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Correct real estate strategy for someone like me (Ireland)?

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zander1983

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Jan 24, 2021
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31
Hi
I know little about real estate investment but want to get into it asap because of inflation. Here are my circumstances.

I have savings of 165k (79k was inherited). Im an IT Consultant and my earn 92k per year. I pay myself 60k and keep the rest in my company account. The top rate of income tax here in Ireland starts at only 35k, at around 40k you're paying a marginal rate of 50%. I reduced down my salary from 92k as I got sick of paying so much tax. Im using the money into thw company account to buy stocks and BTC.

I rent in Dublin, paying 1200 per month for a 1 bed. Im looking to buy a property, or hopefully 2 (rent out the 2nd). Im in Ireland and a deposit of 10% is required for a first home and 30% for a second, third etc. Rental income is subject to income tax. There's capitals gains tax too. In general, what is the best strategy for someone like me? Im thinking to try to get a 1 bed for around 315k (putting 31k down), and after buy a 2 or 3 bed for 400k (120k down) and rent this. Is this a good strategy?

By the way, I using BTC as a long term savings account. Recently, spare money per month goes into this, and spare money after buying probably will too.

Thanks
 
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Fox

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I had a thread on this before, and I don't think there is any "great" way to do this.

The Irish market is imo a scam.

Since it's based on your yearly earnings and multiplied by 3.5 to set your loan limit...

- you either have to pay a LOT of tax upfront to qualify (and then buy an overpriced house)

- or pay yourself less to save on tax and then buy something very cheap - which won't be possible in Dublin

Personally, I didn't feel like getting robbed on income tax, only to buy an overpriced house and get taxed again, and then be taxed for everything from owning a Television to having running water (not a joke).

My approach my to just not buy in Ireland.
At least not until the next major crash anyway.
 

zander1983

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Jan 24, 2021
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I had a thread on this before, and I don't think there is any "great" way to do this.

The Irish market is imo a scam.

Since it's based on your yearly earnings and multiplied by 3.5 to set your loan limit...

- you either have to pay a LOT of tax upfront to qualify (and then buy an overpriced house)

- or pay yourself less to save on tax and then buy something very cheap - which won't be possible in Dublin

Personally, I didn't feel like getting robbed on income tax, only to buy an overpriced house and get taxed again, and then be taxed for everything from owning a Television to having running water (not a joke).

My approach my to just not buy in Ireland.
At least not until the next major crash anyway.
Yes houses here are overpriced, and they will become more and more overpriced, for many decades to come - so its still a great investment. Ireland is so mired in bureaucracy thats theres simply no way to build new houses and get through all the insane regulation) to meet demand. Isn't it an opportunity? I see the first house as necessary since Im paying 1200 in rent, and as a store of value since inflation is destroying my savings. I see the 2nd as way to earn passive income...

How are you hedging against inflation?
 

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I was an IT contractor in the UK where I bought a few rental properties. I moved to Ireland about 18 years ago and the only house I bought was to live in. I think it’s way overpriced here. Youngsters can’t afford to buy, or even rent sometimes.

Personally, if I was in your position again I’d get IT work that’s remote, move out of Dublin, buy somewhere to live, and figure out how to grow more passive MRR until it overtakes my IT contracting revenue.
 
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How are you hedging against inflation?

Probably not the answer you are looking for, but I just decided to leave Ireland.

I love the country but hate the constant taxes on anyone who makes money.
 

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How are you hedging against inflation?
By providing a service that helps businesses make money. It seems to be in demand even when money’s tight.
 

zander1983

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Jan 24, 2021
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I was an IT contractor in the UK where I bought a few rental properties. I moved to Ireland about 18 years ago and the only house I bought was to live in. I think it’s way overpriced here. Youngsters can’t afford to buy, or even rent sometimes.

Personally, if I was in your position again I’d get IT work that’s remote, move out of Dublin, buy somewhere to live, and figure out how to grow more passive MRR until it overtakes my IT contracting revenue.
Difficult for me to leave Dublin, have a gf here, a good job (After 2 years of remote working I'd hate to go back to it).

I understand that houses are overpriced. So isn't it an opportunity? If you can afford 2 (which I can), you can rent 1.

