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Investment Guidance

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  • 10-02-2015 3:15pm
    #1
    dieseldog
    Registered Users Posts: 50 ✭✭


    I am looking for your helpful guidance and advice regarding investments. I am a 26 year old male and I have over 35k in savings. I am in full time employment in the property/construction industry. I do not currently own a property.

    I am interested in putting some of my savings aside in order to invest in something (ie. a house). I am looking into the possibility of purchasing a house in the Armagh region (at approximately £70-80k) with a view of buying to let. There is a high demand for the area and tenants won't be an issue. I would be intending on buying this initially as a first home and then advise the bank in a few months that it isn't working out and that I need to rent it.

    My intention would be to purchase at 10% and mortgage the remainder over approximately 15 years. The intention is that the rent will meet the repayments. I am not looking for an income on the rent.

    I have a friend who is 24 years old and he has bought three houses around the £80-90 mark. I can see him being quite well off in the future - if it doesn't break him.

    Any helpful guidance and advice is appreciated.


Comments

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    #2
    Eldarion
    Registered Users Posts: 484 ✭✭Eldarion


    2006 called. It wants its investment strategy back.

    Please, please, please at least consider alternative investments other than Irish property.

    Index Funds.
    Bonds.
    REITs.
    Long-term savings accounts.
    Hell even Prize Bonds!


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    #3
    NewCorkLad
    Registered Users Posts: 957 ✭✭✭NewCorkLad


    You work in the property/construction industry and want to invest your savings back into the same industry, that is a very high risk strategy. What happens if after 5 years there is another crash in the property market, you lose your job, property prices fall further and you cant find anyone to rent your property.

    As Eldarion said you need to look outside property and try to diversify yourself a bit.


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    #4
    dieseldog
    Registered Users Posts: 50 ✭✭dieseldog


    Hypothetically speaking, if the house value dropped from £80k to £60k in 5 years, (provided it can sell at £60) then I am out the cost of the deposit and in profit for the remainder?
    (Less all related costs, estate agent, rates, solicitors etc)


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    #5
    runawaybishop
    Registered Users Posts: 9,507 ✭✭✭runawaybishop


    dieseldog wrote: »
    Hypothetically speaking, if the house value dropped from £80k to £60k in 5 years, (provided it can sell at £60) then I am out the cost of the deposit and in profit for the remainder?
    (Less all related costs, estate agent, rates, solicitors etc)

    If the house value drops it is likely the industry is dropping and this is your source of income. You are doubly reliant on it and at risk. Diversify.

    Have you not read a newspaper in the last 8 years or something?


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    #6
    dieseldog
    Registered Users Posts: 50 ✭✭dieseldog


    Eldarion wrote: »
    2006 called. It wants its investment strategy back.

    Please, please, please at least consider alternative investments other than Irish property.

    Index Funds.
    Bonds.
    REITs.
    Long-term savings accounts.
    Hell even Prize Bonds!

    Thanks for the comment. I have prize bonds, better there than the credit union although neither are much help. Are REITS working well in Ireland?
    runawaybishop wrote: »
    If the house value drops it is likely the industry is dropping and this is your source of income. You are doubly reliant on it and at risk. Diversify.

    Have you not read a newspaper in the last 8 years or something?

    I am well aware of the issues our country has faced over the last number of years. I think that it is a wise time to invest when houses are at their current prices and before they creep up again.


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    #7
    runawaybishop
    Registered Users Posts: 9,507 ✭✭✭runawaybishop


    dieseldog wrote: »
    I am well aware of the issues our country has faced over the last number of years. I think that it is a wise time to invest when houses are at their current prices and before they creep up again.

    I was under the impression you wanted advice and not just affirmation of a decision you had already made?

    Being a landlord of a single property is not a good investment. You should look elsewhere.


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    #8
    NewCorkLad
    Registered Users Posts: 957 ✭✭✭NewCorkLad


    dieseldog wrote: »
    Hypothetically speaking, if the house value dropped from £80k to £60k in 5 years, (provided it can sell at £60) then I am out the cost of the deposit and in profit for the remainder?
    (Less all related costs, estate agent, rates, solicitors etc)

    Have you actually worked out what return you could acheive after paying the above costs along with income tax, maintenance costs, property taxes and what happens if the property stands idle for a few months with no renters or you get someone in who refuses to pay their rent(it can take 12 months to have them removed).

