Update on my Investment Strategy plans as a 26Y/O

[chronoswirl]

@cee_the_atheist

What do you suggest i do next ?

Write a financial advice book, you're doing better than 99.99% of people. Awesome to see your successes, just a shame to see you need to be Ukranian to avail of your successes.

That's not a dig at you, genuinely impressed, it's a dig at the shitshow of a government to allow such blatant discrimination against Irish people.

 

[cee_the_atheist]

@chronoswirl TBF the ARP is a scheme to accommodate Ukrainians that arrive in Ireland

I provide 2 singe rooms for 2 people and receive 1600 euro tax free

Id be mad not too but i alos provide 3 other double rooms on the rental market

 

[earnest1018]

@cee_the_atheist It's a brilliant plan and I wish you all the best. But you are gonna need 5 or 6 people .. and in my experience all you need is one nutjob to balls it all up!

 

[cee_the_atheist]

@earnest1018 Ye i vet the tenants alot . Theres a ridiculous demand for accommodation for rooms currently but im quite strict on what i want and will always have a trial period of a few weeks for everyone

 

[pearlsamuel]

@cee_the_atheist Only things I will flag is the risk concentration you are building in one Irish asset class i.e. real estate, maybe ok to try and accumulate some wealth but you'll need to watch it and take some of the gains out of the properties and diversify it into other more global asset classes to then maintain it. Also be aware of what you are doing when buying mortgaged properties, you are taking out a leveraged loan, some of the highest leverage money average people can get. But it's still leverage and if the position becomes such that you can't service the payments then you put everything at risk. So you need to ensure you give yourself plenty of headroom on the payments and keep some money e.g. emergency fund to hand to bridge any issues. One observation, you took a 15 year mortgage, general rule of thumb is to take one out for the longest duration possible and then simply look to overpay it vs. taking a shorter duration one and even if overpaying to simply reduce the principal not the loan duration. Reason being if things get tough you can always simply revert to the default payment minimum which will be lower at longer duration. A bank won't help you out and extend the duration out if you get stuck unless they really have to.

 

[cee_the_atheist]

@pearlsamuel

al rule of thumb is to take one out for the longest duration possible and then simply look to overpay it vs. taking a shorter duration one and even if overpaying to simply reduce the principal not the loan duration. Reason being if things get tough you can always simply revert to th

Yes both mortgages are 15 years and i did this as i knew i could afford the repayments and its sometimes difficult to overpay due to breakage fees when interest rates are lowering but i agree with you here that because my repayments are so large due to the term length it will hinder me for future properties when they see repayment capacity

In terms of your concentration comment id tend to disagree with you here . My investment plan is pension and property and the pension is an all world vangaurd etf with davy and theres circa 40k in it but yu hae to factor in im only 26 so i cant put any more in as im maxed at 15 % . My pension will eventually surpass my property portfolio i would guess but ill aim for a 50 /50 split . Then any liquid cash will just sit in a high intrest savings account or ill put back into the VWCE fund and pay my 41% exit tax

Previous to buying my second home i had the 80 k i used for it sitting in VWCE in degiro but the tax is shocking whereas if it sits in a pension it grows tax free

 

[pearlsamuel]

@cee_the_atheist The diversification comment relates to asset allocation mainly. Let's say you manage to keep things at 50% on Irish real estate. That's a huge exposure to a very small (globally speaking) real estate market in a small country in. Euro zone. It's not a good risk diversification. All it takes is for any of, another Irish property market crash, Irish economy/political unrest and/or a Eurozone crisis and at least 50% of your portfolio is exposed. The winds are starting to turn against landlords in Ireland and globally from a rights and taxation perspective.

Also, note, even if pensions do grow to equal real estate you can't access them until at least age 50 at best, probably later by time you get there the way political winds blowing.

On taxable brokerage account, to skip around the ETF taxation you can always use UK investment trusts or buy US ETF's via options and exercise them early to get assigned the shares.

 

[cee_the_atheist]

@pearlsamuel Yes i get the diversification ut i have a few points back here but this is just a conversation and not trying to argue or anything as i like hearing different opioions

1. you say 50 % of my assets in property is risky yet its an actual fact that 80 % of irish peoples wealth is tied up in there homes .Im not saing this is a good or bad thing but it is what it is and on that note if house prices fall which in my opinion wont happen in the next 10 years the rental income will always be there so i dont really care if my houses prices get cut in half cause ill always have the cashflow as ill never sell the asssets
2. In terms of pension tbh i plan on been well retired by 50 so it will just be a bonus as ill look to live off the cashflow of the properties and plan to pay down all the mortgages . Probably aim for 3 rental with one Primary residence
3. I haven't done enough research into investment trusts but i will in the new year

But look im 26 years old and have no wife or kids . Things change alot when these come into your life im told so who knows where ill be in 10 years time but ill keep plugging away and alwasy be investing in wherever i can

Thanks again

 

[pearlsamuel]

@cee_the_atheist Ya, no problem I get it.

I would suggest that the way Irish people have done investment historically isn't what best practices look like internationally and is a by-product of the taxation environment (can be worked around) and financial literacy in the country (generally very poor). It might be worth reading up on what happens outside Ireland, some good places to start might be https://www.amazon.co.uk/Little-Boo...&dplnkId=cc4c84f0-c61a-4891-88fe-689982f57e92 and https://rationalreminder.ca/podcast and https://bogleheads.org/ and Ben Felix of PWL Canada and the rational reminder podcast has a great standalone YouTube channel also

.

In general if you put enough time into education in this space you will at least understand the pros/cons of what you are doing and go in eyes wide open.

Personally I don't want to be heavily exposed to Irish real estate, or real estate in general. I will be overweight somewhat because of the principal primary residence gains tax exemption in Ireland which means it is worth using as a vehicle to grow wealth but I won't get into being a landlord. I max out personal pensions and then global equities (not dividend as it's a huge tax drag), global equity passive index funds. Beyond that I focus on growing my income and earnings and have that system in place to then save any excess.

 

[rosyy57]

@cee_the_atheist Pension your doing everything right, retirement is sorted. If you ever move job dont merge the pensions and run two.

Landlord thing.. your call but I wouldn’t do that. You don’t really need to. Easier ways to make money these days.

 

[missaqua]

@rosyy57 Like..
Some examples please

 

[felixclouse]

@cee_the_atheist This has made for an interesting read, fair play for your plan and for posting about it.

A couple of things I’d be weary of though, are the rent a room 14k tax free and the Ukrainian ARP scheme guaranteed to be in place for a given length of time or could they expire at any time? Would you be under pressure if either went?

Is it difficult to vet the Ukranians as tenants, can you try to choose working Ukrainian tenants or are you limited here?

Would you be as well to get a couple of good friends to rent a couple of the rooms, even for a bit less rent, just to help reduce the risk of bad tenants, which would probably be any landlords nightmare.

Keep us posted in another 6 months!