Closing on an investment property 16.04.2013

RATM

MMAGirl wrote: »

You can see why your figures are useless then. Sure you don't even know what the mortgage is or what perc deposit I paid.
You just pulled figures out of thin air. yet you come in with workings like they actually mean anything.

They're your figures, re-read the thread, I didn't pull any numbers out of the sky.

But your defensive attitude is making me think that you have

If you want to be an advocate for jumping into buy-to-let apartments while we are at the dawn of the biggest repo program in the history of the state then fair enough, be my guest.

But for your own sake learn the lessons of the past and make sure you've got your sums right.

Victor

MMAGirl wrote: »

Now please go get a life.

Play nice

Moderator

MMAGirl

Victor wrote: »

Play nice

Moderator

Basically I'm being called a I liar when I try to contribute to the conversation. It's typical of the attacks you always get here from people who just hate anything to do with property that doesn't end in financial ruin from the buyer.

Anyone sensible can work out figures properly for themselves on whether what I said is workable or not.
I didn't even start this thread yet it has become a thread specifically to bash me.
I could have got involved in the conversation and maybe helped some people out but now there is just a bad taste here. i'm out.

lima

MMAGirl wrote: »

I think its worth a punt at this point.
Im closing on an investment property tomorrow.
Numbers are good.
Basically I put up 25k deposit and then the mortgage is going to cost me no more than a days wages per month and at the moment the rental income will be twice what the mortgage is.

Thats workable and I think i'll be doing it again soon.
Brother in law already has two apartments in the same place.

If you want to be an advocate for jumping into buy-to-let apartments while we are at the dawn of the biggest repo program in the history of the state then fair enough, be my guest.

There's a reason I am still renting even though I have mortgage approval and 3 times that amount for deposit.

The cards are coming down this year, roll on repo's

gaius c

MMAGirl
I'm an engineer so playing with figures is childsplay to me and you don't seem to realise it but you pretty much gave us all the figures bar the daily salary and I was able to make some assumptions on that.

Just so we're clear on the maths.
You said mortgage equals daily salary.
You said rent equals double that.
You said yield equals 10% so 120 x rent = sale price of the property
You also told us that you paid down a 25k deposit so we can make a stab as to how much you had to borrow but to be honest, I have no idea why you are borrowing when you can buy properties for less than a year of your salary.

Why did I do these sums?
Because your credibility is suspect and I don't believe you. Only a month ago, you were displaying your ignorance re part 4 tenancies and getting extremely defensive when everybody asked you to cease & desist. Now you're some sort of master investor getting yields even Warren Buffet would be happy with?

If you're a credible poster telling the truth, then fine, this is information that should be shared but if you're spoofing and posting suspect figures to push an agenda or troll, then it's reasonable to question those figures. You should appreciate this as good investors are the most sceptical of folk!

gaius c

MYOB wrote: »

Think that's the sweet spot where it might be possible on those calculations. There's 11 one beds in Daft's idea of the city centre under 100k. Some of them are actually pretty central: http://www.daft.ie/searchsale.daft?id=710477

Would you get 770 for that though, I dunno.

Excellent post and if MMAGirl was actually telling the truth it is the type of post she would have made. There's 55 one beds for rent in Dublin 1 and asking rents for the first ten are as follows:
750
850
1050
850
975
850
650
900
750
695

Only one Parnell St address for let and that's going at 695. Assuming that they are similar then that points to 9.3% yield.

Possibly plausible if it wasn't coming from a poster with a habit of flying off the handle and pointing to some defunct thread as her backup when challenged.

StillWaters

There are such yields out there still. Rare enough, but such bargains can be picked up. The problem most people have is accessing finance, also in terms of borrowing, It makes sense to borrow for property even if you have cash reserves.

murphaph

StillWaters wrote: »

There are such yields out there still. Rare enough, but such bargains can be picked up. The problem most people have is accessing finance, also in terms of borrowing, It makes sense to borrow for property even if you have cash reserves.

Some people on this thread are jealous IMO but that's all I'll say about that.

As regards it making sense to borrow even if you have the cash...
I wonder, does it make sense only so long as you are allowed to deduct 75% or mortgage interest and/or your interest rate is low?

Would it still make sense to borrow (assuming you have the cash) if interest rates were 10% and the govt decided to completely strip the interest deduction (they were already way out of line reducing it to 75% IMO, it's a business or it isn't after all!).

