price a house is worth?

boardie100

i've read this somewhere before but as an investor.... what price would he/she pay for a house that would command a rent of 1000 a month? there is some calculation i've seen before?...
i guess in the current market it's only something like this that can give you the real worth of a house

riclad

i think they say you should get 7 to ten percent return per year.
SAY you buy house for 100k, should get at least 7 to 10 k rental income.Per year.SAY rent is 1000 per month, 12k per year,
i wouldn,t pay more than 110k in that case.
you can buy book s on investment,financial advice in most bookshops.
Which go into more detail ,re property purchase,taxes,expenses,rate of return.

THE Government is reducing rent allowance,including single mothers.,this may push the average
house rent down in certain areas.

zac8

Multiply one months rent by 120 to show you what to pay in order to achieve 10%.

Multiply by 100 for 12%.

boardie100

riclad wrote: »

i think they say you should get 7 to ten percent return per year.
SAY you buy house for 100k, should get at least 7 to 10 k rental income.Per year.SAY rent is 1000 per month, 12k per year,
i wouldn,t pay more than 110k in that case.
you can buy book s on investment,financial advice in most bookshops.
Which go into more detail ,re property purchase,taxes,expenses,rate of return.

THE Government is reducing rent allowance,including single mothers.,this may push the average
house rent down in certain areas.

thanks.... my only problem with this though is that in a lot of average areas where rent is 1000 a month for example..the price to buy the house seems way out of whack with the above, even after all the falls over the past few years....
Is it that people put more value on a place when buying it to live in over its actual value to an investor?....
Would there still be any professional investors buying in the current market if this is the case?

riclad

Most people who buy are not investors,people buy to be near work, live in a nice area ,to be close to luas ,trains.
Most people do not think what is the annual, return on capital,in relation to taxes,expenses ,depreciation ,vs cost of loans ,interest rates etc
ie most people are not accountants or financial advisers.
IN some areas theres a shortage of houses,3bed,with garden.
SO prices maybe higher than the ten per cent investment,formula.
Theres no such thing as the perfect economy or market,
because people do not always act in a logical rational manner,
as we have seen in the celtic tiger.
eg people were borrowing 300k for a house 60 miles from dublin ,and commuting to work.
Some people will pay an extra 100k to live in a certain post code ,or to live
on the southside,even though theres perfectly nice areas on the northside.
eg i know someone who bought investment 2bed apartment,140k
the rental doesn,t even come close to covering the mortgage.
AS its not in dublin very hard to get tenants,
single mothers wont rent it on rent allowance ,
cos they prefer to rent a 3bed house.
ITS probably worth maybe 80k now.

boardie100

riclad wrote: »

Most people who buy are not investors,people buy to be near work, live in a nice area ,to be close to luas ,trains.
Most people do not think what is the annual, return on capital,in relation to taxes,expenses ,depreciation ,vs cost of loans ,interest rates etc
ie most people are not accountants or financial advisers.
IN some areas theres a shortage of houses,3bed,with garden.
SO prices maybe higher than the ten per cent investment,formula.
Theres no such thing as the perfect economy or market,
because people do not always act in a logical rational manner,
as we have seen in the celtic tiger.
eg people were borrowing 300k for a house 60 miles from dublin ,and commuting to work.
Some people will pay an extra 100k to live in a certain post code ,or to live
on the southside,even though theres perfectly nice areas on the northside.
eg i know someone who bought investment 2bed apartment,140k
the rental doesn,t even come close to covering the mortgage.
AS its not in dublin very hard to get tenants,
single mothers wont rent it on rent allowance ,
cos they prefer to rent a 3bed house.
ITS probably worth maybe 80k now.

i guess there musnt be any investor buyers around at the moment then because even at todays prices i dont see any value using the calculation method above

lomb

Its worth what someone is willing to pay...
Personally I think its worth t when the rent-maintainance-insurance-agent fees are greater than the cost of funds ie 4%+other costs
On that basis property is good value now, on the other hand theres an oversupply of certian property and prices are going to plunge furthur so why buy now?

gurramok

boardie100 wrote: »

thanks.... my only problem with this though is that in a lot of average areas where rent is 1000 a month for example..the price to buy the house seems way out of whack with the above, even after all the falls over the past few years....

That's because of Rent Supplement, it controls up to 50% of the market.

EricPraline

boardie100 wrote: »

i guess in the current market it's only something like this that can give you the real worth of a house

In the current market, most professionals working in the auctioneering or banking industries do not appear to have the slightest clue how to value property (assuming that they did previously). Our economic fortunes are unpredictable, sales volumes are very low, and there seems to be huge variations between local markets depending on the exact area and property type. So I'm not sure some rough all-encompassing rule of thumb is going to tell you very much.

Some people compare price per square foot, but that will only get you so far. For instance, I don't see the point of comparing price per sqft for an apartment or terraced house in one area, versus a semi-d or detached house on a large plot in another.

Another option would be to compare pre-bubble prices in the area that you are interested in, and adjust for inflation. But those prices will be difficult to find, and some areas will have improved or declined in the last 12+ years.

Imho short answer is that there isn't an easy way to gauge "worth" in Ireland's broken property market.

riclad

in certain areas, it maybe a good time to buy ,
IF you have maybe 130k saved up ,ie not borrowing much.
IN the boom ,it was crazy, people borrowing 200k, to buy a house,
rent it for 1100 per month.
ie the rent didnt even cover the mortgage,
i think those people were stupid, and thought ,ah sure
in 15 years time it,ll be worth 300k.
Sure ,ill make 100k profit.
They never made a profit, now they are in negative equity ,struggling to pay the loan.And they have
added stress, dealing with tenants, insurance,tax,es etc
it was like the stock market,
it takes a certain amount of stupid people to
keep the market going, AND pay big bonus,s
commisions to bankers and brokers.