42% Tax on Gross 2,418
Investment 140,000
Net Return on Investment PA 2.22%
Interesting start, could you explain the €1,000 in misc exp (just for completeness) There should also be some capital allowances on furnishings ect.
Also the USC is computed on rent after expenses but before capital allowances.
Is it not 41%?
To put this in perspective, over the last five years:
- European large caps delivered 5.9% pa
- Euro Gov Bonds delivered around 6.9% pa
- European Property delivered around 4.2% pa
That is right, over the past five years while Irish investors have been sitting on masses of negative equity, investors in European stocks, bonds and even property have seen their investments recover and start to deliver good returns.
European property did reasonably well for two reasons: diversification and because the UK/Ireland are traditionally excluded from the investment strategy.
As for considering this proposal as a business, it's a long time ago since I practice as an accountant, but I can never recall us advising anyone to take up a business in which the net margin was only a couple of percent! The risks and efforts versus the returns just do not lend merit to it.
No matter how you present it, you will be very hard pushed to find a long term investing period in which property competes reasonably well as opposed to the alternatives. And if you take the time to search you'll even find studies that show that even the mortgage = rent theory does no better.
Did European equities really only yield 5.9% in the 5 years after Lehman. I would have thought there would be a bigger rebound.
This is all backward looking, the prospective yield on property is forward looking, based on tangible forecasts.
and Property Tax
Not 100% certain, but the 2.17% net return (Cremeegg) does not seem correct. Would you not first have to account for offsetting the expenses and then also the capital allowances?. Although I suppose for capital allowances/expenses it is not till the following year after purchase that you can claim any. Assuming you intend to hold on to the investment for a few years, I guess you should factor this in???
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