# Building a property portfolio.



## TwoWheels (7 Nov 2005)

So the idea is roughly as follows.

Get a mortgage & buy a house to be your home.
Interest only repayments.
Pay interest repayments & invest the difference.
in four years there should be sufficient funds for deposit on 2nd property.
Repeat interest only option & rent out house #2
Within 2.5 years, savings from house #1&2 should yield deposit for 3rd house
Repeat etc.
Good plan?


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## ClubMan (7 Nov 2005)

TwoWheels said:
			
		

> Pay interest repayments & invest the difference.




What difference? The difference between the interest only and repayment/annuity mortgage repayments on the same property I presume?


> in four years there should be sufficient funds for deposit on 2nd property.


Can you show us the figures that illustrate how this is likely to happen please?



> Good plan?


Have you compared it to other alternative investment possibilities? What are your investment goals and timeframes? Would you be concentrating mainly or solely in property? Have you crunched the numbers to see how viable this strategy might be? Are you aware of the risks of concentrating on a single asset class and geographic region as compred with assembling a more diversified (by asset class, geographic region and risk/reward profile) portfolio? What if property prices fall leaving you in negative equity on the investment properties? Are you assuming that rental income will always cover most or all of the mortgage repayments on all properties?

How will the capital on the properties (in particular the initial _PPR_) be paid off?


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## JohnnieKippe (7 Nov 2005)

TwoWheels said:
			
		

> Good plan?




Yes I think it is a very good plan. I have been doing similar for the last  6 years or so and its working so far.


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## ClubMan (7 Nov 2005)

JohnnieKippe said:
			
		

> Yes I think it is a very good plan. I have been doing similar for the last 6 years or so and its working so far.


Can you clarify precisely on what basis it is a good plan please? Don't forget that past performance is no guide to future returns so just because it was a good plan for the last six years does not, of itself, mean that it is a good plan going forward.


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## JohnnieKippe (7 Nov 2005)

Of course, nobody can see into the future. I think that property investment will continue to be a good bet for the future. People have been warning about a property downturn for several years now and there is still no sign of it. If I had been pessimistic and cautious six years ago I would have done nothing. Instead I have made hundreds of thousands of euro (no exagerration) by investing in property.


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## doberden (7 Nov 2005)

Because there is no sign of it that does not mean it won't happen.  Rental yields have been falling with consistently high increases in property prices accross the world,  there will have to be a correction at some stage!!  Not likely in Ireland for the next couple of years but there's one coming!


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## SteelBlue05 (7 Nov 2005)

doberden said:
			
		

> there will have to be a correction at some stage!!


 
What do you mean by a "correction"? 

Do you think prices will actually decrease? With regards to Dublin unless there is a fairly major economy downturn or a large (3% +) increare in interest rates then I cant see prices decreasing. I think they should increase at a lower rate than is happening currently but I dont think there should be any decrease.

Whats likely to happen,IMO, is the population of Dublin will keep increasing, supply of housing will go up but I dont think we'll reach a situation of there being more supply than demand. The likely scenario is house prices in Dublin will continue to rise at about 4-5% per year for as long as the economy remains farily solid. 

But I also have a feeling there will be jump in prices when the majority of SSIA's start comming on stream in 2007 and when the new Transport 21 projects start comming near to completion. The prices jumped a lot this year with the abolition of stamp duy for first time buyers (up to 317.5 k etc) so I think the same will happen again with these events.


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## JohnnieKippe (7 Nov 2005)

doberden said:
			
		

> ...there will have to be a correction at some stage!! Not likely in Ireland for the next couple of years but there's one coming!



Ireland is in a transition from a backward country as recently as the seventies\eighties to one of the best economys in the world. The wealth this brings to us and the influx of people from other countries wanting to live and work here , is the driving force behind the property boon. I see no reason for the bubble to burst while these factors remain.


