Should I buy an apartment as an investment?

Augeo

Augeo wrote: »

......

Crude figures
- gross income assuming 10 months rental per year €12k
.............

newacc2015 wrote: »

....... I dont understand where people are thinking that you would have an apartment empty for 2 months of the year in Dublin. ............

Crude & Assume were the words used for calculation purposes.
95% occupancy over 10/20 years is deliriously optimitistic imo.

Labarbapostiza

newacc2015 wrote: »

....... I dont understand where people are thinking that you would have an apartment empty for 2 months of the year in Dublin. ............

You could have it empty for a lot longer than 2 months of the year.

The typical bank mortgage adviser, advising "investors" (that's people who borrow) to not have any tenants in the apartment, as this will lower the value of the "investment"........At least 10% of all property in Dublin is vacant all year round.

It's stomach turning what's going on in the commercial sector. The banks all bailed out, and the bollixes on the march again. I've seen a few businesses that made it all the way through the recession now being shut down, because bollixes have money from the bank to "invest", and their buildings have been sold from beneath them.

The banks actually want less availability of commercial and residential space, as this creates a scarcity of supply, driving up rents and making the returns on investment look better than they are. The ideal model NAMA and the banks would like is bollixes just selling property back and forth to other bollixes, without ever having tenants.

syklops

handlemaster wrote: »

Currently 138 for sale in Dublin for 175k or less

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

Did you look at some of them? A dog would turn their nose up at many.

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

Other capitals like where? London, Paris, Prague etc?

Is there a capital city in Europe which is as devoid of public transport as dublin where rents are higher? I doubt it.

Labarbapostiza

syklops wrote: »

Did you look at some of them? A dog would turn their nose up at many.

Well, the dogs don't often have much choice....

It's interesting looking at DAFT. There is crap that should never have been given planning permission. There are apartments in Smithfield, where the only window faces into complete darkness.

I also have a suspicion, that some of the property, if a cash buyer made a much reduced offer, they'd get it.

I bet if you had cash, you'd get http://www.daft.ie/dublin/apartments-for-sale/dublin-2/apt-3-2930-lad-lane-dublin-2-dublin-1149338/ For much lower than the asking price. It's a bit of fixer upper, but it is in a great location.

Augeo

Augeo wrote: »

Crude & Assume were the words used for calculation purposes.
95% occupancy over 10/20 years is deliriously optimitistic imo.

You would be unlucky to have a week of no occupancy per year as things stand. People are fighting over properties. No occupancy would be very low on my list of worries.

Houston Famous Oboe

Houston Famous Oboe wrote: »

You would be unlucky to have a week of no occupancy per year as things stand. People are fighting over properties. No occupancy would be very low on my list of worries.

As things stand is well and good, one must consider longterm. For calculation purposes using 10 months/annum occupancy is a decent yardstick imo. A few years ago Dublin had less demand and more supply, no point using best case scenario when calculating longterm return, at the moment is all well and good but no guarantee of the future.

No one mentioned no occupancy so it being low on your list is nice to know but largely of no benefit to the discussion.

MarkAnthony

Houston Famous Oboe wrote: »

You would be unlucky to have a week of no occupancy per year as things stand. People are fighting over properties. No occupancy would be very low on my list of worries.

This is a frequently offered anecdote. There are quite a few people at viewings but it's not like LLs are having their arms ripped off. Especially in places like Santry. Not that there is anything wrong with Santry it's just not ideal in regards to demand - still high enough but you could still easily have a couple of weeks while you wait for the right tenant.

Furthermore we're at peak demand at the moment. Things might continue to go up in the short term but I don't believe they'll continue like this in the medium to long term. I also don't see apartment prices doing much over the next ten years.

