First Time Buyer - 1 Bed Apartment

Royale with Cheese

Looking for some advice here as I've got absolutely no experience in property. I'm currently renting a room in shared accommodation in Dublin but I'm getting pretty sick of sharing and definitely feel it's time for me to get my own place. I've been looking at renting a one bed place and I'll be doing well to get somewhere decent for €900 a month. I'd previously considered buying a two bed apartment before deciding to just rent a room again for a while. I opted against buying a two bed place when I did the maths and realised I just couldn't afford it without taking in a lodger which kind of defeated the whole purpose of why I wanted to buy. I'd been told by various people not to buy a one bed place as they can be trouble when it comes to selling, but out of curiosity I've looked into it now and it appears to make sense in my situation.

More than anything I just want to live on my own, and am prepared to spend €900 a month in rent to do so. A quick search for one bed places in Dublin and I found some apartments in Loughlinstown for €105,000. It's a bit far out of town but I actually grew up about a 5 minute walk from where the apartment is so I'd have no problem living there. Now at €105,000 I could probably throw in €25,000 deposit leaving me with an €80k mortgage. Borrowing that over 10 years would leave me paying back around €800-850 a month. Plus whatever management fees there are. This would give me the one bed place I want, for around the kind of money I am willing to pay, and within 10 years I'd own the place.

I'm aware I'm probably being quite naive here. What are the downsides of doing this? Will it cost me later in life to use up whatever first time buyer privileges I get on a cheap property like this? Are one bed places really that much of a problem to own? If I decide within a few years that the place is too small and I'd like to move on will I face many problems? I'd struggle to cover the mortgage if I were to rent it, and I don't think I'd be living there for the entire 10 years (although I wouldn't 100% rule it out). I guess my rough plan would be to live in it for a few years and then if I decide to get a house I would rent it out for the remainder of the mortgage, covering the difference between whatever rent I'm getting and how much the mortgage repayments are myself. So after 5-7 years of renting it out I'd own the place and could either choose to keep renting or sell up.

I don't feel the need to start investing in property but when I think about my situation the above seems to make quite a lot of sense to me. I really feel the need to get my own place asap, so I'd be a lot better off investing in an asset rather than giving €900 a month to invest in somebody else's asset?

the_syco

Royale with Cheese wrote: »

I opted against buying a two bed place when I did the maths and realised I just couldn't afford it without taking in a lodger which kind of defeated the whole purpose of why I wanted to buy. I'd been told by various people not to buy a one bed place as they can be trouble when it comes to selling, but out of curiosity I've looked into it now and it appears to make sense in my situation.

A two bed will allow you to have storage space, and in the long run, have the space to start a small family (unless you plan to be forever alone). In a one bed, the moment your girlfriend gets pregnant, is the moment you have 9 months to figure out how you'll pay to rent a new house, and subsidise the mortgage of the one bed.

=-=

It looks like they were built on a plot of leftover land that they didn't build houses on. I think the hospital next to it may also be closed soon, and I doubt any ambulances go there any more (they by-pas it, and goto St Vincents, I think?).

=-=

Finally, be aware that the bedroom is always next to the living room of the two bedroom apartments, so if you're a light sleeper, best of luck.

username123

OP, my detailed response to this earlier was lost due to technical issues so briefly:

You have not considered the cost of mortgage interest in your calculations.

An existing mortgage will be seen as a liability by the bank when you go to buy a house and you will only be able to borrow less.

The cost of mgmt fees and normal maintenance like painting, replacing appliances (that currently your landlord pays).

Conveyancing costs money so no point in paying twice in a few years.

Being a landlord costs money, tax implications, prtb, costs if problem tenants or empty tenancy etc.

And something I didn't mention earlier but has occurred to me - there are plenty of people in this country stuck in a property they only meant to stay in for a few years due to a variety of unforeseen circumstances, as one of them I'd say save and buy a place you want to live in for a long time when you can.

