Teacher with multiple properties living on the breadline

Folks

Stay on thread here. Please don't bring up irrelvant, or vaguely relevant points.

Thanks

Brendan
 
Bronte said:
H, I don't get your second point here?
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I may have a Pat Kenny moment if someone tries to tell me this isn't so. I've heard it all before; "see I have to have the bills in my name because a previous tenant didn't pay / paid too much / ran away with the spoon"

There may be legitimate reasons for having the bills in the Landlords name but, from my experience, by far and away the most prevalent is to (naively) try and prevent a paper trail and evade tax on the income.

The scenario in this thread leeps out at me as one of non tax compliance. 5 properties with 3 seperate individuals across 2 tax boundaries. One of the properties used to be a PPR.

The OP has stated the he/she has their bases covered. That's a different thing altogether from being tax compliant. The complexity alone leads me to believe it is not so.
 
I disagree with Bronte on this one. In no circumstances would I be buying out all your partners, see below

Nikephorus said:
Rough estimate of value of home: €280,000
Amount outstanding on your mortgage: €180,000
What interest rate are you paying? Tracker (ECB +1.15%).
Outgoings = €950, Rent ( I have it rented out = €950).
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Is this the same property as Investment Property #1? If so see below.

Nikephorus said:
Investment Property #1, Value €280,000 (own 60% of this with business partner A), Mortgage €180,000, Tracker (+0.85%) - Monthly Payments (incl bills etc) = €1000, Rent = €950, VERY STABLE tenants.
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Buy out Partner A's 40%. I have assumed that this could be your future home & is perhaps close to your work, perhaps you could comment. You could set this up & rent out rooms under the rent-a-room scheme for a temporary period.

Nikephorus said:
Investment Property #2, Value €475,000 (own half of this as co-owner with business partner B), Mortgage €320,000 (only liable for 33% of this, as I provided the deposit for the property purchase).
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Let Partner B buy you out. From its value it sounds like a 2 bed apartment or a 3 bedroom house. Partner B is looking to get married in 2010, it may suit him/her too. This could be his future home.

Nikephorus said:
Investment Property #3 (in Belfast), Value £230,000, Mortgage £190,000. My monthly payments are about £500, Rent should be about £750, but tends to be average at about £300 due to difficulties finding tenants.
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Sell this within the 6 months while interest rates are still low.

Nikephorus said:
Investment Property #4 (also in Belfast, I own 50% of this with business partner A), Value £180,000, Mortgage £145,000. Outgoings = £400, Rent £450. Tenants are stable.
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Sell you share in this property to Partner A. Its like exchanging his 40% in Property #1 for your 50% in Property #4.

Pay off any debts using any profits made from disposing of Property #2 to Partner B & selling of Property #3

There may be an option for you to hold onto Property #3. Perhaps follow the steps below:

1. Buy out Partner A - Investment Prop #1 & sell out to Partner A - Investment Prop #4. Ties cut with Partner A.
2. Sell out to Partner B - Investment Prop #2. Ties cut with Partner B.
3. Any profits - Pay off your loans.
4. Investment Property #1 - Your home - Set up a rent a room scheme - Pay remainder of your mortgage - approx. €500/month.
5. You will be in a better position if 1-4 are complete, so you could pay off mortgage to Investment Property #3 where its required out of your salary, or sell within the next year.
 
..leaving the prospect of negative equity out ,
...assuming rents stay where they are,
..even leaving out the likely introduction of a property tax of up to 1k a year
..and forgetting completely the income levy on gross rental income..

In my opinion 0% mortgage interest relief will be phase in over the next 3 years.

Have you worked out what that will mean to you for tax, in an environment of increasing interest rates? Taking 700k debts at an interest rate of, say 4%, which is probably likely over the medium term, means you will lose annual interest relief of 28k. At a marginal tax rate of say 45%, that means your tax will rise by over 12k a year - that's 1k a month. I think many people have not done their sums here - it has the potential to wreak havoc to highly geared landlords.


