# is 'buy to let' worth the hassle?



## paddytheape (1 Sep 2016)

Is BTL worth the hassle?  (House purchase originally intended for a sibling but circumstances have changed, is it worth following through on purchase as an investment)


25 year buy to let mortgage 56k, 70% ltv, 5.05%:  Repayments 4200/year plus say 1500 expenses (House Insurance, PRTB, NPPR, lpt, maintanence )=say 6k/yr.

 Expected income 500 month x 12 =6k year.  Tax due each year 1.5K, Capital off mortgage at end year 1 = 1500.  Potential problem with attic roof supports and small flat roof repair, otherwise small cottage in great location, rentable @ 500/month 


For the hassle of filling in tax forms and paying CGT when selling in the future, is this a good use of my 30% dep, namely 25K which would probably be better spent putting a roof and windows on my own house (50K mortgage left, value 150k) TIA, Paddy


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## T McGibney (1 Sep 2016)

Discussed recently http://www.askaboutmoney.com/threads/tax-take-on-rental-income-is-staggering.200198/


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## Brendan Burgess (1 Sep 2016)

paddytheape said:


> For the hassle of filling in tax forms and paying CGT when selling in the future,



I think that is the least of your hassle.  Surely getting decent tenants and maintaining the building would be much more hassle. 

I am not a fan of buy to let. I certainly don't think that an €80k property earning €6k a year in rent could be worth all the hassle and risk, unless there was some extraordinary potential for capital gains. 

Brendan


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## galway_blow_in (1 Sep 2016)

paddytheape said:


> Is BTL worth the hassle?  (House purchase originally intended for a sibling but circumstances have changed, is it worth following through on purchase as an investment)
> 
> 
> 25 year buy to let mortgage 56k, 70% ltv, 5.05%:  Repayments 4200/year plus say 1500 expenses (House Insurance, PRTB, NPPR, lpt, maintanence )=say 6k/yr.
> ...



i cant see how  its worth it if you have to borrow , i own one which i bought with cash , no way would i buy another unless i was max borrowing 50% of the purchase price


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## Gerard123 (1 Sep 2016)

Agree with prior contributors.  This does not make sense, eiter practically or financially.  Think you will end up paying for most of the house from your own funds rather than the rent actually. Pay into a pension AVC, get the tax deduction for that, and put your feet up and avoid the hassle!  Sort out your own house roof also.

Annual expenses may well be higher than 1,500 over time, maybe not in the first couple of years but there are periods when you need to spend significantly more to refresh and update.  The disallowance of 25% of interest for tax purposes is also a significant factor given the rate of 5.05%.


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## galway_blow_in (1 Sep 2016)

there are plenty of stocks which pay above 4% of a dividend yield , no issue with getting paid and capital appreciation should match or exceed property when you consider bargains are more or less gone in good locations in this country

ive 20 k in dividend paying stocks which average 5% , ive spread amongst five different companies , i could potentially borrow 35 k and buy a one bed apartment in a slightly run down area of limerick city  for 55  k ( rent would probably be about 650  per month )  but i dont think id earn as much as i would from the stock portfolio and with far more anxiety about having to cover repayments etc


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## MrEarl (4 Sep 2016)

Brendan Burgess said:


> .... I certainly don't think that an €80k property earning €6k a year in rent could be worth all the hassle and risk, unless there was some extraordinary potential for capital gains.
> 
> Brendan



Hi,

I think thats the key consideration here, in terms of a reason to be drawn to investing in a BTL (with no other reason than for investment purposes) ...

The original poster mentions it is in a great location but to be clear - is it a great location in terms of convenience to the original poster, a great location for renting, a great location for capital growth or just a great location in terms of somewhere his sibbling wanted to live (which is no longer a factor) ?

Unless there is genuinely good potential for an increase in the capital value of the house (potentail for getting pp for increasing the size of the house, building a second house on the same land or various other opportunities for capital growth) then the return looks far too low given the risks associated with buy to let properties.

There are REITS and ETFs that offer exposure to the property sector if thats what the original poster really wants.  The offer professional management, diversifcation in terms of type of property, location, tenants etc. and all admin etc. is handled for the investor - albeit at a cost, incurred within the investment (not paid seperately). 

Investing the available funds in a pension by way of AVC might be worth looking at - but considerations such as age, capacity to avail of tax relief on the AVC and need for future income from the investment (or even access to the capital itself, before retirement) all need to be considered before proceeding.

As a nation, we love investing in property becuase it seems straight forward and because there's physical bricks and mortar involved, we think it's a great idea to borrow high levels of debt to help acquire property but don't actually realise the full implications of property investment or involving debt (which increases the potential risk significantly, albeit also the potential return) etc.

The original poster needs to consider how long they want to invest for (minimum period), what they need out of this investment and when (in terms of regular income, capital growth), what level of risk they are willing to take on (in terms of risk of losing their investment if the property value drops and they then have to sell up), if they can afford to cover the proposed mortgage repayments for say 2-years if they have no rental income for a pro-longed period etc. etc.


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## Gordon Gekko (4 Sep 2016)

The interest rate is very high (5.05%). That kills it in my view. Ultra low trackers can make an investment like this attractive, but current BTL rates are prohibitive.


