Hi all,
Looking for some general opinions on an investment opportunity that may be available to me - both negative and positive as I am in two minds about this
I may have an opportunity to buy an investment property in Sth Dublin - as part of the deal the property will be managed by a property rental company - this company guarantees a minimum return of 3.75% per annum, based on the purchase price of the property, for ten years, and with a minimum number of return reviews over the ten years. This guarantee is contractual (i.e. written into a contract) and the company is a well-respected international property company with substantial assets.
If I get an interest only mortgage on the property the return will cover the cost of servicing the mortgage until such time as interest rates go above 3.75% (My opinion is that interest rates will start to rise by Jun '06)
All other charges / costs are taken by the property company i.e. annual management fees, insurance, repairs etc so no additional expense for me over the ten years
The risks that I see are 1. Interest rates rise far above current levels 2. Rental returns stay at 3.75% for the ten years 3. There is no capital appreciation and the asset is un-saleable in 10 years time
My reason for investing is to provide me with a supplement to my pension in 30 years + time as I feel my current pension will be inadequate come that time
My gut tells me that this is a "no brainer" and I should go for it, but I usually try not to let my gut make investment decisions for me!
What I am missing in my analysis? What other risks are there that I need to be aware of? Are there additional positives to this investment that I haven't considered?
Does anyone know of similar investment opportunities that offer similar guarantees that I should look at?
Apologies for the long post but I wanted to get as much info down as possible
All comments greatly appreciated
Looking for some general opinions on an investment opportunity that may be available to me - both negative and positive as I am in two minds about this
I may have an opportunity to buy an investment property in Sth Dublin - as part of the deal the property will be managed by a property rental company - this company guarantees a minimum return of 3.75% per annum, based on the purchase price of the property, for ten years, and with a minimum number of return reviews over the ten years. This guarantee is contractual (i.e. written into a contract) and the company is a well-respected international property company with substantial assets.
If I get an interest only mortgage on the property the return will cover the cost of servicing the mortgage until such time as interest rates go above 3.75% (My opinion is that interest rates will start to rise by Jun '06)
All other charges / costs are taken by the property company i.e. annual management fees, insurance, repairs etc so no additional expense for me over the ten years
The risks that I see are 1. Interest rates rise far above current levels 2. Rental returns stay at 3.75% for the ten years 3. There is no capital appreciation and the asset is un-saleable in 10 years time
My reason for investing is to provide me with a supplement to my pension in 30 years + time as I feel my current pension will be inadequate come that time
My gut tells me that this is a "no brainer" and I should go for it, but I usually try not to let my gut make investment decisions for me!
What I am missing in my analysis? What other risks are there that I need to be aware of? Are there additional positives to this investment that I haven't considered?
Does anyone know of similar investment opportunities that offer similar guarantees that I should look at?
Apologies for the long post but I wanted to get as much info down as possible
All comments greatly appreciated