    This is a very high risk strategy especially taking into account your employment is dependent on the same industry.


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    #9
    um7y1h83ge06nx
    Closed Accounts Posts: 5,029 ✭✭✭um7y1h83ge06nx


    Another thing to consider is whether or not you own your own home? I'm not an expert but be careful you don't get too deep into investment property so when you want to buy your own home you find out you can't get more credit and the investment property is not where you want or can live.


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    #10
    skallywag
    Registered Users Posts: 3,000 ✭✭✭skallywag


    First off OP, congratulations on having such savings at the age of 26.

    If you have done the math carefully on exactly what your total expenses will be, and if you are very confident of renting out the property, then what you are suggesting may not be such a bad idea. Are you confident that the rent which you take will be sufficient to meet the mortgage payments after you have deducted tax on that income etc?

    e.g. say you provide 10% of an 80K property, and take a 15 year mortgage on the remainder. Assuming an interest rate of, say, only 3%, would mean monthly payments of ca 500 per month. Will your rent cover this once you have removed the deductions?

    As for your friend with multiple properties, I would put this to the back of your mind, you don't want to have something like that hanging over you.


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    #11
    Eldarion
    Registered Users Posts: 484 ✭✭Eldarion


    dieseldog wrote: »
    I think that it is a wise time to invest when houses are at their current prices and before they creep up again.

    This a very "time the market" approach so let me counter with the same.

    Consensus is 2012/start of 2013 was the "bottom of the market". Many are theorising we're actually another peak due to the CB limits coming into effect and that we should see a decline once the current approval batch has been exhausted.

    If you really are crunching the numbers then go with the assumption of very minimal, if any, capital appreciation. Then also take into consideration the following expenses that will occur between your Rental Income and Mortgage repayments.
    • Tax @ ~50%
    • Property Tax
    • Insurance
    • Life Assurance
    • Advertising
    • Repairs
    • Maintenance

    Now your mortgage repayment comes out.


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    #12
    runawaybishop
    Registered Users Posts: 9,507 ✭✭✭runawaybishop


    Eldarion wrote: »
    This a very "time the market" approach so let me counter with the same.

    Consensus is 2012/start of 2013 was the "bottom of the market". Many are theorising we're actually another peak due to the CB limits coming into effect and that we should see a decline once the current approval batch has been exhausted.

    If you really are crunching the numbers then go with the assumption of very minimal, if any, capital appreciation. Then also take into consideration the following expenses that will occur between your Rental Income and Mortgage repayments.
    • Tax @ ~50%
    • Property Tax
    • Insurance
    • Life Assurance
    • Advertising
    • Repairs
    • Maintenance

    Now your mortgage repayment comes out.

    Should also assume the property will be vacant about 5-10% of the time.


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    #13
    MouseTail
    Registered Users Posts: 1,663 ✭✭✭MouseTail


    You will need to become very au fait with tax and tenancy issues in a different juristiction. Are interest payments an allowable expense, are rates payable etc?


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    #14
    MarkAnthony
    Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    I'd be very surprised if there's not a bank out there that's going to lend 90% of a BTL; 50% on a BTL is much more realistic.

    I'm going to be renting out an apartment at €1150 per month with a mortgage repayment of €550. I've a loss of over €2000 per year. Be very sure you've gone through all of your plans with an accountant and FA.


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    #15
    dieseldog
    Registered Users Posts: 50 ✭✭dieseldog


    Thanks very much for all of your comments, I'm going to look into this further and get some professional advice also.


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    #16
    ballyharpat
    Registered Users Posts: 1,806 ✭✭✭ballyharpat


    While I am not an advocate for buying properties as a way to invest your money. I came on her a few years ago with the same proposal and was warned and forewarned what the downsides were. I did all the math and it has worked out brilliant for me. I have two rental properties and am finishing my own house and looking to buy a third rental.

