Option 1
Low risk fund: mix of property, bonds, equities.
Option 2: buy say 3 investment properties. Today in Dublin rents for two beds are 1800/month. Three properties today gives 64,800 per year.
What I like about option 2 is that rents will gradually increase over time. Property prices similar.
So in several years time, you should have more than 1m in assets.
Also the rental income will increase over time. I estimate the monthly rental income on an average 2 bed will be at least 2,400 in 10 years time. That's annually 86,400 for 3 properties.
Thought experiment:
Let's say you had €1m in cash and you wanted to put it to work.
The goal is to generate enough passive income or investment yield to cover your cost of living.
Let's say your cost of living is €30k/year all-in and to keep things simple you will pay 50% tax on any yield.
So you need to hit €60k/year or a 6% yield on €1m.
How would you go about this in Ireland?
What % yield would you say is achievable in Ireland with relatively low risk?
Could you not just invest in perhaps ten well known huge companies that pay good dividends?
Think of a well known soft drinks company or a huge bank in America ,fast food company with a clown for mascot ,large Japanese car
company
If those go bust ,we are all in serious trouble
30 k should be easily achievable
Dividend yields for these types of company have been around 2% to 3% the last few years.Think of a well known soft drinks company
that rents will gradually increase over time
Dividend yields for these types of company have been around 2% to 3% the last few years.
After tax that doesn't get you your €30k per year and you've got currency risk and of course risk of capital loss.
Unlikely. Irish rents in the last 25 years have been either stable (01-05; 10-13, increasing rapidly (95-01; 06-08; 14-date), or falling rapidly (08-12). There has never been a sustained period of something like 2% increases per year.
Otherwise as a general rule a very tax-efficient use of your wealth is to buy a house and live in it.
It depends on (a) whether you intend to exhaust totally your initial sum or leave an inheritance; and (b) your life expectancy. If you intend to leave an inheritance your investment needs to generate an internal real rate of return thath leaves your initial investment with a value of zero, i.e. so only the inheritance remains over your expected life span. Otherwise it the IRR that leaves you with a value of zero when you reach your life expectancy. As you are investing in risky (i.e. variable return) assets you require an expected annual return that is greater than your target return. And this is the after tax return your investment must earn.
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