OP I work it out as a net 6500 return (roughly) pa. Whether it's worth the hassle to you is entirely down to you, just go into being a LL with your eyes open. If I were you I'd be looking at the longer term council backed scheme's with 100% interest relief and getting a BTL mortgage. Speak to a qualified and recommended FA to get the best return on your money. I dont think having all your eggs in one basket is a good idea.

jimbobaloobob

Many more costs to factor. Small but necessary. Reg each tenant prtb, insurance, property tax. Wear and tear and upkeep.

handlemaster

syklops wrote: »

Did you look at some of them? A dog would turn their nose up at many.



The OP is only looking for 1 investment property im sure he could find one house among the 138 that someone would be happy to rent from him.

jimbobaloobob

jimbobaloobob wrote: »

Many more costs to factor. Small but necessary. Reg each tenant prtb, insurance, property tax. Wear and tear and upkeep.

Most of which are reducing your tax bill also though.

CIARAN_BOYLE

Houston Famous Oboe wrote: »

You would be unlucky to have a week of no occupancy per year as things stand. People are fighting over properties. No occupancy would be very low on my list of worries.

Yeah but 10 months a year is a good baseline for 20 years. 200 months out of 240. Lets say theres one bad tennant that overholds without paying and you can't get rid of them for 18 months and you have 22 months where you have no rent due to vacancy between tenants and renovation work being done..

newacc2015

Augeo wrote: »

Crude & Assume were the words used for calculation purposes.
95% occupancy over 10/20 years is deliriously optimitistic imo.

If you are from Kinsale, you are unaware of what it is like to rent in Dublin. Its a huge city, with a constant demand for accommodation. Especially anywhere reasonable close to the city. If you have a house/apartment in a student area in Dublin. You can expect 100% occupancy.

If you look at the apartment I suggested. Its around the corner from DCU basically, where there will always be demand for student housing. Land is fixed in supply, so I don't think you can assume a new town with competing housing will be built beside DCU.

A lot student housing in Dublin is exempted from normal tenancy law and non-paying tenants can be evicted rapidly. Assuming anything other than 95% occupancy is ridiculous.

Labarbapostiza

newacc2015 wrote: »

If you are from Kinsale, you are unaware of what it is like to rent in Dublin. Its a huge city, with a constant demand for accommodation. Especially anywhere reasonable close to the city. If you have a house/apartment in a student area in Dublin. You can expect 100% occupancy.

Where do you get this 100% occupancy from? The college year is only 8 months.

I live near a large guesthouse in Dublin (it's very large for a guest house). They have students during the college year and then in summer they have the tourist trade. Accommodating students is seasonal.

caviardreams

Also, if you are renting to students the wear and tear will be much higher than with professionals typically, so you will likely have higher costs.

q85dw7osi4lebg

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

I've sold apartments in there, some had pyrite and the banks wouldn't lend on them.

newacc2015

newacc2015 wrote: »

If you are from Kinsale, you are unaware of what it is like to rent in Dublin. Its a huge city, with a constant demand for accommodation. Especially anywhere reasonable close to the city. If you have a house/apartment in a student area in Dublin. You can expect 100% occupancy.

If you look at the apartment I suggested. Its around the corner from DCU basically, where there will always be demand for student housing. Land is fixed in supply, so I don't think you can assume a new town with competing housing will be built beside DCU.

A lot student housing in Dublin is exempted from normal tenancy law and non-paying tenants can be evicted rapidly. Assuming anything other than 95% occupancy is ridiculous.

haha

I've lived and worked in Dublin in the past so my current location shouldn't really be taken as a presumption of what I am aware of or not, that would apply to everyone really, I wouldn't presume someone living in Dublin knows sfa about Kinsale or annywhere else.

I hadn't looked at the apartment you suggested and again my 10months/annum occupancy figure is a general guide that one should use when calculating the viability of properties.

athtrasna

Mod note

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john1963

I suppose I see an income of 500 a month. my money is in a fixed asset. not as risky as shares. no pressure to sell and I have 360k to invest so 170k after expenses...no liquidity problems

bmm

MarkAnthony wrote: »

Furthermore we're at peak demand at the moment. Things might continue to go up in the short term but I don't believe they'll continue like this in the medium to long term. I also don't see apartment prices doing much over the next ten years.

