The Pro's and Cons of buying an apartment as an investment in Dublin at the moment

jobless

as a novice... how does one calculate rental yield on a property?.. gross/net etc?

Gloomtastic!

jobless wrote: »

as a novice... how does one calculate rental yield on a property?.. gross/net etc?

Cost of property = 100k
Yearly rental income minus all property costs = 10k
Yield = 100k/10k = 10%

Tax is deductible from the profit and is not considered as part of the yield.

Snakeblood

bear_hunter wrote: »

while i agree that property market may have further to fall , when yields of over 6% are available, this in itself offers a compelling investment , the so called experts are predicting that the appartment market ( even in dublin ) has further to fall but if someone can buy a one bed for around 100 k and look forward to 750 euro per month rent , thats 9% per year gross , hard to call its a poor shot

In the absence of context it does, yeah. If I could get 10% on my apartment it may be tempting, if the apartment in question is hanging over a possibly live volcano, it may appear less tempting.

Monty Burnz

bear_hunter wrote: »

while i agree that property market may have further to fall , when yields of over 6% are available, this in itself offers a compelling investment

I disagree. 6% net of all costs (tax, depreciation, voids etc. etc.) isn't bad, but you'd get 5% from state savings certificates without any of the hassle of managing a property, dealing with tenants (worst case scenarios include dealing with tenants who trash the place/decide to stop paying rent and there's nothing you can do but wait for months/years to get rid of them) and so on. And of course shares over the last 100 years have yielded a lot more than 6% (although I imagine many of us have been burned by shares in the last decade) with no tenants ringing you on Saturday morning telling us the toilet is broken and needs to be fixed immediately.

I'd be looking for maybe 12% yield net of costs before I'd consider investing in property (and there are some places that offer that out there - assuming rent allowance doesn't get cut again and again in the next few years).

jobless

Gloomtastic! wrote: »

Cost of property = 100k
Yearly rental income minus all property costs = 10k
Yield = 100k/10k = 10%

Tax is deductible from the profit and is not considered as part of the yield.

thanks

whats considered profit though?.... if i rent an apartment for 750pm and my mortgage is 500 do i pay tax on the 250?.... what if i stretch out the term and mortgage becomes 350?

Gloomtastic!

jobless wrote: »

thanks

whats considered profit though?.... if i rent an apartment for 750pm and my mortgage is 500 do i pay tax on the 250?.... what if i stretch out the term and mortgage becomes 350?

You can claim 80% of your mortgage interest against tax (not the principal though). You also have insurance, management fees to consider etc. Anything left is profit. You then need to deduct second property tax and household charge - they're non tax deductable:mad:s.

jmayo

bear_hunter wrote: »

while i agree that property market may have further to fall , when yields of over 6% are available, this in itself offers a compelling investment , the so called experts are predicting that the appartment market ( even in dublin ) has further to fall but if someone can buy a one bed for around 100 k and look forward to 750 euro per month rent , thats 9% per year gross , hard to call its a poor shot

The worry I would have is that the 6% will not last.
Everything I can think of points to increasing costs driving down the endline.
A huge chunk of our rental market is getting government support.
I would not like to be basing my yield on government budget.

The thing that worries me about taking a chance on property is that it is much harder to divest oneself of the investment if it starts losing money.
Shares you can offload in hours, a property not so easy.

I think if you are not loan dependent then it could be good bet.

daltonmd

jmayo wrote: »

The worry I would have is that the 6% will not last.
Everything I can think of points to increasing costs driving down that yield.
A huge chunk of our rental market is getting government support.
I would not like to be basing my yield on government budget.

The thing that worries me about taking a chance on property is that it is much harder to divest oneself of the investment if it starts losing money.
Shares you can offload in hours, a property not so easy.

I think if you are not loan dependent then it could be good bet.

Was going to post the same. Between dwindling disposable income and possible further cuts in rent allowance, whether you rent to RA recipients or not, it will affect rental prices.

bear_hunter

Monty Burnz wrote: »

I disagree. 6% net of all costs (tax, depreciation, voids etc. etc.) isn't bad, but you'd get 5% from state savings certificates without any of the hassle of managing a property, dealing with tenants (worst case scenarios include dealing with tenants who trash the place/decide to stop paying rent and there's nothing you can do but wait for months/years to get rid of them) and so on. And of course shares over the last 100 years have yielded a lot more than 6% (although I imagine many of us have been burned by shares in the last decade) with no tenants ringing you on Saturday morning telling us the toilet is broken and needs to be fixed immediately.

