Should I buy an apartment as an investment?

antoinolachtnai

RainyDay wrote: »

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.

When you buy shares you are also effectively borrowing to invest, or inviting someone to do it on your behalf, because the companies you invest in have bank and other borrowings.

rhis is why investment in equities is so risky.

If you want a low risk investment, I would say that easily rentable property with a relatively low leverage is a lot safer than equities.

MarkAnthony

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

They're good value in that regard certainly, but then this is the whole renting vs buying debate. As regards long term investments - who knows, it seems to me, anecdotally, LLs are getting out of the business.

As for up 8% what figure are you going on YoY? That has a massive loading on the big gains from this time last year. Even if it's a genuine 8% increase all the figure I have seen have the caveat that they are very low volumes. I can't see apartments gaining much more in Dublin. I don't see them crashing either but I do think they will be adversely effected by supply over the next 5-10 years. Apartments are seen as a second class option by most Irish people.

lima

MarkAnthony wrote: »

They're good value in that regard certainly, but then this is the whole renting vs buying debate. As regards long term investments - who knows, it seems to me, anecdotally, LLs are getting out of the business.

As for up 8% what figure are you going on YoY? That has a massive loading on the big gains from this time last year. Even if it's a genuine 8% increase all the figure I have seen have the caveat that they are very low volumes. I can't see apartments gaining much more in Dublin. I don't see them crashing either but I do think they will be adversely effected by supply over the next 5-10 years. Apartments are seen as a second class option by most Irish people.

Yep well that's from the CSO data (7.8% not 8% actually) http://cso.ie/en/releasesandpublications/er/rppi/residentialpropertypriceindexoctober2015/ so defo based on those low transactions..

I done a lot of analysis over the last 3 or so years for apartments in Dublin (and I'm far from an expert!) and I do think the low volumes skew the data, but what also skews the data is that the highest gains were in certain areas (grand canal, D4, D6, anywhere either southside or 'nice' city centre). However whilst there were drops in some areas, there were more subtle increases in other areas. The area I bought in a certain popular central northside suburb still (kind of) had value in it a year ago. My 'plan' was that the crazy prices of the nice-inner-southside will raise the prices of the area I am in. Coupled with the lack of sales in my area, it seems that this has somewhat happened. A couple of apts in my area hit over e300k for 2br's (they are not on the PPR yet).

Now I don't expect apt prices to rise much further, but I still think that even if prices fall, they will be due to the prices going down in the southside areas I mention above. Apartments in other areas can still rise

Defo true about Irish and apartments.. I do my own thing though and I love apartment life.. as do all the foreigners in my block

syklops

Labarbapostiza wrote: »

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.

Between the size and location, thats a pretty good deal as it stands. If only I'd the money I'd snap that up very quickly.

Eric Cartman

Labarbapostiza wrote: »

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.

thats been flooded before. and quite badly it would seem. Id investigate why that was, could be uninsurable.

PissFlapsDory

frank_scorpio wrote: »

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

oh...yes.. remember it well back in the day when Alsopp's were doing the distressed auctions in Dublin 2010...a one bedroom near Stephens Green was had for 120,00EUR. Wahaaaaaaaaaaayyyyyyy, love a bargain!!!!

Dick Dastardly

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

Add your reply here.
OP whether you should invest in a property or not whether you have cash to spare or not depends on a whole pile of factors - none of which you've flagged. Do you own other property - if you do then investment 101 would suggest you diversify out to another asset class.... Where are you in life? Starting off - what about family needs? Older profile - what about liquidity? Are you fully pensioned/ using all your allowances? Do you need an income from your cash pile? Have you other assets / income etc?

I'm not a financial advisor but if I was in your shoes I'd pay someone to give me a fully informed investment view. Small beer relative to the actual and opportunity costs of sticking 180k in an apartment.

Uno my Uno.

RainyDay wrote: »

.


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.

Very much this, buying a property to let and becoming a landlord isn't an investment so much as starting a new business.

Being a landlord isn't just a matter of buying a property and having rent deposited into your account. There are legal obligations, advertising and viewings, maintenance on the property, awkward tenants to deal with and the list goes on. It takes time and effort.

Labarbapostiza

Eric Cartman wrote: »

thats been flooded before. and quite badly it would seem. Id investigate why that was, could be uninsurable.

I think you're right.

I'm pretty sure you're right.

It would be impossible to either mortgage or insure against flooding.

It's funny, I know the building well. I was always curious as to how it dealt with flooding.........apparently not too well.

Diarmuid

antoinolachtnai wrote: »

When you buy shares you are also effectively borrowing to invest, or inviting someone to do it on your behalf, because the companies you invest in have bank and other borrowings.

