Buy a second house or put money into existing mortgage?

D3PO

SuperTina wrote: »

Thanks very much for this info. We have very similar income, I am good at saving, he is not! He's also not vindictive, so I can safely assume that this is not an issue that would arise.

cool its unlikely to be an issue so then, good to have all the information at your disposal though

SuperTina

Definitely! Many thanks for clarifying.

twowheelsonly

SuperTina wrote: »

Thanks very much for this info. We have very similar income, I am good at saving, he is not! He's also not vindictive, so I can safely assume that this is not an issue that would arise.

Without knowing the chap, or indeed yourself, I would still have to say don't assume this - Money, property, friends and family can be strange bed-mates when push comes to shove. (And family 'lawyers' start giving free advice :rolleyes: )

Regarding your original post, I'd be siding with those that are recommending investing the money elsewhere. Keep your nest-egg for the moment.
In 6-12 months time you'll be in a much better situation to assess both your own relationship, and what's going to happen to your current property and mortgage, and the housing market. (Is it possible that your OH is also making contingency plans, including staying in the current house??) IMHO, housing prices will not go up in the meantime but your savings will. As another poster stated, God only knows what surprises the Government have in store for those with investment properties. A 10% tax on rental income for instance would throw all your figures into jeopardy. Hypothetical, but at the moment nobody knows what's coming next.

You seem at the moment to be unsure what to do. You're doing the right thing by seeking independent opinions and having your calculations done though. However, my opinion, for what it's worth, would be to hold off for a while.

SuperTina

twowheelsonly wrote: »

You seem at the moment to be unsure what to do. You're doing the right thing by seeking independent opinions and having your calculations done though. However, my opinion, for what it's worth, would be to hold off for a while.

Exactly. I am contemplating and looking and calculating and wondering and throwing my thoughts to the wolves and it's good to get different opinions and suggestions. I never thought about investing the money, I am not sure I have the energy to research shares and investments, as I don't know enough about it and am highly suspicious about it, too!

D3PO

SuperTina wrote: »

Exactly. I am contemplating and looking and calculating and wondering and throwing my thoughts to the wolves and it's good to get different opinions and suggestions. I never thought about investing the money, I am not sure I have the energy to research shares and investments, as I don't know enough about it and am highly suspicious about it, too!

you dont have to invest in equities to make a decent return. there are plenty of above inflation returns available with little or no risk.

that said I personally like the way the sums stack up in the BTL option for you. Yes as others said who knows what the government will do down the line but you can only make an investment decision based on the here and now.

P.S PRTB fee is TAX deductable, paying refuse is also normally tennants responsibility.

P.P.S BER survey wont be needed. The seller of the property will ahve had to do one to sell the property. Therefore a valid BER for rental will be avilable to you already besides which BER is allowable tax deductable.

So I think you need to tweak your maths slightly in a positive way

SuperTina

D3PO wrote: »

you dont have to invest in equities to make a decent return. there are plenty of above inflation returns available with little or no risk.

This is where the "inner economist" is missing - I have no idea what above inflation returns are (although the name kind of gives it away)

D3PO wrote: »

that said I personally like the way the sums stack up in the BTL option for you. Yes as others said who knows what the government will do down the line but you can only make an investment decision based on the here and now.

Well, at last one person who likes my idea:D And thanks for the info on the various tax deductibles.

I think I need to also look into all the potential implications of my dad actually buying the house, or partly buying the house. He would only pay 20% tax (at the moment anyway) being a foreign landlord.

D3PO

SuperTina wrote: »

This is where the "inner economist" is missing - I have no idea what above inflation returns are (although the name kind of gives it away)



Well, at last one person who likes my idea:D And thanks for the info on the various tax deductibles.

I think I need to also look into all the potential implications of my dad actually buying the house, or partly buying the house. He would only pay 20% tax (at the moment anyway) being a foreign landlord.

Inflation running at 2.2% annually. Essentially if you get less than 2.2% return your money is worth less than the same time last year. You get more above inflation :pac: ) your money is worth more.

re your dads partial investment or full investment. I have no idea how that works TBH, you would really need to talk to a tax expert specilising in that area id say.

even without that the projected returns you have made stack up nicely although as im dishing out feeback BTL investors generally calculate yield based on 11 months occupancy in a calendar year rather than 12 to allow for vacancy periods. Id suggest you should do the same

SuperTina

D3PO wrote: »

Inflation running at 2.2% annually. Essentially if you get less than 2.2% return your money is worth less than the same time last year. You get more above inflation :pac: ) your money is worth more.