I'd be looking for maybe 12% yield net of costs before I'd consider investing in property (and there are some places that offer that out there - assuming rent allowance doesn't get cut again and again in the next few years).

state savings might offer a similar yield but their is no capital appreciation and thats before we consider how safe the euro or savings in an irish institution are , property in ireland might not be at the bottom but it is still cheap by any yardstick right now , lack of credit is the main thing keeping it supressed , at least in good locations

as for stocks , the majority of people loose money in stocks , its not simply enough to sit on them like a hen on an egg , you need to know when a stock is over bought or over sold , anyone who bought microsoft ( a rock solid company ) in the year 1999 , is well down on their investment , anyone who bought apple at the same time is up a fortune yet would your average amateur have been able to seperate the two a decade ago , im all for having a stock portfolio aswell but i think property is a sensible investment as part of a diversified portfolio


12% on property is only possible in a poor location ( outside dublin most likely ) where appreciation is likely to be non existant , im getting 12% of a div on shares in france telecom right now , i bought the stock at a near twelve year low in may , its going nowhere in the next few years price wise but everyone needs a phone so its not going to disapear either , the difference between a snoozing giant like france telecom and a one bed appartment in port laoise i can off load frances version of vodafone at the click of a mouse , you could pick up a one bed appartment in any provincial town for 50 k or less and bring in a rent of around 500 euro per month but try getting rid of it


ps , what are peoples opinion on the location of stoneybatter in dublin 7 , i know its not a rathmines or anything fancy but i would have thought its not harlem either

Monty Burnz

bear_hunter wrote: »

state savings might offer a similar yield but their is no capital appreciation and thats before we consider how safe the euro or savings in an irish institution are

On the other hand, Irish apartments offer capital depreciation. Apartment prices will continue to fall off a cliff for the next few years.

Gloomtastic!

Can we please keep the pro's and cons of buying property to another thread? OP started this one to prove/disprove whether you can make money from property investment at this time. I believe the numbers will speak for themselves at the end of the year.

bear_hunter

Monty Burnz wrote: »

On the other hand, Irish apartments offer capital depreciation. Apartment prices will continue to fall off a cliff for the next few years.

they,ve already fallen off a cliff and they wont tumble everywhere from here on , add to that , if this were to happen , it would be a reflection of a general malaise in the markets across the board , hence stocks in general would nose dive aswell

Monty Burnz

Gloomtastic! wrote: »

Can we please keep the pro's and cons of buying property to another thread?

Agreed, we should probably leave the macro stuff off this thread.

Gloomtastic! wrote: »

OP started this one to prove/disprove whether you can make money from property investment at this time. I believe the numbers will speak for themselves at the end of the year.

Although I doubt the case will be proven in a year or less...

Monty Burnz

bear_hunter wrote: »

they,ve already fallen off a cliff and they wont tumble everywhere from here on , add to that , if this were to happen , it would be a reflection of a general malaise in the markets across the board , hence stocks in general would nose dive aswell

Dublin apartments - those that might hold up best - have been falling for 5 years and fell around 20% this year. There's no reason they wouldn't carry on falling - albeit at a decreasing absolute amount - for the next 5 years, in fact I expect them to.

There's also no reason why Irish property prices can't fall while shares (especially the 99% of companies that aren't Irish) rise. The rest of the world isn't as fascinated by Irish property as Irish people are.

bear_hunter

Monty Burnz wrote: »

Dublin apartments - those that might hold up best - have been falling for 5 years and fell around 20% this year. There's no reason they wouldn't carry on falling - albeit at a decreasing absolute amount - for the next 5 years, in fact I expect them to.

There's also no reason why Irish property prices can't fall while shares (especially the 99% of companies that aren't Irish) rise. The rest of the world isn't as fascinated by Irish property as Irish people are.

the appartment market in dublin is down about 60% at this stage , were it to head over another cliff like you suggest , we would be looking at early nineties prices , this isnt greece

i hasten to add , im refering to the dublin market , appartments in many parts of the country may indeed be worth less than a packet of peanuts, thier are micro markets in the capital right now , let alone the country as a whole

Monty Burnz

bear_hunter wrote: »

the appartment market in dublin is down about 60% at this stage , were it to head over another cliff like you suggest , we would be looking at early nineties prices , this isnt greece

Yes, unlike Greece, we are not in an IMF programme...oh no wait, we are.

