I would value opinions on how we are doing.

Hi All
Been on this forum for some time now. I find the input from people helps you step back and look at your own circumstances. So here goes.
Please add any constructive comments.

Personal details

Age:53
Spouse’s/Partner's age:51

Number and age of children:0


Income and expenditure
Annual gross income from employment or profession: €69,500
Annual gross income of spouse: €33,500

Monthly take-home pay about: €6000

Type of employment: e.g. Civil Servant, self-employed: Both Private-sector

In general are you:
(a) spending more than you earn, or Yes
(b) saving? 100 Euro per month


Summary of Assets and Liabilities
Family home worth €430k with a €130k mortgage
Defined Contribution pension fund: €370,000k
Shares : €40k various company's also €50,000 going to mature next August.
Buy to Let Property worth €290k with mortgage of €150k


Family home mortgage information
Lender Everyday Finance
Interest rate ECB+1% On All mortgages
If fixed, what is the term remaining of the fixed rate? N/A

(No need to tell us the monthly repayments or what term is left)

Other borrowings – car loans/personal loans etc N/A

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? N/A


Buy to let properties
Value: €290k
Rental income per year: €15,600
Rough annual expenses other than mortgage interest : Management fee €2,400 per Year. Life Insurance (Rental has bells and whistles on policy, PPR policy is small ) €1,300 per Year
Lender Everyday Finance
Interest rate ECB +1%
If fixed, what is the term remaining of the fixed rate? N/A
Extra Information:- Rental income €1,300PM. Outgoings Mortgage is €1,348 PM + Management fee and Insurance €308 PM +Tax €280PM.
So income is €1,300 and outgoings €1,936 = shortfall of €636 PM. We are topping this up, hope this made sense.

Other savings and investments:

Do you have a pension scheme? Yes

Do you own any investment or other property? Yes please see above

Other information which might be relevant

Life insurance: Yes


What specific question do you have or what issues are of concern to you?

We are getting along ok, the Rental Top-up is a pain, in RPZ so cant adjust rent to market rate that is is €1,800.

I have read Brendan's posts before that the rental income is a form of saving and i do agree. My main question is are we mad topping up the Rental. The Tax and Management fee is were we feel the pain. Would like to keep the rental as the plan was to sell when mortgage is finished in 10 years and buy a property abroad with cask left to enjoy.

Other option is to sell the Rental pay off both mortgages and load AVC. My fear is the extra free cash we would just spend.

All view most Apricated.

Thanks

The buy-to-let property is not performing well. The gross yield is a little over (15,600/290,000)=5.4%, but you are getting hammered by marginal tax treatment and a disgraceful management fee. The rent is unlikely to rise to market levels any time soon in my view and I would be very concerned about further changes to tenancy laws that would make it harder to secure vacant possession if you ever wanted to sell. I think you should sell the property ASAP. Talk to a solicitor and get your ducks in a row before serving notice of termination. Use the surplus of (290-150)=€140k to either pay off your home mortgage or invest in an asset with a better expected return profile than this BTL property.

There has been quite a bit of discussion on this website recently about whether people with trackers should change products and get fixed rate instead. If you decide to keep either or both trackers, you should take a look at those threads. I think your mortgage would be a touch-and-go case. I presume Everyday Finance don't offer fixed rates? If you have a bad credit record as some Everyday borrowers will, you might also have difficulty switching.

€100 monthly saving on a €6,000 net monthly income sounds quite low, especially as you have no children. Perhaps you have other unstated obligations or elderly dependents? If not, then you might find room to trim expenditure and either increase your mortgage payments or pension contributions.

I would sell the BTL, clear both mortgages, trim excess spending, and put the extra monthly savings into your pension.

Thanks.
Sorry one important bit of information I should have added. I just changed jobs last month my salary went up €17,000. So not 100% sure what I come out with the €6,000 take home pay for us both
may be a bit conservative. Also we bought the rental for €250,000 so a small bit of CGT would have to be paid.Rental yield is 6.3%.
Is the yield not calculated with my outstanding balance I.e. 15,600÷150,000= 10.4 %

Management fee is 2400 a year? It seems a little on the high side - are there ongoing structural issues being dealt with?

Hi
Yes very high, there is some structural issues in the development also building up sinking fund.

noelÓm said:

Use the surplus of (290-150)=€140k to either pay off your home mortgage or invest in an asset with a better expected return profile than this BTL property.

