It's 2005 again.. in Chapelizod..!

riclad

IF you are spending 10 k on rent ,and a mortgage is 12k per year ,i think its rational to consider buying a home.
IF we had proper banking regulation it would never have
developed into a crisis.
i think in the long term some people prefer to buy ,especially couples who are having kids.
There,s many single people who rent ,or family,s who live in council homes.
if i was buying an apartment i,d prefer to buy in a
development with 30 units, than say a block
with 500 units.

Duckjob

riclad wrote: »

IF you are spending 10 k on rent ,and a mortgage is 12k per year ,i think its rational to consider buying a home.

I've always thought comparing the monthly mortgage payment today vs monthly rent payment today (while completely ignoring big picture figures such as the cost of the mortgage) is a spectacularly IRRATIONAL way of evaluating the single largest purchase most will make in their lives.

stevedublin

Duckjob wrote: »

I've always thought comparing the monthly mortgage payment today vs monthly rent payment today (while completely ignoring big picture figures such as the cost of the mortgage) is a spectacularly IRRATIONAL way of evaluating the single largest purchase most will make in their lives.

What do you consider "the cost of the mortgage" if it is not the amount you have to pay back?

Duckjob

stevedublin wrote: »

What do you consider "the cost of the mortgage" if it is not the amount you have to pay back?

I mean Total cost of the mortgage. Like, for example, how borrowing €300,000 over 30 years could mean a total re-payment of €550,000-€600,000 over that term.

Looking at monthly repayment in isolation is financial myopia. Of course, that means it gets pushed all the time by EAs, banker, policitians, and all other sorts of vested interests who thrive on peoples financial myopia.

mdebets

riclad wrote: »

IF you are spending 10 k on rent ,and a mortgage is 12k per year ,i think its rational to consider buying a home.

You are aware, that a mortgage of 12k costs you a lot more per year than 12k?
You have e.g:
Management fees
Household Tax
House insurance
small repairs
money to be put aside for larger repairs in a few years time

Plus the costs associated with not being able to move fairly quickly in case
you loose your job and get a new one at the other side of the country
your new neighbours are anti-social
you need a bigger house, because you get children

magicbastarder

Duckjob wrote: »

I mean Total cost of the mortgage. Like, for example, how borrowing €300,000 over 30 years could mean a total re-payment of €550,000-€600,000 over that term.

this is immaterial if you're comparing rents to mortgages. as you'll spend more on rent. and have no assets at the end.

rent is generally subject to inflation. you'll meet people who are paying maybe a few hundred per month on a mortgage which is about 20 years old, where a renter will be paying maybe €1200 after twenty years.
what would you have advised the renter had they been in a position to buy 20 years ago?

Duckjob

magicbastarder wrote: »

this is immaterial if you're comparing rents to mortgages. as you'll spend more on rent. and have no assets at the end.

rent is generally subject to inflation. you'll meet people who are paying maybe a few hundred per month on a mortgage which is about 20 years old, where a renter will be paying maybe €1200 after twenty years.
what would you have advised the renter had they been in a position to buy 20 years ago?

Not immaterial at all. You're doing the classic diversion of deducing that if somebody doesnt buy now, that means they're going to rent the rest of the lives.

As for what I would advise a renter to do 20 years ago, that's real "if my auntie had b****cks stuff....". If I had a crystal ball, I'd just play the lotto numbers and retire instead...

stevedublin

Duckjob wrote: »

Not immaterial at all. You're doing the classic diversion of deducing that if somebody doesnt buy now, that means they're going to rent the rest of the lives.

So what do you think people should do, rent or buy?

whatnext

Looking at these properties purely as numbers it stacks up very well.

If you are a cash buyer and many were according to what I heard on the radio its even better.

Conservative estimate as follows
Rent - 1000 x 11 months = 11000
Management fee (for the development no lifts or internal issues) say 1000
Insurance, PRTB, letting agent, household charge etc 1200

Net cash return = 8800 pa.

Property price 200,000
Acquisition costs 5000
Net Cost = 205000.

8800 / 205000 = 4.3% return.

That's just a very basic calculation. the real yield is probably closer to 6.3%

That stacks up very favourable to most bank rates.