So, imagine you had high interest rates (deposits would come nowhere near in this case) and no interest deduction allowed...would it then make sense to plough your own cash into the property?

I understand the "old way" was to leverage as much as possible and hope that capital appreciation would make up for it but that is a dangerous strategy as we have seen.

Thoughts welcome...I'm not an expert on this side of things.

roro2

murphaph wrote: »

Some people on this thread are jealous IMO but that's all I'll say about that.

As regards it making sense to borrow even if you have the cash...
I wonder, does it make sense only so long as you are allowed to deduct 75% or mortgage interest and/or your interest rate is low?

Would it still make sense to borrow (assuming you have the cash) if interest rates were 10% and the govt decided to completely strip the interest deduction (they were already way out of line reducing it to 75% IMO, it's a business or it isn't after all!).

So, imagine you had high interest rates (deposits would come nowhere near in this case) and no interest deduction allowed...would it then make sense to plough your own cash into the property?

I understand the "old way" was to leverage as much as possible and hope that capital appreciation would make up for it but that is a dangerous strategy as we have seen.

Thoughts welcome...I'm not an expert on this side of things.

But you don't need to rely on capital appreciation if you get a sufficient rental yield. Yes, the old way was to ignore rental yield and rely on capital appreciation but that doesn't need to be the case now if you choose your investments wisely.

It is riskier to take on high leverage, but not if you have cash resources and are taking on the leverage for tax efficiency purposes while retaining the cash. It may still make sense to borrow now even if you have the cash. As you say, interest rates are low and there are tax advantages. Just because interest rates may increase in the future and the tax advantages may be removed at some point does not simply mean "ploughing your own cash" into a purchase is the thing to do. Again, just retain the cash and if interest rates or tax structures are no longer advantageous - clear the borrowings. Taking on leverage without any cash is a different story.

murphaph

roro2 wrote: »

But you don't need to rely on capital appreciation if you get a sufficient rental yield. Yes, the old way was to ignore rental yield and rely on capital appreciation but that doesn't need to be the case now if you choose your investments wisely.

It is riskier to take on high leverage, but not if you have cash resources and are taking on the leverage for tax efficiency purposes while retaining the cash. It may still make sense to borrow now even if you have the cash. As you say, interest rates are low and there are tax advantages. Just because interest rates may increase in the future and the tax advantages may be removed at some point does not simply mean "ploughing your own cash" into a purchase is the thing to do. Again, just retain the cash and if interest rates or tax structures are no longer advantageous - clear the borrowings. Taking on leverage without any cash is a different story.

No, I just meant that if those things changed then I guess it would no longer make sense to borrow most likely. Those things (really just the tax advantage I suppose) are what causes it to make sense to borrow even if you have the money.

bobbyg

What was the point of this thread?

gaius c

bobbyg wrote: »

What was the point of this thread?

Bullish troll tries to get a rise out of people and gets burned.

PhilMcGee

I like that idea of the calculation of return on money invested.
Never thought of it that way before, but it makes a lot of sense.

Amount put on the table.
Yearly return as a percentage of that.
Great concept. Kind of like a normal interest calculation after dirt.

About getting a mortgage on investment properties, I think its a good idea to do that for the tax reasons and gearing, but it might not be for everyone, and you certainly dont want to gear to much.

The Nutty M

Nevermind those haters MMAgirl,as you seen in Darren's property portfolio the same type of comments (possibly the same people :rolleyes:) engulfed his thread.The amount of good sound actual evidence he posted was brilliant.The yields are there and you and I both know it.

In the stupid times people were buying properties with below 5% yields but there was no sign of the engineers crunching numbers then like they are now.It's a bit of a cliche but the time is right to invest.I am in the midst of closing on a BTL like yourself MMAgirl and have a modest 8% yield set.Any money made will be an added bonus although all I'm looking for is to own a house or two at the end of it.


I wish you well and hope all goes with fairly smooth sailing.I wouldn't blame you like I don't blame Darren for not posting on the subject anymore.As you know yourself,they're are always hurlers on the ditch and always will be.Picture their names or faces on the punchbag next time you thump it,it gives great satisfaction.:D

Enjoy.

