What would you bid? 4 bed, Dundrum

Glowing

Hi there,

We're first time buyers, not rushing to buy but seriously looking and have had mortgage approval.

We've recently found this property which ticks all the boxes for us - given its only a 5 min walk from Dundrum village and the Luas and is situated on a lovely secluded st ...

http://www.myhome.ie/residential/search/brochure/5-laurel-drive-dundrum-dublin-co&-city/OLKUA400070

What would you bid? Currently on the market for 524,000 ...

Thanks!

p.s perhaps you wouldn't bid at all?

the_syco

Picture number 2... is that the front door? I ask as the house looks nice and open, and the moment you open the door, you'd get a lot of heat loss.

=-=

Looked on daft, and I preferred http://www.daft.ie/1394962, as it has a porch. Looks like you're getting a lot more for your buck. I admit it's €6,000 more, but it's closer to the LUAS, and looks a wee bit bigger. As for price, I don't know. The location is good, it's a fair sized house, but as the property prices are falling, dunno.

El Stuntman

applying the 14 year rule:

monthly rental is realistically €1,500 (and dropping fast! let's be generous)

11 month's occupancy p.a. = €16,500

This place is worth about €231,000

The asking price is in la-la land compared to the actual economic value. I would not even bother entering into negotiations.

Gurgle

Reasonable sized 4-bed, needs modernization by the sound of it.
I'd guess €350k as a 'realistic' value, but who knows what their bottom line is.

El Stuntman

OP, you're FTBs right?

how much of a deposit do you have saved and what's your annual income?

are your jobs secure?

gurramok

Dundrum ain't Foxrock. Over half a mill for that house, insane.

Whats it worth to you?

D3PO

El Stuntman wrote: »

applying the 14 year rule:

monthly rental is realistically €1,500 (and dropping fast! let's be generous)

11 month's occupancy p.a. = €16,500

This place is worth about €231,000

The asking price is in la-la land compared to the actual economic value. I would not even bother entering into negotiations.

14 year rule is for investors, and even then its a US based rule so it has no place here. Besides which a homebuyer and an investor are poles apart.

El Stuntman

D3PO wrote: »

14 year rule is for investors, and even then its a US based rule so it has no place here. Besides which a homebuyer and an investor are poles apart.

it's a globally accepted rule of thumb. What's your alternative?

You're right, homebuyers and investors have totally different motives in purchasing property. It still doesn't mean that a homebuyer should make a purchase decision which makes no financial sense. I would argue that buying this gaff for 525k makes no financial sense. I've provided some rationale for my argument. Do you think it does make sense?

barryfield

El Stuntman wrote: »

it's a globally accepted rule of thumb. What's your alternative?

You're right, homebuyers and investors have totally different motives in purchasing property. It still doesn't mean that a homebuyer should make a purchase decision which makes no financial sense. I would argue that buying this gaff for 525k makes no financial sense. I've provided some rationale for my argument. Do you think it does make sense?

not unless you want lose 30/40% by 2012

D3PO

El Stuntman wrote: »

it's a globally accepted rule of thumb. What's your alternative?

You're right, homebuyers and investors have totally different motives in purchasing property. It still doesn't mean that a homebuyer should make a purchase decision which makes no financial sense. I would argue that buying this gaff for 525k makes no financial sense. I've provided some rationale for my argument. Do you think it does make sense?

Dont mistake my reply for thinking the asking price here is reasonable !! Im just saying a home is being bought because its a home not to make x annual yield.

purchasing a home isnt 100% about it being the best finincial decision you could ever make no more than buying a car is, but obviously there needs to be a balance,

El Stuntman

barryfield wrote: »

not unless you want lose 30/40% by 2012

not to mention the interest repayments on this negative equity....double whammy

El Stuntman

D3PO wrote: »

Dont mistake my reply for thinking the asking price here is reasonable !! Im just saying a home is being bought because its a home not to make x annual yield.

purchasing a home isnt 100% about it being the best finincial decision you could ever make no more than buying a car is, but obviously there needs to be a balance,

I totally agree with you but purchasing a home purely on the basis of societal pressure ('get on the housing ladder' mentality), fear (of prices going up forever out of your reach), nesting instinct or any other kind of non-rational emotion - without reference to the financial logic of the transaction - is nuts.