The_Conductor

I've split off the posts discussing the pro's and cons of buying apartments in Dublin as investment properties, into a separate thread of their own, from Darren's Property Diary thread.

Shane

jmayo

bear_hunter wrote: »

they,ve already fallen off a cliff and they wont tumble everywhere from here on , add to that , if this were to happen , it would be a reflection of a general malaise in the markets across the board , hence stocks in general would nose dive aswell

Oh ffs.
Newsflash the price of Kerry Group or Elan shares is not dependent on the price of Irish apartments. :rolleyes:

Isn't it marvellous that there are still people out there that actually believe that good or high property prices are essential to a proper functioning economy.

Maybe the construction malaise can have a disproportionate affect on the ISEQ because such big players in the Irish stock exchange include construction related companies like CRH, Kingspan and any dip in their stock price can have a bigger affect on the index.
So it was when the banks collapsed.

But other non constrcution related companies like Kerry, Glanbia, Fyffes, Elan could be flying.
Usually you can find when one investment is doing poorly people move their money into other forms of investment.

bear_hunter wrote: »

the appartment market in dublin is down about 60% at this stage , were it to head over another cliff like you suggest , we would be looking at early nineties prices , this isnt greece

Why don't you go and study a bubble curve.
You might realise that prices usually go back to what they were before the bubble began to start.
Now some might say the bubble began in mid to late 90s when prices started rising.

BTW we are closer to Greece than you think.
And you do know that even countries that were not in receipt of bailouts and had massive economies have had huge property bubble bursts.
Check out Japan.

bear_hunter wrote: »

i hasten to add , im refering to the dublin market , appartments in many parts of the country may indeed be worth less than a packet of peanuts, thier are micro markets in the capital right now , let alone the country as a whole

Yes your first bit of sense.

I have noticed a fair few bullish posters recently arriving on the scene here.

I wonder if any of them had previous accounts on boards ?

bear_hunter

Monty Burnz wrote: »

Yes, unlike Greece, we are not in an IMF programme...oh no wait, we are.

you mentioned earlier that you would expect a yield of 12% in order for it to be worthwhile buying property in dublin, tell me , who in their right mind would continue paying rent if a property could be paid for in ten years , you do realise that in order for yields to be in the range of 10 to 12 % , not only must property remain cheap , rents must remain high

take off those smug glasses for a moment and take a more balanced look

Monty Burnz

bear_hunter wrote: »

you mentioned earlier that you would expect a yield of 12% in order for it to be worthwhile buying property in dublin, tell me , who in their right mind would continue paying rent if a property could be paid for in ten years , you do realise that in order for yields to be in the range of 10 to 12 % , not only must property remain cheap , rents must remain high

They don't have to remain high. That's my point. I'd expect rents to fall in the coming years as the vast oversupply of property (300,000 empties), falling disposable income (tax rises etc.) and cuts in RA all take effect. And some people - like me - are quite happy to rent, thanks very much.

bear_hunter wrote: »

take off those smug glasses for a moment and take a more balanced look

Smug? We are back to the property bull tactic of insulting other people when your arguments are shown to be weak.

murphaph

daltonmd wrote: »

Was going to post the same. Between dwindling disposable income and possible further cuts in rent allowance, whether you rent to RA recipients or not, it will affect rental prices.

The effects of reduced disposable income/RS etc. will be HIGHLY regional IMO.

Properties in better locations (more employment) will suffer a lot less than properties tacked on to small towns in the midlands etc.

Indeed, people may well be forced to pay more rent in a city in the hopes of finding work than simply staying put in a town with one closed down factory. People have historically moved to the cities to seek work.

Reducing welfare may make employment more attractive for the not insignificant number of people who currently are better off on welfare in that ghost town, forcing their hand into moving to a city and paying more rent.

I am not saying that these things will happen, but the effects on rent are going to be felt very differently across the country IMO.

jmayo

murphaph wrote: »

The effects of reduced disposable income/RS etc. will be HIGHLY regional IMO.