Rent may be dead money, but mortgage interest is deader IMO.

the_syco

username123 wrote: »

And something I didn't mention earlier but has occurred to me - there are plenty of people in this country stuck in a property they only meant to stay in for a few years due to a variety of unforeseen circumstances, as one of them I'd say save and buy a place you want to live in for a long time when you can.

Agreed.

username123 wrote: »

Rent may be dead money, but mortgage interest is deader IMO.

Also agreed. Those claiming rent was dead money in the past, probably now want their negative equity written off.

Mrs OBumble

Unless the OP has a partner or an active plan to get one (I don't get that from their post) then I don't think that the possibilities of pregnancies and relationships come into the equation if they're over 30-ish. Under that I'd be worried that life may change too much if a relationship emerges.

Apart from that, I don't think it's a totally dumb idea in the OP's situation, provided

1) they get a property that's well managed and not in a slum (or new complex that will turn into one in 10 years), and

2) their mortgage is manageable on their salary. (A bank will only let you use about 30% of net income for housing, whereas you may currently be paying more, for the privlidge of living alone), and also if the interest rate does something drastic (eg doubles).

3) they don't pay too much for it.


But I guess it comes down to what charges the OP would need to pay on top of the mortage, which are currently hidden in the rental payment. House insurance, property tax, management fees, ... what else? And also the cost of purchasing ... conveyancing, survey, stamp duty - what else?

moxin

I don't think banks will give a mortgage on 1 bed apartments.

Trish56

moxin wrote: »

I don't think banks will give a mortgage on 1 bed apartments.

Banks will consider lending on 1 bed apartments up to 75% loan to value.

killers1

Trish56 wrote: »

Banks will consider lending on 1 bed apartments up to 75% loan to value.

Ptsb's will still consider up to 90% finance on 1 beds.

justasknow

Royale with Cheese- I am considering the same option at present. Can you guide or give me any advice in what to do?

I have a deposit for 45,000!

JustAThought

justasknow wrote: »

Royale with Cheese- I am considering the same option at present. Can you guide or give me any advice in what to do?

I have a deposit for 45,000!

If I had a deposit of 45,000 I would put half of it into government guaranteed post office savings bonds/certificates and keep saving & hold onto the rest.

Buying a 1 bed apartment is like deciding to pay extra tax - property tax, local government tax management fee tax ( e1000 per yr) AND the HUGE tax you pay to buy your next " proper" house or home for which you are liable to pay penalty taxes because you are no longer a first time buyer. You will also bd paying capital gains tax on any profit you make on selling your unsuitable one bed appartment. Not to mention the total lack of regulation around upkeep & regulation of so called " management companies" ( usually owned or controlled by the builders) which problems are already starting to show - no sink fund, no control of who can deplete the fund, etc.

Houses are at such a low now and taxes - particularly for those trading up who pay a percentage tax on the price of their second home - that it is really hard to see how a 1 bed flat could be seen as Attractive. Mortgage on a 3 bed house could be e900.... Far better value, easier to rent if you run into problems , possibility to take in a lodger if made unemployed etc.

Royale with Cheese

Houses are so low now? What are you on about? I'd love a house but there just wasn't a anything available in any area I'd want to live in within my price range. I looked at some in other areas that I could afford but realised location was more important to me than I wanted to admit.

I've just signed for a two bed apartment in Sandyford. My situation has changed a fair bit since I wrote the original post, and I've been very fortunate to be able to aim a little higher than I was a year ago. Its not a short term mortgage like i had originally planned, but its very affordable and I've ended up with a nice enough 2 bed all in for 750 a month. I've managed to avoid the necessity of a lodger, plus I have the extra space I wouldn't have got with the one bed. I guess people will use that as an example of how situations can quickly change and how if I'd bought the one bed before this then I'd be stuck with it, but I think mine was a very specific situation. Unless you think you're going to be coming in to a large sum of money soon then I don't think the above is relevant to you.