PhilMcGee

The Nutty M wrote: »

Nevermind those haters MMAgirl,as you seen in Darren's property portfolio the same type of comments (possibly the same people :rolleyes:) engulfed his thread.The amount of good sound actual evidence he posted was brilliant.The yields are there and you and I both know it.

In the stupid times people were buying properties with below 5% yields but there was no sign of the engineers crunching numbers then like they are now.It's a bit of a cliche but the time is right to invest.I am in the midst of closing on a BTL like yourself MMAgirl and have a modest 8% yield set.Any money made will be an added bonus although all I'm looking for is to own a house or two at the end of it.


I wish you well and hope all goes with fairly smooth sailing.I wouldn't blame you like I don't blame Darren for not posting on the subject anymore.As you know yourself,they're are always hurlers on the ditch and always will be.Picture their names or faces on the punchbag next time you thump it,it gives great satisfaction.:D

Enjoy.

Can you post a link to that portfolio thread you are posting about. I would be interested in reading it.
This thread caught my eye today and I posted in it.
I have a spreadsheet that I've said im going to post in another thread when I get home. Then I read the rest of this thread and im actually afraid to post it in this thread, :eek: so i think i'll stick to the other one.

Anynama141

The Nutty M wrote: »

In the stupid times people were buying properties with below 5% yields but there was no sign of the engineers crunching numbers then like they are now.

Plenty of 'engineers' crunched the numbers then too - the evidence is all over the internet.

The difference is that they were ignored during the bubble as people were caught up in property hysteria. Now a few more people actually pay attention. Not many, but a few.

The Nutty M wrote: »

I wish you well and hope all goes with fairly smooth sailing.I wouldn't blame you like I don't blame Darren for not posting on the subject anymore.As you know yourself,they're are always hurlers on the ditch and always will be.Picture their names or faces on the punchbag next time you thump it,it gives great satisfaction.:D

That reminds me of something...what was it again...

The Bertie wrote:

"Sitting on the sidelines, cribbing and moaning is a lost opportunity. I don't know how people who engage in that don't commit suicide because frankly the only thing that motivates me is being able to actively change something."

That was Ahern's response to people warning about the property bubble. The were just moaners.

NinjaTruncs

MMAGirl why not put up the numbers, I'm not sure if it's been said already but your calculations have one major flaw that I can see, you're not including the additional money your going to add every month.

Lets say for instance you need to put in an additional 200 a month, don't forget it's not just mortgage shortfall you will have to cover, there is tax and other expenses that will crop up that need to be factored in, so I'd say 200 is a reasonable figure. That would be 2400 a year.

If you're expecting to make a yield of 10% on your 25K that would mean you're getting 2500 a year, however this is less the 2400 in additional money you are going to put into the property so in fact you will only make 100 a year on your 25K. Lets say the 200 a month is more than you'd need to put in lets call it 100 a month that would still only leave you with 1300 a year or 5% without taking into account un-rented time or interest rate increases both of which will occur over the lifetime of your investment.

The above numbers are rough, as they have to be without you providing real values, but you're hope of 10% PA on your initial 25K investment is very optimistic.

PhilMcGee

NinjaTruncs wrote: »

MMAGirl why not put up the numbers, I'm not sure if it's been said already but your calculations have one major flaw that I can see, you're not including the additional money your going to add every month.

Lets say for instance you need to put in an additional 200 a month, don't forget it's not just mortgage shortfall you will have to cover, there is tax and other expenses that will crop up that need to be factored in, so I'd say 200 is a reasonable figure. That would be 2400 a year.

If you're expecting to make a yield of 10% on your 25K that would mean you're getting 2500 a year, however this is less the 2400 in additional money you are going to put into the property so in fact you will only make 100 a year on your 25K. Lets say the 200 a month is more than you'd need to put in lets call it 100 a month that would still only leave you with 1300 a year or 5% without taking into account un-rented time or interest rate increases both of which will occur over the lifetime of your investment.

The above numbers are rough, as they have to be without you providing real values, but you're hope of 10% PA on your initial 25K investment is very optimistic.

I hope she does put them up. One more post mmagirl?
Im going to put mine up in another thread so whoever want to can look them up later.s
I already had 3 investment properties from years ago.
I only just started buying again last year.