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## paddytheape (6 Sep 2016)

Thanks for all the replies, eventhough i was due to sign contracts yesterday, I pulled out of the deal as family circumstances have changed and it no longer makes sense for my sister not to live at home home.  Had I found some way of getting the house into siblings name (other than paying gift tax) then it would have been a runner as she could then do as she wished with the house but no matter how or where I turn with btl, tax due made it unworkable.(CAT, CGT, tax due on 'free rent' ..etc)  A lucky escape i feel so thanks again to all!


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## Laoisa (3 Oct 2016)

Good morning, Thanks for all this information. My mother is considering  buying a house for 305,000  for cash from inheritance & renting it through the  Council housing section long term rental scheme at 20% of market value. Is buying for cash & renting to the housing authorities a good investment?  Any feedback would be gratefully appreciated. Laoisa


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## jim (3 Oct 2016)

Hi laoisa

Surely a better investment would be to rent it at full mkt value? Esp given the demand?

Why rent through the council scheme?


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## Gerard123 (3 Oct 2016)

On a stand alone basis my view would be a clear no.  The return is not sufficient to justify ploughing all the money into one house.  Also not worth the hassle. If the idea is to buy and rent to council as a way of minimising the hassle forget it.  There will be lots of hassle over the years. 

It is difficult to answer these types of questions in isolation. Better understanding of your mothers overall financial position and resources needed.


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## postman pat (3 Oct 2016)

paddytheape said:


> Is BTL worth the hassle?  (House purchase originally intended for a sibling but circumstances have changed, is it worth following through on purchase as an investment)
> 
> 
> 25 year buy to let mortgage 56k, 70% ltv, 5.05%:  Repayments 4200/year plus say 1500 expenses (House Insurance, PRTB, NPPR, lpt, maintanence )=say 6k/yr.
> ...


 
No


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## Laoisa (3 Oct 2016)

Thanks for the replies. She thought it would be better to give it to the council at a reduced rent so she would not have to pay too much tax at the higher rate. She has a solid pension & the house is an investment for us. I do not know much about other investments in Ireland. She tells me the entry fee, service charges, commissions & taxes are through the roof which is why she thought buying an old council house to let back to the council may work. Any other comments or suggestions would be greatly appreciated. She is trying to reduce taxes. I'm not investment savvy. Thanks Laoisa


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## T McGibney (3 Oct 2016)

Laoisa said:


> Thanks for the replies. She thought it would be better to give it to the council at a reduced rent so she would not have to pay too much tax at the higher rate. She has a solid pension & the house is an investment for us. I do not know much about other investments in Ireland. She tells me the entry fee, service charges, commissions & taxes are through the roof which is why she thought buying an old council house to let back to the council may work. Any other comments or suggestions would be greatly appreciated. She is trying to reduce taxes. I'm not investment savvy. Thanks Laoisa



It makes no sense to try to reduce taxes by depriving oneself of income in the first instance.


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## landlord (3 Oct 2016)

T McGibney +1

I still find it astonishing that people are  thinking along those lines. 
My advice would be to just rent it for free, then you get the bonus of not having to pay any tax!!


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## Laoisa (3 Oct 2016)

Thanks, you can see neither of us is too smart when it comes to what to do with money. We are used to trying to find it not what to do with it. I wish she could use internet & explain it all. I agree that normal rent would be  better return, What I'm not sure of is if it's better to plough the cash into a house or an investment company like bank of Ireland private or Zurich or Irish life. She does not need the cash for a few years. It's her security for her old age. Any suggestion where it could do better then buying this house? Cheers Laoisa


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## monagt (3 Oct 2016)

landlord said:


> T McGibney +1 I still find it astonishing that people are  thinking along those lines.
> My advice would be to just rent it for free, then you get the bonus of not having to pay any tax!!



Quick question. Are you a successful Landlord?


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## T McGibney (3 Oct 2016)

Laoisa said:


> Thanks, you can see neither of us is too smart when it comes to what to do with money. We are used to trying to find it not what to do with it. I wish she could use internet & explain it all. I agree that normal rent would be  better return, What I'm not sure of is if it's better to plough the cash into a house or an investment company like bank of Ireland private or Zurich or Irish life. She does not need the cash for a few years. It's her security for her old age. Any suggestion where it could do better then buying this house? Cheers Laoisa



Do bear in mind that property is a rather illiquid investment and as such may be difficult to offload in a hurry if circumstances change and your mother needs speedy access to the money.


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## jim (3 Oct 2016)

It may very well make lots of sense to go ahead with it as a btl. Rent it for as much as you can is my advice.


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## sunnydonkey (6 Oct 2016)

Brendan Burgess said:


> I think that is the least of your hassle.  [paying CGT]



Its not a hassle but its a real problem.   People decide to sell their investment property of twenty or thirty years and find out that its worth 100,000 less to them than the figure they had in their mind (the market price), because of the CGT.   The result is that they re-consider selling and hold the investment until death.  And an investment that you never cash isnt a good investment.  Of course CGT also applies to shares but at least you can sell the shares over a number of years as required.


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## MrEarl (7 Oct 2016)

On the basis that we are looking at a single BTL investment....

I can't see how it would not be more attractive to invest the funds in a REIT / ETF invseting in real estate etc - less hastle, diversification, lower costs, liquidity etc.


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