Slightly harder to make is stack up with a mortgage, from an investment perspective, but it can be done, with a return. NB capital repayments are not a cost in financial terms.

magicbastarder

mdebets wrote: »

You are aware, that a mortgage of 12k costs you a lot more per year than 12k?
You have e.g:
Management fees
Household Tax
House insurance
small repairs
money to be put aside for larger repairs in a few years time

Plus the costs associated with not being able to move fairly quickly in case
you loose your job and get a new one at the other side of the country
your new neighbours are anti-social
you need a bigger house, because you get children

management fees aside (speaking generally, not just in the case of apartments), household tax, contents insurance, and small repairs will not make up a 2k difference.
plus, your rent will go up (or down) with inflation (or deflation). your mortgage will go up (and down) with interest. which do you think will have the biggest cumulative effect, in say 10 years time?

i recently bought. partly because i'm into gardening, and it's an unusual landlord who would let you have free rein with a garden. i'm happy to admit that a lot of other reasons are because of ireland's weak tenancy laws, which are not financial.

with management fees, these are obviously a major factor to take into consideration in the rent vs. debate on apartments.

Duckjob

stevedublin wrote: »

So what do you think people should do, rent or buy?

Dont think there's one right answer - depends on your own circumstances and where you believe the market is going to go say, over the next 12-18 months.

mdebets

magicbastarder wrote: »

management fees aside (speaking generally, not just in the case of apartments), household tax, contents insurance, and small repairs will not make up a 2k difference.

If you do it properly it will.
Alone for repair, it's normally suggested to set aside 1-3% of the value of the house (so that you have enough set aside, when some high cost repairs need to be done in a few years time). Having seen many houses built in the last few years in Ireland, it might be even more, based on some poor quality.

Theboinkmaster

riclad wrote: »

IF you are spending 10 k on rent ,and a mortgage is 12k per year ,i think its rational to consider buying a home.

What about if your home is depreciating €20k per year :cool:

Idbatterim

What about if your home is depreciating €20k per year

this is exactly why it depends on how reasonable the asking price is now and where etc it is located, this is coming from someone who was very very critical of the rip off boom prices, do you think the 1 bed apartments under discussion, asking 105, will only sell for 85k next year? I reckon absolute worst case scenario, is that they lose roughly what would have been paid in rent, i.e. 750-850 per month. More than likely Id say they will be same price, if not marginally higher...

also there are advantages to no lift, i.e. cheaper management fees. Also I would EXPECT that there shouldnt be any repair costs for quite a few years...

BostonB

The more important issue is not the price, but the location, and is it the right kinda properly to buy.

IMO, a one bed apartment is very limited, if you want to share, live with someone, have kids, etc. Apartments make the most sense in large cities/town centers etc. Which is why their value has been decimated out in the suburbs and rural towns. The market also depends on employment, and being able to get loans/mortgages. Considering the worst of austerity is yet to come, and the survival of the euro and even the banks is far from certain. If you are going to be stuck somewhere, its going to have to tick all your accommodation needs, for the life of the mortgage. Begin able to rent it out is far from certain as is rents staying where they are. Considering the glut of properties in Nama and general economic situation, or RA continuing at its current levels.

Bascially be sure you're buying it for the right reasons. Buying it because its cheaper to rent seems a very shortsighted view point. No point it being cheaper, and it being the wrong property for you in 5yrs time.

StillWaters

mdebets wrote: »

If you do it properly it will.
Alone for repair, it's normally suggested to set aside 1-3% of the value of the house (so that you have enough set aside, when some high cost repairs need to be done in a few years time). Having seen many houses built in the last few years in Ireland, it might be even more, based on some poor quality.

There is no way it costs anywhere near 3% to maintain a house. Sure you can spend it upgrading fixtures and fittings, but you shouldn't have to spend more than €1k a year on actual maintenance, considerably less if you are handy yourself, and willing to paint, clear gutters, unblock drains etc.

mdebets

StillWaters wrote: »

There is no way it costs anywhere near 3% to maintain a house. Sure you can spend it upgrading fixtures and fittings, but you shouldn't have to spend more than €1k a year on actual maintenance, considerably less if you are handy yourself, and willing to paint, clear gutters, unblock drains etc.

