Should I buy an apartment as an investment?

john1963

I have a booking deposit on a 2bed apartment in Northwood Santry. I have to make my mind up this weekend. its 180k and was 360 when originally sold. I want it as an investment and reckon I should get 1200 a month in rent. any opinions as to what I should do gratefully received. I am a cash buyer
thanks

..... 180k ............. I should get 1200 a month in rent......... I am a cash buyer
thanks

My view, making the following presumptions
- you don't encounter problem tenants
- you earn cash from other sources of income and so will paythe high rate of tax on the rental income

Crude figures
- gross income assuming 10 months rental per year €12k
- management charges €1.5K
- letting agent fee €1k
- random expenses €1k

Leaves a net income of approx €4k and your €180k replaced by an apartment that might well be at rock bottom price but in times of rental demand & low interest rates we don't really know that

It's not overly attractive and I'm saying that as a landlord who is in NE (significantly so) but who isn't completely unhappy with the situation as I never had €180k in cash

john1963

Augeo wrote: »

..... 180k ............. I should get 1200 a month in rent......... I am a cash buyer
thanks

My view, making the following presumptions
- you don't encounter problem tenants
- you earn cash from other sources of income and so will paythe high rate of tax on the rental income

Crude figures
- gross income assuming 10 months rental per year €12k
- management charges €1.5K
- letting agent fee €1k
- random expenses €1k

Leaves a net income of approx €4k and your €180k replaced by an apartment that might well be at rock bottom price but in times of rental demand & low interest rates we don't really know that

It's not overly attractive and I'm saying that as a landlord who is in NE (significantly so) but who isn't completely unhappy with the situation as I never had €180k in cash

I expect 1200 a month in rent so less management fee is 12000 approx diveded by 2 = 6000. ....will apartments be cheaper in ten years time.....by then I sbould have gained at least 40k in rent

john1963

Augeo wrote: »

..... 180k ............. I should get 1200 a month in rent......... I am a cash buyer
thanks

My view, making the following presumptions
- you don't encounter problem tenants
- you earn cash from other sources of income and so will paythe high rate of tax on the rental income

Crude figures
- gross income assuming 10 months rental per year €12k
- management charges €1.5K
- letting agent fee €1k
- random expenses €1k

Leaves a net income of approx €4k and your €180k replaced by an apartment that might well be at rock bottom price but in times of rental demand & low interest rates we don't really know that

It's not overly attractive and I'm saying that as a landlord who is in NE (significantly so) but who isn't completely unhappy with the situation as I never had €180k in cash

I expect 1200 a month in rent so less management fee is 12000 approx diveded by 2 = 6000. ....will apartments be cheaper in ten years time.....by then I sbould have gained at least 40k in rent

john1963

john1963 wrote: »

I expect 1200 a month in rent so less management fee is 12000 approx diveded by 2 = 6000. ....will apartments be cheaper in ten years time.....by then I sbould have gained at least 40k in rent

Splitting hairs but you cannot expect 100% occupancy & no expenses over 10 years.

I have no idea what prices will be like in 10 years time, they are a lot cheaper now than 10 years ago. No doubt we will see a boom sometime in the future but I wouldn't predict how soon.

athtrasna

Moved from 3rd level accommodation

caviardreams

Augeo wrote: »

Splitting hairs but you cannot expect 100% occupancy & no expenses over 10 years.

I have no idea what prices will be like in 10 years time, they are a lot cheaper now than 10 years ago. No doubt we will see a boom sometime in the future but I wouldn't predict how soon.

+1 - or that rents will remain at their current levels which are relatively high.

frank_scorpio

john1963 wrote: »

I have a booking deposit on a 2bed apartment in Northwood Santry. I have to make my mind up this weekend. its 180k and was 360 when originally sold. I want it as an investment and reckon I should get 1200 a month in rent. any opinions as to what I should do gratefully received. I am a cash buyer
thanks

assuming you get a max of 1400 per month ( 16800 per year )

you will surely have to pay 1400 per year in managment fees , so one months rent goes on that , insurance and property tax and miscelenanous costs will surely come to a grand per year

so thats 16800 - 1400 - 1000 = 14400 , thats a yield of 8% under the most optimistic outcome , if you have a tenant who wont pay , things are different

if you put the money in bp or shell , they are both paying a dividend of 8% and unlike dublin property , are priced where they were at the end of the 1990,s due to the collapse in oil price , the stock price might drop further but i doubt either go out of business

you pay income tax on both dividends or rent from a BTL so no need to factor in taxes

frank_scorpio

caviardreams wrote: »

+1 - or that rents will remain at their current levels which are relatively high.

rent are not as high in dublin as many lead us to believe , they are relatively cheap compared to other european capitals in fact and wages in dublin are well above the average european capital

Uno my Uno.

