Second Property for Rental Investment now mortgage is paid off?

gmannix1000

Hi All,

Just wondering if anyone has advice for us. The house right beside my parents is recently for sale at a knockdown price (due to condition of it) and my parents are considering buying it as an investment property.theyre on great terms with the seller having been neighbours for many many years. They are both employed full time and should be retiring in the next ten years.

My parents paid off their mortgage on their home a number of years ago and they're considering buying the house next door, renovating it up to standard with the intention of renting it (the rent will cover a bit more than the mortgage and the mortgage would be paid off in roughly ten years maybe. After this, it'll be a nice income when they retire. I know there are tax implications but I think it could be a good little bonus for them looking long-term.we are in a high pressure rent zone with housing demand at an all time high.

Does anyone have any advice or tips? Especially for minimising taxes on the second property and any other implications this may have on them having a second property?

It's early days and they will be getting professional tax and financial information but I just wanted to ask around?

Thanks in advance.

DubCount

Please speak to a financial advisor - this is a big call to make, there is a lot of money involved, and it may or may not be a good idea.

The decision to invest in property should be considered against alternative investments. The choice of property sounds like its poorly thought through. How does the proposed target property compare to other properties in other areas? How much will renovations cost and what will that do to the return on investment? Could your parents sustain mortgage payments, damage repairs and legal costs if they run into a problem tenant? Do they know enough about regulations or would they need to employ an agent? Should the property be purchased through a self administered pension scheme?

Property letting sounds like an easy investment - its not. Get good independent advise, and don't fall into it.

Cuddlesworth

Would be best seeing if they could even get a mortgage and what the repayments would be over 10 years.

antoinolachtnai

The tips are:

If you don’t know about the tax get tax advice.

If you don’t know about building work get a lot of advice in this area.

If you don’t know the ins and outs of letting, again, get advice.

Where are your parents expecting to get builders in a rent pressure zone? The industry is flat out at the moment. They will end up in a 120k project before they know it.

Building/refurb work done on a property you just bought are not allowable as an expense or capital allowance for income tax purposes.

Renting out a property right next door to you is not something that would appeal to an experienced landlord.

Calculate the payback period taking tax into account. (Price of house and refurb /net rent). Is the deal still attractive?

If it were me and I wanted to do it, I would move out of my nice house into this neighboring house and rent my nice house. I would do up this neighboring house whilst living in it. At the end I would probably sell it or maybe rent it. But that is just me. This is unlikely to suit your parents.

This sounds more like an opportunity for a small builder who is an experienced landlord rather than for your parents to be honest.

Samuel T. Cogley

Do they really want a situation where they could have tenants next door that wreck the place and pay them sod all rent for two years? What effect is the going to have on them in retirement? If they can sustain that risk then have at it, otherwise look at alternative investments.

Klonker

Tbh at their age I don't think they should be getting into a risky/stressful investment like this. They should talk to a financial advisor and possibly maximise their pension contributions until retirement if not already doing so.

If rent is slightly more than the mortgage on a 10 year loan then they are going to be paying a lot of tax and will have to make up a big gap between mortgage payments payable and after tax income receivable.

The_Conductor

Honestly- I think its an awful idea.
Your parents will both be retiring within the next 10 years.
Of all the possible investments they could make- becoming a landlord is potentially one of the most stressful things they can do.
They might get lucky and things might go swimmingly- however, you shouldn't have to rely on luck.
If they have paid off their mortgage and have no significant outgoings for the foreseeable- they need to get impartial independent financial advice.
Personally- I'd suggest they look at AVC products to try and bump up their pension rights- and personally I think they would be completely and utterly insane to proceed with their proposed purchase.

April 73

There really isn’t enough info in the first post to be able to make a call on this.
How much money have your parents available for this investment? Do they have the cash to renovate the property? What would the mortgage be relative to the rental income? What other pension provision have they made?

4ensic15

Your parents are probably in their 50's so they will have difficulty getting a mortgage on that account alone. BTL mortgages need a big cash deposit as the loan can only be 70% of the purchase price. Your parents should talk to a mortgage broker to see if this plan is feasible at all. After that you should consider the renovation situation and then the rental situation. Having to deal with tenants and having them next door are going to be new stresses in their lives. I know a guy in his 50s who has a buy to let next door to the house he lives in. His wife is always moaning about it despite the fact that it is mortgage free and producing a good income and there is no hassle from the tenants.

bri007

There are not many bargain properties these days no matter where they are in Ireland, I would imagine it will still be costly, regardless of the condition. There are very few bargains as such in Ireland with the current property crisis.

Taking this into account, if it’s in bad condition it will take a lot of cash, hard work and many stressful days to get it up to rental condition.

Where is the house located, is it near public tansport, trains, Luas buses etc?

Seek financial advice, as it’s a huge financial commitment.

Happy4all

Doesn't sound a great idea. Location might make it viable.

April 73

4ensic15 wrote: »

I know a guy in his 50s who has a buy to let next door to the house he lives in. His wife is always moaning about it despite the fact that it is mortgage free and producing a good income and there is no hassle from the tenants.

His wife needs to cop on. Mortgage-free, with a good income & hassle-free tenants? They have a good thing going there.

3DataModem

antoinolachtnai wrote: »

Renting out a property right next door to you is not something that would appeal to an experienced landlord.

A million times this. I'd rather something at least two buses away.

I think it’s a great idea having tenants right next door, it means you can keep a very close eye on the place without being accused of “showing up” unannounced etc.

Electric Sheep

Jolene Polite Publisher wrote: »

I think it’s a great idea having tenants right next door, it means you can keep a very close eye on the place without being accused of “showing up” unannounced etc.

Few tenants would be keen to live next door to a nosy landlord.

Caranica

I wouldn't recommend being a landlord to my worst enemy and absolutely not to my parents! Getting out was the best thing we ever did.

davindub

Op dont know what you are expecting in terms of comments...but

Buying a property and paying off over a quick period is a good way to build wealth but be careful to allow some redundancy for missed rent payments etc. You won't find another investment that you can get finance for and earn the samw returns possible with property.

Speak to other landlords about how to screen tenants, I've not had a bad tenant yet, but there is a low risk that you will get a bad tenant.

Alkers

If they think they can get a bargain on the house, would they not do it up and sell it on rather than all the hassle of renting. If they can't get a bargain on the house and it goes on the open market, I wouldn't consider it, better off something which isn't next door!

Samuel T. Cogley

Simona1986 wrote: »

If they think they can get a bargain on the house, would they not do it up and sell it on rather than all the hassle of renting. If they can't get a bargain on the house and it goes on the open market, I wouldn't consider it, better off something which isn't next door!

Cracking idea - then they also get to pick who they live next door too.

Not sure if it's a gamble I'd take this close to Brexit but it would certainly be better than being a LL.