From experience though, total vacant time between the 3 is about 4 months in 14 years . Maintenance averages about 500 to 600 per year each. Only costs me about half that because it comes of taxable profit.
Worked out the way she does it im easily getting about 10% per year after taxes and expenses on my initial investment on the properties ive bought in the last year. Theres no point doing that on the ones i had already because they cost very little and the mortgages are very low, and they are trackers, so it doesnt compare to todays climate well at all. They would each give a huge percentage on that calculation. And it would have been even bigger when rents were at their highest.

Thats from memory.
I'll have a look at my spreadsheets when im home and work it out properly.

I found that portfolio thread. I'll read it later.

The Nutty M

PhilMcGee wrote: »

Can you post a link to that portfolio thread you are posting about. I would be interested in reading it.
This thread caught my eye today and I posted in it.
I have a spreadsheet that I've said im going to post in another thread when I get home. Then I read the rest of this thread and im actually afraid to post it in this thread, :eek: so i think i'll stick to the other one.

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

Here's the thread:p. Don't expect too much off anything you post in any thread as you can see the diverse opinions of what is and is not the truth.


Edit
Hadn't read your second reply Phil McGee.Fair do's to you for posting,another person with experience of the market and what it is like,not a hurler on the ditch.

The Nutty M

Anynama141 wrote: »

Plenty of 'engineers' crunched the numbers then too - the evidence is all over the internet.

The difference is that they were ignored during the bubble as people were caught up in property hysteria. Now a few more people actually pay attention. Not many, but a few.

That reminds me of something...what was it again...

That was Ahern's response to people warning about the property bubble. The were just moaners.

Do you accept that a statement made by an engineer about the property market holds as much weight as a politician talking about the property market?

RATM

The Nutty M wrote: »

Do you accept that a statement made by an engineer about the property market holds as much weight as a politician talking about the property market?

I'd trust an engineer a lot sooner than I'd trust a politician.

Engineers use the scientific approach. Politicians read the scientific approach and then spin it whatever way that is needed to further their own agenda.

There were plenty of warnings from posters on here and on the Property Pin about the bubble back in 2006 and they were ridiculed by the political class and the media. If tens of thousands of people had of listened to that prudent advice then they wouldn't be staring down the barrel of repossession and financial ruin right now.

PhilMcGee

Im a number cruncher myself. And the engineers number crunching isnt all that.
Its very flawed. I wont be crossing a bridge he has designed any time soon.
But im not going to get into that argument in this thread. Ive seen what happens. Its like a mob. I'll stick to the other thread. It looks far safer.

RATM

PhilMcGee wrote: »

Im a number cruncher myself. And the engineers number crunching isnt all that.
Its very flawed. I wont be crossing a bridge he has designed any time soon.
But im not going to get into that argument in this thread. Ive seen what happens. Its like a mob. I'll stick to the other thread. It looks far safer.

So rather than offer a counter argument to his number crunching you choose to put your head in the sand and do a runner ?

Just for the record I'm bullish on property investment properties at the moment provided they meet certain conditions as I outlined on Darren's property thread. His buying in Swords is a good strategy as prices are lower than the city centre but rents are almost comparable. Employment in Swords is relatively constant (airport has 5,000+ employees, Hertz has nearly 2,000 and so on). He also got in for sub €100k and has it rented for around 750pm iirc. So that appears to be good business.

But I don't think those same criteria would apply to 90% of the country right now, there are not many locations in Ireland right now where you'd hit the key criteria of location, low prices/10% yields and solid local employment. Swords is one of those few areas and therefore I think Darren was absolutely correct to take his risk. I do not however think it is correct to take that same risk in the vast majority of locations in Ireland right now as a majority of locations will fail on at least one if not more of those conditions.

PhilMcGee

I cant find the other thread I was going to post in so at the risk of the wrath of the engineers i'll post it in here and run.

I cant copy the spreadsheet in so im going to just type it in here.
Ive rounded numbers roughly too.
Dont be too hard on me if there are typos.
This is from one property bought last year.
The others bought in the last year arent very different at all. Just different prices and rents etc.


