Buying a plot of land or tiny cottage

[babydays]

Worried about my income in old age! I'm only in my 30s now but we're a single income (and therefore single pension) family with 2 kids and don't have a huge salary. Are paying into SSIAs but that all the savings we have. Have a good sized house in Dublin subburbs but with high mortage (relative to our income). Saw part of Primetime pensions programme the other night - - terrified me.

So, thinking of alternative investments such as land. If I scrape, borrow and beg I might be able to muster approx E30K. I;'ve seen small cottages in places like Leitrim for around that amount or plots of land in scenic areas aroudn Cork for similar.

As we've just had years of booming house prices is it a bad idea to buy at the peak of it. I'm thinking of something that we could hold onto and hopefully sell in 30 years - if a plot of land. If it's a tiny cottage we'd renovate what we could and again hope to sell it on in 10 yrs or whatever.

Is this a good way to make money?!!!!!

 

[ubiquitous]

If your mortgage is high relative to your income, your first priority should be to use whatever funds you can muster to reduce it to a more manageable level. Frankly buying a small plot of land or rural cottage is likely to be a highly risky option. Unless you know exactly what you are doing, you stand a strong chance of being ripped off by being sold a site that has zero chance of ever getting planning permission or a wrecked cottage that would cost a multiple of several times €30k to restore to a habitable (or even marketable) condition.

 

[maryrose]

Hi babydays, I watched that prog. as well and it set me thinking too. A great time slot , an hour or so before bedtime!

If you can hang on til next year, when ssias mature, and keep an eye in the various banks and instituitions, there will be loads of pension type products rolled out fur further investment. At least thats what helps me sleep at night.
Seamus Brennan looked like a very anxious man the other night, and I will eat these words if the government dont have something in the pipeline as we speak.

Buying land/cottage in places you are not familiar with is a minefield.

Why should you put yourself in further debt?

I would pay off the current mortgage, before investing in anything of a speculative nature.
h

 

[RainyDay]

To be honest, that sounds like a panic knee-jerk reaction to a TV show rather than a sensible investment strategy. What if Prime Time does a show on dodgy land deals in Leitrim on the week after you sign for ymour land - What will you do then?

As Ubiquitous says, I'd worry about getting your mortgage under control first to protect you from possible job loss. I'd strongly recommend that you seriously examine the pension options open to you before you rule them out. Does you employer offer a DB or DC pension? Do they offer to match employee contributions? Do you have a member representative on the trustees? What kind of fees are charged on contributions and fund management?

 

[babydays]

Tks for replies.

Yes my land ideas are a bit of a knee jerk reaction to the TV programme but for the last long while we've been hearing more and more negative stories about pensions and at the same time about land being a good long-term investment. About 10 yrs ago when my partner and I had no money we desperately wanted to buy something tiny to get a foot on the ladder but couldn't. Of course that was at the beginning of the huge boom and now we're possibly at the end of it (or moving there) but as everyone says 'if only we had bought then'. I now wonder what we'll say in another 10 years!

At least my husband has a permanent contract so won't be losing his job (and better still he loves his job!). We were talking about using SSIA monies to reduce mortgage but aren't sure how much impact it will make- our mortgage is now E225,000 and we'll get approx E13,000 from SSIA. We have about 281/2 yrs left on our mortgage so if applying the full amount to our repayment would only reduce it by about a year it doesnt' seem like a very good use of the money. Or are there better ways to apply the money to the mortgage (to capital or interest or something). I think I'd better contact my mortgage provider for a bit of advice!

I actually wouldn't borrow again from the bank to purchase land/cottage but would aim to borrow a v. small amount from family or share cost with family.

Am reading lots of posts on this site for advice!w

 

[RainyDay]

Yes my land ideas are a bit of a knee jerk reaction to the TV programme but for the last long while we've been hearing more and more negative stories about pensions and at the same time about land being a good long-term investment.

You really need to get beyond the 'headline' news and understand the detail. The way to address the negative stories about pensions is not to avoid them alltogether. If you avoid pensions altogether, you are missing a huge opportunity for reducing your tax liabilty, getting tax-free growth on your assets and possibly missing 'free money' from his employer (if they match employee pension contributions). I haven't heard many reputable stories about land being a great long-term investment. The last set of reliable comparative figures for the 'property vs shares' that I saw showed that share investments (which make up the lion's share of most pension funds) beat property in the long term. What reliable sources have you heard the 'land as a good investment' stories from?

