# Money in bank-What to do ?



## jxwell (17 Sep 2013)

Hello, First time poster, I will give background as concise as possible.
*Couple mid forties - children in national school
*Own family home mortgage free and no other debts.
*1 in secure employment approx earnings 50k p.a.
* pension from previous job fund approx 80k on hold - no pension with current position.
*college fund is a balanced savings managed fund currently approx 30k with ongoing contribution 190 p.m.

 Now the big question.. Have 150k on instant access deposit (few a/c's)(built up from a redundancy many years ago and on going savings as we never really jumped on that well known Tiger's back)
Q1.Are considering is this an oportune time to invest in a rental property for hopefully a payback in 20 years at 65-68 age  ?
Several of my siblings have rentals so I am fully aware of the highs & lows that may come with being a landlord.
Q2. What proportion of lump sum should we use provided we can secure a buy to let mortgage ?
Q3. What ideas for the pension fund - am considering a buy out bound as this is still an option but unsure what route to take.

In general I recognise the fortunate position we are in overall but want to make the best we can from it for the future while still living & enjoying the here & now. The description for us would be "risk adverse" I believe, hence the lack of action in the so called boom but don't want to miss an oportunity either.

Any constructive comments or words of wisdom would be very welcome, many thanks.


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## Steven Barrett (17 Sep 2013)

First thing to do is calculate how much you need in your emergency fund and leave that on deposit.

Where to put the rest is dependent on what your goals are in the short term as well as the long term. Taking on a mortgage is a long term strategy, with debt so proceed with caution. All your savings (less the emergency fund) will be gone and you won't see it for 20+ years.

Also, wait until after the budget before making a decision. There has been talk that they remove the ability to write off 75% of interest against rental income.

Steven
Www.bluewaterfp.ie


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## cremeegg (6 Oct 2013)

It seems to me that your first decision is whether you wish to manage the investment of your €150,000 yourself or will you leave it to the professionals.

That is a purely personal choice, however I would suggest that leaving it to the professionals isn't that simple and requires significant expertise on your part.

If you want to invest it your self, you need to ask your self what knowledge or skill you have to make a success of investing a substantial sum like this.

Being a landlord is not rocket science, but it is something you have to learn to do.

Some people are temperamentally unsuited, but if you have siblings who do this, you should have an insight into the business and have some idea of what is involved.

You also have people who can give you the benefit of their experience.

If you want to be a landlord, go for it, you have as good a chance of making a success of that business as any other. If you don't, either leave your money on deposit or learn to be an investor.

You can teach yourself to be an investor, take €10,000 and invest it actively for 5 years. Cheaper than a masters in finance and probably more effective. And who knows you make a profit.

If you want to go down the landlord route here is my take on a property in a good town outside Dublin, sorry about the lack of tabs.


Investment			                       125,000


Rental Income			      8,320
Weeks	          52		
Rent per week	160		

USC on Gross	7%	582	
PRTB		                  90	
Property Insurance       300	
Property Tax		225	
Advertising		        100	
Other Expenses        1,000	

Total Projected Expenses		2,297	

Gross Return after expenses			6,023

42% Tax on Gross		2,529	
4% PRSI On Rental Profit         241	

Income Tax and PRSI			       2,770

Net Return			                     3,252

Net Return on Investment PA			2.60%


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## Jim2007 (6 Oct 2013)

OP be aware that investing more than between 5 and 7 percent of your wealth in property is a high risk strategy!  Had Irish investors adhered to proper asset allocation strategies in the past, they would in most cases have recovered their losses by now like most other Europeans have done.


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## danial3262 (7 Oct 2013)

I think you should wait for budget to declare before taking any decision on this.


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## manninp2 (7 Oct 2013)

Why would you as a risk adverse investor bet all of your money on one investment i.e. a BTL house?

It's like someone who says they don't drink a lot turning around and downing a double of Jack Daniels in one go right in front of me.

Pay for independent financial advice. Make sure whoever you hire isn't getting paid a commission from any investments they are advising you to make.

A well diversified, low fee portfolio of equity and high quality bonds in roughly a 50/50 split is more than likely what they'll recommend.

Don't check your portfolio daily! You're probably going to buy and hold for 5-7 years.


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## cremeegg (8 Oct 2013)

Oh goody here come the asset allocation guys again. Hi guys.

What they are saying makes sense, but only if you are handing over your money to others to manage on your behalf.

If you invest in shares, say Tesco, you are relying on Tesco management to make money for you. You have no control over, for example Tesco's US exit strategy.

You may have an opinion on the quality of Tesco's management. You may think that Tesco's management are excellent and that this is not fully reflected in the Tesco share price, but unless you are an expert on the UK retail market etc.etc. your opinion is not likely to be better than the markets opinion. And again you cannot influence the appointments to the Tesco board.

On the other hand you can make money as a landlord by being good at that business. You can make your own decisions about tenants, repairs and so on. Yes you have a lot of money tied up in the business, but if you believe in your ability to run the business well, that makes sense. 

You can make, OR LOOSE, money based on your own talents and efforts. 

I think Sean Quinn's experience illustrates this brilliantly. 

He invested in quarries which he ran himself and made millions, he invested in cement plant and made more millions, he invested in radiators, and in Insurance and made billions. He ran all of these business himself or through people he appointed.

Then he invested in Anglo, where he was relying on other people to make money for him, and lost every thing.


