I'm thinking of buying an apartment - Opinions please!

Shane732

Hi all,

So I'm currently considering dipping my toe into the property market. I'm looking at an apartment in Dublin as an investment property.

I don't currently own my own property and don't intend on buying a property to live in for 3/4 years at a minimum.

I was looking at apartments in and around Grand Canal Dock but the apartments seem overpriced to me. Ideally I'd like a 10% return but if I'm going to buy somewhere in the city centre obtaining a 10% return will be difficult. I'm now looking at Spencer Dock as the apartments generally seem more reasonable price wise.

With certain properties in Spencer Dock I'd probably be able to get an 8.5% return and assuming the property is rented it should cover itself (interest and capital). I'm not looking to make money out of this on an annual basis. Merely want the property to breakeven, including tax.

I'm wondering if an over you have any experience with the rental market in Spencer Dock? There doesn't seem to be a lot of properties on the market in the area and whatever properties are up there are advertised at €1,450 - €1,700 and in my opinion they don't seem to be the best properties in Spencer Dock.

Is assuming a rental income of €1,500 per month realistic for the area. Also how high is the demand in the area?

Thanking you in advance.

athtrasna

Don't forget to factor in management fees. City centre management fees can cost as much as two months rent!

Sheep Shagger

Be sure to do the math, your rental income is taxed at pretty much half less some deductible expenses.

Check the likes of Daft to see what demand is like, there's normally a lot of renters around that area with Google nearby.

Shane732

athtrasna wrote: »

Don't forget to factor in management fees. City centre management fees can cost as much as two months rent!

It's certainly a months rent anyway.

Shane732

Sheep Shagger wrote: »

Be sure to do the math, your rental income is taxed at pretty much half less some deductible expenses.

Check the likes of Daft to see what demand is like, there's normally a lot of renters around that area with Google nearby.

I've got the cashflows done and the income tax covered off (tax consultant by trade).

I suppose the problem is taking the leap into the unknown. It's really the question of whether I want to take on a mortgage at 24.

im invisible

oh you'll never get it so cheap, prices are only going one way...

Gloomtastic!

Shane732 wrote: »

I've got the cashflows done and the income tax covered off (tax consultant by trade).

I suppose the problem is taking the leap into the unknown. It's really the question of whether I want to take on a mortgage at 24.

Do it, review it, change it. But you won't know until you do it!

Shane732

im invisible wrote: »

oh you'll never get it so cheap, prices are only going one way...

I know! I'm told property prices are going to increase 20% in the next two weeks!

In reality the question of whether any of the properties I'm looking at are at the bottom and whether they will increase over the next 5/10/15 years is somewhat irrelevant.

While of course capital appreciation would be brilliant; even if the property dropped, say, 10% over the next 10 years if wouldn't really matter provided the monthly rental income covered the cost of having the property.
The aim of the investment is that I can essentially sell the property mortgage free in a number of years and get, say €200,000, for having had to put in a fraction (<20%) of this amount into the property myself.

I'd be happy with stagnation, once the rental income covers the cost of having the property.

Moonbeam

Remember then 2nd home tax , property tax , prtb registration and the cost of maintenance too.
Personally I would go for it once you have a stable income from elsewhere..

lima

I would like to know how you get on, I've been waiting around with mortgage approval but I've been hesitant to take the plunge!

Incidentally have you factored in whether you'd have to go abroad to work and how that would impact you?

Shane732

lima wrote: »

I would like to know how you get on, I've been waiting around with mortgage approval but I've been hesitant to take the plunge!

Incidentally have you factored in whether you'd have to go abroad to work and how that would impact you?

I don't working aboard is likely for me. If I went big 4 and was getting towards partner level I'd probably have to do a bit of a secondment abroad but it would only by 9 - 12 months, at a guess. Otherwise I don't think having to work abroad is something I'll have to factor in.

