing everyone a curveball so we shall see .

Im going to go 100pc in equities for pension and contribute 20pc for the forseable future.

Ill overpay one of my rentals by 30k in june this year id say.

Retain all my current properties.

Start building up saving again starting from 2020.


Re-evaluate again in a few years time potentially when it comes to a house move or any other major live events.


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