Regarding passive income and starting a business, I've given up on that dream for now.
 
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zander1983

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Jan 24, 2021
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Probably not the answer you are looking for, but I just decided to leave Ireland.

I love the country but hate the constant taxes on anyone who makes money.
Is it that much better elsewhere? Where did you go?
 

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Is it that much better elsewhere? Where did you go?

I left Ireland years ago, travelled for quite a bit, and live in Poland now.

It's around half the price of Ireland and way more relaxing in general.

If moving is possible you got a lot of options within just a few hours flight.
 

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I understand that houses are overpriced. So isn't it an opportunity? If you can afford 2 (which I can), you can rent 1.
Do you think Dublin house prices in today's money will go up in the next few years, or down?
I wouldn't be surprised if they drop like they did 10+ years ago.
 
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biophase

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Hi
I know little about real estate investment but want to get into it asap because of inflation. Here are my circumstances.

I have savings of 165k (79k was inherited). Im an IT Consultant and my earn 92k per year. I pay myself 60k and keep the rest in my company account. The top rate of income tax here in Ireland starts at only 35k, at around 40k you're paying a marginal rate of 50%. I reduced down my salary from 92k as I got sick of paying so much tax. Im using the money into thw company account to buy stocks and BTC.

I rent in Dublin, paying 1200 per month for a 1 bed. Im looking to buy a property, or hopefully 2 (rent out the 2nd). Im in Ireland and a deposit of 10% is required for a first home and 30% for a second, third etc. Rental income is subject to income tax. There's capitals gains tax too. In general, what is the best strategy for someone like me? Im thinking to try to get a 1 bed for around 315k (putting 31k down), and after buy a 2 or 3 bed for 400k (120k down) and rent this. Is this a good strategy?

By the way, I using BTC as a long term savings account. Recently, spare money per month goes into this, and spare money after buying probably will too.

Thanks
Why don’t you get the two or three bedroom home first. You can put less money down and it can create income.

How much can you rent a bedroom for? What is the current interest rate on the loan that you would get?
 

zander1983

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Jan 24, 2021
52
31
Do you think Dublin house prices in today's money will go up in the next few years, or down?
I wouldn't be surprised if they drop like they did 10+ years ago.
I look at it in 10 years chunks. At that lens, up. Even year on year I think they will keep going up - theres mountains of regulations and bureaucracy to go through to build something in Ireland, so demand will continue outstrip supply. My parents wanted to put a Veelux window in - they had to film out a 48 page planning permission form.
 

zander1983

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Jan 24, 2021
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Why don’t you get the two or three bedroom home first. You can put less money down and it can create income.

How much can you rent a bedroom for? What is the current interest rate on the loan that you would get?
Im took old to be living with strangers!

Renting a room in Dublin is insane. You can easily charge 1,000 euro per room. The interest rate would be 3%
 
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biophase

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Im took old to be living with strangers!

Renting a room in Dublin is insane. You can easily charge 1,000 euro per room. The interest rate would be 3%
So you could buy the 1br, then rent it out for $1200. Then buy the 2-3 br for yourself.
Or, buy the 2-3br and rent it out, then buy the 1br for yourself.

How do the cashflow numbers work out at 3%. I imagine it would be close on the 1br.
 

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Biophases strategies are good but his approach is naturally from an American perspective. The banking rules and requirements along with the tax laws are massively different here making some things more advantageous to do than others.

As Fox alluded to, trying to purchase a property while self employed is almost crazy impossible without paying a bunch of needless tax. Zander doesn't have that problem as he is employed so that tax will be paid anyways. Plus his income figure taken into account by banks is the gross income not net which is what self employed people face.

The two most important factors to take into account for anyone purchasing for the first time in Ireland are the Capital Gains Tax rules and the Rent a Room Relief Tax Break.


This means you won't pay tax on any gains if you occupy the home as your own property for over 12 months.


You can rent a room in your property for up to 14k euro a year tax free.

The best strategy for the first purchase is to buy and live in the place for 12 months while renting up to the 14k limit. This means in year two your declared income will be 92k per year + 14k tax free bringing you up to 106k on paper for a bank application when applying for that second purchase loan. Also, in reality that 14k is worth almost the same as a 30k wage increase in work due to it being tax free. You can then possibly sell the first property if you want to generate more cash or just hold onto it.