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If you still want to be a landlord still this is by far the best option. You would have enough to (just about) buy a one-bed apartment that would yield €1k a month after management fees if it's a first-time let.

You would have no mortgage so all profit. Much better than the status quo.

Thanks noregretsCoyote.
The Tax and Management fee are the killer. I would like to keep it for our future, just dont know what's the best foot forward. Thanks for your advice I will way everything up.

Blackwexford said:

Hi
Yes very high, there is some structural issues in the development also building up sinking fund.

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It's painful, but it looks like the OMC is being responsible. Better this than kicking the can down the road for years and then imposing huge levies..

Yes they have been. If the building regs were monitored at the time off build would have been a lot better. All in all we are lucky a lot worse off.

Blackwexford said:

Is the yield not calculated with my outstanding balance I.e. 15,600÷150,000= 10.4 %

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The ‘gross yield’ is total cashflow (the rental income in your case) divided by the value of the asset (the apartment valuation you supplied). So, (15,600/290,000) = 5.4% per annum. This is a comparable measure of how much rent you can get out of a unit right now at today’s rents and property valuations. This differs across housing types and areas of the country. You might find it is higher for 1-beds or 2-beds in Dublin city compared with larger Dublin city properties and you will likely find it is higher in the countryside than in Dublin.

The gross yield does not take into account expected changes in the rent or property price. So, you might think you have an unusual property that should see high prices rise or rent rises over time and that might allay concerns about a low current gross yield. For instance, you might think the property is in a well-located, but rundown area that might improve over time. But that’s a gamble and you could instead move your money elsewhere instead.

The gross yield also doesn’t take into account the costs of maintaining the property or paying tax. You ultimately care about the amount of money ending up in your hands at the end of every month. Your costs seem high and are pushing down your “net yield” quite a lot.

The typical gross yield cited by investors is for a situation in which the investor owns the property outright with no mortgage. In your case, you have debt and so your net investment position at present in this BTL is actually only (290,000-150,000) = €140,000. You own the property, but the bank needs to be paid if you ever sell. You didn’t put €290,000 cash into the investment, you only put up your deposit initially and have keep whatever price increases you’ve enjoyed since then locked up in the property. In the jargon, you are using “leverage” to lever up your gross yield to (15,600/140,000) = 11.1%. Notice, however, that you can arbitrarily raise your gross yield by taking on more and more debt! Say you refinance up to 70% LTV, then you could push your gross yield up to (15,600/(290,000-(290,000*0.7))) = 17.9%. You could then use the extra ((290,000*0.7)-150,000)= €53,000 for some other purpose. This is very tempting, but it was also a large part of the downfall of Celtic Tiger investors who thought the sun would always shine. Yields are the return side of the investment, but you can’t forget about the risk of vacancy, rental decreases, and price declines. The more debt you have, the greater the difficulty you will have if things go sour. Your net investment will get wiped out by modest price declines, but the bank will still need to be paid. Imagine you had also used the €53,000 to buy another BTL and so on and so on. Some people fool themselves into thinking they are a genius investors because they are taking wild risks.

The gross yield and net yield on your apartment seem quite low. I would be willing to bet that you’d find better investment properties out there than this one if you were determined to remain a landlord. And I would again stress that BTLs aren't your only option. You could quickly clear both mortgages and invest through your current income into tax-relieved pensions. But that's a matter of preference and risk appetite.

There’s a lot of material online that might help clarify things for you and it would be really worth your time.
https://www.auctioneera.ie/rental-yield-calculator

noelÓm said:

Say you refinance up to 70% LTV, then you could push your gross yield up to (15,600/(290,000-(290,000*0.7))) = 17.9%. You could then use the extra ((290,000*0.7)-150,000)= €53,000 for some other purpose.

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And don't forget that BTL finance is very hard to get and quite expensive. Neither of these likely to change.

Thanks all for replying, thanks NoelOM for taking the time and effort into your reply. Just got mortgage statement €130,000 owing on buy to let. So Rent €13.000 mortgage €13.000 extra and tax about 7.000 so really saving about 6.000 per year. I reckon if I can just keep making up short fall for a few more years I will sell. Be left with no mortgage and 100, 000 towards holiday retirement house.