Buy to Let advice

buytolet89

Hi

I'm new to boards(made this account for advice)i am in much need of some guidance before i purchase a property to let.Long story short i earn 24k pa and have been granted 110k mortgage(50k savings) so i will be spending roughly 160k altogether.

I will be buying in Dublin and i am just looking for advice on how to get it started do i let an estate agent do all the paper work or is that all up to me?Also i will be buying a 2 bed apartment and hopefully rent it out asap.

Just need some tips on how to get the ball rolling, any replies will be much appreciated

_Kaiser_

My advice (likely unpopular) would be to forget about it.. This isn't 2006

Landlording isn't (in theory anyway!) the free-for-all handy money it was in the "good old days". You'll need to be registered, pay tax on the income, maintain the place in decent condition, cover the property tax etc etc

All that on a salary of €24k??

Eldarion

Please, for your own sake, explore other investment opportunities rather than real estate. You are bringing a world of hassle down on yourself for what works out to be quite low ROI in most cases after tax, maintenance and other fees are taken into account.

Look at real estate later if you wish to diversify an already padded portfolio, don't sink your nest egg entirely into Irish property.

buytolet89

I understand where you are coming from, but you have to see that this could be a great opportunity for me my mortgage will be around 620 monthly while i will be receiving rent of around 1250 per month and my families home is only around the corner so it is very convenient

buytolet89

Eldarion wrote: »

Please, for your own sake, explore other investment opportunities rather than real estate. You are bringing a world of hassle down on yourself for what works out to be quite low ROI in most cases after tax, maintenance and other fees are taken into account.

Look at real estate later if you wish to diversify an already padded portfolio, don't sink your nest egg entirely into Irish property.

Also what other investment opportunities you have in my mind that would profit me 400e per month?

Eldarion

buytolet89 wrote: »

I understand where you are coming from, but you have to see that this could be a great opportunity for me my mortgage will be around 620 monthly while i will be receiving rent of around 1250 per month and my families home is only around the corner so it is very convenient

While I'm sure you've crunched the numbers extensively I hope you're not thinking you're looking at a ~10% ROI from the 160k earning 15k per year.

Some really quick napkin figures just for example, taking 11 months rent as rule of thumb is to allow 1 month per calendar year of vacancy:

Gross Rent received (1250 * 11) €13,750

Repayments -€7,440
Maintenance Fees -€1,200
Property Tax -€315
Insurance -€300
Life Assurance -€300
Advertising -€XX
Repair & Maintenance -€XXX

And you still haven't paid income tax on the €13,750. Much less any capital expenditure to furnish the place. And you should really be considering the possibility of leasing to a trouble tenant who doesn't pay or trashes the place and how that could effect you.

There's a lot more to consider than just Rental Income vs Mortgage repayments here...

Eldarion

buytolet89 wrote: »

Also what other investment opportunities you have in my mind that would profit me 400e per month?

For comparison, if you had sunk your 50k into any US Index fund for the year 2013 you'd have earned over 800e per month.

Past performance does not necessarily predict future results.

buytolet89

Eldarion wrote: »

For comparison, if you had sunk your 50k into any US Index fund for the year 2013 you'd have earned over 800e per month.

Past performance does not necessarily predict future results.

hindsight is a beautiful thing, other option is to possibly invest in gold

The_Conductor

Eldarion wrote: »

Past performance does not necessarily predict future results.

Too damn right- 2013 was a most unusual year for equities.

The_Conductor

buytolet89 wrote: »

hindsight is a beautiful thing, other option is to possibly invest in gold

As a store of value- you'd have lost almost 30% over the past 24 months- had you your wealth invested in gold.

buytolet89

So no advice?

TJ Mackie

buytolet89 wrote: »

any replies will be much appreciated

buytolet89 wrote: »

So no advice?

Any replies will be much appreciated, but only if they're what you want to hear, right?

IlmoNT4

My advice...Keep your nest egg and do not buy an investment property.
It may seem attractive to become a landlord, or at least it might appear that its an easy profit. But you dont know whats around the corner... You are very young, you could go traveling, what happens when you meet someone, want to setup a home with them, what happens if the market collapses again, you get sick, you cant get tenants, you have bad tenants, things break, situation at work/home changes, you want to get another mortgage.

Cash is king..... when you have cash in the bank, you have options.

superman28

My advice is to think its a risky investment looks like a small return for taking on such a massive amount of debt/risk relative to your salary. (unless you live in a house that has no mortgage)

You have 50k savings, why not check out something like a managed fund

http://www.irishlife.ie/funds/fund-factsheets-prices.html

You could make a decent 7 - 12% return each year without the hassle of becoming a landlord.

Having said all of that, I reckon there are a few bargains around to be had,, so I am surprised the bank has approved a buy to let on your salary, but it could be a good oportunity to buy now and flip in 3 years or so.. but a massive risk as I said..