Of course, banks etc are supposed to protect us from our worst instincts when it comes to advancing the mortgage for house purchases (by applying conservative lending criteria) but as we know, they didn't do a very good job of that....:(

D3PO

El Stuntman wrote: »

I totally agree with you but purchasing a home purely on the basis of societal pressure ('get on the housing ladder' mentality), fear (of prices going up forever out of your reach), nesting instinct or any other kind of non-rational emotion - without reference to the financial logic of the transaction - is nuts.

Of course, banks etc are supposed to protect us from our worst instincts when it comes to advancing the mortgage for house purchases (by applying conservative lending criteria) but as we know, they didn't do a very good job of that....:(

agreed hense the need for balance. would you buy a home for 25% less than market in an undesirable area (assume we are not in a falling market for a min) just because its a good financial deal ?

spockety

D3PO wrote: »

14 year rule is for investors, and even then its a US based rule so it has no place here. Besides which a homebuyer and an investor are poles apart.

Could be a fair point.

Historically here we've used 3x first salary plus 1x the second salary of the household.

A 92% mortgage on this property would be 482k.

To borrow at historical rates for the Irish property market, 1 person in the household should be earning at least 120,000 a year. If the primary earner is earning 120,000, then so too should the secondary earner. The more the primary earner earns, the less the secondary earner needs to earn, and so on.

USER X

OP, my brother bought a house in Dundrum recently. Its a 3 Bed semi with bigger gardens and he bought it for 330K so this property is way over-priced. Have you seen a BER report for the property? With my brothers place, were stripping the plaster off the inside of any external walls to upgrade it to Fibre backed plaster board to improve the BER, new double glazed windows, rewiring the place, replumbing with a high efficiency Gas boiler (Previouly a diesel boiler), all the internal walls were very thin (1" cavity) so replacing them with 3" cavity stud walls. I dont like the look of the back of that house you posted. Good luck with the house hunt!

El Stuntman

D3PO wrote: »

agreed hense the need for balance. would you buy a home for 25% less than market in an undesirable area (assume we are not in a falling market for a min) just because its a good financial deal ?

if the area was undesirable, why the hell would I be looking to buy a home there?

25% less than 'market' may or may not represent good economic value. In the case of 99% of properties in Ireland, it currently doesn't.

Glowing

El Stuntman wrote: »

OP, you're FTBs right?

how much of a deposit do you have saved and what's your annual income?

are your jobs secure?

Thanks everyone for your opinions!

Yeah we're FTB's - combined income of 110k and savings to cover 10 or 15% of asking price....

It's just so hard to know what to do since we're getting married next year and would love to be in our own house by then. We're in a great situation at the moment and not paying rent, but this could go bad at any time and we'll be turfed out, could be in 2 weeks or 6 months, we just don't know.

BTW. We're both in permanent, IT/Engineering related jobs.

Tks

spockety

Glowing wrote: »

Thanks everyone for your opinions!

Yeah we're FTB's - combined income of 110k and savings to cover 10 or 15% of asking price....

It's just so hard to know what to do since we're getting married next year and would love to be in our own house by then. We're in a great situation at the moment and not paying rent, but this could go bad at any time and we'll be turfed out, could be in 2 weeks or 6 months, we just don't know.

BTW. We're both in permanent, IT/Engineering related jobs.

Tks

It's a decision that gets tied up with emotion, so you'll have a hard time really taking a cold hard look at it from a financial point of view.

Do you think you'd be well able to continue paying the mortgage if one of you lost your job, or one of you decided to become a stay at home parent if and when you have children?

If it was me, I think if you can service it on one income without sacrificing the other areas of your life, and you really like the house, then go for it. But you're not me, and you might have a different take on it.

D3PO

El Stuntman wrote: »

if the area was undesirable, why the hell would I be looking to buy a home there?

.

Exactly my point. Buying a home is more than just about the financial value of the purchase .... So you like i would suggest most people would allow the "HOME" factor to override the financial aspect.

excatly why 14 x investor formula plays no part in somebody purchasing a home

spockety

D3PO wrote: »

Exactly my point. Buying a home is more than just about the financial value of the purchase .... So you like i would suggest most people would allow the "HOME" factor to override the financial aspect.

excatly why 14 x investor formula plays no part in somebody purchasing a home

Is it only emotion that should play a part?

