Assessment of Financial Goals with €2m property and 955k Debt

Gordon Gekko said:
We do need to be careful in terms of being overly cautious around debt.

Prudent borrowing is great way to acquire assets and grow wealth.

It is not always the right decision to pay down debt.
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Gordon, What are your thoughts on my debt to income level etc?
 
Bronte said:
Tell us more about how you borrowed please. I’m interested in seeing how easy it is to borrow. Because I thought your work salary might have prevented all the mortgages.
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The amounts banks were willing to let to me varied massively from about 150k to 1.25m. I tried every bank directly to see what they would give me.
Banks policies on rental income vary massively. Like you have mentioned before, my PAYE income is small and the bank i went with even said it to me. They gave this loan based on my total assets combined with expected income vs debt i was taking out. I could have taken out more however i chose not to in the end.
 
Wise not to take as much as they are willing. As I suspected they are willing to lash it out. Are you willing to divulge which bank offered the most. If not, pm me in total confidence. Also would like details on your tenancy 10k problems, in public or pm. Want to always understand the mistakes us landlords make and how to not make them. Like everybody I was too naive originally.

Can you check if moving your business to one bank will get you a better interest rate. Owing 1 mill gives you leverage.
 
I would suggest reducing LTV on rental 3 and rental 5
Which you give as 80pc and 70pc respectively

But by my calculations they are actually 70pc and 63pc

So to reduce to 50pc only requires repaying 50k
And 30k

Then over time, with capital appreciation if you keep paying interest only and if the properties appreciate by 100% (10 years time)
The LTV will then be 25%
 
Gordon Gekko said:
We do need to be careful in terms of being overly cautious around debt.

Prudent borrowing is great way to acquire assets and grow wealth.

It is not always the right decision to pay down debt.
Click to expand...

Amen to that, I got such a strong reaction on this site two years ago to a 50 k ten year mortgage ( 540 per month repayments ) @5.7% I had on a property bringing in 12k per annum NET, that I paid it off less than a year into the term.

Had I instead not been fickle and swayed by ultra cautious opinion, I could have bought a brand new three bed house in castletroy Limerick for 220 k cash, I paid off that loan and put the money in European equities and I'm down about 5% today and let's just say houses in Limerick are in a different place to 2017

Some people believe unless your borrowing at below 3%,its a disaster
 
Bronte said:
Wise not to take as much as they are willing. As I suspected they are willing to lash it out. Are you willing to divulge which bank offered the most. If not, pm me in total confidence. Also would like details on your tenancy 10k problems, in public or pm. Want to always understand the mistakes us landlords make and how to not make them. Like everybody I was too naive originally.

Can you check if moving your business to one bank will get you a better interest rate. Owing 1 mill gives you leverage.
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How do i PM, potentially as im not an active user, i may not have permission. If you PM me, i might be able to respond maybe?

Going back to a previous comment you said, I would never assume the banks will give me a refi especially with the level of debt we are talking about. Everyone is in it for them self and depending on financial confidence at the time i look for it, they may not give me anything. Thats why im trying to position myself as best as possible. I thought having 1m in debt is the opposite of leverage and is coming from a point of weakness?
 
moneymakeover said:
I would suggest reducing LTV on rental 3 and rental 5
Which you give as 80pc and 70pc respectively

But by my calculations they are actually 70pc and 63pc

So to reduce to 50pc only requires repaying 50k
And 30k

Then over time, with capital appreciation if you keep paying interest only and if the properties appreciate by 100% (10 years time)
The LTV will then be 25%
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Your right with the LTV's i set it at that based on the LTV interest rate rather than what my exact LTV is right now. I have some 50pc LTV where it might be closer to 40-45pc as well. Its just easier to read i think.

I think im going to to ahead with rental 5 and pay down the 30k. Im not so sure about rental 3. Although i would save a decent amount of money as it would drop to an interest rate of 4.4pc. I would be afraid when it comes to me trying to get my PPR, i wont have enough liquid cash. If i was living in my final PPR right now. That would be my next plan, however i just need to balance all angles im going for.
 
galway_blow_in said:
Amen to that, I got such a strong reaction on this site two years ago to a 50 k ten year mortgage ( 540 per month repayments ) @5.7% I had on a property bringing in 12k per annum NET, that I paid it off less than a year into the term.

Had I instead not been fickle and swayed by ultra cautious opinion, I could have bought a brand new three bed house in castletroy Limerick for 220 k cash, I paid off that loan and put the money in European equities and I'm down about 5% today and let's just say houses in Limerick are in a different place to 2017

Some people believe unless your borrowing at below 3%,its a disaster
Click to expand...

I think hindsight is 20/20. Luck plays a major role and i try to learn from your mistakes as best as you can however in your case its impossible to time it. At the time when i bought my 3rd property i had the opportunity to get a loan then as well where i could have got another property and made 100+k net profit on it. I choose not. It can go the other way as well. I do know of people over leveraged who have lost everything close to retirement and that is a position i want to avoid. Likewise if you bought equities at the bottom, you could have trebled or quadrupled your principle. As long as your finances are in the positive and growing im happy :).