So something like this would be a half decent option: 3 Years - State Savings - 2.28% Tax Free

D3PO wrote: »

re your dads partial investment or full investment. I have no idea how that works TBH, you would really need to talk to a tax expert specilising in that area id say.

indeed, I read somewhere about the option of buying in form of a trust, which would save me inheritance tax, but this sounded so difficult, i would definitely need an expert for this kind of stuff.

D3PO wrote: »

even without that the projected returns you have made stack up nicely although as im dishing out feeback BTL investors generally calculate yield based on 11 months occupancy in a calendar year rather than 12 to allow for vacancy periods. Id suggest you should do the same

will do!

StillWaters

I know you are not looking for relationship advice, but you need to factor in what happens if the relationship breaks down, and your partner stays in the house refusing to pay the mortgage.

You could then move to the second house, but could you pay both mortgages. If not both homes could be at risk. This to me is a big argument for your father to purchase the second house.

SuperTina

StillWaters wrote: »

I know you are not looking for relationship advice, but you need to factor in what happens if the relationship breaks down, and your partner stays in the house refusing to pay the mortgage.

You could then move to the second house, but could you pay both mortgages. If not both homes could be at risk. This to me is a big argument for your father to purchase the second house.

Well, you've only thrown in another scenario and not given me some unhelpful advice, so all constructive comments are welcome!

So if that was to happen, my father would most certainly not come after me to chase the repayments for house 2 - he would probably come to Ireland to strangle my OH though! But joke aside, I have thought about this and what I would probably have to do is move to the second house and let out a room, depending on interest rates to cover the mortgage on house 1. Although I would not anticipate this to happen, but of course you are right, one needs to consider everything.

StillWaters

I don't envy you the position you are in, but you are doing the right thing weighing everything up. You are in a fortunate position having the freedom that the 'running away' money can buy, but as well as the hard financials I think you need to factor in the softer what ifs.

Are you tied here? You say your dad is abroad and you seem to have a tight bond with him, could you see yourself emigrating at some stage, in which case it makes sense to have the money liquid.

SuperTina

Well, I've lived here for a very long time now and I love my job and I have built up a life here, so it's not something I'm planning to do anytime soon, although I might go back for retirement, but that's a good few years away yet :-)

edanto

It's certainly a complicated situation.

One potentially important factor that hasn't been included yet is repayments to your Dad. Assuming that he will want that repaid, I would suggest that your savings may not be enough yet to consider a BTL. Have you discussed with him the repayments timeline?

Alternatively, if your father is the owner/landlord of the property and you're just buying 20% of it with your next egg, then you wouldn't have the full predicted rental yield of €450, surely you would only be earning 20% of that? That throws off your calculations quite a bit.

Any other advice I have on the situation would be related to relationships and outside the scope of what you're asking for. Still, I think it's important to mention. It seems like you're under quite a bit of strain with the relationship problems and that can often be a difficult time to make decisions. I would try to simplify your life and not complicate things by a new property investment. There are probably ways to invest your savings that don't have the same level of long term commitment and risk.

NIMAN

In this current climate I would put money into current mortgage instead of a 2nd property tbh.

And this is coming from someone who had a 2nd property rented out and was more than happy to get it sold.

SuperTina

edanto wrote: »

One potentially important factor that hasn't been included yet is repayments to your Dad. Assuming that he will want that repaid, I would suggest that your savings may not be enough yet to consider a BTL. Have you discussed with him the repayments timeline?

This would be a very flexible arrangement, depending on the situation, my Dad would only look for very little repayment, or defer it if I couldn't repay it for a while.

edanto wrote: »

Alternatively, if your father is the owner/landlord of the property and you're just buying 20% of it with your next egg, then you wouldn't have the full predicted rental yield of €450, surely you would only be earning 20% of that? That throws off your calculations quite a bit.