Or do you think there is any quick and dirty formula that someone could use to determine if their emotions are either going to bankrupt them, or make them buy a property that is way overvalued?

amacca

My opinion for what its worth is Id think carefully about about forking over €525k for that house.

Would it be so bad to find a nicer place to rent for a year or two and see what way the market goes. Given that its unlikely to shoot up anytime soon and if it does reach a bottom it will in all likelihood bump along or increase very modestly. You're greatest ally is time, up to now it was working against you as a prospective buyer (have to buy now or may never get on the property ladder etc) now its working for you so use it to your advantage.

As a buyer with mortgage approval you can afford to wait whereas a lot of sellers selling now see whats coming down the tracks and are selling because they are afraid they will have to accept much less for the property in the future. Again if they do increase (highly unlikely imo+ Rents are dropping, wages are dropping, unemployment will increase etc -> this will only put downwards pressure on the price of houses in the near future at least) surely it will be by tiny amounts but in all likelihood there will be an increase in properties on to the market over the next couple of years when peoples one year mortgage payment protection expires and the one year moratorium on repossession expires after this.

On the otherhand, if you absolutely love the area, simply must own a home right now and cant see any superior product on the market and are 100% sure of your income and 100% that you're going to be living there in marital bliss for a long time and you have taken a look at what the repayments on a mortgage of that size would be if interest rates were to climb to say 5-6% over the next 4 to 5 years and you would be happy forking over this amount of cash (consider what disposable income youll be on and the possibility of children meaning one wage going or childminding fees etc) then by all means go for it but for your own financial comfort Id try to get it at a much lower price than €525k. Sellers are probably only putting this asking price on it realising that no matter what price they ask buyers will low ball it.

D3PO

spockety wrote: »

Is it only emotion that should play a part?

Or do you think there is any quick and dirty formula that someone could use to determine if their emotions are either going to bankrupt them, or make them buy a property that is way overvalued?

there has to be a balance of course, unless your a billionare who can be reckless and frivileous but you cant just go 14 multiplied by x oh asking price is more thats bad value. not when your talking about a home

spockety

D3PO wrote: »

there has to be a balance of course, unless your a billionare who can be reckless and frivileous but you cant just go 14 multiplied by x oh asking price is more thats bad value. not when your talking about a home

Ok, so what exactly do you do?

You've said already that you don't want us to mistake your criticism of the 14x rule for saying this house represents good value.

So assuming you don't agree with the price, what kind of calculation have you done that would make you dismiss this valuation? (genuinely curious)

El Stuntman

Glowing wrote: »

Thanks everyone for your opinions!

Yeah we're FTB's - combined income of 110k and savings to cover 10 or 15% of asking price....

It's just so hard to know what to do since we're getting married next year and would love to be in our own house by then. We're in a great situation at the moment and not paying rent, but this could go bad at any time and we'll be turfed out, could be in 2 weeks or 6 months, we just don't know.

BTW. We're both in permanent, IT/Engineering related jobs.

Tks

15% of asking price = 78,000 in savings, well done on saving that much. Let's round it down and say you have 70k saved (you don't want to use all your savings up)

let's say you manage to get the place at asking price - 10% = 470k approx.

so your mortgage will be about 400k. If we hold the 5% rate assumption over the life of the mortgage, you will pay approx 300k in interest plus the capital repayments.

on a 25 year mortgage at 5%, your monthly repayment would be about €2,400 (I am excluding TRS as I expect this to be abolished in the near future - we saw the first moves towards it in the last mini-budget)

if I take your 110k joint income and make a simplistic assumption that you both earn 55k, your monthly after-tax income is 6,400 combined. You'd be paying out almost 40% of your income in mortgage repayments! way above the recommended safe limits

conclusion: don't buy this house

reasons:
(1) you can't afford it (per the above)

(2) it will be cheaper next year and cheaper again the year after that (we are in for long, slow Japanese-style bust)

(3) there has never been a period of greater uncertainty in the Irish economy - this is not the time to be taking on a massive commitment.

D3PO

spockety wrote: »

Ok, so what exactly do you do?