Properties in better locations (more employment) will suffer a lot less than properties tacked on to small towns in the midlands etc.

Indeed, people may well be forced to pay more rent in a city in the hopes of finding work than simply staying put in a town with one closed down factory. People have historically moved to the cities to seek work.

Reducing welfare may make employment more attractive for the not insignificant number of people who currently are better off on welfare in that ghost town, forcing their hand into moving to a city and paying more rent.

I am not saying that these things will happen, but the effects on rent are going to be felt very differently across the country IMO.

When things gets really bad for employment chances in this country people don't move to a city, they get to fook out of the country.
That has always been the case.
From my experience the ones usually moving to a city have guaranteed job or are students.
Now granted there are better chances of a job in a city, but people can travel for interviews.
This country is not the US, Canada or some such with large geographical areas not near employment spots.

StillWaters

But you can't deny migration to major urban areas. That was apparent from the census statistics. This was driven not only by looking for work, but by high fuel costs, people returning to education and training.

bear_hunter

Monty Burnz wrote: »

They don't have to remain high. That's my point. I'd expect rents to fall in the coming years as the vast oversupply of property (300,000 empties), falling disposable income (tax rises etc.) and cuts in RA all take effect. And some people - like me - are quite happy to rent, thanks very much.

Smug? We are back to the property bull tactic of insulting other people when your arguments are shown to be weak.

you throw out that 300,000 empty property figure as if it has much relevance ( if any ) to the specific market location in question ( the capital ) , ive already acknowledged that appartments in portlaoise or leitrim may be worth nothing for the next ten years

just because you perfer to rent , does not mean most do , this is ireland and people will continue to buy if prices are affordable , all things being equal , property is very attractive in quality locations in dublin right now

a close relative of mine is about to buy a ( house - three bed ) period residence in raneleagh village for 380 k , you could spend that kind of money on a three bed bungalow in meath , kildare and wicklow six years ago

Monty Burnz

StillWaters wrote: »

But you can't deny migration to major urban areas. That was apparent from the census statistics. This was driven not only by looking for work, but by high fuel costs, people returning to education and training.

You can deny it, because it's not true.

Cities suffer amid exodus to commuter-belt counties

While the population of Co Laois increased by one-fifth in just five years, Dublin and the other four cities lost population share

IN THE late 1990s, when strategic planning guidelines for the greater Dublin area were being drafted, nobody involved in this ultimately fruitless exercise could have imagined that, less than 15 years later, Co Laois would lead the population growth scorecard – followed by Co Cavan.

As the figures from census 2011 show, the population of Co Laois increased by one-fifth over the previous five years – more than double the 8.2 per cent growth rate for the State as a whole. Co Cavan grew by 14.3 per cent and Fingal (which at least is part of Dublin) went up by 14.2 per cent.

Yet again, the commuter-belt counties were the main areas of population growth – up by more than 10 per cent since 2006. So it comes as no surprise that Leinster grew marginally faster than the State overall and now accounts for a whopping 54.6 per cent of the population; Munster has only 27.1 per cent.

Depressingly, Dublin and the other four cities (excluding their extensive suburbs) lost population share, having grown by just 3 per cent collectively. For the second census in a row, Cork and Limerick both shrank, while Dublin, Galway and Waterford “grew modestly”, as the Central Statistics Office (CSO) noted.

So in spite of all the apartments etc. that were built (increasing supply) their population share actually fell. The suburbs didn't do as badly.

bear_hunter

murphaph wrote: »

The effects of reduced disposable income/RS etc. will be HIGHLY regional IMO.

Properties in better locations (more employment) will suffer a lot less than properties tacked on to small towns in the midlands etc.

Indeed, people may well be forced to pay more rent in a city in the hopes of finding work than simply staying put in a town with one closed down factory. People have historically moved to the cities to seek work.

Reducing welfare may make employment more attractive for the not insignificant number of people who currently are better off on welfare in that ghost town, forcing their hand into moving to a city and paying more rent.

I am not saying that these things will happen, but the effects on rent are going to be felt very differently across the country IMO.

while the credit enviroment will have a universal effect , if you seperate that issue , , quality locations in dublin are a whole other country to the market in provincial towns

jmayo

StillWaters wrote: »

But you can't deny migration to major urban areas. That was apparent from the census statistics. This was driven not only by looking for work, but by high fuel costs, people returning to education and training.