Whether it is a good move or not depends entirely on the apartment itself. Is it in a good location where apartments (as opposed to houses) are in demand? Is it spacious and well proportioned? Is the development well run and maintained? What sort of tenants can you expect to attract?

if the answers to these questions are in the negative the maths regarding the finances aren't really important, it's s bad move,

Amirani

frank_scorpio wrote: »

assuming you get a max of 1400 per month ( 16800 per year )

you will surely have to pay 1400 per year in managment fees , so one months rent goes on that , insurance and property tax and miscelenanous costs will surely come to a grand per year

so thats 16800 - 1400 - 1000 = 14400 , thats a yield of 8% under the most optimistic outcome , if you have a tenant who wont pay , things are different

if you put the money in bp or shell , they are both paying a dividend of 8% and unlike dublin property , are priced where they were at the end of the 1990,s due to the collapse in oil price , the stock price might drop further but i doubt either go out of business

you pay income tax on both dividends or rent from a BTL so no need to factor in taxes

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

john1963

thanks for alk the replies...lots to ponder

antoinolachtnai

Lots of good practical advice there. The other thing you should consider is buying two. Borrow another 180k from the bank with the two apartments as security and repay over ten years. You put the same money down, you will get almost the same cash flow from the two properties as you would from one over the ten years but at the end you own two apartments outright instead of one.

john1963

Amirani wrote: »

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

when u say these oil companies pay a dividend of 8% what is it 8% of....not the current price???? or does each share have a nominal value?

john1963

Amirani wrote: »

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

when u say these oil companies pay a dividend of 8% what is it 8% of....not the current price???? or does each share have a nominal value?

john1963

Amirani wrote: »

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

when u say these oil companies pay a dividend of 8% what is it 8% of....not the current price???? or does each share have a nominal value?

handlemaster

OP why dont you put the 180k into a house in dublin. No management fee and higher rent

john1963

Amirani wrote: »

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

when u say these oil companies pay a dividend of 8% what is it 8% of....not the current price???? or does each share have a nominal value?

john1963

thanks for alk the replies...lots to ponder

frank_scorpio

Amirani wrote: »

Also worth considering the lack of liquidity and the lack of risk diversification you get from investing in property. Much more of a time-sink too than other investments.

lack of liquidity is just investment community jargon , if a property is priced right and demand for rental is strong , its a good buy , the risk with property investment is troublesome tenants and contrary to public opinion , the law is completely on the side of tenants in this country

frank_scorpio

antoinolachtnai wrote: »

Lots of good practical advice there. The other thing you should consider is buying two. Borrow another 180k from the bank with the two apartments as security and repay over ten years. You put the same money down, you will get almost the same cash flow from the two properties as you would from one over the ten years but at the end you own two apartments outright instead of one.

this is poor advice , it almost never pays to borrow money for a BTL , loans are at least 5% and in an area like dublin , the return on investment after the mortgage is paid off will be less than what you would get from a savings account

property is not a good buy if your priority is capital appreciation , stocks beat it hands down and if your borrowed heavily to buy property , all you have is potential capital appreciation , it might have been ok three years ago when house prices were on the floor , not now

frank_scorpio

handlemaster wrote: »

OP why dont you put the 180k into a house in dublin. No management fee and higher rent

you wont get a good house for 180 k in dublin , santry is an average area but 180 k will buy a better income producing apartment than house

a better area than santry is beaumont though its still nothing special

frank_scorpio

john1963 wrote: »

when u say these oil companies pay a dividend of 8% what is it 8% of....not the current price???? or does each share have a nominal value?

if a stock is priced at $ 100 and the dividend is $8 per year , thats an 8% dividend

the further the price of a stock falls , the higher the dividend yield , no one likes to see a stock falling in price and stocks rise and fall much harder than houses but provided the dividend is not cut , 8% is incredible , its a strategy which takes incredible will power however , the temptation to sell if the stock dropped another 20% might be very great for a novice , its nearly impossible to call the bottom in a stock but many of the oil majors share prices are at near twenty year lows due to the collapse in oil price

these are 150 billion dollar plus companies however , the chances of them going broke are less than most nations

handlemaster

frank_scorpio wrote: »

you wont get a good house for 180 k in dublin , santry is an average area but 180 k will buy a better income producing apartment than house

a better area than santry is beaumont though its still nothing special

Currently 138 for sale in Dublin for 175k or less

http://www.daft.ie/dublin/houses-for-sale/?s%5Bmxp%5D=175000

frank_scorpio

frank_scorpio wrote: »

this is poor advice , it almost never pays to borrow money for a BTL , loans are at least 5% and in an area like dublin , the return on investment after the mortgage is paid off will be less than what you would get from a savings account

property is not a good buy if your priority is capital appreciation , stocks beat it hands down and if your borrowed heavily to buy property , all you have is potential capital appreciation , it might have been ok three years ago when house prices were on the floor , not now