You've said already that you don't want us to mistake your criticism of the 14x rule for saying this house represents good value.

So assuming you don't agree with the price, what kind of calculation have you done that would make you dismiss this valuation? (genuinely curious)

Well right now its probably fair to say nobody can determine reasonable value.

If I could Im sure Biffo would have been asking me to run NAMA

all you can do is use current economic indicators and future projections to make a basis around what a reasonable value is for said property in said area. I dont know the answer I genuinely dont and as somebody who expects to be in neg equity myself by the years end im hardly a ringing endorsement for buying "value"

also it hasnt been pointed out but unlike an investor you would need to link in other things to help define value. TRS and rental savings amongst others.


personally speaking my crystal ball is telling me were still about 20% overpriced, but then again what do I know ?

D3PO

El Stuntman wrote: »

15% of asking price = 78,000 in savings, well done on saving that much. Let's round it down and say you have 70k saved (you don't want to use all your savings up)

let's say you manage to get the place at asking price - 10% = 470k approx.

so your mortgage will be about 400k. If we hold the 5% rate assumption over the life of the mortgage, you will pay approx 300k in interest plus the capital repayments.

on a 25 year mortgage at 5%, your monthly repayment would be about €2,400 (I am exlcuding TRS as I expect this to be abolished in the near future - we saw the first moves towards it in the last mini-budget)

if I take your 110k joint income and make a simplistic assumption that you both earn 55k, your monthly after-tax income is 6,400 combined. You'd be paying out almost 40% of your income in mortgage repayments! way above the recommended safe limits

conclusion: don't buy this house

reasons:
(1) you can't afford it (per the above)

(2) it will be cheaper next year and cheaper again the year after that (we are in for long, slow Japanese-style bust

(3) there has never been a period of greater uncertainty in the Irish economy - this is not the time to be taking on a massive commitment.

stunt dont forget to add in the stamp duty rate they will have to pay on this as FTB's

El Stuntman

D3PO wrote: »

stunt dont forget to add in the stamp duty rate they will have to pay on this as FTB's

do FTBs still pay SD on second-hand houses? what's the rate?

gurramok

El Stuntman wrote: »

15% of asking price = 78,000 in savings, well done on saving that much. Let's round it down and say you have 70k saved (you don't want to use all your savings up)

let's say you manage to get the place at asking price - 10% = 470k approx.

so your mortgage will be about 400k. If we hold the 5% rate assumption over the life of the mortgage, you will pay approx 300k in interest plus the capital repayments.

on a 25 year mortgage at 5%, your monthly repayment would be about €2,400 (I am exlcuding TRS as I expect this to be abolished in the near future - we saw the first moves towards it in the last mini-budget)

if I take your 110k joint income and make a simplistic assumption that you both earn 55k, your monthly after-tax income is 6,400 combined. You'd be paying out almost 40% of your income in mortgage repayments! way above the recommended safe limits

conclusion: don't buy this house

reasons:
(1) you can't afford it (per the above)

(2) it will be cheaper next year and cheaper again the year after that (we are in for long, slow Japanese-style bust

(3) there has never been a period of greater uncertainty in the Irish economy - this is not the time to be taking on a massive commitment.

Crazy money alright.

If one part of the couple is to have kids or gets ill or just loses their job with a few years, that 40% will skyrocket along with negative equity.

Or as some naieve bulls here say, extend the mortgage to 35years to make it 'affordable' and make them a cashcow for the bank!!

D3PO

El Stuntman wrote: »

do FTBs still pay SD on second-hand houses? what's the rate?

sorry your right my bad. half asleep here

kenmc

D3PO wrote: »

stunt dont forget to add in the stamp duty rate they will have to pay on this as FTB's

Stamp duty = 0 for FTB

The_Chopper

El Stuntman wrote: »

(2) it will be cheaper next year and cheaper again the year after that (we are in for long, slow Japanese-style bust)

The rest of the post I snipped was excellent.

However I disagree with point 2. From my own research I think 1 of 2 things will happen

1. Houses will drop a little more before bottoming out
2. The coutry will go broke and houses will drop around 90% i.e a 500k house will now cost 50k

This is largely linked to how our economy comes out of the recession