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## bacchus (7 Nov 2005)

TwoWheels said:
			
		

> So the idea is roughly as follows.
> 
> Get a mortgage & buy a house to be your home.
> Interest only repayments.
> ...


sorry, i am completely missing the point/idea.... 
When do you repay the capital? 
when do you actually own?
On which equity do you guarantee fund for 2nd, 3rd etc... house?


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## bacchus (7 Nov 2005)

JohnnieKippe said:
			
		

> Yes I think it is a very good plan. I have been doing similar for the last 6 years or so and its working so far.


 
Johnnie,
Can you please explain/quantify your "its working so far"?
How many houses have you managed to buy in 6 years?


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## JohnnieKippe (7 Nov 2005)

bacchus said:
			
		

> When do you repay the capital?



You can sell after say five years, pay off the mortgage, pay your tax and enjoy your profits.

Otherwise, you can get yourself up and running with the properties for a few years interest only and then switch to traditional mortgage when rents increase.


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## JohnnieKippe (7 Nov 2005)

bacchus said:
			
		

> Johnnie,
> Can you please explain/quantify your "its working so far"?
> How many houses have you managed to buy in 6 years?



I would say it is working so far in that the properties are paying for themselves and my initial investment in each property has increased significantly.

4 apartments\houses so far.


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## noelk (7 Nov 2005)

as regards price correction in property, i bought a property 2 .5 years ago and values in the estate have gone up by 15 and 20% on the last two years.the property cost me 350k.if the correction that is mentioned earlier in the thread happens in say 2 years time and no more increases happen,how much will the value of property fall?most people speculate on a "soft landing" ,so why all the doom and gloom about property on this site? the population is increasing thru immigration,people need somewhere to live.soon immigrants will start to enter property in greater numbers which will keep the momentum going.


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## markowitzman (7 Nov 2005)

Two wheels
Where do you invest the difference?
What return are you getting on this investment?
What %deposit are you putting up for each new property?
Are you concentrating on investing in property only and if so property in Ireland only?
On your whole property portfolio what is your overall loan to value?
What is the loan to value on your ppr?
Thank you


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## ClubMan (7 Nov 2005)

noelk said:
			
		

> how much will the value of property fall?


Nobody knows.



> why all the doom and gloom about property on this site?


People should distinguish between _Devil's Advocacy _and critical analyses of/challenges to proposed property investments (often from people with little or now appreciation of the issues involved or the possible alternatives) and simply negativity. In many cases people read the former as if it was necessarily the latter...


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## mikeyny (7 Nov 2005)

forget doom and gloom look at the facts 
from Businessworld.ie


> Senior officials from the OECD and the Central Bank recently accepted that the Irish property market is overvalued by 15pc, according to a confidential account of their meeting produced by the Paris-based body.
> 
> Central Bank officials, however, were reluctant to disclose such a figure in case it might destabilise the Irish property market, the Irish Times reports.
> At a meeting of senior officials from the Organisation for Economic Co-operation and Development and the Central Bank on the subject of the property market, Irish officials were told of OECD research that suggests that Irish prices were 15pc overvalued.
> ...


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## markowitzman (10 Nov 2005)

Two wheels, I hope the questions have not frightened you off!
Your plan has merit but I feel is risky.
Fine in a rising market with low interest rates.
But in flat or falling market I am not so sure.
I think it sounds toomuch like the "rich dad strategy" of property purchase.
Not apparent from the rich dad stuff is that dear Robert Kiyosaki is raking in millions so he can go on a perpetual aggressive property purchase spree. Now he is predicting crash which weakens his argument for property as a long term investment!
I feel one would need significant reserves to weather a downturn with the approach you detail in your post.
If you feel you have good luck to you and I hope it works well for you.
If you do not and you are interest only to help with cashflow I would be wary.
Also in this market I feel the days of expecting appreciably above inflation rises are drawing to a close.
I think it is now a buy and hold market (10 years plus).
I still think property is an excellent investment and do not buy into the doom and gloom stuff.
Demographics still point to long term appreciation of property.
Position yourself to ride (via lower loan to vlaue investments) any 3-5 year downturns (possible negative returns) and I  think you will be still in the game for long term gains.
Over leveraging yourself could force you out when you least want to in the middle of a market correction.
Feel free to challenge me on the above!


