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Rental Markets

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  • 19-04-2011 11:03am
    #1
    infamous
    Closed Accounts Posts: 100 ✭✭


    Ive read posts with various opinions on the recent property auction. With people saying it is still crazy to be buying at these knock down prices as property will drop further. Where do people see the rental market going.

    Take the apt in Temple Bar I think it went for in the region of 125k, open to correction. Its is in a good location and will be easily rented. There are three properties in Daft averaging at 983 per month we will take the lowest value 850, assume it is occupied for 11 months of the year which would be quite prudent there still would be a yield of just shy of 7.5%. On the face of it still seems to be a good investment better than sticking it on deposit for a year. Anyone any other opinions?
    www.daft.ie/21021701
    www.daft.ie/21021885
    www.daft.ie/21040459


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    #2
    pmb79
    Registered Users Posts: 6 ✭pmb79


    i think you need to take into account approx 1k mgt fees, cost of upkeep, potential repairs/maintenance, etc and the fact that rental income is subject to universal social charges and presumably the higher rate of income tax, when looking at the yield.

    You might find that the net yield is closer to the deposit rate in a bank.

    On the positive side you will presumably be using leverage by means of a mortgage so will get the benefit of any upside. ( likewise there is also the danger of any downside) . it's in a very good location so should be easy to rent. however, there maybe some more downward pressure on rents coming down the line too with NAMA beginning to move on developers and offloading properties.

    in summary, it looks like a decent medium term investment but i wouldn't expect any spectacular return


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    #3
    ixus
    Registered Users Posts: 2,436 ✭✭✭ixus


    You would also have to take into account the initial outlay on your investment. Is this with 100% cash or has a loan been taken out pay for this in part? If you're paying 7% interest on a 20 year mortgage of 50% of the outlay, well, I'd imagine that would do a lot of damage to the yield.

    Moved to property where you may get a better discussion.


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    #4
    eclectichoney
    Closed Accounts Posts: 4,291 ✭✭✭eclectichoney


    Also those properties you linked to are 1 bed apartments, not studio apartments like the allsop property, which would rent for much lower - I would imagine nearer €600 depending on the condition


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    #5
    Snakeblood
    Registered Users Posts: 4,466 ✭✭✭Snakeblood


    infamous wrote: »
    Ive read posts with various opinions on the recent property auction. With people saying it is still crazy to be buying at these knock down prices as property will drop further. Where do people see the rental market going.

    Take the apt in Temple Bar I think it went for in the region of 125k, open to correction. Its is in a good location and will be easily rented. There are three properties in Daft averaging at 983 per month we will take the lowest value 850, assume it is occupied for 11 months of the year which would be quite prudent there still would be a yield of just shy of 7.5%. On the face of it still seems to be a good investment better than sticking it on deposit for a year. Anyone any other opinions?
    www.daft.ie/21021701
    www.daft.ie/21021885
    www.daft.ie/21040459

    I'd be betting that Rent Allowance will be dropping, which will probably force rents in general down. Also, I'd be using a measurement of 10 months in the year, personally.


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    #6
    infamous
    Closed Accounts Posts: 100 ✭✭infamous


    Thanks for the replys, it is not something I am looking at at present, there are higher returns to be had elsewhere, I just couldn understand some of the posts slating people for picking up property at the auction comments along the lines of some people never learn etc. I thought I was missing something and your replys re mgt fees and the the affect a reduced rental allowance will have on the market makes it clear that this isnt a great investment however it isnt an off the wall investment for someone sitting on cash. It will interesting to see if NAMA go down the route of providing mortgages to buyers, as they will have a vested interest in keeping property prices high.


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    #7
    gurramok
    Closed Accounts Posts: 13,992 ✭✭✭✭gurramok


    infamous wrote: »
    Thanks for the replys, it is not something I am looking at at present, there are higher returns to be had elsewhere, I just couldn understand some of the posts slating people for picking up property at the auction comments along the lines of some people never learn etc. I thought I was missing something and your replys re mgt fees and the the affect a reduced rental allowance will have on the market makes it clear that this isnt a great investment however it isnt an off the wall investment for someone sitting on cash. It will interesting to see if NAMA go down the route of providing mortgages to buyers, as they will have a vested interest in keeping property prices high.

    You have to take account of the fact that the Temple Bar apt is a studio, its not a real 1bed apt. It may well indeed rent out due to its location but will not rent at a 1 bed apt price.

    On NAMA, there are suppose to be around 6000 apts in their possession within the M50. Are there a few thousand buyers for these at a NAMA desired price? Certainly not with how the economy is in the crapper. Just take a look at the 2nd hand market, already a shortage of buyers there at the right price. If NAMA is a real firesale at real knockdown prices, they may just shift but the problem remains in that they are relying on investors with spare cash to buy some of those apts to support a rental market that needs more tenants.


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    #8
    smelltheglove
    Registered Users Posts: 4,503 ✭✭✭smelltheglove


    Rent allowance is holding the rental market up. I reckon as soon as that drops then there will be a noticeable drop in the rental market too. The prices local to us took a little drop recently and then went up again mind not to what they were but not far off.

    The rental scheme is unfair (as a previous home owner who thankfully sold in boom, we were on rental scheme for a time when husband was out of work), although I hope we never have to go on it again and it is stressful going through paperwork etc etc being self employed myself I find it quite ridiculous. The government is paying out shed loads of money on rent that it does not have to, the landlords would not get the money if it were not for the amount of people on rent allowance and once the fat cats have the balls to drop the rent allowance, even by 100 a month the landlords will have to just accept it, the market isnt there anymore people cant afford it and unfortunately for the landlords, they also have to take the pain of the falling economy.


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