Buying 2nd home and renting first

B

brookied

Registered User
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Hi All
Myself and the wife are looking to buy a second home. we are in a 2 bed terraced in Ashbourne and are looking to step up to a 3 bed semi for space.

We have been in Ashbourne for 5 years and have 200k in equity with 125k outstanding on mortgage.
The plan is to release enough equity to have 35k deposit, stampduty, and clear off the car and CC's
Leaving us debt free apart from mortgages. We will be renting the first home at 1200pcm and the repayments on this have been quoted at 950 and will be able to afford the mortgage on the second quite comfortably.

some advice needed.
I am looking to have 20k spare for purchasing some goods for the new gaff but mainly to get start some major savings, should i invest a large chunk in any particular long-term plan. looking to invest about 5-8k.

Is there anything i can look out for to reduce cost of stamp duty, clawback?

I will be approaching an accountant in ashbourne to look after the money side of renting my first home and maybe seek advice. Anybody know of a decent person in my area.

I have looked through a lot of posts but can not find the answer. any advice would be fantastic.

Cheers
Darren
 
brookied said:
We have been in Ashbourne for 5 years

...

We will be renting the first home at 1200pcm

...

Is there anything i can look out for to reduce cost of stamp duty, clawback?
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You will not be liable for any clawback of SD here since you will be renting it out more than two (was five) years since purchase.

Have you made allowance for taxes on rental income? You will only be able to offset interest on the mortgage outstanding before any topups to buy your new home against rental income. You can claim owner occupier mortgage interest relief on any topup amounts used to purchase your new home.
looking to invest about 5-8k.
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Are you sure that borrowing (even at mortgage rates) to invest is a good idea?
Is there anything i can look out for to reduce cost of stamp duty,
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On what? The new purchase? What are the details?

You should have about 2 years of your "FTB" owner occupier mortgage interest tax relief preferential rate period left even though you are moving to a new home as a non FTB.
 
ClubMan said:
Are you sure that borrowing (even at mortgage rates) to invest is a good idea?
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Yes, the same should be said about his investment in property! Surely it is not a good idea to borrow money to invest in property in a falling market? From the information that he has given it seems a bit unwise to have so much borrowing tied up in one asset class, property. Surely this is like having all his eggs in one basket. What about diversification?
 
Are you sure you'd get €1200pm in Ashbourne for a 2 bed house, I'd reckon that seems high??
 
sam h said:
Are you sure you'd get €1200pm in Ashbourne for a 2 bed house, I'd reckon that seems high??
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From looking at Daft it seems that 1200pm is on the high end. Theres 17 2beds to let atm. Theres only one up for 1200, and its brand new, never lived in. The rest are between 950 and 1150, with quite a few brand new places, never lived in, which represents a fair bit of competition, since your place is a few years old.
How would your calculations work out if you only got 1000pm? Dont forget to factor in tax, maintanence, management fees, interest rate hikes and vacant periods. Since capital apprechiation for the short/medium term seems unlikely, it may not be the best investment. A much better investment might be in a pension (tax breaks etc....), or even just a deposit account!
 
speaking to a number of estate agency's in Ashbourne we can rent our place in about 3 weeks tops. Reason for 1200 pm is the inclusion of Sky basic and broadband.

we wont to rent until the market picks up again and then sell the unit use this to clear the mortgage and pay a lump some from the new mortgage if anything is left.

We dont plan to add a chunk off money but was thinking we may have some left over. maybe dont draw on it would be the best thing?
 
Have you talked to your lender yet?
It sounds like you're planning to do a loan consolidation exercise, plus borrow the deposit for the new place?
With an additional mortgage for the new place, how much do you plan to borrow in total?
In case you haven't been reading the press recently, market sentiment has shifted and you might find your lender has become "conservative" than they were 5 years ago.
 
spoke to lender last week and from his point of view all thumbs up, will know more next week.
 
brookied said:
speaking to a number of estate agency's in Ashbourne we can rent our place in about 3 weeks tops. Reason for 1200 pm is the inclusion of Sky basic and broadband...
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Just curious. Does this mean that you will pay the Sky basic and broadband bills for your tenants? If so, then have you included this in your calculations. If not, why do you think it justifies a higher rent than the other properties. A tenant of one of the other properties can often get such a package in themselves with no connection fee, just monthly cost.
 