This is the kind of stuff people were saying in 1996 ! We had 10 more years of crazy growth !
I would estimate we would have another 10 years of strong growth in Dublin before another correction for the simple reason that Irish people are still obsessed with property and owning property. Apartment pricing will always feel a downturn more than houses, but we are getting to a stage where houses are just too expensive for middle and lower income purchasers.

johnnyskeleton

newacc2015 wrote: »

A lot student housing in Dublin is exempted from normal tenancy law and non-paying tenants can be evicted rapidly. Assuming anything other than 95% occupancy is ridiculous.

I think people estimate 10/12 months to deal with circumstances where tenants stop paying rent and have to be evicted etc. Referring to an average 10/12 months occupation doesnt necessarily mean no one livig there for 2 months each year, its a practical assessment that a landlord may risk, on average, 2 months rent not being paid per year for whatever reason. Kind of like a bank estimating that 1 in 10 borrowers will default etc.

MarkAnthony

bmm wrote: »

This is the kind of stuff people were saying in 1996 ! We had 10 more years of crazy growth !
I would estimate we would have another 10 years of strong growth in Dublin before another correction for the simple reason that Irish people are still obsessed with property and owning property. Apartment pricing will always feel a downturn more than houses, but we are getting to a stage where houses are just too expensive for middle and lower income purchasers.

Go and put your money where your mouth is (so to speak :pac:) in the Property 2015 thread. While house prices still look buoyant (to a degree) we seem to have learnt our lessons in relations to apartments. The massive growth in apartment prices was driven by people (I know I was one) trying to get on the ladder.

There's nothing wrong with the ladder per se but the first purchase can't cost more than a 3 bedroom semi in the burbs! Apartment prices now are only being fueled by investors. A major red flag for me is the OP saying it 'was 360' - all well and good but it won't be again for 30-40 years and then only due to inflation.

Uno my Uno.

Houses in certain areas are holding value as are apartments in city center areas. Elsewhere it's a different story. I don't think the market is anything like it was 10 years ago, most people seem to have learnt the lesson that a small two bed apartment in a small town in rural west Meath or even Wicklow doesn't make sense and isn't worth €400k.

Of course even this thread is evidence to the contrary,the idea that a house in santry is a good investment because of its proximity to DCU and that it will likely attract 95%occupany rates despite the college year only being 9 months long makes the mind boggle.

lima

MarkAnthony wrote: »

Go and put your money where your mouth is (so to speak :pac:) in the Property 2015 thread. While house prices still look buoyant (to a degree) we seem to have learnt our lessons in relations to apartments. The massive growth in apartment prices was driven by people (I know I was one) trying to get on the ladder.

There's nothing wrong with the ladder per se but the first purchase can't cost more than a 3 bedroom semi in the burbs! Apartment prices now are only being fueled by investors. A major red flag for me is the OP saying it 'was 360' - all well and good but it won't be again for 30-40 years and then only due to inflation.

Apartments are still good value I think

Rents in my block are now hitting e1500 per month and my mortgage is e870 so a couple (or even 1 salary like me) can make a massive saving by buying an apt instead of renting. Plus apartments are up over 8% this year so they are still going up

Uno my Uno.

lima wrote: »

Apartments are still good value I think

Rents in my block are now hitting e1500 per month and my mortgage is e870 so a couple (or even 1 salary like me) can make a massive saving by buying an apt instead of renting. Plus apartments are up over 8% this year so they are still going up

It defends where the apartment is, in an area with high population density apartments will remain in demand. In areas with low density apartments will not command high prices.

john1963

Uno my Uno. wrote: »

Houses in certain areas are holding value as are apartments in city center areas. Elsewhere it's a different story. I don't think the market is anything like it was 10 years ago, most people seem to have learnt the lesson that a small two bed apartment in a small town in rural west Meath or even Wicklow doesn't make sense and isn't worth €400k.