Depending on your attitude to risk, you need to play to your strengths and to some 5pc is too high and to others its acceptable. Both are ok depending on the person and you have ensure you did your best in ensuring your affordability.
 
fonduster said:
I think hindsight is 20/20. Luck plays a major role and i try to learn from your mistakes as best as you can however in your case its impossible to time it. At the time when i bought my 3rd property i had the opportunity to get a loan then as well where i could have got another property and made 100+k net profit on it. I choose not. It can go the other way as well. I do know of people over leveraged who have lost everything close to retirement and that is a position i want to avoid. Likewise if you bought equities at the bottom, you could have trebled or quadrupled your principle. As long as your finances are in the positive and growing im happy :).

Depending on your attitude to risk, you need to play to your strengths and to some 5pc is too high and to others its acceptable. Both are ok depending on the person and you have ensure you did your best in ensuring your affordability.
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It's a mistake to only focus on interest rates, paying off debt means having less cash to buy other things
 
It’s a far bigger mistake to confuse outcome with strategy - hindsight is always 20/20 vision.

I would join the chorus here - the risks taken by the OP have paid off so far, time to consider cashing in some chips.
 
I don't think 4.5 versus 4.4 makes much odds
And not suggesting you rush into paying down the 30k and 50k
If you gradually pay down those amounts then you're in fairly secure position
And my other point was the LTV will naturally reduce all by itself as the properties appreciate. Even if you just pay interest only.
 
LTV on individual properties is kind of irrelevant on a portfolio of this size. The entire is under 50% LTV.
 
galway_blow_in said:
It's a mistake to only focus on interest rates, paying off debt means having less cash to buy other things
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Having liquidity is very important i agree. Im not quite focusing on the interest rate per se. I'm more focusing on what the net difference is if i get it down to x rate which can be quite a bit over a few years. Another aspect im considering is if house prices slump. I wouldnt be able to get it down to that rate however if its at 4.5 right now banks are not likely to revalue it in the future to increase the rate.
 
moneymakeover said:
I don't think 4.5 versus 4.4 makes much odds
And not suggesting you rush into paying down the 30k and 50k
If you gradually pay down those amounts then you're in fairly secure position
And my other point was the LTV will naturally reduce all by itself as the properties appreciate. Even if you just pay interest only.
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Over the long run, they will appreciate. In the short to medium(5-10yrs) i expect we will have some form of recession. No facts to back that up. Its just my gut feeling and i hope im wrong.
 
I'd tend to agree with @Gordon Gekko

Even stress testing your scenario (sadly I've played around with a few scenarios over the weekend to see when it becomes worrying);
if you convert these to P&I mortgage over 20 years, interest rates increase to 6.5% and a 20% drop in Rent, they're still cash flow positive (after tax). They're the kind of scenarios you need to be looking at so you're not forced into a sale if you can't meet repayments.

But that doesn't get away from the fact that you are highly concentrated in a single asset class.
 
RedOnion said:
I'd tend to agree with @Gordon Gekko

Even stress testing your scenario (sadly I've played around with a few scenarios over the weekend to see when it becomes worrying);
if you convert these to P&I mortgage over 20 years, interest rates increase to 6.5% and a 20% drop in Rent, they're still cash flow positive (after tax). They're the kind of scenarios you need to be looking at so you're not forced into a sale if you can't meet repayments.

But that doesn't get away from the fact that you are highly concentrated in a single asset class.
Click to expand...

out of interest lots of assets classes appear to drop around the same time as property ,if you leave cash out of it ,

Just putting it out there very interested in others posters views,
 
Value, Loan, LTV, Gross Income - Monthly - Yearly - mortgage
PAYE - 2750 – 33,000*
300K 0K Home
220K 110K Rental 1 – 1,100 – 13,200 -413 should be 690
180K 95K Rental 2 – 1,075 – 12,900- 357 should be 596
250K 175K Rental 3 – 1,500 – 18,000 - 1042 should be 1042
240K 120K Rental 4 – 1,400 – 16,800 - 450 should be 753
220K 140K Rental 5 – 1,220 – 14,640 - 566 should be 913
240K 110K Rental 6 – 1,350 – 16,200 - 413 should be 690
240 K 120K Rental 7 – 1,350 – 16,200- 450 should be 753
190K, 85K Rental 8 – 1,350 – 16,200 - 319 should be 534
2080K Value
Loans 955K
Total rents – 13,095 – 157,140

Question 1. Rent total is not 13095 monthly? It's 10345?
Question 2. What are the figures in the next post
Question 3. What is your annual tax bill on rental income (40K mentioned)

Income 124K, Unless income is 160K.(157K)
Mortage repayments 48K (or 72K if C&I I think)
Tax of 20K I think
10K, 3K, ????


Deductions for tax
10K management fee.
W&T
Insurances 3K
RTB
Interest 43K
 
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