How to get on the investment property ladder

[ned official]

Is there any way to get onto the investment property ladder without any real capital. I would love to get into some buy to let properties. I'm in the middle of buying a investment property for 250k mortgage repayments of 1000 odd per month. I can rent it for 1500 1600 per month. Expect to clear 5k PA after expenses tax etc. If I had a million quid would buy 5 properties while there is still value in the market and rents are high. All my liquidity went into deposit for investment property and although are fully own my own house can't use that as collateral for 3rd property.

 

[Joe_90]

How much are you paying for the new house?

How much are the annual costs of ownership?

€1,000 per month on €250k at 3% is 30 years repayment term? What is your term?

What's your own income? How did you clear the mortgage on your PPR if you wanted to buy investment property?

 

[Sarenco]

I'm in the middle of buying a investment property for 250k mortgage repayments of 1000 odd per month.

I would love to know how you are borrowing €250k for a BTL with monthly repayments of only €1,000 per month.

I believe Ulster Bank have the cheapest published BTL variable rate at the moment - it's 4.5% with a maximum LTV of 60%. The monthly repayments on €250k @ 4.5% over 35 years are €1,183.

You would be doing well to net €1,200 after expenses on a projected monthly rent of €1,600. Then you have income tax, USC and PRSI to consider.

Bearing in mind that 25% of mortgage interest payments and LPT are non-deductible, I really can't see how this could possibly be a good investment.

 

[Gordon Gekko]

He/she is buying it for €250k. No mention of borrowing €250k. The mortgage is likely to be no more than €200k.

I'd be very concerned about concentration risk, OP. Putting all of your wealth into one asset class (in one geography) isn't wise.

In the UK, there's a far healthier investment culture, where people tend to build a diversified share portfolio before even contemplating an investment property.

I have an investment property, but only by accident, and if it wasn't for the 0.5% mortgage rate, I'd have sold it. I would run a mile from investing in property based on today's dynamics.

 

[Sarenco]

Ah, fair enough I may have misinterpreted the post.

It doesn't really change the conclusion though - borrowing @~4.5% to part-finance the purchase of an asset with a net yield of ~5% doesn't make sense given the current tax regime. Borrowing @~5% makes even less sense.

 

[Gordon Gekko]

Ah, fair enough I may have misinterpreted the post.

It doesn't really change the conclusion though - borrowing @~4.5% to part-finance the purchase of an asset with a net yield of ~5% doesn't make sense given the current tax regime. Borrowing @~5% makes even less sense.

Agreed. Arguably a REIT like iRes via spreadbet or CFD might make more sense in terms of getting similar but more diversified exposure with a cheaper cost of finance.

 

[galway_blow_in]

i honestly cannot see how investing in a BTL is a good investment unless you are buying it entirely with cash or if not , , it needs to be an absolutely prime location in either dublin , cork or galway

i bought a btl last year for 120 k with cash and im earning 700 per month gross rent ( managment fee is 1100 per anum ) , tenants are great ( so far ) but i would not do it again ( bought the property at auction and fake bidders drove it up on me ) as i can think of many blue chip stocks on FTSE which pay over 5% yield dividends , capital appreciation is likely to be much greater from these multi billion pound companies than on my bricks and mortar , thats before i consider potential problems of not getting paid my rent at some stage , contrary to popular belief , tenants have loads of rights in this country and there are almost no real consequences for delinquent tenants

 

[galway_blow_in]

Agreed. Arguably a REIT like iRes via spreadbet or CFD might make more sense in terms of getting similar but more diversified exposure with a cheaper cost of finance.

while becoming popular , i dont think id invest in any of the irish REIT,s , the yields are pretty poor and its a small market, id prefer take my chances with currency difference and buy one of those vanguards REIT,s

 

[Gordon Gekko]

while becoming popular , i dont think id invest in any of the irish REIT,s , the yields are pretty poor and its a small market, id prefer take my chances with currency difference and buy one of those vanguards REIT,s

I just meant that iRes is an attractive alternative to buying a single apartment. The yield is attractive and the lack of supply is favourable.

 

[Sarenco]

For what it's worth, IRES is currently trading at an implicit yield of 2.99% (as against 3.55% for the broader EPRA/NAREIT Index and 4.04% for the FTSE 100).

In my option, it almost never makes sense for an individual to borrow at current RIP rates to finance the purchase of a BTL, given current yields and the tax treatment of rental income.

The numbers simply don't add up.