Of course even this thread is evidence to the contrary,the idea that a house in santry is a good investment because of its proximity to DCU and that it will likely attract 95%occupany rates despite the college year only being 9 months long makes the mind boggle.

some apartment owners in santry have told me that as soon as they advertise for tenants they get them. its close to airport, Beaumont hospital, mater m50 etc....but of course always a risk but what in life isnt

Tiddlypeeps

Labarbapostiza wrote: »

I bet if you had cash, you'd get http://www.daft.ie/dublin/apartments-for-sale/dublin-2/apt-3-2930-lad-lane-dublin-2-dublin-1149338/ For much lower than the asking price. It's a bit of fixer upper, but it is in a great location.

The quotes "basement level apartment" and "suffered from substantial water ingress" would have me quite concerned about a property like that, especially given it's proximity to a canal. They don't say flood damage, but I think that would be a reasonable assumption, especially given the pictures. You would have to factor into your calculations the costs that would be incurred if flooding happened again in the future. Especially since if it's in an area that is prone to flooding insurance companies won't touch it. Even if a significant discount was gotten it's still seems like a very risky property to purchase.

john1963

john1963 wrote: »

some apartment owners in santry have told me that as soon as they advertise for tenants they get them.............

I wouldn't doubt that, I have a flat in Kildare rented out since 2005. I'm on 6th/7th set of tenants and I think it's only been empty a few weeks at a time. Small gaps between folks leaving and next lot moving in.

In saying that I still advise anyone considering BTL to not factor in best case scenario when doing their figures.

lima

Uno my Uno. wrote: »

It defends where the apartment is, in an area with high population density apartments will remain in demand. In areas with low density apartments will not command high prices.

Yeah defo, Santry would't have as big a density as city centre or inner-suburb but then again the rents are cheaper there so would suit someoen living closeby or a young foreign family (I say that because there are lots of foreign families in my apt block and Irish families don't seem to like aps for some reason)

caviardreams

Tiddlypeeps wrote: »

The quotes "basement level apartment" and "suffered from substantial water ingress" would have me quite concerned about a property like that, especially given it's proximity to a canal. They don't say flood damage, but I think that would be a reasonable assumption, especially given the pictures. You would have to factor into your calculations the costs that would be incurred if flooding happened again in the future. Especially since if it's in an area that is prone to flooding insurance companies won't touch it. Even if a significant discount was gotten it's still seems like a very risky property to purchase.

There is a much bigger issue with this apparently as well:
http://www.thepropertypin.com/viewtopic_iphone.php?f=10&t=18457&p=855994

RainyDay

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.

You forgot to mention that you're doubling the risk by borrowing. Any borrowing to invest is risky, as lots of people who thought they'd never lose while investing in property are finding out.

frank_scorpio wrote: »

lack of liquidity is just investment community jargon

liquidity is a major issue. You can't sell 1/4 of your house to fund a family wedding or to cover sudden health costs. You can sell 1/4 of a stock portfolio.

frank_scorpio wrote: »

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

Yes, you could do that - or you could just buy into a managed fund which will invest into a couple of hundred companies across a range of industries and regions and take the benefit of diversification that comes with that. They'll manage the tax on dividend income too, all at a fairly modest cost if you look around.

jimbobaloobob wrote: »

Many more costs to factor. Small but necessary. Reg each tenant prtb, insurance, property tax. Wear and tear and upkeep.

Yes, lots of costs, and lots of time involved. It's really like setting up a small business rather than making a hands-off investment. If you're up for this, great. If you're not, you might want to look elsewhere.

When you invest in Ryanair, Mick O'Leary doesn't ring you at 10pm on a Saturday night to get you to fix a broken toilet.