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## CoffeeBrew (11 Nov 2005)

A quick note on the immigration argument which is so widely touted. I think it has an underlying flaw: It is a circular argument.

This has been pointed out by several commentators.

What we are essentially saying is that construction in Ireland is so intensive that we need immigrant workers in increasing numbers.

Our need for construction workers means we need more houses.

That means we must build more which in turn means we need more immigrants.

This bears more than a slight resemblence to a pyramid scheme.


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## asdfg (11 Nov 2005)

> Originally Posted by *JohnnieKippe*
> 
> You can sell after say five years, pay off the mortgage, pay your tax and enjoy your profits.


 
I trust you are making a return for each property each year to Revenue and paying the tax due on Rental Income less certain allowable expenses


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## Thrifty (11 Nov 2005)

i think personally i'd feel safer not having an interest only mortgage on the property that's my own home. i didn't think you could get an interest only mortgage on your PPR anyway.


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## bacchus (11 Nov 2005)

noelk said:
			
		

> the population is increasing thru immigration,people need somewhere to live.soon immigrants will start to enter property in greater numbers which will keep the momentum going.


 
A lot of immigrating people rent has they can not afford to buy.
I advertised on daft recently to rent a house.  I got about 70 phone calls of which only about 10 from native english speaker.. 
So, i think house prices will have to come down before they can enter the 
property ladder.
Also, they have great difficulties at getting a mortgage, that's why they have to rent.


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## brodiebabe (11 Nov 2005)

bacchus said:
			
		

> Also, they have great difficulties at getting a mortgage, that's why they have to rent.


 
Article in the property section of Times yesterday was all about immigrants buying their own houses.  No mention of any problems with getting mortgages.  Just wondering where you got the above fact from?


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## niceone (12 Nov 2005)

Corrections, downturns, peaks, troughs are based on History.  5 years ago the banks were saying the Irish propert market had peaked, they're now saying it's gone beyond peak.  In reality they haven't a clue !!  Ireland is a different market now, ECB controlled interest rates, massive immigration.  I take the doom and gloom stories with a pinch of salt.

Ultimately, property investment is a long term project and will appreciate.  You need to stress test your loans and make sure you can afford an interest rate of 5%/6%, coupled with periods of non-rental.

The buy, release equity, buy system does work but just be CAREFUL or you could be swimming with the fishes !


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## bacchus (14 Nov 2005)

brodiebabe said:
			
		

> Article in the property section of Times yesterday was all about immigrants buying their own houses. No mention of any problems with getting mortgages. Just wondering where you got the above fact from?


 
I got them from talking to 3 differents individuals: 2 russians and 1 afghan. All earning good money but have less than 5 years in the country which seems to be a major problem.


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## JohnG (18 Nov 2005)

I wonder how many of these "foreign buyers" are really investors / irish people?

I have to believe that most of the immigrants we see on our streets will be unable/unwilling to purchase property in Ireland.


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## ClubMan (18 Nov 2005)

bacchus said:
			
		

> I got them from talking to 3 differents individuals: 2 russians and 1 afghan. All earning good money but have less than 5 years in the country which seems to be a major problem.


Completely anecdotal but I know a _Russian _couple who are only here about five years who bought their own house in the last two years. I have also worked with other immigrants who have been here for a similar period of time who have bought here.


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## JohnnieKippe (18 Nov 2005)

asdfg said:
			
		

> I trust you are making a return for each property each year to Revenue and paying the tax due on Rental Income less certain allowable expenses



Of course. I would be breaking the law otherwise.


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