What?! That's complete nonsense. If you take out a loan to buy shares that's "borrowing to invest". Anything else is not.
You have €100 in the bank and you take it and invest it in Ryanair. If Michael O Leary goes and uses that €100 to borrow another €200 and then looses it all, he wont' come calling around looking for the €200 extra!

antoinolachtnai wrote: »

rhis is why investment in equities is so risky.

Equities are risky because risk and reward are linked. Equities produce a higher return in the long run so are more volatile. That's investing 101

athtrasna

Diarmuid wrote: »

What?! That's complete nonsense. If you take out a loan to buy shares that's "borrowing to invest". Anything else is not.
You have €100 in the bank and you take it and invest it in Ryanair. If Michael O Leary goes and uses that €100 to borrow another €200 and then looses it all, he wont' come calling around looking for the €200 extra!


Equities are risky because risk and reward are linked. Equities produce a higher return in the long run so are more volatile. That's investing 101

Mod note

And there's an investment and banking forum to discuss such things. This is Accommodation and Property thanks. This appplies to all posters.

RainyDay

antoinolachtnai wrote: »

When you buy shares you are also effectively borrowing to invest, or inviting someone to do it on your behalf, because the companies you invest in have bank and other borrowings.

rhis is why investment in equities is so risky.

If you want a low risk investment, I would say that easily rentable property with a relatively low leverage is a lot safer than equities.

This is dangerously misleading.

If the OP takes your advice, and borrows €180k to buy 2 apartments, he is on the hook for €360k. If the investment goes belly-up, his potential loss is €360k.

If, on the other hand, the OP invests €180k in equities, his maximum potential loss is €180k. It doesn't matter what borrowings the companies have or take out - there is no scenario where the investor becomes liable for the company borrowings. The maximum possible loss is €180k.

Talk to some BTL investors who went in at the wrong time on 80% borrowings and see how they are dealing with their losses of 4 x their original capital.

antoinolachtnai

The building is relatively new and presumably building insurance is in place. The apartment isn't suddenly going to disappear. It always has a value and you can always sell it.

It is hard to foresee a situation where two apartments won't together be worth 160000 or 170000 in five years which is what it would have to be worth in 5 years to pay off what remains of the mortgage. This would be the case even if the apartment block burned to the ground and triggered a claim on the insurance.

Even the land value of those apartments is significant enough. Even without insurance the site the apartment and parking place stands on is probably worth about 50,000. And barring a direct strike by a 737 even a major fire would not destroy the structure.

That said it is certainly not impossible to lose more than your original investment. It is, however, incredibly unlikely. if events transpire to lead to this situation (failure of property prices and failure of the insurance system) then the equity investment will certainly be completely hosed too.

I do agree that property can be leveraged to a degree that equities cannot (though many people invest in equities on margin, borrowing against their shareholding). I would say that if you are not interested in leveraging the value through borrowing (not necessarily at the beginning but at some stage) then you definitely should not buy rental property as an investment.

This is just one aspect of the investment though. The costs, taxation and building issues are a lot more important for the OP to consider.

Uno my Uno.

antoinolachtnai wrote: »

The building is relatively new and presumably building insurance is in place. The apartment isn't suddenly going to disappear. It always has a value and you can always sell it.

It is hard to foresee a situation where two apartments won't together be worth 160000 or 170000 in five years which is what it would have to be worth in 5 years to pay off what remains of the mortgage. This would be the case even if the apartment block burned to the ground and triggered a claim on the insurance.

Even the land value of those apartments is significant enough Even without insurance the site the apartment and parking place stands on is probably worth about 50,000. And barring a direct strike by a 737 even a major fire would not destroy the structure.

That said it is certainly not impossible to lose more than your original investment. It is, however, incredibly unlikely. if events transpire to lead to this situation (failure of property prices and failure of the insurance system) then the equity investment will certainly be completely hosed too.

I do agree that property can be leveraged to a degree that equities cannot (though many people invest in equities on margin, borrowing against their shareholding). I would say that if you are not interested in leveraging the value through borrowing (not necessarily at the beginning but at some stage) then you definitely should not buy rental property as an investment.

This is just one aspect of the investment though. The costs, taxation and building issues are a lot more important for the OP to consider.

It's a major assumption that insurance is in pace or that it will remain in place. If there are issues with the management company (and hundreds if not thousands of developments across the country are in distress or liquidation) the insurance may have lapsed and in that case the apartment will be essentially unsaleable. Many many people who bought properties in the boom have since discovered that contrary to your assertion, the property has no inherant value and if it does they are prevented from selling it.