About 10 yrs ago when my partner and I had no money we desperately wanted to buy something tiny to get a foot on the ladder but couldn't. Of course that was at the beginning of the huge boom and now we're possibly at the end of it (or moving there) but as everyone says 'if only we had bought then'. I now wonder what we'll say in another 10 years!

Remember that through your house, you already have a large stake in the property market. Are you now saying for your next investment, you're going to concentrate again in the land/property market? You might want to consider spreading your bets, not having all your eggs in one basket.

At least my husband has a permanent contract so won't be losing his job (and better still he loves his job!).

I'm not sure I understand. Unless he is a civil servant, there is really no such thing as a permanent job anymore.

We were talking about using SSIA monies to reduce mortgage but aren't sure how much impact it will make- our mortgage is now E225,000 and we'll get approx E13,000 from SSIA. We have about 281/2 yrs left on our mortgage so if applying the full amount to our repayment would only reduce it by about a year it doesnt' seem like a very good use of the money. Or are there better ways to apply the money to the mortgage (to capital or interest or something). I think I'd better contact my mortgage provider for a bit of advice!

While it can be useful to discuss these things with your mortgage provider, don't rely on them as a source of independent advice. You can play around with Karl Jeacle's Mortgage calculator to see the effect of the additional repayment. It looks to me like a once-off payment of 13k will save you 16k in interest payments over the life of a 28 year mortgage.

 

[babydays]

Tks for the Jeacle Calculator I'll have a look at it.

Regarding mortgage providers not necessarily giving independent advice surely if I ask my mortgage provider specific questions i.e. if I make a E13,000 lump sum payment how much will this reduce my monthly payments by presumably they will give me the correct and honest answer?



Husband has a permanent contract but isn't a civil servant. Didn;t realise that was so unusual these days - I know it's not as common as before but they do exist!



It's true that we do have a large stake in the property market (a good-sized house in increasingly popular area) but we'd like to stay in the house long-term therefore don't stand to make money on the house (through selling). Therefore we were thinking that someother property might be a good investment. But I was looking at the Ask About money guide to savings and investments which seems to suggest that the stockmarket (over the long run) is less risky and of course require considerably less management. I had always viewed the stockmarket as v. risky - from the tables presented in that guide there are sickening negative yrs but again I suppose these have to be viewed in the longrun.

lots of research to be done!

by the way rainyday - how do you add quotes into a message?

 

[RainyDay]

Regarding mortgage providers not necessarily giving independent advice surely if I ask my mortgage provider specific questions i.e. if I make a E13,000 lump sum payment how much will this reduce my monthly payments by presumably they will give me the correct and honest answer?

Generally yes, though it can depend on whether the person you end up speaking to is actually competent or not. The point I was getting at was that some people view their bank managers as general investment advisors, whereas in reality, they are product salesmen these days. So don't expect an impartial view on the property vs equity question, for example.

Husband has a permanent contract but isn't a civil servant. Didn;t realise that was so unusual these days - I know it's not as common as before but they do exist!

The point I was making was that even those with permanent contracts can be made redundant, so it makes sense to consider that possibility in your financial planning. Companies close down, get taken over, outsource staff etc etc all the time.

It's true that we do have a large stake in the property market (a good-sized house in increasingly popular area) but we'd like to stay in the house long-term therefore don't stand to make money on the house (through selling). Therefore we were thinking that someother property might be a good investment. But I was looking at the Ask About money guide to savings and investments which seems to suggest that the stockmarket (over the long run) is less risky and of course require considerably less management. I had always viewed the stockmarket as v. risky - from the tables presented in that guide there are sickening negative yrs but again I suppose these have to be viewed in the longrun.

Definitely do the research - there is no simple answer. Some people have done extremely well in property investment over the past 10 years or so (though I don't think those with small plots of land in Leitrim are at the top of the returns list). The real question is whether this will continue in the long run. Personally, I'm not a big fan of property investments because of the time/effort required to manage the property and the relatively low returns at present (maybe 3%-4% net yield). I would strongly recommend you learn more about the pension options available in your husband's employment before you make a final decision.

by the way rainyday - how do you add quotes into a message?

Click on the 'Quote' button at the bottom right of any message.