And also I think the OP needs to consider what would happen, despite what the agent says, the house lies idle for a couple of months. Would the OP be in a position to support the mortgage on two properties for that peroid. It's all well and good trusting the word of an agent, but what happens if the reality is different?
 
We did same 2 years ago - rented out family home in Churchtown, bought in Wexford. Important consideration is that we let the house unfurnished, to a family for a minimum 2 year period - we also have a formal Rental Agreement Contract. No experts required - we do own tax, very little management required on property (Management companies tend to take 1 months rent for very little return in my experience). There can be hidden costs, mainly maintenance of kitchen gadgets, plumbing etc. however with a long-stay tenant they tend to look after this stuff. So, my advice is go for the rental/purchase process but I don't think you should borrow at mortgage rates for anything other than property. Also, be ready for the time when your rental property is vacant - that's a big dip in income. Good luck.
 
Eithneangela said:
We did same 2 years ago - rented out family home in Churchtown, bought in Wexford. Important consideration is that we let the house unfurnished, to a family for a minimum 2 year period - we also have a formal Rental Agreement Contract. No experts required - we do own tax, very little management required on property (Management companies tend to take 1 months rent for very little return in my experience). There can be hidden costs, mainly maintenance of kitchen gadgets, plumbing etc. however with a long-stay tenant they tend to look after this stuff. So, my advice is go for the rental/purchase process but I don't think you should borrow at mortgage rates for anything other than property. Also, be ready for the time when your rental property is vacant - that's a big dip in income. Good luck.
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We do have about 8 months rent put by should the house be idle.
The management fee is something that is sticking with me. i need to speak to some people whom look after everything themselfs and if i have an accountant to help with tax etc i would agree with the above in that they dont do an awful lot more for the fee?

Long term rental is something i had not thought off, at least a two year rent period.
i have included the Sky abd Broadband into the rental price. The only price to the tennant would be phone line stuff as i am going with ICE or another supplier.
 
AFAIK, all the tenant has to do is to request to transfer the lease to another party. The landlord is then left with a choice of either allow the lease to be transferred to another party that s/he has no say over or to refuse the request to transfer. If the landlord refuses the request to transfer the lease, then the tenant may issue a termination notice.
 
The tenant can simply walk out the door....

As per the Residential Tenacies Act (if they are nice people).


DURATION OF TENANCY NOTICE PERIOD
Less than 6 months 28 days
6 or more months but less than 1 year 35 days​
1 year or more but less than 2 years 42 days
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http://www.irishstatutebook.ie/2004/en/act/pub/0027/sec0186.html#partix-sec186

186.—(1) This section has effect—

(a) despite the fact that the tenancy concerned is one for a fixed period, and

(b) despite anything to the contrary in the lease or tenancy agreement concerned.

(2) If a landlord of a dwelling refuses his or her consent to an assignment or sub-letting of the tenancy concerned by the tenant, the tenant may serve a notice of termination in respect of the tenancy and terminate it accordingly.

(3) The period of notice to be given by that notice of termination is—

(a) that specified in section 66 , or

(b) such lesser period of notice as may be agreed between the landlord and the tenant in accordance with section 69 ,

even if the lease or tenancy agreement provides for a greater period of notice to be given.
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plant43 said:
AFAIK, all the tenant has to do is to request to transfer the lease to another party. The landlord is then left with a choice of either allow the lease to be transferred to another party that s/he has no say over or to refuse the request to transfer. If the landlord refuses the request to transfer the lease, then the tenant may issue a termination notice.
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No idea what that is about at all.
 
plant43 said:
If they just walk out the door, I believe the landlord would have a right to pursue the tenant for the rent for the remaining period of the lease.
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I don't think so, all they'd get would be the amount in respect of the notice period.
 
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