Excluding Costs, inflation and interest etc;
With capital repayments of €1,000 a month -
Property in North Dublin - Cost of house €200,000
Property in the Country - Cost of house €150,000
After 10 year of payments on North Dublin he would have €80,000 left on mortgage. After 10 year of payments on the property in the Country he would have €30,000 left on his mortgage.
Cost of houses €350,000 less repayment of €240,000, he will still have a dept of €110,000
It Socks sells his house and moves to the Country - Cost of house €150,000
After 10 years he will be mortgage free and have €90,000 in savings. So he is no better off with two houses.
Your forgetting some things
1. the 110,000 debt he owes, 80,000 of that is still being paid for by the tenant, so in another 10 years, without having to pay much (or anything), he will have that asset.. Isnt all investment about the long term, not shortish term i.e. 10 yrs? and if thst propert went up in value!
2. Did the landlord make a profit on yearly rent after paying everything? I make 2k on mine, so in 10yrs for me thats 20k..
In the 2 examples:
- Rental property in north dublin after 20 years- potential asset worth 250 - 300k, plus rental profit say 2k per year over 20 years = 40k maybe:
-> 290 - 340k,
-> plus the second property of lets say 200 - 250k so that would make grand total of 490 - 590k
- Property in the county - after 10 years he owns it and 90k in savings, in another 10 years how much would he save? 200 - 250 for house + the 90k in saving + how much they would save over 10 years, would have to be at least 150k to match with rental property!
**note i took the lower figures for the first one and the higher for the second option, just to illustrate my point even further
Therefore, if you rental circumstances are good like the 2 points above i.e. that the rental income covers the mortgage and then some so that you make a small profit, would it not be more favourable to keep the rental long term?
My only argument here is that rental properties have to be a part of the consideration, as Brendan pointed out this was wrong:
"That is not the right way to think about it but it is a very common mistake of confusing income and expenditure with capital repayments."
"I am simply pointing out that including the capital repayments on the mortgage is irrelevant to the decision."