Santa Cruz

buytolet89 wrote: »

I understand where you are coming from, but you have to see that this could be a great opportunity for me my mortgage will be around 620 monthly while i will be receiving rent of around 1250 per month and my families home is only around the corner so it is very convenient

Go for it and never mind the pessimists here. Have a good look at Irish Landlord.com site and you will find loads of useful info.
Main advice. Treat this as a business. Tenants are customers not friends. Do it by the book and have an accountant submit your returns. Keep receipts for every purchase.

If you are a bit handy you will be able to do a lot of maintenance yourself.
Think long term. This could be a great pension fund. Think is there anything you can do with the surplus rent.

Mrs OBumble

OP - where are you living now, and how much rent are you paying?

IlmoNT4

OP, what will the mortgage repayments be? On 24K a year, can you afford to pay this mortgage, in full for 6 months, if you couldn't get the apartment rented, while maintaining the rest of your life.

A lot of people told me back in 2007, I needed to buy and now was the time, otherwise I'd never get a home, prices were only going to go up etc etc.... so I blew my nest egg

7 years later I'm still living in my apartment, with zero options to move out, move in with someone, buy another property. I cannot live with my partner because I cant afford to rent my place, and pay rent some where else.... It was my decision, I made it, I accept it. Hard luck etc etc

If I had a time machine, I'd keep my nest egg because now I'm at a stage in my life, where I want to buy a home and its not possible because I spent my deposit 7 years ago. My apartment and choices I made in 2007 have limited me in ways I couldn't have imagine back then.

dubbie82

Well looking at this as an outsider, no mortgage here and I am not a houseowner.

You want a two bed and I assume it has to be somewhere in the Dublin region otherwise I don't think you would get 1200 Euro in rent for a 2 bed. Just had a quick look at daft for 2bd apartments for about 150k in Co. Dublin but not many of them seem to be worth the money really, or as a tenant, I would not be to pushed to pay 1250 Euro per month for it.

If you were looking for something to be a home for the next couple of years at least then sure go for it, I would because I am bit sick of the renting situation but as an investment opportunity no.

And as some people already pointed out there is a lot of other expenses to consider when you become a landlord, managment fees for example, property tax and god knows what other tax surprises are hidden in the next budget?

Why not just stick part of your money into a saving account with good interest, maybe sometime down the line you want your own business or extend your own home, upskill or whatever. See I think the whole saving for a rainy day isn't a bad thing at all.

Eldarion

I don't know if it's the older generation advising and recommending property as the only vehicle of investment or if it's just the Irish mentality but it's scary how common this discussion is out there.

I wouldn't recommend buying real estate in Ireland as an investment unless you're in a position that you can acquire 5+ units to exploit economies of scale. Otherwise, it's just a far too time consuming, risky and costly endeavor for mediocre returns at best.

handlemaster

I think property investment would be good. I Dont think the 160 for a two bed is good value. Id look at 120 Max for two bed. Or go get two one beds for what you were looking to fork out at 160. Or a three bed semi

Jaybor

buytolet89 wrote: »

Hi

I'm new to boards(made this account for advice)i am in much need of some guidance before i purchase a property to let.Long story short i earn 24k pa and have been granted 110k mortgage(50k savings) so i will be spending roughly 160k altogether.

I will be buying in Dublin and i am just looking for advice on how to get it started do i let an estate agent do all the paper work or is that all up to me?Also i will be buying a 2 bed apartment and hopefully rent it out asap.

Just need some tips on how to get the ball rolling, any replies will be much appreciated

I think I can give you some insight, but dont have a lot of time so ill be quick.

If its in Dublin you can count on more or less full occupancy. Out of all my properties I think ive had 3 weeks vacant in total the last 10 years.

If you are thinking apartments for rental yield only. 1 bed apartments are the most profitable. Dont count on capital appreciation, but know it can be there. eg What could you have bought that apartment for 2 years ago?

The whole being a landlord thing is actually very easy. Anyone who says its difficult must have a really easy job elsewhere. You do about a days work a month.
And if you dont even want that let an agent manage it for 8% of the rent and in reality it only costs you half that.

You dont need life insurance on an investment property.
Advertising costs are negligible.
Over many years with many properties I have found the maintenance on the 1 beds to average out at about €500 per year.

So if your rent -costs - tax can keep you close enough to your yearly mortgage payments you are looking at owning the apartment outright in 25 years or whatever your mortgage is.

Irishlandlord website has a lot of info for you.

My advice is to go to an accountant and get him to work out expected numbers for you. Then you'll be able to work out if its for you or not. Anyone with a keyboard can be an expert, so take anything you read on the internet with a pinch of salt. Get professional advice and then make your decision.

buytolet89

Mrs OBumble wrote: »

OP - where are you living now, and how much rent are you paying?

I'm living at home and will be for the next three years

buytolet89

loulou2009 wrote: »

OP, what will the mortgage repayments be? On 24K a year, can you afford to pay this mortgage, in full for 6 months, if you couldn't get the apartment rented, while maintaining the rest of your life.