I'm a bit away from taking the plunge. I'd have to satisfy myself that Spencer Dock is a good place to buy first. Ideally I'd like Grand Canal but the prices don't seem to make sense to me.

sunnysoutheast

Shane732 wrote: »

The aim of the investment is that I can essentially sell the property mortgage free in a number of years and get, say €200,000, for having had to put in a fraction (<20%) of this amount into the property myself.

Not being more geared than I was at the time was a mistake I made in my earlier, carefree (!) years. I bought fairly well, but didn't stretch things. A guy I used to work with in the late 90s now has 300 rental properties with his brother! 300!!! It's a mistake I am slowly putting right now (in the UK).

My only comments are to remember the old adage that the day you buy is the day you sell, so check out the management company, quality of neighbouring tenants, shared areas, parking situation etc. I've pulled out of a couple of purchases over here as the blocks just didn't look like they were looked after.

Good luck with it.

Marcusm

Shane732 wrote: »

I've got the cashflows done and the income tax covered off (tax consultant by trade).

I suppose the problem is taking the leap into the unknown. It's really the question of whether I want to take on a mortgage at 24.

As a tax consultant, you should know that it is a profession assessed under case II of schedule D and not a trade!!

Seriously though, you can spreadsheet it out and establish parameters with which you are comfortble - interest cover at ddifferent interest rates, consideration of how to deal with rental deficits etc. however, you need also to take account of hassle factor. A friend of one (also a tax consultant, by the by) has a number of rented apartments (4) and some Re easier than others. Some tenants process an inability to change recessed lightbulbs, some refuse to deal with tradespeople (meaning she has to make herself or hubby - also a tax consultant - available). Voids for good city centre apartments are low in Dublin at moment but personally i am pursuing converted buildings with a mix of 1/2/3 bed flats. These offer an easy 10% yield and I can more easily get a managing agent for a 1 site portfolio.

Debt is also much harder to come by than previously and buy to let properties are not high on any banks agenda.

Also, at your point n life, you need to think what impact this might have on borrowing for a PPR. There's not much liquidity with apartments so if you were restricted in total debt burden, you might have to go on renting for longer than you want.

Anynama141

sunnysoutheast wrote: »

Not being more geared than I was at the time was a mistake I made in my earlier, carefree (!) years. I bought fairly well, but didn't stretch things. A guy I used to work with in the late 90s now has 300 rental properties with his brother! 300!!! It's a mistake I am slowly putting right now (in the UK).

For every one of those guys, there's a hundred who ruined themselves.

MMAGirl

Make sure you do your reearch.
Im closing on a 1 bed apartment next week myself.

I think there is a lot of money to be made in property at the moment and want to diversify from the investments I already have.
Much like yourself im planning on having it look after itself for the term of the mortgage and then sell it.

I found this really helpful. Really well worked out figures on it.

Darrens property portfolio diary.

http://www.boards.ie/vbulletin/showthread.php?p=79604340

sunnysoutheast

Anynama141 wrote: »

For every one of those guys, there's a hundred who ruined themselves.

Oh I agree, particularly in Ireland with the "...why not have another 200k and buy a little rental" from the banks.

Personally I wouldn't enter the Irish rental market as an investment. Certain specific areas of the UK, yes, I would and I am.

djimi

Putting the financial side of things aside for a second, the single biggest question you need to ask yourself is do you want to get into the business of being a landlord? Are you prepared to actually deal with tenants; if they have an issue are you willing/able to deal with them in a timely fashion? Are you prepared for phone calls in the middle of the night when a pipe bursts? If the boiler goes in the middle of winter will you have the funds to repair/replace it in a timely fashion (ie more or less immediately)? There are an awful lot of accidental landlords in Ireland at the moment, and quite a lot of them seemingly would give anything to get away from being a landlord. Are you absolutely certain that you want to enter into such a business, and are you prepared to run your business properly?