    What mattered to me was it is in a prime location-Killarney is bombproof as a rental area. I had one apartment rented and tenents in 2 hours after purchase. I had a rental deposit for the house, 6 weeks before it was going to be available-I rent at just 5%+- below market rate to create loyalty and a sense of goodwill with tenents. The yield for rent alone, after expenses is 8%. I do most of my own repairs, I check with the tenants frequently and do spotchecks to check doors/floors/fittings etc to ensure I fix before it needs to bne replaced. you need to have a bit of money aside for unforseeables like washing machine breaking etc.

    I started with stocks and shares and will always have some money in those but it is hard to beat the yield on rentals here. do your research, crunch numbers, see what works, but also, remember you will lose first time buyers relief for ever after this house. You will not get interest relief once it is a rental. House insurance and most expenses rise in rental properties as opposed to residential properties.

    No matter what area you put your money in, there will always be people telling you how bad it is and the worst case scenario. Take this with a pinch of salt but be aware of the worst case scenario and how you would handle it.

    Good luck, it is an easy way to make money, but having said that, I have no mortgage on any property so it is stress free.


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    #17
    handlemaster
    Registered Users Posts: 6,003 ✭✭✭handlemaster


    ballyharpat wrote: »
    While I am not an advocate for buying properties as a way to invest your money. I came on her a few years ago with the same proposal and was warned and forewarned what the downsides were. I did all the math and it has worked out brilliant for me. I have two rental properties and am finishing my own house and looking to buy a third rental.

    What mattered to me was it is in a prime location-Killarney is bombproof as a rental area. I had one apartment rented and tenents in 2 hours after purchase. I had a rental deposit for the house, 6 weeks before it was going to be available-I rent at just 5%+- below market rate to create loyalty and a sense of goodwill wit[HTML][/HTML]h tenents. The yield for rent alone, after expenses is 8%. I do most of my own repairs, I check with the tenants frequently and do spotchecks to check doors/floors/fittings etc to ensure I fix before it needs to bne replaced. you need to have a bit of money aside for unforseeables like washing machine breaking etc.

    I started with stocks and shares and will always have some money in those but it is hard to beat the yield on rentals here. do your research, crunch numbers, see what works, but also, remember you will lose first time buyers relief for ever after this house. You will not get interest relief once it is a rental. House insurance and most expenses rise in rental properties as opposed to residential properties.

    No matter what area you put your money in, there will always be people telling you how bad it is and the worst case scenario. Take this with a pinch of salt but be aware of the worst case scenario and how you would handle it.

    Good luck, it is an easy way to make money, but having said that, I have no mortgage on any property so it is stress free.


    Why did you buy in a small town as oppossed to a city ? Has the demand for rental been as high as you expected ?


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    #18
    ted1
    Registered Users Posts: 23,536 ✭✭✭✭ted1


    OP few people here including myself would know the situation in Northern Ireland regarding lettings and taxes/ fees that a landlord incur. With a 35kEuro deposit and a property worth 80kstg your not taking much of a risk and a price drop of 50% won't kill you.
    If you can afford it i'd go for it, TBH providing that you know the area and are confident of being able to let IT I'd see about splitting the deposit between 2 and maybe pick up a 2 one.

    I don't reall see the need to get back onto the bank. Once they get paid they don't really care what you do it with it. The tax man is different and would like to know


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    #19
    ballyharpat
    Registered Users Posts: 1,806 ✭✭✭ballyharpat


    ,
    handlemaster wrote: »
    Why did you buy in a small town as oppossed to a city ? Has the demand for rental been as high as you expected ?

    While Killarney is a small town, it is very affluent, prices are about 75% more in \for a house as compared to \, which is only 20 miles away. rent reflects that.
    I would not buy in a city as \i do not know the market there, \i may end up in a bad neighbourhood and unable to rent. \i know \killarney. Also, since \i maintain the properties myself, \i need to be near them if something goes wrong, I am 3 doors away from one rental, and 5 minutes walk from the other. I could rent 2 beds all day in \killarney, prices have gone up about 10-15% for 2 bed apartments in the area, and will probably go up another 10% on the next 6-12 months, Rent will probably rise about 5-10% I believe, but Killarney is not a reflection of Kerry in general, in other areas, I believe prices will remain stagnant for the next 2/5 years.....


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