A catastrophic fire is far from the worst eventuality for an apartment owner, (and such a fire would certainly have the potential to destroy the budding r leave it requiring demolition) a much more likely problem is a structural issue which the sinking fund is not large enough to resolve. The residents of priory hall were the victims of the most extreme example of this but something simple like a lift that must be replaced can cause significant issues and result in a situation where no properly advised buyer will purchase an apartment in the development.

The notion that buying apartments as an investment is "safe as houses" is untrue and in fact it must be done wth the greatest of care and circumspection.

antoinolachtnai

A 'major' structural flaw as you describe would require further investment. It is a very serious situation, no doubt about it. But a major lift fault doesn't devalue the property by more than a few thousand euros. It causes a liquidity issue sure but in the example there would be plenty of cover for this from having two apartments rather than one.

It does not reduce the value of the property to zero. The bank's security is basically safe.

The banks won't advance finance on an uninsured property, nor will they accept their clients breaching their mortgage conditions by not paying insurance bills. If there are big problems they are pretty evident at the ten year point.

Hidden building defects do not suddenly emerge in ten-year-old apartment buildings.

Make no mistake it is definitely possible to lose a lot of money in rental property. But your bankers are very unlikely to see your loans go underwater with a 50 percent (and falling) loan.

There is a load of stuff above about investment being 'safe as houses' and about the wisdom of borrowing 80 percent of the value of BTLs. Obviously I didn't say that apartment investments were safe as houses nor did I say that borrowing 80 percent on BTLs is a good idea.

Uno my Uno.

antoinolachtnai wrote: »

A 'major' structural flaw as you describe would require further investment. It is a very serious situation, no doubt about it. But a major lift fault doesn't devalue the property by more than a few thousand euros. It causes a liquidity issue sure but in the example there would be plenty of cover for this from having two apartments rather than one.

It does not reduce the value of the property to zero. The bank's security is basically safe.

The banks won't advance finance on an uninsured property, nor will they accept their clients breaching their mortgage conditions by not paying insurance bills. If there are big problems they are pretty evident at the ten year point.

Hidden building defects do not suddenly emerge in ten-year-old apartment buildings.

Make no mistake it is definitely possible to lose a lot of money in rental property. But your bankers are very unlikely to see your loans go underwater with a 50 percent (and falling) loan.

There is a load of stuff above about investment being 'safe as houses' and about the wisdom of borrowing 80 percent of the value of BTLs. Obviously I didn't say that apartment investments were safe as houses nor did I say that borrowing 80 percent on BTLs is a good idea.

I think it's clear that you don't understand the risks and potential issues surrounding apartments. The need to replace a lift or a roof or ventilation system or ther problem can cost tens of thousands of euros. If the sinking fund is not sufficient or not in place the funds must be sourced from the apartment owners, any independent advisor should tell their client not to buy in such a circumstance meaning sellinsucha a property is exceptionally difficult.

Secondly, apartment owners do not pay the block insurance nor are they able to pay it. This is done by the development management company. If the MC is not able to collect management fees (or owners don't pay them) it can happen that the MC is not able to pay the insurance. The problem arises if a buyer buys in a development where the MC is in difficulty and insurance subsequently lapses, as you point out no bank will lend on such a property. You are correct that the apartment has not gone anywhere, however if it can't be sold its value as an asset is severely lessened and it may instead become a liability.

Finally structural defects do emerge after 10 years, if anything such defects are more likely to emerge later rather than earlier.

These circumstances can and do come about and as a result it is vital to do full investigations (through your solicitor) and be aware f the possible risks. The idea that an apartment block is a sound investment because it is unlikely to be hit by an airplane is unfortunately short of the necessary care to be taken.

khamilto

The sale of my brother's apartment was delayed by 6 months waiting for new management company accounts to show that the sinking fund had increased. Neither the buyer's solictor nor lender were happy to proceed at all until then.

RainyDay

antoinolachtnai wrote: »

The building is relatively new and presumably building insurance is in place. The apartment isn't suddenly going to disappear. It always has a value and you can always sell it.

It is hard to foresee a situation where two apartments won't together be worth 160000 or 170000 in five years which is what it would have to be worth in 5 years to pay off what remains of the mortgage. This would be the case even if the apartment block burned to the ground and triggered a claim on the insurance.

Even the land value of those apartments is significant enough. Even without insurance the site the apartment and parking place stands on is probably worth about 50,000. And barring a direct strike by a 737 even a major fire would not destroy the structure.

That said it is certainly not impossible to lose more than your original investment. It is, however, incredibly unlikely. if events transpire to lead to this situation (failure of property prices and failure of the insurance system) then the equity investment will certainly be completely hosed too.

I do agree that property can be leveraged to a degree that equities cannot (though many people invest in equities on margin, borrowing against their shareholding). I would say that if you are not interested in leveraging the value through borrowing (not necessarily at the beginning but at some stage) then you definitely should not buy rental property as an investment.