RATM

I wouldn't enter property as an investment either. There are much better profits to be had elsewhere - stock markets for example- the likes of the Dow or S&P have all now regained the losses of 2008. You can't say the same about Irish property which just shows what a deep dark hole the market it in.

OP before you make the plunge with property for a 20 year investment I challenge you to pick out ANY 20 year period of the Dow Jones. I'd be pretty confident that the Dow would beat property hands down on a 20 year investment. In the last 100 years it has had an annual appreciation of 9.4%. And unlike property it is a liquid asset and carries no risk of fire or tenants who won't pay or any of the other myriad of pitfalls that a landlord can fall down.

Some observations from historical stock market gains
http://observationsandnotes.blogspot.ie/2009/03/average-annual-stock-market-return.html

9.4% annual return over the last 100 years some going. That is after two world wars and several black Fridays, Tuesdays, 1970's Oil Crises, Dot Com bubble and bust, 2008 financial crises. If you took out the Great Depression and the two world wars then the Dow Jones would be averaging somewhere in the region of 11-12% returns annually.

In my opinion if you are going for a long term 20 year investment then the stock markets will give you better returns and far less risks than property. With Irish property the chances of capital appreciation over the next 20 years is overly dependent on political decisions of government, bankers and NAMA, when you invest in Irish property you are exposing yourself to decisions made by gombeens.

If you invest in an index tracking the Fortune 500 then you are exposing yourself to the decision making of 500 of the smartest CEO's in America.

I know which grouping I'd rather invest in.

MMAGirl

djimi wrote: »

Putting the financial side of things aside for a second, the single biggest question you need to ask yourself is do you want to get into the business of being a landlord? Are you prepared to actually deal with tenants; if they have an issue are you willing/able to deal with them in a timely fashion? Are you prepared for phone calls in the middle of the night when a pipe bursts? If the boiler goes in the middle of winter will you have the funds to repair/replace it in a timely fashion (ie more or less immediately)? There are an awful lot of accidental landlords in Ireland at the moment, and quite a lot of them seemingly would give anything to get away from being a landlord. Are you absolutely certain that you want to enter into such a business, and are you prepared to run your business properly?

I've decided to outsource that end of it.
I have an agent (one that friends have been using for similar for years) engaged to get the tenants and deal with anything that comes up. They can phone me during normal hours if money needs to be spent and discuss it with me, or if its an emergency use their discretion.

Thats going to cost me 7.5% of the rent. I will have no dealings whatsoever with the tenants. I can do the accounts myself. They'll only take a couple of hours once a year. I already do them for my friends anyway.

My friends have had zero void periods in the last 8 years (im sure this can only happen in Dublin though). Agent always has someone to move in the day a previous tenant moves out. Worst case scenario for me is if i cant let at all ever then the mortgage payment for the month is less than a days wages. Or I could take money out of another investment and just pay the mortgage off, or sell.

As it is the mortgage is backed up by money on deposit and is very little. tbh used to spend more on cigarettes in a month than the mortgage will be.

Ive already maxed out my risk in the markets, so property is just a way of diversifying for me.

Anynama141

sunnysoutheast wrote: »

Personally I wouldn't enter the Irish rental market as an investment. Certain specific areas of the UK, yes, I would and I am.

Well it's good that you have your eyes open to the downsides. I'd be worried about buying in the South East of England as they are so reliant on the FIRE economy and their proximity to London - and prices in London itself have never recovered downwards since their own bubble. Prices in the North of England and elsewhere seem to be receding to more reasonable levels.

Glenbhoy

Shane732 wrote: »

I don't working aboard is likely for me. If I went big 4 and was getting towards partner level I'd probably have to do a bit of a secondment abroad but it would only by 9 - 12 months, at a guess. Otherwise I don't think having to work abroad is something I'll have to factor in.

Most secondments are about 2 yrs, but I think you're getting a little ahead of yourself with that statement anyway.