If you think they won't pull interest relief, then just imagine what will politically the easiest - you're unlikely to see landlords marching down O'Connell St - not much public sympathy there!

by the way I'm in a not too dissimilar position myself - and I'm expecting the worst here and battening down the hatches. If I were you and I had the opportunity to sell, deleverage and still come out with cash - I would bite their arm off.
 
I agree with a lot of what is been said. But.

If 0% interest deductibility becomes the norm. I have little doubt in time this will result in rent increase as landlord decide it is not worth renting.
Some one mentioned above the OP does not have 5 investment properties but rather five mortgages and saw this as a major disadvantage. But looking deeper the OP has borrowed money at rates from banks which from now on people will never be able to access so cheaply again. So why rush to give away this benefit?
I fully agree it appears the OP has stretched to much but I dont see it as bad as some. Some one mentioned €650K debt on €60 income but is the rent not also an income?
No body knows the direction of future house prices, in the short term econmist might predict further falls but who is going to predict with accuracy a 10-20 year forecast.

Perhaps the OP should consider selling a portion of one or more of the property to some one, hence get some cash to reduce loans and still retaining an interest in the properties?

I do agree the OP need to release some cash reduce the short term debt and some how but aside some cash for the interest rate rise on the way.
 
Arch2 said:
If 0% interest deductibility becomes the norm. I have little doubt in time this will result in rent increase as landlord decide it is not worth renting.
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I agree to a certain degree, but the decision to hold out for these higher rents will be driven very much by the extent of your borrowings.

Over the medium term (3-5 years), rents may increase as highly borrowed landlords realise the impact of 0% investor interest relief and dump property at a loss as they will be subsidising their investment and paying very high Case V taxes too. They will be selling into a market with only owner occupiers or investors with cash, as no one is going to borrow money ever again to buy residential investment properties with borrowed money if there is no relief. I imagine this will decrease the supply of rental properties, and increase the supply of new homes for sale.New FTBs who hold out for this (in 3-5 years) are in for a treat, although their interest rates may be higher.

So existing wealthy investors who have no borrowings and spare cash will be the winners, as they will be able to pick properties up very cheaply that will provide very high yields, as long as they pay cash. The smaller more recent landlords are going to be in serious trouble, unless they are willing to subsidise through the nose, and hold out for the long term.
 
In my opinion, if you feel you can tough it out you should....

however, it would seem you are significantly overexposed to one asset class (too late to do anything about that now though)

Nobody knows where property prices will be the next 5-10 years.

Consensus appears to be against property as an asset class at present, a la England in the late 80's 90's - however, 10 years later property prices in England began increasing dramatically again. If prices increase in the future, you never know, in 5-10 years you may be extremely happy that you toughed it out.

Crystallising losses at the bottom of the market never made sense to me - property should be a long term investment - in general, Irish people seem to have forgotten that in the heady days
 
The5acre said:
Crystallising losses at the bottom of the market never made sense to me -
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Very true, but that assumes we are now at the bottom of the market.

If I had a penny for every time someone said we were at the bottom of the market, I wouldn't be worrying about property prices.
 
Hi Canice

I never suggested we are at the bottom of the market now - it's obvious nobody knows, including you ....

My primary point was made earlier in the reply ....
 

A statement like 'Nobody knows where property prices will be the next 5-10 years' is very misleading and shows a vacuousness of thought. While one doesn't know for certain one can make a very reasonable assumption. The likelihood of property prices increasing is very remote as unemployment will remain high without significant investment or new industry emerging in Ireland (no growth drivers apparent as Ireland has done aswell as it could out of the US gravy train and our industry is still in retreat). You've got further severe tax hikes and job cuts coming down the line for at least the next two years! Things are already rough in Ireland but unemployment could easily hit 15% next year along with further wage reductions amid increased competitiveness for jobs.
Ireland is not England and does not have a very powerful financial sector (which was the driver for increased prices in UK which then spread to other parts of the country). Plus UK has it's own currency, Ireland doesn't.

