Save for second House (home)

tiobraid

Hi,

I bought a house last year and am a year to the day in the house. I'm lucky that i don't have a huge mortgage and i am renting out two rooms. My plan has always been to use this as an investment property and save for 6-7 years before I purchase my real home and maybe settle down! I've given my details below and enquiring if people think I should continue to over pay my mortgage or not to. I'm conscious of the tax implications on a rented property.

Details
Age 30 Salary €44000
Mortgage €98,000 (35 years) 3.5% Location Galway Suburbs
Monthly Repayment is €407 but have been paying €774 (overpaying since the 3rd month)
Income from Tenants €700
Outlay on Property Tax, Water, Bins, Internet, Property Mgt, etc is €190 per month
Gas and Electricity are split 3 ways (Average €30 each per month)

My thinking is to reduce the repayments to €600 which will give me an extra €12,000 in savings in 6 years. (Mortgage will be paid off in 18 years, which will allow me around 17 years of Profit from this house)
If I do this I can comfortably save €7,500 per year.

I am also lucky enough to have forestry which is due for thinning this year. Income is about €4000 every 5 years for the next 15 years and approx. €120,000 in 20 years time. I'm hoping the thinning income will go some way to car upgrades, etc.

I would also be hopeful of wage increases in the next few years.

I don't have a pension and I'm not sure I want to go that way. I'd be interested in anyones opinions. My main concern is you only get tax relief on interest paid on the rented property and as the mortgage lowers the interest is less. Over the course of the mortgage I want to ensure that the rented house is breaking even at best. Online calculators suggest this could be tricky. Maybe I shouldn't overpay at all once I've the second house and pay off one final lump sum? Anyone with knowledge of a second rented property maybe able to advise. Thanks.

gingercordial

Hi tiobraid! I am afraid that since you are in Ireland and this is a UK site you are unlikely to find people here with much experience of Irish tax on pensions, rental income, deductions and so forth, nor on the Irish economy/housing market or law around being a landlord. You would be better off asking your questions on a personal finance site in Ireland or indeed making an appointment with a qualified financial adviser. Best of luck!

tiobraid

Hi, thank you for your reply. I googled Irish sites and this one came up. So I just assumed.

Thanks very much for your reply and letting me know!