I think I'd have gone with the one bed if my situation hadn't changed. Maybe not at the price I originally mentioned nor the short term, but something affordable I felt I could live in. I guess I wasn't really looking for an investment, I was more interest in securing somewhere for myself to live that didn't involve sharing or cost half my salary. I never actually checked what those apartments sold for in the end. I'd imagine it was a lot higher than €105k given the property prices in the area. I was scheduled to view an apartment further down the road in Shankill village (OK, a nicer location than loughlinstown) and was told a day before the viewing that the first viewer offered substantially over the €230k asking price in cash and it was gone.

dearg lady

JustAThought wrote: »

If I had a deposit of 45,000 I would put half of it into government guaranteed post office savings bonds/certificates and keep saving & hold onto the rest.

Buying a 1 bed apartment is like deciding to pay extra tax - property tax, local government tax management fee tax ( e1000 per yr) AND the HUGE tax you pay to buy your next " proper" house or home for which you are liable to pay penalty taxes because you are no longer a first time buyer. You will also bd paying capital gains tax on any profit you make on selling your unsuitable one bed appartment. Not to mention the total lack of regulation around upkeep & regulation of so called " management companies" ( usually owned or controlled by the builders) which problems are already starting to show - no sink fund, no control of who can deplete the fund, etc.

Houses are at such a low now and taxes - particularly for those trading up who pay a percentage tax on the price of their second home - that it is really hard to see how a 1 bed flat could be seen as Attractive. Mortgage on a 3 bed house could be e900.... Far better value, easier to rent if you run into problems , possibility to take in a lodger if made unemployed etc.

You don't pay CGT on your PPR, and what are the local government tax and the penalty taxes as a non first time buyer you refer to?

handlemaster

don't see any property of that notion advertised on line for that area ?

custom_build

handlemaster wrote:

don't see any property of that notion advertised on line for that area ?

you realise the op was a year ago?

handlemaster

How have others gotten on with one bed Apt investment properties ?

lcwill

I am a strong supporter of 1 beds from an investment point of view though mainly considering yields rather than capital gain. Though many people want to rent them there are fewer people interested to buy them as homes so when you sell it will probably be to another investor who is also looking for strong yields.

The planning system is also very biased against 1 bed apartments now so there will not be many built in the coming years, despite the fact that there are more and more single person households forming. I think this is a big mistake from the Government as it will push up prices and rents of one beds and make it harder for people to get on the ladder - I have no idea who thought all these two beds were a good idea: more 1 beds (young couples and singles) and 3 beds (families) makes much more sense.

I predict a major shortage of one bed apartments in future with high rents for those which are available and many people forced to share 2 bed apartments when they would prefer their own place.

I have 2 one beds in the Christchurch area bought in 2012/13 for around E110k when the situation was still looking bad but it was hard to imagine how it could get much worse given property price drops were already the worst in the history of any developed country. I spent E15k on each doing a complete refurbishment - up to the kind of standard you might expect in the Docklands rather than D8 (the builder and letting agent thought I was crazy at first but now others are following suit in the same buildings, plus my first priority is always to provide a decent place to live for my tenants, whatever rent I get, and the previous landlords had let the apartments get into what I consider an unacceptable state. Both are now rented for E1100 a month to young European professionals working in tech sector.

p.s. I realise that I am a landlord and therefore part of the problem but I am just playing by the rules of the game to do the best for my family. I will vote for any party that puts an end to all the tax benefits of private buy-to-lets and taxes capital income on the same basis as labour income with no tax deductible expenses if a landlord owns his properties directly rather than through a company. If you are a private landlord you are not a business. If they want to be treated like a business then transfer the properties to a company.

Mellowbird

lcwill wrote: »

p.s. I realise that I am a landlord and therefore part of the problem

What do you mean?

johnnyskeleton

If asking rents are anything to go by, a nice well located 1 bed in the city centre could rent for 1.2k p.m. if bought for 180k thats an 8% gross yield, c. 6% net yield. Thats not a bad deal at all.

So right now there are great yields on such properties, and if youve just come into a pension lump sum etc...


....you could take a punt and hope that rents dont drop!

handlemaster

even if rents did drop a little or the property prices even it wouldn't make any difference to the long term investor as the rental return will exceed what the banks would offer assuming your only into property and deposits