Use common sense to figure it out. Prices are most likely to be less or the equivalent to today's prices. To be equivalent to today's prices we will probably have to had come up with a whole new economic model in the meantime. It's all about prices to personal income when credit is pulled.... From my reading of the situation you don't have a hope in hell of staying solvent with the current portfolio in a 10 year period...to many variables to knock you sideways during that time.
I'll keep my personal thoughts to myself...
 
I diagree completely with the last post
There is no way to predict 5 years ahead full stop let alone 10.
In addition Extreme events are much more common then percieved in every day life .......
Think of 10 "unthinkable" things that could "never happen" in the next 10 years and i guarantee 3 or 4 will actually happen!
 
mtk said:
Think of 10 "unthinkable" things that could "never happen" in the next 10 years and i guarantee 3/4 will actually happen!
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You guarantee than 7 and a half things will happen. How does that work?
 

Yes you can predict 5 years ahead with relative accuracy about many things. Education system will still be broadly the same in Ireland except you'll be paying more for it and no free fees. Greece will still be a mess, French people will still be eating baguettes . If you have high blood pressure and keep eating a bacon and eggs every morning and burger for dinner you will almost certainly be in a worst state 5 years later. You owe money now and somebody will be looking for it 5 years later if it is not paid up...

Sure extreme events happen but just what extreme event can solve the issue of bank debt or personal debt in Ireland? Leave the euro, okay and the country will put through massive chaos, it won't solve problems of unemployment because nobody would loan us any money after defaulting our debts!

New industry or changes in society take time, Ireland's not setup to capitalise as much as it can on rapid changes in the world. Not saying that unlikely events couldn't happen but by their very nature they are 'extremely rare' and it would take a convergence of rare events to suddenly solve Ireland's structural economic problems...making it even more unlikely. I have read the Black Swan too you know. Depending on the hand of God to solve your problems is a fool-hardy method and not practical.

Things like industrial development are usually built on a solid base and take time to ramp up. For any industry or service you have to work from that through increments as the knowledge base and reputation in that industry builds over time. Designing and building and selling a car or airplane for instance, it takes a huge amount of experience and teamwork to make it happen. Building an international reputation in education like UK, US and Australia didn't happen overnight but took co-ordination from their government promotion bodies and a history of achievement over decades or centuries.
 
Nikephorus said:
Investment Property #3 (in Belfast), Value £230,000, Mortgage £190,000. My monthly payments are about £500, Rent should be about £750, but tends to be average at about £300 due to difficulties finding tenants.
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This segment has struck a chord with me. If the property will only let for 300 GBP then surely that is the market price/value. Or am I missing something here?
 
Hello to all.

I've a few updates for anyone who is interested. Thankyou for your comments on my situation. All were thought-provoking, some were very useful.

I decided to tough it out and have done reasonably well over the last few months. By developing some free or very inexpensive hobbies (walking, galleries, museums, reading, online gaming, studying... if that qualifies as a pastime!, eating in with friends and family, digital photography, gardening) I've had a frugal but very enjoyable time of it. Christmas was difficult to negotiate, but I managed to spend modestly and make some of the pressies myself.

I have started giving grinds and taken on another job part-time. These net me about €50 per week - not a huge amount, but vital in my constrained situation.

I now have both houses in the North let out longterm to reliable tenants and am happy to say that I have all but cleared my overdraft debts up there.

Meanwhile I have reduced my southern overdrafts from €8,000 to €6,500. My plan is keep my head firmly down until the summer. By summer I would hope to have my overdrafts reduced to about €2,500. Then a cheap backpacking holiday somewhere sunny and interesting will be mine!

By the time interest rates change, I should be on steadier ground. Fingers crossed.
 
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Good for you mate, fair play to you, yes we are all in the same boat, trying to keep our heads above the water, well done
 
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