Location : Dublin
Advertised price : >100000
Purchase price : 88000
Deposit : 20000
Mortgage : 68000
Monthly mortgage payments : 390
Total outlay : 21500 ( 1500 for solicitor and other small costs before letting)
Rent received per year : 9360 - Rented 5 days after purchase went through when it was cleaned up and ready

Yield : >10%

==================================

Projected rent and costs

Rent : 9360

Est Various Property taxes : 300

Management Fee : 600
Est Maintenance costs : 1000 (Experience with other properties puts this at about 500 - 600 per year but picking 1000 to be sure)
Agent : 700 (rent collection, letting, management, etc)
Interest paid on mortgage : 3300
Interest Allowable : .75 x 3300 = 2475

Profit taxable : 9360 - (1000 + 600 + 700 + 2475) = 4585

Income Taxes at approx 50% on 4635 : 2292


==================================

After 21500 outlay.
9360 rent received annually.
All of mortgage and expenses are paid.
Profit after that is 2292 according to the revenues calculation of profit, but its really a bit less than that because you cant take off all of the interest and property taxes for this year. Property taxes can be deducted next year and there will be no NPPR tax.

Not even including the fact that the mortgage will be paid off without further injection within 25 years, theres an excellent return on that 21500.
What will you get with that on deposit and DIRT to be taken out too.

PhilMcGee

RATM wrote: »

So rather than offer a counter argument to his number crunching you choose to put your head in the sand and do a runner ?

Just for the record I'm bullish on property investment properties at the moment provided they meet certain conditions as I outlined on Darren's property thread. His buying in Swords is a good strategy as prices are lower than the city centre but rents are almost comparable. Employment in Swords is relatively constant (airport has 5,000+ employees, Hertz has nearly 2,000 and so on). He also got in for sub €100k and has it rented for around 750pm iirc. So that appears to be good business.

But I don't think those same criteria would apply to 90% of the country right now, there are not many locations in Ireland right now where you'd hit the key criteria of location, low prices/10% yields and solid local employment. Swords is one of those few areas and therefore I think Darren was absolutely correct to take his risk. I do not however think it is correct to take that same risk in the vast majority of locations in Ireland right now as a majority of locations will fail on at least one if not more of those conditions.

You are correct. Im only interest in certain parts of Dublin myself. But im going to keep those locations to myself as im still actively seeking investments.

Anynama141

The Nutty M wrote: »

Do you accept that a statement made by an engineer about the property market holds as much weight as a politician talking about the property market?

Why would I accept that?

Investment and basic finances are about numbers. Engineers work with numbers for a living. A bit of common sense and some mathematical ability are critical if you are going to understand the pros and cons of investing in any sort of yielding asset.

RATM

PhilMcGee wrote: »

You are correct. Im only interest in certain parts of Dublin myself. But im going to keep those locations to myself as im still actively seeking investments.

Phil thanks for offering the numbers, I think it shows that property investment in Dublin right now can be viable, especially on one bed apartments in good locations in the city. I don't blame you keeping schtum on the locations you're looking at.

Just a point on your figures- you didn't mention capital allowances on fixtures, fittings and furniture. I think it is allowable at 12.5% a year so every 8 years the you get the price of these costs offset against your tax.

PhilMcGee

RATM wrote: »

Phil thanks for offering the numbers, I think it shows that property investment in Dublin right now can be viable, especially on one bed apartments in good locations in the city. I don't blame you keeping schtum on the locations you're looking at.

Just a point on your figures- you didn't mention capital allowances on fixtures, fittings and furniture. I think it is allowable at 12.5% a year so every 8 years the you get the price of these costs offset against your tax.

e
That apartment is in its first year now. There are none yet. There probably wont be any next year either. There were contents in it when i bought it. It just needed cleaning is all.
You are right though they will be allowable at 12.5% per year

gaius c

PhilMcGee wrote: »

Im a number cruncher myself. And the engineers number crunching isnt all that.
Its very flawed. I wont be crossing a bridge he has designed any time soon.
But im not going to get into that argument in this thread. Ive seen what happens. Its like a mob. I'll stick to the other thread. It looks far safer.

But you will drink my beer.

Fairly okay looking figures all the same. You should probably allow for a month per year of voids in the calcs.

PhilMcGee

gaius c wrote: »

But you will drink my beer.

Fairly okay looking figures all the same. You should probably allow for a month per year of voids in the calcs.

As I said before I've had very little vacant time in my other properties that I've had for many years..
Between the 3 of them its about 4 months in 14 years.
Agent always has someone ready to move in on the day someone else moves out. Unless its Christmas then it can go 2 weeks.