# Mortgage free home and two buy to lets - should I buy more?



## Atport1 (18 Nov 2017)

Hi all,

Long time follower of AAM here and have found the information really useful over the years, thank you...

I now have a direct query pertaining to an investment I am considering.

Background 
Employed sal €93k
Wife home maker
3 kids 13, 9, 6

Own home no mortgage no other debts

Current investments 

Hse 1 Bought for €96k in '16 mortgage of 15 Yrs for €55.5k Rent €11k/yr

Hse 2 Bought for €111 in '16 mortgage of 15 Yrs for €55.5k Rent €11k/yr

Savings €130k

Life cover €237k dual lives convertible 

Serious Illness Cover €70k

Pension Fund currently €225k. Currently putting in max 25% salary via AVC Company contribute 6%.

Looking at the following

Hse 3 Purchase for €130k mortgage of 20yrs Yrs for €91k Rent €11k/yr

Apt 2bed purchase for €95k mortgage of 20yrs for €66k Rent of €6k 90% Section 23 relief available.

Is this a sound investment or is Hse 1&2 enough of property assets?

Any advice would be most appreciated.

Rgds
Atport1


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## Brendan Burgess (18 Nov 2017)

You probably have enough property. 

But why don't you pay off your mortgages with the cash? 

You are probably paying 4.5% interest. After tax relief, that is about 2.5% net.  You are not getting 2.5% on your savings. 

Brendan


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## RedOnion (18 Nov 2017)

If you're weighing up the options between the 2, make sure that's still a valid section 23 relief that can transfer. If it was first rented more than 10 years ago it doesn't transfer to purchaser.

Like Brendan though, I'd be looking at reducing my debt first, or as part of the decision.


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## noproblem (18 Nov 2017)

I know it depends where the property is located but what are they worth now? How's your and your wife's health?
 Maybe pay  €100k off the mortgages and keep a rainy day fund. Also, don't forget we're living in very strange and uncertain times and you'll have college fees, etc, to think about pretty soon plus the life changes that can jump out of nowhere.


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## galway_blow_in (19 Nov 2017)

Atport1 said:


> Hi all,
> 
> Long time follower of AAM here and have found the information really useful over the years, thank you...
> 
> ...




holy smokes !

those are impressive yields , where can a house costing as little as 130 k and delivering a rent of 11 k per annum be bought right now ?

your mortgages ( relatively small ) are so easily covered by those rents , i would not bother paying off the loans , invest in the stock market as a way of diversifying


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## RedOnion (19 Nov 2017)

galway_blow_in said:


> those are impressive yields , where can a house costing as little as 130 k and delivering a rent of 11 k per annum be bought right now ?


@galway_blow_in  I'm surprised. you're playing it too safe if you're not getting yields like that! 
All about risk.
I can point you towards regional towns where you could achieve an 18% gross yield on apartments.


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## Brendan Burgess (19 Nov 2017)

galway_blow_in said:


> invest in the stock market as a way of diversifying



GBI 

The main reason one diversifies is to reduce risk. 

Borrowing money to invest in the stock market increases risk. 

Brendan


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## galway_blow_in (19 Nov 2017)

Brendan Burgess said:


> GBI
> 
> The main reason one diversifies is to reduce risk.
> 
> ...



does the fact that the OP has such a high income not slightly change this principal ?

he has a lot of assets with relatively low borrowings and none on his principal residence , a little interest write off seems reasonable so does he need to clear debt  ?

just to be clear , i dont think he should buy more property , he has enough as is


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## galway_blow_in (19 Nov 2017)

RedOnion said:


> @galway_blow_in  I'm surprised. you're playing it too safe if you're not getting yields like that!
> All about risk.
> I can point you towards regional towns where you could achieve an 18% gross yield on apartments.



can you really though ?, i have friends in the property sector and even you buy an apartment for 40 k in somewhere like ballinasloe , you wont get 18% unless im completely behind on where rents are in places like that


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## RedOnion (19 Nov 2017)

galway_blow_in said:


> can you really though ?, i have friends in the property sector and even you buy an apartment for 40 k in somewhere like ballinasloe , you wont get 18% unless im completely behind on where rents are in places like that


pm sent.


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## Brendan Burgess (19 Nov 2017)

galway_blow_in said:


> does the fact that the OP has such a high income not slightly change this principal ?



I agree that it changes it slightly.


He is not by any means overborrowed.  So the risk is small. But the risk is still increased by borrowing. 

Diversification into equities does not reduce the risk - it increases it as he is doing it with borrowed money. 

He is borrowing at about 2.5% net after tax to invest in equities.  Most of the time, he will probably beat 2.5% net and may well do so in the long term.  I hate timing the stock market, but it just does seem very high at the moment and I think that people with borrowings should be paying them off. 

But your point is valid, it's less of an error for someone with 15% of their assets in loans.

Brendan


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## Atport1 (19 Nov 2017)

Thank you for all the views I would not consider stocks as per Brendans analysis I feel they are too dear at the moment.

The decision I must make is whether to add €161k of debt / invest a further €69k equity on 2 additional properties or pay off the mortgages on the 2 existing loans.

If I did pay off the 2 loans I would have an income of €10k per annum nett.

At current rents the 4 loans would pay the mortgage, costs and tax and would leave €4.5k nett of costs between them.

This is the choice as I see it.

@no problem - I see your point about future changes and would see Brexit as a main risk to Ireland.  Were England to choose to ignore our plight like so many times in the past we will be in trouble.  However a change of government there could alter the landscape greatly.