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## cremeegg (8 Oct 2013)

manninp2 said:


> Why would you as a risk adverse investor bet all of your money on one investment i.e. a BTL house?



Using your money to back yourself in a business is not betting. It is entrepreneurship


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## Steven Barrett (9 Oct 2013)

cremeegg said:


> I think Sean Quinn's experience illustrates this brilliantly.
> 
> He invested in quarries which he ran himself and made millions, he invested in cement plant and made more millions, he invested in radiators, and in Insurance and made billions. He ran all of these business himself or through people he appointed.
> 
> Then he invested in Anglo, where he was relying on other people to make money for him, and lost every thing.



You could also say that he made money by investing in the things that he knew. When he stepped outside his area of expertise, he ended up ruining himself. 

The top investors/ fund managers research everything about a company before they invest. How many Joe Soaps do that before they invest whether it's property or equities?


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## dub_nerd (9 Oct 2013)

How many top investors / fund managers do better than Joe Soap who just follows market trends? Statistics say not many.


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## Jim2007 (9 Oct 2013)

dub_nerd said:


> How many top investors / fund managers do better than Joe Soap who just follows market trends? Statistics say not many.



What statistics are you talking about???

And in any case asset allocation will have a bigger impact on performance for most individual investors than instrument selection will.

Furthermore when it comes to funds managers, you find that managers of family offices, sovereign funds, Swiss private pension funds and so on tend to do very well.  While managers of publicy available funds other fail to achieve the benchmark - which is not surprising since the odds are stacked against them from the start.


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## cremeegg (11 Oct 2013)

SBarrett said:


> You could also say that he made money by investing in the things that he knew. When he stepped outside his area of expertise, he ended up ruining himself.



Exactly



SBarrett said:


> The top investors/ fund managers research everything about a company before they invest. How many Joe Soaps do that before they invest whether it's property or equities?



IS this what they do, this is not asset allocation it is seeking alpha return, using  money (other peoples) to leverage knowledge and experience, to earn a return.

That is exactly the option that I suggested to the OP


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## cremeegg (11 Oct 2013)

Jim2007 said:


> What statistics are you talking about???
> 
> And in any case asset allocation will have a bigger impact on performance for most individual investors than instrument selection will.
> 
> Furthermore when it comes to funds managers, you find that managers of family offices, sovereign funds, Swiss private pension funds and so on tend to do very well.  While managers of publicy available funds other fail to achieve the benchmark - which is not surprising since the odds are stacked against them from the start.



Come on JIM2007! you have been the biggest promoter of asset allocation here in the past. Often commenting that people have too much money invested in property.

Are you now accepting that it can make sense for people to put their money along with their energy and talents into becoming a landlord.

Sovereign funds dont seem to practice asset allocation and the one family office I had exposure to certainly didn't.


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## Bronte (11 Oct 2013)

jxwell said:


> *Couple mid forties - children in national school
> *Own family home mortgage free and no other debts.
> *1 in secure employment approx earnings 50k p.a.
> * pension from previous job fund approx 80k on hold - no pension with current position.
> ...


 

Well my advise is that you are coming to this the right way around and based on your past actions would seem to be a very sensible person. As you probably know I'm a landlord and I've been through one boom and two busts, (currently sorry I didn't sell in the boom, but then again I might have gone crazy and just leveraged myself into a bad situation).

I think based on what you've posted, a rental property is spot on. We are not allowed to talk about property prices, but I believe I can say this, your timing is superb. Location is where it's at, that cannot be underestimated. I advise you to look at another landlord's posts on here, Oldnick, primarily in the Dublin market and well experienced on the business.

From your siblings you will know the highs and lows of the rental business, if you manage it well there should be little or no issue. We have all had the nightmare tenant, but that's just the nature of the game. 

On the financial side, I recommend a 10% deposit with 90% borrowings, over 20 years, that gets you from now to 65. I presume you wish to borrow currently as you do not need an extra income, but you will then get an income when you're 65. If you just paid directly for a property you'd lose half the rent straight away in taxes. To me the key is that the rent must cover the mortgage and all other costs. Have you done up the figures. Oldnick had a post about how much yield you currently need. And he also advised on apartments in Dublin as a better return then houses. I don't know the Dublin market, but it's a question of figures. Location is also very important. I also advise on a well build structure. As far as I'm concerned property eats money. I had to do a roof repair last year, straight 10K etc. These things have to be figured in. On the upside, there is always the possibility of a capital gain. You have to figure that out.

This strategy probably means that you won't be spending a lot of your capital. What to do with that, well you can follow the strategy of others. But I know a load of people who invested in rock solid bank shares and have nothing to show for it. I don't trust Irish brokes, but I'm not a fan of share. As for equities and all that, as I still cannot fully understand them, no matter how much I've studied them, I cannot trust them, that may be a personal thing. Others apparently are geniuss at making money from them. The poster Jim2007 seems to be excellent on portfolio diversity, but he is in Switzerland, I wouldn't be impressed with Irish stock brokers etc, he seems to have invested wisely, and he has no vested interest on this website, so if you're going down that route I'd go with his advice.

Have you looked at your pension, and do you now what income it will give you at 65?  Will it be enough. 

Will the kids 3rd level fund be enough?  Might be an idea to buy somewhere now that may be of use to you when they go to college?  

Is your current income enough to see you through secondary school.  Your income is not very high, but I presume you're well able to live that.  Particulary as you've no mortgage.


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