Investing in a Second Property

B

Bernie T

Guest
Hello There,


I am considering investing in a second property but unsure if its the right thing to do.
Briefly my situation is as follows:

I have recently stopped working and plan to stay at home with my kids for the next few years. I have 15,000 in savings and i'm due a similar figure from SSIAs in April. My husbands earns 35,000 a year.
We are in our early 30s and have 141,000 left to pay on the mortgage on our home valued at 300,000 + now. We have no other loans.

My objective is to take a career break for the next few years and in the meantime I would like to invest yet have the benefit of staying at home and cutting out childcare costs.
I hope to work from home in childcare later in the year to have an additional income coming in.

If I invest in a second property it would be in Cork City and I have seen small houses for 250,000 with an 800 a month rental income possible. 250,000 would be my maximum spend.

Any suggestions or advice on the next step to take would be greatly appreciated.

Thank you for taking the time to read my email,


Regards,

Bernie T.
 
Bernie,

I would look at your net income(after tax) and all expenditure for the past 6 months and find out what(if any) cash surplus you have on a monthly basis. Make sure that you allow for annual things like insurance/road tax/schoolbooks/uniforms etc. You will need a cash surplus as you would have to pay some of the mortgage yourself.

Renting is not necessarily easy. If you view some of the posts on this site, you will see the kind of problems people can have. There is a risk that a tenant could wreck your house and/or simply stop paying the rent. It can be difficult/costly to evict a bad tenant.

You should allow for only 10 to 11 months rent a year to allow for periods when the house is not rented.

If you find that you could be struggling to subsidise your investment property mortgage then I would'nt recommend putting yourself and your family under that pressure.
 
Hi

i have a property that i bought last year for 280,000 euro . The rent i recieve is 1,000 per month .The MORTAGE interest only is 970 euro if rates go up much more i will have to pay out of my own pocket.Can you affort this .On the up side the property is worth about 400,000 now.
Hope it works out
! RAY
 
!RAY said:
Hi

i have a property that i bought last year for 280,000 euro . The rent i recieve is 1,000 per month .The MORTAGE interest only is 970 euro if rates go up much more i will have to pay out of my own pocket.Can you affort this .On the up side the property is worth about 400,000 now.
Hope it works out
! RAY
Click to expand...

That's a 42% increase in the value of the property in one year. That's pretty impressive. Any chance you could tell us where (roughly) it is?
 
How do you know it's worth €400k now. Have others sold in the area recently ?

If you read the Indo yesterday you'd be selling it quickly if you can get that much for it !
 
Are you aware of the risks of concentrating most or all of your assets in a single asset class and geographic region (e.g. Irish residential property)? Would you not consider diversifying your portfolio a bit more to spread the risk?
 
Hows about paying a chunk off your mortgage and investing the amount saved in monthly payements... you could even invest it in property related funds.
 
Hi There,

thanks for your replies and suggestions. I understand there is a risk involved particularly having read other peoples comments on this website. Certainly not something I plan to undertake in a hurry unless confident I can cover payments etc. I woud definitely look at diversifying my portfolio a bit more to spread the risk, I suppose again being an amateur where to start?

However, I'll take your advice Don and look at my outgoings over the last 6 months and see what extra money I may have.

Also I do like the suggestion on paying off a lump sum and investing money saved in property related funds. Only set back here is my mortgage is fixed for the next 8 years so the maximum I can pay off is 10% in one lump sum without being penalised. This gives me roughly my SSIA money which I could invest elsewhere. Comanche if you know where i could get further information on property related funds I'd appreciate it.

Thanks again for taking the time to email me,

Bernie T.
 
Bernie T said:
I woud definitely look at diversifying my portfolio a bit more to spread the risk, I suppose again being an amateur where to start?
Click to expand...
, [broken link removed] and the key topics pinned to the top of this forum here for example?
Only set back here is my mortgage is fixed for the next 8 years
Click to expand...
Yikes! That's extremely inflexible. What rate? Why on earth did you fix for such a long time?
 
Its fixed at 4.95%. I fixed for 10 years 2 years ago. We really wanted to be able to afford the payments indefinitely and the monthly payment is well affordable on 1 salary so we really wanted the security of this should one of us only be working (a situation we are now in).
 
Bernie T said:
Hi There,

if you know where i could get further information on property related funds I'd appreciate it.
Click to expand...

Funny you should ask but the Motley Fool website (free registration req) has just published this article about UK Real Estate Investment Trusts.

Advantages
Diversification & Liquidity

1. fund and returns are in Stg
2. Property is outside Irl.
3. Can tranfer to cash immediately

http://www.fool.co.uk/news/your-mon...operty-no-mortgage.aspx?source=ioowfeml004008


Murt
 
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