Yes, but was that people who had migrated for work.
From experience of growing up and living in an area with not a lot of employment options, unemployed people stayed where they were doing odd jobs or on dole.
Eventually most left.
They did not move to Galway or Dublin to go on the dole.
They moved to those cities if they got work or if they were going to college.
If they were moving anywhere to chase for work it was usually to the UK, the US or some other country.
We never had huge amount of migration compared to emigration in this country.
Otherwise the population would not have been 3.5 to 4 odd million for the best part of a hundred years.

bear_hunter wrote: »

...
a close relative of mine is about to buy a ( house - three bed ) period residence in raneleagh village for 380 k , you could spend that kind of money on a three bed bungalow in meath , kildare and wicklow six years ago

Ahh the relatives again.
Stop comparing the current price to what it was during the height of the bubble, because it will always make the current price look reasonable and a bargain.
Compare the price to what it was 12, 14 or maybe even 16 years ago and then you are getting closer to the truth IMHO.

Monty Burnz

bear_hunter wrote: »

you throw out that 300,000 empty property figure as if it has much relevance ( if any ) to the specific market location in question ( the capital ) , ive already acknowledged that appartments in portlaoise or leitrim may be worth nothing for the next ten years

Yes, and you continue to pretend that there are no empties in Dublin and there are no substitution effects between Dublin and the rest of Ireland, or between houses and apartments. There are thousands of empty apartments around Dublin.

bear_hunter wrote: »

just because you perfer to rent , does not mean most do , this is ireland and people will continue to buy if prices are affordable , all things being equal , property is very attractive in quality locations in dublin right now

a close relative of mine is about to buy a ( house - three bed ) period residence in raneleagh village for 380 k , you could spend that kind of money on a three bed bungalow in meath , kildare and wicklow six years ago

The only properties at that price available in Ranelagh are ruins that need hundreds of grand to modernise and make liveable. I keep a close eye on the D6 market, having lived there for most of a decade.

And the fact that something costs less than it used to does not mean it's suddenly good value. If I cut the price of a Mars bar from €100 to €50, would you suddenly want to buy it from me?

bear_hunter

jmayo wrote: »

Yes, but was that people who had migrated for work.
From experience of growing up and living in an area with not a lot of employment options, unemployed people stayed where they were doing odd jobs or on dole.
Eventually most left.
They did not move to Galway or Dublin to go on the dole.
They moved to those cities if they got work or if they were going to college.
If they were moving anywhere to chase for work it was usually to the UK, the US or some other country.
We never had huge amount of migration compared to emigration in this country.
Otherwise the population would not have been 3.5 to 4 odd million for the best part of a hundred years.



Ahh the relatives again.
Stop comparing the current price to what it was during the height of the bubble, because it will always make the current price look reasonable and a bargain.
Compare the price to what it was 12, 14 or maybe even 16 years ago and then you are getting closer to the truth IMHO.

ok then , the property they are buying in reneleagh would have cost in excess of 800 k at the height of the boom , how much would a three bed period in west london cost today , i know dublin is not london but it does have its exclusive neighbourhods and their are still high earners in this country , btw , their buying it to live in , not as an investment

bear_hunter

Monty Burnz wrote: »

Yes, and you continue to pretend that there are no empties in Dublin and there are no substitution effects between Dublin and the rest of Ireland, or between houses and apartments. There are thousands of empty apartments around Dublin.

The only properties at that price available in Ranelagh are ruins that need hundreds of grand to modernise and make liveable. I keep a close eye on the D6 market, having lived there for most of a decade.

And the fact that something costs less than it used to does not mean it's suddenly good value. If I cut the price of a Mars bar from €100 to €50, would you suddenly want to buy it from me?

would you go away with your hundreds of grand , with the majority of builders on the scrap heap , refurbishments cost but a fraction of what they used to

http://www.daft.ie/searchsale.daft?id=652561

you call this a ruin :rolleyes:

Milk & Honey

jobless wrote: »

as a novice... how does one calculate rental yield on a property?.. gross/net etc?

It doesn't make any difference whether you are a novice or not. Rental yield is calculated the same way for everybody.