A lot of people told me back in 2007, I needed to buy and now was the time, otherwise I'd never get a home, prices were only going to go up etc etc.... so I blew my nest egg

7 years later I'm still living in my apartment, with zero options to move out, move in with someone, buy another property. I cannot live with my partner because I cant afford to rent my place, and pay rent some where else.... It was my decision, I made it, I accept it. Hard luck etc etc

If I had a time machine, I'd keep my nest egg because now I'm at a stage in my life, where I want to buy a home and its not possible because I spent my deposit 7 years ago. My apartment and choices I made in 2007 have limited me in ways I couldn't have imagine back then.

Put the offer in for a 2 bed apt in Dublin, rent is yielding 1200-1250 for exact same units in the area, mortgage works out at 632 per month and i will be living rent free for the next three years so it is a no brainer

Thanks for the advice everyone i put the offer in so fingers crossed

MagicMarker

buytolet89 wrote: »

i will be living rent free for the next three years

Erm, are you only planning on having a mortgage for 3 years or something? What about when you move out?

Creeby

From what I've gathered on this board these would be the typical monthly expenses for a 1 bed apartment in Dublin:

Tax: 50
Management: 50
Repairs: 100 (on average)
Agent: 70

So 270 euro worth of expenses minus say 800 euro in rent would leave you with 530 euro profit per month.

http://www.daft.ie/sales/76-hampton-wood-avenue-finglas-dublin/720966/

Take the above for an example say it costs 80,000 to buy after everything is said and done, that equals to 12.5% ROI per annum.

Obviously I am talking in rounded figures here and am probably missing one or two things but is this the general jist?

ABC101

Whilst there are some good bargains to be had in property... the costs associated with such is not to be underestimated.

For a 2 bed apartment you could be looking at 3.5K costs just to rent it out... and that is not including mortgage repayment costs.

There is the risk for investors of Govt policy... current taxation policy is "Hostile" to landlords... this may get worse i.e. 75% reduced to 50% etc.

The reason why the "establishment" has this hostile policy is that they do not want small investors getting into property.

As for various charges... LPT, Water, Broadcasting, PRTB we are at the "Thin edge of the wedge".

I can't see a 200K property staying at 315 euro / year for long... it will be ramped up... similar to the old car tax system.

So costs for landlords will rise.. and allowable expenses reduced.

That's just my opinion...

You might be better off looking at investing in a REIT.. ?

murphaph

Eldarion wrote: »

For comparison, if you had sunk your 50k into any US Index fund for the year 2013 you'd have earned over 800e per month.

Past performance does not necessarily predict future results.

Diversity is key in any investment strategy but the OP doesn't want to simply invest in equities, he wants to leverage the lump sum he has in the form of a mortgage and use it to buy an asset he can't afford alone. The bank won't lend money to invest in shares unless you're a proven investment genius, so it's not a straightforward choice for the OP here.

The OP should certainly understand that it is a risky thing that he is contemplating, made more risky by having just one property. If you have several properties to let then you can sustain your investment when one tenant decides to pay no rent for a year. That's fatal for a single property leveraged landlord more often than not.

Having said all that, if he's lucky and never has a bad tenant or other issues then a property could be a great addition to whatever pension plan he has in place.

buytolet89

ABC101 wrote: »

Whilst there are some good bargains to be had in property... the costs associated with such is not to be underestimated.

For a 2 bed apartment you could be looking at 3.5K costs just to rent it out... and that is not including mortgage repayment costs.

There is the risk for investors of Govt policy... current taxation policy is "Hostile" to landlords... this may get worse i.e. 75% reduced to 50% etc.

The reason why the "establishment" has this hostile policy is that they do not want small investors getting into property.

As for various charges... LPT, Water, Broadcasting, PRTB we are at the "Thin edge of the wedge".

I can't see a 200K property staying at 315 euro / year for long... it will be ramped up... similar to the old car tax system.

So costs for landlords will rise.. and allowable expenses reduced.

That's just my opinion...

You might be better off looking at investing in a REIT.. ?

I have to start somewhere don't i? I am 23 now i plan to purchase an apartment in Dublin and rent it out every ten years

buytolet89

MagicMarker wrote: »

Erm, are you only planning on having a mortgage for 3 years or something? What about when you move out?

I'm living at home for the next three years then will be buying my own home

Mrs OBumble

buytolet89 wrote: »

I'm living at home for the next three years then will be buying my own home

Ya, but what will happen if Mammy gets sick of you freeloading and tells you to either move out or pay market rent - can you afford thsi?

buytolet89

Mrs OBumble wrote: »

Ya, but what will happen if Mammy gets sick of you freeloading and tells you to either move out or pay market rent - can you afford thsi?

I'm gonna be saving for my own place in the three years i plan to save another 30k to purchase my own house