You can write off 75% of the interest against tax also though which has to be taken into consideration.

frank_scorpio

might be also no harm to consider the fact that its not only oil companies which pay high dividend yields , the following companies all pay dividends in excess of 5%

vodafone
hsbc bank
general motors ( around 4.5% )
ford pays 4%
at+t ( americas vodafone ) also pays in excess of 5%

you could buy around ten stocks which pay a 5% plus dividend , thus spreading risk

newacc2015

frank_scorpio wrote: »

assuming you get a max of 1400 per month ( 16800 per year )

you will surely have to pay 1400 per year in managment fees , so one months rent goes on that , insurance and property tax and miscelenanous costs will surely come to a grand per year

so thats 16800 - 1400 - 1000 = 14400 , thats a yield of 8% under the most optimistic outcome , if you have a tenant who wont pay , things are different

if you put the money in bp or shell , they are both paying a dividend of 8% and unlike dublin property , are priced where they were at the end of the 1990,s due to the collapse in oil price , the stock price might drop further but i doubt either go out of business

you pay income tax on both dividends or rent from a BTL so no need to factor in taxes

An oil company? Are you serious? Oil is $35 a barrel and is expected to continue to fall due to excess production and it will be worse next year with Iran. There is also currency risk, since BP is listed in GBP.

OP you can expect about €1300 to 1400 for a 2 bed in rent roughly in D9. I would expect 95% occupancy, I dont understand where people are thinking that you would have an apartment empty for 2 months of the year in Dublin. I know you might be unlucky to get a non-paying tenant, but if you screen people right that shouldnt be an issue

Check the obvious such as the fire standards for the building, sinking fund, levels of owner occupiers in the building. The less owner occupiers, the more rough the place tends to be.

Can you take on the stress of being a landlord? If not an apartment like this one might be a better option as it is managed by an onsite company. Plus its a 3 bedroom apartment.

http://www.daft.ie/dublin/apartments-for-sale/ballymun/13-the-gateway-ballymun-dublin-1144526/

Its a student residence literally right beside DCU, so you will pretty much have 100% occupancy. I think this one might be a former tax relief student development and I know one of the advantages of that was the students didnt have traditional tenancy rights. Meaning a non-paying tenant could be evicted really easily.

frank_scorpio

Houston Famous Oboe wrote: »

You can write off 75% of the interest against tax also though which has to be taken into consideration.

not enough reason

frank_scorpio

to newacc

beit property or equities , the super buys are when no one wants to touch an asset , people said the same about property in ireland in 2011 and early 2012 , when the recovery in an asset has arrived , its too late , they are no longer bargains

Labarbapostiza

john1963 wrote: »

I have a booking deposit on a 2bed apartment in Northwood Santry. I have to make my mind up this weekend. its 180k and was 360 when originally sold. I want it as an investment and reckon I should get 1200 a month in rent. any opinions as to what I should do gratefully received. I am a cash buyer
thanks

If you're a cash buyer, that's a good price. It's not that risky a place to put your money. When people borrow to "invest" it's a different story.

But, be careful with your rent projections. The rising rents this year have just been a part of a rent bubble. If you got 9k a year, 750 a month, you'd be getting 5% return which is better than the bank rate. You could even go lower and still beat the bank rate. The rent bubble has meant people agreeing to rents they can't actually pay, and then they don't pay.

If you're in it for the long haul, ten, twenty years, Or you're not going to be under pressure to sell at a point that isn't the right time, then it's a safe investment.

Amirani

frank_scorpio wrote: »

lack of liquidity is just investment community jargon , if a property is priced right and demand for rental is strong , its a good buy , the risk with property investment is troublesome tenants and contrary to public opinion , the law is completely on the side of tenants in this country

No - lack of liquidity means you can't get access to your money quickly if you need it. Also can't get access to part of your money easily without liquididating the whole assets.

If you completely dismissing this as investment community jargon then you're not really considering all the factors you should be. It isn't something that absolutely means you shouldn't buy property, but it should be a consideration.