I guess you have the numbers worked out, although I'm surprised about the results you're getting tbh (the returns seem on the high side) and I'm sure you're aware of the many potential downsides that may manifest themselves in the next few years therefore it seems like the idea is a goer.

One thing to consider is that if you do decide to purchase a property to live in, the other mortgage will be taken into consideration, of course it could be well above water by then and we could be back booming, but if we're not......

Shane732

MMAGirl wrote: »

Make sure you do your reearch.
Im closing on a 1 bed apartment next week myself.

I think there is a lot of money to be made in property at the moment and want to diversify from the investments I already have.
Much like yourself im planning on having it look after itself for the term of the mortgage and then sell it.

I found this really helpful. Really well worked out figures on it.

Darrens property portfolio diary.

http://www.boards.ie/vbulletin/showthread.php?p=79604340

Interesting that 1 bed apartments seem to be a the preferable route from an investment perspective.

sunnysoutheast

Anynama141 wrote: »

Well it's good that you have your eyes open to the downsides. I'd be worried about buying in the South East of England as they are so reliant on the FIRE economy and their proximity to London - and prices in London itself have never recovered downwards since their own bubble. Prices in the North of England and elsewhere seem to be receding to more reasonable levels.

I don't want to derail the thread too much but I only consider very specific areas in and very close to the major Thames Valley commuter towns. Supply is very tight though, decent new builds usually sell off-plan in a matter of days.

jesus_thats_gre

im invisible wrote: »

oh you'll never get it so cheap, prices are only going one way...

Yep, down

true

Property in Dublin is still over-valued. In many county town parts of the country apartments can be bought for less that 40 grand. As people want to move out of the city towarsds a better quality of life, more organic food, less traffic and pollution, lower costs , etc, I can see property in Dublin falling some way more yet.

Shane732

Glenbhoy wrote: »

Most secondments are about 2 yrs, but I think you're getting a little ahead of yourself with that statement anyway.

I guess you have the numbers worked out, although I'm surprised about the results you're getting tbh (the returns seem on the high side) and I'm sure you're aware of the many potential downsides that may manifest themselves in the next few years therefore it seems like the idea is a goer.

One thing to consider is that if you do decide to purchase a property to live in, the other mortgage will be taken into consideration, of course it could be well above water by then and we could be back booming, but if we're not......

Totally getting ahead of myself with the statement. Was merely pointing out that the only way I'd be going abroad would be if I was aiming for a partnership in a Big 4 and even at that there are any number of variables.

In relation to the figures - well of course it's totally dependant on how much I put down myself at the start and how long I run the mortgage over.

My gut is telling me that it's probably still too early to be looking at this at a real investment opportunity.

Shane732

djimi wrote: »

Putting the financial side of things aside for a second, the single biggest question you need to ask yourself is do you want to get into the business of being a landlord? Are you prepared to actually deal with tenants; if they have an issue are you willing/able to deal with them in a timely fashion? Are you prepared for phone calls in the middle of the night when a pipe bursts? If the boiler goes in the middle of winter will you have the funds to repair/replace it in a timely fashion (ie more or less immediately)? There are an awful lot of accidental landlords in Ireland at the moment, and quite a lot of them seemingly would give anything to get away from being a landlord. Are you absolutely certain that you want to enter into such a business, and are you prepared to run your business properly?

I'd more than likely outsource that side of things. In any event, I've plenty of family members who are landlords so I'm well aware of what it's like.

Anynama141

sunnysoutheast wrote: »

I don't want to derail the thread too much but I only consider very specific areas in and very close to the major Thames Valley commuter towns. Supply is very tight though, decent new builds usually sell off-plan in a matter of days.

Doesn't that sound a lot like a peaky market though? I'd be very worried about buying in or around London, to be honest.

What kind of net yield are you looking at after all costs? Are you thinking of interest only or do you plan to pay off the capital as you go? Are you relying on capital appreciation?