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## cremeegg (20 Nov 2017)

Atport1 said:


> Current investments
> 
> Hse 1 Bought for €96k in '16 mortgage of 15 Yrs for €55.5k Rent €11k/yr
> 
> ...



Well for a rent of €11k you paid, first €96k, then €111k, and now you are looking at €130k. Prices have not risen that much since 2016. The only real mistake in property investment is paying too much.


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## cremeegg (20 Nov 2017)

galway_blow_in said:


> those are impressive yields , where can a house costing as little as 130 k and delivering a rent of 11 k per annum be bought right now ?



Here, in your part of the world.

http://www.daft.ie/galway/houses-fo...-habhain-ballygaddy-road-tuam-galway-1507153/

And that is with 2 minutes searching.


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## galway_blow_in (21 Nov 2017)

cremeegg said:


> Well for a rent of €11k you paid, first €96k, then €111k, and now you are looking at €130k. Prices have not risen that much since 2016. The only real mistake in property investment is paying too much.



depends which period you use , eighteen months ago was may 2016 , houses in dublin alone are up 20% since then as my sister has been looking for that long in D 6 , limerick city is up more than 20% in that period of time

in some areas ( mostly very rural ) , property is up 40% since eighteen months ago , brexit did the opposite of what most expected , property began its next leg up around mid summer of 2016 having not moved all that much in the previous eighteen months , my mother bought a three bed semi in beaumont in december 2014 ( the end of the first leg since the recovery began in mid 2012 ) for 300 k even , it was worth not a penny more by the middle of 2016 , its worth about 370 today


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## Bronte (21 Nov 2017)

I'd buy the two properties.  But watch out in the apartment for the management company and if that is all sorted.  Section 23 etc.  whenever I looked into those in the past didn't seem to be of any benefit.  I have a thing about apartments in Ireland not being properly build (sound/quality/heating). 

I'd prefer if you did out all four properties with how much rent/costs/tax you're actually paying on them. 

Might need to have a think about increasing your pension contribution if it brings down your tax payable.


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## Bronte (21 Nov 2017)

cremeegg said:


> Here, in your part of the world.
> 
> http://www.daft.ie/galway/houses-fo...-habhain-ballygaddy-road-tuam-galway-1507153/
> 
> And that is with 2 minutes searching.



They are out there, you just need to know where to look.  As you used Tuam in that example.  I know it.  Be careful where you buy there - but that applies everywhere of course.


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## Bronte (21 Nov 2017)

Brendan Burgess said:


> But that is not the source of risk in this case?  These investments are small in relation to his total assets and he can repay them in full at any time.
> 
> If any of the following go wrong, then borrowing will make the losses worse:
> 
> ...



Yep went true a catastrophic drop in value with the celtic tiger bust, currently on the way back up
Possible out of NE now on the last property
Yep interest rates went up
Initially when I started out interest rates for me were over 9% and other's were paying 17%
Yep, had many falls in rent
Currently rents have never been higher
Yep had tenant take me to the High court for personal injuries - paid her to leave and fixed the house
I have my decision made up as to what to do if I ever get a non paying tenant, I reckon 10k to the PRTB would be the way to go


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## cremeegg (21 Nov 2017)

galway_blow_in said:


> houses in dublin alone are up 20% since then as my sister has been looking for that long in D 6 , limerick city is up more than 20% in that period of time



€96k plus 20% is €115.2k still far short of €130k

More importantly irrespective of how much prices may be up generally what is value at €96k may not be value at €130k. It is certainly not such good value.


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## cremeegg (21 Nov 2017)

Bronte said:


> As you used Tuam in that example.  I know it.  Be careful..



Brilliant


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## Atport1 (13 Apr 2020)

Hi All at AAM,

Having received excellent views/advice I just wanted to update on where I got to since the last post in Nov 17.

Updated Background: 
Employed Salary €112k
Wife home maker
3 kids 15, 11, 8
Own home no mortgage 
Car Loan €10k/2yrs
No other debts
Savings €40k
Life cover €250k dual lives convertible 
Serious Illness Cover €70k
Pension Fund currently €280k. Currently putting in min 4% salary Company contribute 6%.

Investment Update:
Decided to clear the mortgages on the 2 houses purchased for €96k & €111k Jan 19.

I went ahead and purchased 2 additional houses late last year Oct 19 - did not proceed with the S23 Apt.

1 semi detached 3 bed cost €150k 70% loan rent €14,400/yr.
1 terraced 3 bed cost €141k 70% loan rent €13,200/yr.

Plan now is to release equity on freehold houses and purchase in a provincial town:

1. Terraced house with 2 x 1 bed apts, cost €90k rent €11,500/yr
2. Terraced house with 4 x 1 bed apts, cost €95k rent €19,500/yr

Finance using 100% interest only 15 years with sale at year 15 with interest payments 100% tax deductible at the moment.

Just wondering what are peoples views on this proposal.

Atport.


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## RedOnion (13 Apr 2020)

Orenda said:


> Atport1, it is possible to sell a *Section 23* property *after 10 years* of qualifying lettings and suffer no clawback, even where the loan related to the property has not been fully repaid. A new purchaser may be in a position to claim *Section 23 relief* depending on the circumstances.


It's good practice to provide a link when you copy & paste from a website. 

That way, as well as recognising copyright, the context will be understood - you copied an answer from a question where someone had only owned the property for 5 years.

Irish times, April 22 2010.








						Q&A
					

Does Section 23 relief stop after 10 years?




					www.irishtimes.com


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