Do you get much of a return on investment properties?

windmilllane

We have a lump sum to invest and are toying with the idea of buying an investment property or just putting it away for pension. Just wondering if it’s worth it by the time you pay property tax, insurance, maintenance costs, tax, etc

sunnysoutheast

windmilllane wrote: »

We have a lump sum to invest and are toying with the idea of buying an investment property or just putting it away for pension. Just wondering if it’s worth it by the time you pay property tax, insurance, maintenance costs, tax, etc

You are trying to catch a falling knife if you try to become a single property landlord in Ireland at the moment, given the fiscal and regulatory regime which is only getting more hostile.

If you can invest in a pension with tax relief etc. I'd do that. If you really want exposure to the rental market many funds hold REIT investments. That's what we've done.

Even the most committed smaller landlords I know have been selling up for a while now.

pwurple

Nope. Not much, and the rules are constantly changing every year, eroding it further. Far better return on my shares and pension fund.

Are your pensions maxed out? 20% in your 30’s and 25% in your 40’s I think are the limits for AVCs. Much better bang for buck there at the moment as there is the tax rebate and the global markets are growing. I have been getting 11% return on pension the last 7 or 8 years, property yield is practically nil.

handlemaster

I dont think there will many looking to invest with the government constantly changing the posts. All to please the public to get voted in again. The funny thing is in the long run the public will pay more and have less choice.

Fian

I've recently sold a place and I put an offer in on another this week. I have a one bed apartment let out and the offer has gone in on a 3-bed semi D. But it is going at a good price, we will get a decent yield and will need only 1/3rd of cost in mortgage because of the recent sale.

It will also be suitable for one of my kids to live in down the road, has scope for a good extension & is near my house, these are significant factors in the decision for me.

As a rule of thumb you need to be able to rent for twice the mortgage payment if you are going to be able to "break even" on a cash-flow basis, without subsidising from your income. Of course that disregards the "saving" effect of paying down the principal on the mortgage, which can offset the other expenses in the long run, but not in the short term.

Remember that you have to pay tax and only the interest part of mortgage is tax deductible. Do not do it as a speculation on the increase in property prices, do your maths based on the rental yield.

Reit or other investments may be the way to go.

iamtony

windmilllane wrote: »

We have a lump sum to invest and are toying with the idea of buying an investment property or just putting it away for pension. Just wondering if it’s worth it by the time you pay property tax, insurance, maintenance costs, tax, etc

I would say you should speak to a good financial advisor about such matters and not rely on random people on the internet.

Personally if it were me I would only do it if you were paying cash for the house. I wouldn't get a mortgage.
The advise above on maxing out pensions and investing wisely is good before you think about buying houses but it's also boring:pac:

Edgware

The good days for small time landlords is gone. Tax has to be paid now and a lot more regulation. Look elsewhere

normanbond

Being a landlord is a minefield. Stay clear as you are heavily penalized by govt taxes, loads of costly compliance requirements and get the thin edge of the wedge from PTRB. Absolutely everything is weighed in favor of the tenant. So avoid the headaches and empty pockets and look elsewhere...

ted1

Yes and no.

I make a small return , however I’m about a third of the way through my mortgages which have Been paid for by other people.

A Couple of years before I retire I’ll have no mortgage.

So could sell and take a big lump sum or continue pocketing the monthly payments which will fund a nice lifestyle.

Or I could just give them to my kids.

I wouldn’t recommend getting into the game now

DubCount

I would reckon that a gross yield (before costs) is in the region of 8%. Then there is at least 2% in costs (insurance, RTB Registration, property tax, maintenance etc.). So a net yield (before tax) of about 6% if you have no mortgage. Mortgage interest rates for a Buy2Let mortgage is about 5%.

The mortgaged element is working for the bank, with little return for the investor.

Given the risk, and the lack of scope for capital gains, the returns on a mortgaged buy2let don't make sense IMHO. That's why people are bailing out in stead of piling in.

REITs pay a dividend yield of about 3.5%, with someone else worrying about non-paying tenants, overholding, HAP, RTB hearings, phone calls to fix things, trips to the WRC to deal with discrimination allegations.

All things considered, there are easier ways to make money.

windmilllane

Thanks everyone for taking the time to reply I do appreciate it. Looks like it definitely isn’t a good idea to buy at the moment. We definately don’t want to get a mortgage so unless prices were to fall we probably won’t buy.