The 1-3% are not just the yearly maintenance, but also the money to be put aside for the big maintenance jobs a few years down the line.

mdebets

Idbatterim wrote: »

Also I would EXPECT that there shouldnt be any repair costs for quite a few years...

I wouldn't bet on this. They were a receivership sale and not all of them were finished.
So you can expect that the builder might have skipped on quality material and used cheap ones instead. They might also have been open to the environment for some while. So the buy might see hefty repairs much earlier then expected.

StillWaters

mdebets wrote: »

The 1-3% are not just the yearly maintenance, but also the money to be put aside for the big maintenance jobs a few years down the line.

I've included that in the 1k figure, a well maintained house shouldn't need any big jobs. Roofs, windows etc should last the length of the mortgage. Insulation is the only thing I can think would need upgrading every so often, but you get the pay back for that in any case.

BostonB

StillWaters wrote: »

I've included that in the 1k figure, a well maintained house shouldn't need any big jobs. Roofs, windows etc should last the length of the mortgage....

Which parallel universe is this, I want to buy a house there. :cool:

magicbastarder

Duckjob wrote: »

I mean Total cost of the mortgage. Like, for example, how borrowing €300,000 over 30 years could mean a total re-payment of €550,000-€600,000 over that term.

just getting back to this.
200k over 30 years at 4% means total repayments of €343k, or €386k at 5%. at €950 pm to service at 4%, or €1070 at 5%.

but the same place will probably cost €1200 pm to rent at current prices. allowing 2% rent inflation per annum, that works out at (rough calculation) spending €583k over 30 years for renting a similar place.

so, based on the 5% interest rate, buying is €200k cheaper. and you own the property at the end.

granted, the above is based on assumptions about interest rates and inflation rates, but it's worth doing the comparison.

mikemac1

Not sure you'd get 1200pm in Chapelizod

And this place is right on the edge, a fair walk from the bus stop and a nightmare of a road for traffic

1000pm I'd say at the upper range

I haven't looked on daft, you may find 2 beds for 1200 but that's asking price and I doubt they are getting it.

kaymin

whatnext wrote: »

Looking at these properties purely as numbers it stacks up very well.

If you are a cash buyer and many were according to what I heard on the radio its even better.

Conservative estimate as follows
Rent - 1000 x 11 months = 11000
Management fee (for the development no lifts or internal issues) say 1000
Insurance, PRTB, letting agent, household charge etc 1200

Net cash return = 8800 pa.

Property price 200,000
Acquisition costs 5000
Net Cost = 205000.

8800 / 205000 = 4.3% return.

That's just a very basic calculation. the real yield is probably closer to 6.3%

That stacks up very favourable to most bank rates.

Slightly harder to make is stack up with a mortgage, from an investment perspective, but it can be done, with a return. NB capital repayments are not a cost in financial terms.

10 Year National Solidarity Bonds offers 4.14%, a significant junk of which is DIRT free. I'd be looking for a minimum return from property of the risk free rate +3% - i.e. 6%+. Most properties, including Chapelhill, don't offer these returns. Not sure where your 6.3% comes from. There are many other issues / costs you should factor in:

Maintenance costs - initially and in the future. Chapelhill properties are bought as seen - no opportunity for snagging
Risk property is unoccupied for more than 1 month per year
Hassle of being a landlord and managing the letting agent
Risk of exorbitant property taxes in the future
Water charges - possibly the landlord will have to bear these
Risk of property being thrashed by tenants
Risk of problematic tenants and issues with PRTB
Risk that even less mortgage interest will be tax deductible in the future

hmmm

We should ask all potential buyers to sign a document stating that they will not come looking for a bailout from taxpayers if their investments don't work out.

whatnext

kaymin wrote: »

10 Year National Solidarity Bonds offers 4.14%, a significant junk of which is DIRT freeand it will never be any greater than 4.14% either. I'd be looking for a minimum return from property of the risk free rate +3% - i.e. 6%+. Most properties, including Chapelhill, don't offer these returns. Not sure where your 6.3% comes from. There are many other issues / costs you should factor in:

Maintenance costs - initially and in the future. Chapelhill properties are bought as seen - no opportunity for snagging. I quoted a sale price far greater than that achieved on the day
Risk property is unoccupied for more than 1 month per year That is a risk, but an acceptable one, it may be let for 12 months also
Hassle of being a landlord and managing the letting agent done it for 15 years now, its as hard as you make it
Risk of exorbitant property taxes in the future no matter how this is set up, phrased or othrer wise its the tenant who will ultimately bare the cost
Water charges - possibly the landlord will have to bear these and if so will be passed on to the tenant, as a bill or in rent
Risk of property being thrashed by tenants that is a risk
Risk of problematic tenants and issues with PRTB Have had 2 problem tenants over the years one a Doctor!! he was persuaded to leave with out a fuss, the other a drug dealer who I paid off, money very well spent, the good cancel out the bad over time
Risk that even less mortgage interest will be tax deductible in the future I quoted for a cash buyer, but if they touch the mortgage interest relief on tax again there is a whole house of cards going to come down.

Property investment is not what was going on in Ireland for the past 10 years, the majority of it was property speculation, they are quite separate and distinct strategies. I firmly believe that a property investment should be looked at as a 20 year to perpetuity duration. For me its about generating a retirement income. I am mortgaged up to my eyeballs due to an aggressive repayment strategy, but solvent, and will be mortgage free in 10 years.

For me, those properties do stack up, thats my opinion and no more, but they are not for me as I have passed the age where I can wait for them to be repaid.

Duckjob

magicbastarder wrote: »

just getting back to this.
200k over 30 years at 4% means total repayments of €343k, or €386k at 5%. at €950 pm to service at 4%, or €1070 at 5%.

but the same place will probably cost €1200 pm to rent at current prices. allowing 2% rent inflation per annum, that works out at (rough calculation) spending €583k over 30 years for renting a similar place.

so, based on the 5% interest rate, buying is €200k cheaper. and you own the property at the end.

granted, the above is based on assumptions about interest rates and inflation rates, but it's worth doing the comparison.

While i'd take issue with some of your figures there (I highly doubt for example that interest rates won't go well over 5% in the next 30 yrs), at least it's big-picture anaylsis of renting vs buying.

My point was that just looking at a monthly rent payment vs a monthly mortgage payment and deducing from that that it's cheaper to buy is a nonsense.

Also, the point I also make is people always seem to fall back to comparing buying vs renting the rest of their lives. I don't think I know anyone that doesn't intend to buy at some point.

Making an evaluation at any point in time on whether to buy now, or to wait another 12 months and reevaluate is a highly worthwhile exercise and can save 10s of thousands of euro depending on market conditions.

ballooba

W123-80's wrote: »

From an investors perspective they are definately a good buy, particularily the 1 beds.

I suspect you're making casual use of hyperbole, but if "From an investors perspective" something were "definately (sic) a good buy", then profit would be guaranteed. This would imply zero risk, market forces would kick in, prices would rise and the opportunity would quickly disappear. Let's see what happens.

ballooba

riclad wrote: »

IF you are spending 10 k on rent ,and a mortgage is 12k per year

Only if you were comparing like for like i.e. you can mortgage the property your rent for marginally more (mortgage interest < rent).

Even then, you're ignoring what will happen in the future. Which is almost reasonable, seeing as no one has a crystal ball. I think we can make a reasonable guess at what is going to (or rather not going to) happen in the macro environment in the medium term though.

W123-80's

ballooba wrote: »

I suspect you're making casual use of hyperbole, but if "From an investors perspective" something were "definately (sic) a good buy", then profit would be guaranteed. This would imply zero risk, market forces would kick in, prices would rise and the opportunity would quickly disappear. Let's see what happens.

Fair point. Replace the word "definately" with "possibly".

rickydune

Hey, Long time lurker 1st time poster here, just took the long awaited plunge for the two bed here, I was hoping to hook up with some of the others who took the plunge and perhaps lever their experiences for survey etc.
As this is only sale agreed any other advice with this
area would be great