Lots of people start getting into tricky accounting procedures then to continue to take advantage of the tax benefits such as buying through siblings, their kids, parents or others. It's really up to yourself.

You may not want to live with others due to age/spouse or other factors but it really is the way to generate amazing returns in the first few years.

There are other ways around it too though. I have helped a lot of people convert sections of their properties into self contained units that they rent to students or on Airbnb. If you leave an interior door in place between it and the main part of the property it still qualifies on paper as the same dwelling and can be used for these renter tax breaks. You can just lock the door, soundproof it and block it off with a wardrobe or bookcase. You can then build a new exterior door at the side of the house (if the new door is at the front of the house you'll require planning permission) that the tenant/guest can enter through so you never have to interact or share the space with them.
 

biophase

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You can rent a room in your property for up to 14k euro a year tax free.

The best strategy for the first purchase is to buy and live in the place for 12 months while renting up to the 14k limit. This means in year two your declared income will be 92k per year + 14k tax free bringing you up to 106k on paper for a bank application when applying for that second purchase loan. Also, in reality that 14k is worth almost the same as a 30k wage increase in work due to it being tax free. You can then possibly sell the first property if you want to generate more cash or just hold onto it.
Wow, that is a pretty big tax savings. This is a fast way to get ahead. $14k tax free a year makes purchasing a 3 or 2 bedroom vs 1 bedroom a no brainer.

With these 2 tax rules, I would be buying the largest home I could and then renting out a room. The strategy being that a larger home will appreciate more and you are able to sell it tax free while having someone pay for more than half your mortgage.
 
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zander1983

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Jan 24, 2021
52
31
Biophases strategies are good but his approach is naturally from an American perspective. The banking rules and requirements along with the tax laws are massively different here making some things more advantageous to do than others.

As Fox alluded to, trying to purchase a property while self employed is almost crazy impossible without paying a bunch of needless tax. Zander doesn't have that problem as he is employed so that tax will be paid anyways. Plus his income figure taken into account by banks is the gross income not net which is what self employed people face.

The two most important factors to take into account for anyone purchasing for the first time in Ireland are the Capital Gains Tax rules and the Rent a Room Relief Tax Break.


This means you won't pay tax on any gains if you occupy the home as your own property for over 12 months.


You can rent a room in your property for up to 14k euro a year tax free.

The best strategy for the first purchase is to buy and live in the place for 12 months while renting up to the 14k limit. This means in year two your declared income will be 92k per year + 14k tax free bringing you up to 106k on paper for a bank application when applying for that second purchase loan. Also, in reality that 14k is worth almost the same as a 30k wage increase in work due to it being tax free. You can then possibly sell the first property if you want to generate more cash or just hold onto it.

Lots of people start getting into tricky accounting procedures then to continue to take advantage of the tax benefits such as buying through siblings, their kids, parents or others. It's really up to yourself.

You may not want to live with others due to age/spouse or other factors but it really is the way to generate amazing returns in the first few years.

There are other ways around it too though. I have helped a lot of people convert sections of their properties into self contained units that they rent to students or on Airbnb. If you leave an interior door in place between it and the main part of the property it still qualifies on paper as the same dwelling and can be used for these renter tax breaks. You can just lock the door, soundproof it and block it off with a wardrobe or bookcase. You can then build a new exterior door at the side of the house (if the new door is at the front of the house you'll require planning permission) that the tenant/guest can enter through so you never have to interact or share the space with them.

Hey I just saw this reply, really nice advice here. Problem for me is I have a partner and we're expecting our first child. So renting the spare room isnt an option.

Other issue Im having is I pay myself 55k out of the 92k (I got sick of handing the Irish government nearly 40k in income tax for them to piss up against the wall). Of the remainder, I use on business expenses, put most of it into a pension, bought shares and a few other things. So I've nothing left. The bank are calculating my mortgage off of the 70k. So Im being limited to 245k mortgage :( I had thought they would calculate it off the 92K (which I had being paying myself in previous years). So now Im struggling to afford a 2 bed for me and my partner.

Also, given that rates are increasing, is this a really bad time to be taking out a mortgage? Or still good?
 

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