Scenario and assumptions
Sarah is 49 and has an eligible self-directed pension valued at €300,000. She is considering a residential investment property priced at €500,000 with expected rent of €3,000 per month. This is a simplified educational illustration, not a recommendation or quotation.
| Property price | €500,000 |
|---|---|
| Pension-funded deposit | €250,000 |
| Indicative pension mortgage | €250,000 |
| Loan-to-value | 50% |
| Illustrative variable rate | 5.90% |
| Term and basis | 15 years, capital and interest |
Repayments if the rate stayed at 5.90%
- Monthly repayment: approximately €2,096
- Annual repayments: approximately €25,154
- Total of 180 monthly repayments: approximately €377,309
- Total interest over 15 years: approximately €127,309
The rate is variable, so the actual payment and total interest can change.
Illustrative purchase cash
| Item | Illustration |
|---|---|
| Pension-funded deposit | €250,000 |
| Standard residential stamp duty assumption | €5,000 |
| Lender application fee at 0.5% | €1,250 |
| Lender legal fee at €1,500 plus VAT | €1,845 plus outlays |
| Illustrative allowance for trustee, provider, pension advice, valuation, survey and other costs | €5,000 |
| Purchase cash before reserve | €263,095 plus outlays |
The €5,000 professional-cost allowance is only an example. Each cost must be quoted, and fit-out, refurbishment, insurance, VAT or unusual legal work may increase the requirement.
Rental cash flow and yield
| Item | Annual amount |
|---|---|
| Gross rent | €36,000 |
| Operating-cost allowance at 20% of rent | (€7,200) |
| Net property income before mortgage | €28,800 |
| Indicative mortgage repayments | (€25,154) |
| Indicative annual cash surplus | €3,646 before unplanned costs |
The gross rental yield is 7.2%. Gross rent covers the indicative mortgage by about 1.43 times before operating costs and about 1.14 times after the assumed costs. Qualifying rent is generally exempt from income tax within a Revenue-approved pension arrangement when applicable conditions, including RTB registration for a qualifying residential tenancy, are satisfied.
Liquidity after completion
Six months of repayments is approximately €12,577. Six months of the assumed operating costs is €3,600, producing an illustrative reserve of about €16,177. Purchase cash of €263,095 plus that reserve is approximately €279,272 plus legal outlays. From a €300,000 pension, roughly €20,728 would remain before costs above the assumptions.
That is not automatically an adequate margin. The provider, trustee or lender may require a higher reserve, and the pension must also fund fees, vacancies, repairs and retirement benefits.
Interest-rate stress test
| Illustrative rate | Monthly repayment | Annual repayment | Cash surplus after €7,200 costs |
|---|---|---|---|
| 5.90% | €2,096 | €25,154 | €3,646 |
| 6.90% | €2,233 | €26,797 | €2,003 |
| 7.90% | €2,375 | €28,497 | €303 |
At 7.90%, almost all assumed net rent is required for the mortgage. A one-month vacancy removes €3,000 of rent and would make the illustration cash-flow negative. Property value, rent, costs and interest rates can all move against the investor.
Change the assumptions
Use the calculator to test another property price, mortgage percentage, rate, rent, costs and reserve period.
Open the calculatorThe 15-year example also assumes an applicable normal retirement age after the final repayment. Sarah’s age alone does not establish that this term is permitted.