This is just one aspect of the investment though. The costs, taxation and building issues are a lot more important for the OP to consider.

I don't think any apartment has any 'land value' as you don't buy the land, you lease it for 999 years or something like that. The management company owns the land and common areas.

But having said that, I generally agree with you, that it would be extremely unlikely that two apartments would be worth less then the current cost of one.

But there are people out there struggling with banks today who thought exactly the same thing when they bought in 2007. Any leveraged investment increases your risk, and the borrower needs to understand exactly what they are getting into.

witchgirl26

OP - one important question is which development in Northwood is it? There are at least 3 I'm aware of and some rent easier & for higher amounts than others. Some of the apartments in Temple Gardens had issues with damp which caused a few problems with tenants for example (had friends renting there at the time). It does look like a bargain but I'd really look into the property price register aswell for the area & see what the general sale price has been lately of that specific development. If this one is going for €180k but the last 3 similar have gone for €220k (for example) then you'd have to ask big questions as to why the difference in price.

john1963

witchgirl26 wrote: »

OP - one important question is which development in Northwood is it? There are at least 3 I'm aware of and some rent easier & for higher amounts than others. Some of the apartments in Temple Gardens had issues with damp which caused a few problems with tenants for example (had friends renting there at the time). It does look like a bargain but I'd really look into the property price register aswell for the area & see what the general sale price has been lately of that specific development. If this one is going for €180k but the last 3 similar have gone for €220k (for example) then you'd have to ask big questions as to why the difference in price.

its in temple court....it is a 2 bed with ensuite and faces south over a geen and santry demense. it has pyrite but is on the remediation list. needs 2k spend to redecorate...not sure if its a bargain but shiuld be easy to rent out. my money is earning no interest and maybe its worth a gamble.....in 10 years in a growing economy will it be worth less than 180k

pc7

Pyrite confirmed, wouldn't touch it at all, keep looking for something else. It's not easy being a landlord, it can be difficult to say the least. One bad tenant, government bringing in other rent controls or taxes, I'd sit tight and look for somewhere else. Really think a house is a better buy, as you avoid management companies and the likes.

jd

john1963 wrote:

its in temple court....it is a 2 bed with ensuite and faces south over a geen and santry demense. it has pyrite but is on the remediation list. needs 2k spend to redecorate...not sure if its a bargain but shiuld be easy to rent out. my money is earning no interest and maybe its worth a gamble.....in 10 years in a growing economy will it be worth less than 180k

Remediation is starting Jan 11th in Temple Court, 9 month project approx. If it is ground floor people will be out for 6 weeks or so. That said, Temple Court rents out pretty easily.

MarkAnthony

john1963 wrote: »

...in 10 years in a growing economy will it be worth less than 180k

We simply don't know.

I don't think (I hope) we'll see the kind of silliness with apartments outside of very desirable areas like D1, 2 and 4 that we saw during the boom. Within 10 years hopefully we'll see housing supply on stream and these factors will push against inflation.

Will it crash? Probably not. My money is on a small rise. The question you have to ask your self is are you willing to be a LL for roughly 6K a year? Would you still be okay with a very real possibility of it being more like 3 or 4K a year in 10 years time.

blacklilly

You've been given some good advice here.

I am very familiar (professionally) with the developments in Northwood and my advice would be by and large to stay clear.

There are better builds elsewhere and pyrite is not the only building issue to consider.

john1963

blacklilly wrote: »

You've been given some good advice here.

I am very familiar (professionally) with the developments in Northwood and my advice would be by and large to stay clear.

There are better builds elsewhere and pyrite is not the only building issue to consider.

what other issues are there? I had the apartment surveyed and nothing showed up

handlemaster

john1963 wrote: »

what other issues are there? I had the apartment surveyed and nothing showed up

Looks like your going to buy no matter what. Best of luck . Let us know how it goes

john1963

handlemaster wrote: »

Looks like your going to buy no matter what. Best of luck . Let us know how it goes

I wont if I hear about other issues...I am quite unsure now

john1963

john1963 wrote: »

I wont if I hear about other issues...I am quite unsure now

I think I will pull out....maybe if house prices drop a bit a house would be a better bet

Uno my Uno.

john1963 wrote: »

I think I will pull out....maybe if house prices drop a bit a house would be a better bet

If you are basing your decision on the opinions of strangers on the internet you aren't ready to make any kind of investment.

john1963

Uno my Uno. wrote: »

If you are basing your decision on the opinions of strangers on the internet you aren't ready to make any kind of investment.

there are lots of opinions....estate agents and stock brokers differ.....I value peoples opinions....I have invested before and done well but never in haste