WEll, he would buy it so it's not in my name and hence not within reach of the banks should house 1 go under. In that case I would sign a lease and sublet it or something or the other. I haven't thought that far. The whole exercise is so that I can make some money or have somewhere to live if needs be and do it in the most financially viable and secure manner.

edanto wrote: »

Any other advice I have on the situation would be related to relationships and outside the scope of what you're asking for. Still, I think it's important to mention. It seems like you're under quite a bit of strain with the relationship problems and that can often be a difficult time to make decisions.

That's why I'm here getting lots of input rather than having already rushed out there and done it.

edanto wrote: »

I would try to simplify your life and not complicate things by a new property investment. There are probably ways to invest your savings that don't have the same level of long term commitment and risk.

I don't know much about investments, I like the idea of having something that can bring some income and can be sold and is of "physical" use, i.e. in case I wanted to live there myself. And I'm not sure how risky it really would be. I've been watching the likes of myhome.ie and daft.ie like a hawk, and the properties I would have considered were snapped up within weeks, today I read in the paper that rent in Dublin is going up. There are very few houses coming for sale where I'm looking and there are only also very few available to rent, so unless I'm missing something vital it looks to be as good a situation to buy a BTL as ever.

NIMAN wrote: »

In this current climate I would put money into current mortgage instead of a 2nd property tbh.

If I didn't have the uncertainty about my relationship I would agree, but this way I might end up throwing good money after bad. I know this sounds crazy, but I do not want to put money into something which I only own half of.

NIMAN wrote: »

And this is coming from someone who had a 2nd property rented out and was more than happy to get it sold.

I would love to hear about your experiences with that, especially since it sounds like you had a bad experience?

Bren157

Hi Tina, You need legal advice as much as financial. Buying property for investment is speculative but it is reasonable to feel now is a good time relatively. Remember that prices will not recover until we see banks lend, employment rise and the over-supply wash out. But I reckon there is longterm value in Dublin especially. Normally I would think paying down debt is best value long-term but you need to get your personal life sorted first or you could be paying down your partners liability as much as your own!

SuperTina

talk financial wrote: »

Hi Tina, You need legal advice as much as financial.

Well, if I go ahead with this plan I most certainly will get legal advice, I'm still in the deliberation phase though :-)

talk financial wrote: »

Buying property for investment is speculative but it is reasonable to feel now is a good time relatively. Remember that prices will not recover until we see banks lend, employment rise and the over-supply wash out. But I reckon there is longterm value in Dublin especially.

This would be a long term investment, so this is not something I'm nervous about.

talk financial wrote: »

Normally I would think paying down debt is best value long-term but you need to get your personal life sorted first or... you could be paying down your partners liability as much as your own!

Well, sometimes we make bad decisions and then we have to pay for them. It might be highly unfair and I could dwell in self pity for ever, but it would not change a thing. I am only focusing on how to protect myself in case that happens and what is the best way to go about it. I may well have to pay for it. People keep making reference to sorting out the relationship, but there are things I can't control, can't forsee and can't influence.

MMAGirl

There was a guy posting about running an investment property a few months ago. Looks like he got bored, but it seems to have worked out very well for him.

It looks very interesting and might be useful to you op.

http://www.boards.ie/vbulletin/showthread.php?t=2056694650&page=5

Bren157

You should not pay off any joint debt or acquire any assets in your own name until you sort out your private life. Get the relationship stable and happy or get out. Then with your freedom either in a good relationship or on your own, you will have no confusion over best decision to make.

NIMAN

SuperTina wrote: »

I would love to hear about your experiences with that, especially since it sounds like you had a bad experience?

Quite the opposite in fact.

I became an accidental landlord as we bought a bigger house when the family arrived, and ended up with 2 as the 1st would not sell, so I rented it out.

I got a guy I know as a tenant, and never had a problem with him in any respect. But at the same time, I still did not see it as an investment for the future due to the plummeting house prices in Donegal. When I sold it I still made a profit, but I think if I had held on to it for another year I would have made a loss or else not been able to get rid of it.

Add to this all the property taxes, 2nd home taxes, making tax returns, adding money each month to make up the mortgage, the worry about anything ever happening to it etc etc etc, I was so glad to see the back of it. There was a chance that this same tenant might have stayed in it until the mortgage was clear but I always feared him leaving and me getting a bad tenant and having constant problems with the new one.

The fact that I got it shifted, paid a bit off my current mortgage, and now there is a repossessed property of the same size in the same street for €20k less, makes me know I made the right move.