Buying to Let

0gac3yjefb5sv7

I have a family member who is thinking of buying an apartment outside Dublin somewhere such as Waterford Town or Donegal for approx 50k.

They have about 15k in savings for a deposit. I was just wondering would anyone have any advice on if this would be a sensible investiment and if there are many hidden costs when letting an apartment?

Thanks

Michael D Not Higgins

1. They should know the market and demand. No point buying a cheap apartment no one wants.

2. They need to do all their sums, to determine if the investment is right for them. This includes taking into account tax, maintenance costs, insurance, management fees, and the risk of non paying tenants who cause damage to the property over the course of a year before they can be legally evicted. There are high returns on renting property right now, but this is a multi-year investment. They need to look at how long their money is tied up, how much of a dip in the market they can tolerate, etc. to determine the risk and reward.

3. Other costs they might consider are agent fees, considering they are looking in Waterford and Donegal, I expect they don't live where they're looking to buy so they'll need someone locally looking after the property.

4. I can think of many more sensible investments but that's not usually what people are looking for when they get into small time letting.

athtrasna

The other issue is btl mortgages require 30% deposit typically. On top of that they'll need money for legal fees and other once off costs, will likely be several thousand euro.

MarkAnthony

Pheonix10 wrote: »

I have a family member who is thinking of buying an apartment outside Dublin somewhere such as Waterford Town or Donegal for approx 50k.

They have about 15k in savings for a deposit. I was just wondering would anyone have any advice on if this would be a sensible investiment and if there are many hidden costs when letting an apartment?

Thanks

A financial advisor and an accountant.

DubCount

They will need more savings to make such an investment. In addition to a minimum of 30% deposit and legal costs, stamp duty etc., there way be money to be spent on new white goods or furniture or redecorating. Then they would need some funds to cover mortgage payments when the the property is vacant etc. Typically, its advised to expect an average of 1 month per year vacancy, but if the rental market is slow in an area, they may need more. Check out some advertised on Daft and see how long they have been advertised.

Also, watch out for tax. Even if rental income is the same as mortgage repayments, there will be a tax liability. The mortgage repayment will have an element of interest and capital in each repayment. only 75% of the Interest part is allowed as a cost against tax.

I think an hour with an accountant/financial advisor would be well spent.

SarahMollie

I wouldnt be a fan of this as an investment. Rental markets in those glorified large towns are never going to be as robust as those in a real city.

Also, being a landlord sounds like a potential pain in the backside. Could this person afford mortgage repayments if they got a nightmare tenant who refused to leave and wasn't paying rent?

Mark Anthony gave the best advice - go see a financial adviser. Likely much safer, stress free ways to get that money working.

DEUTZ1507

Any property that cost 50000 will generate very little rent

not sensible in my view. cash is king and they will be tying it up in an illiquid investment far away that could give them many headaches.

Graham

Pheonix10 wrote: »

I have a family member who is thinking of buying an apartment outside Dublin somewhere such as Waterford Town or Donegal for approx 50k.

Has this person worked out the potential return on such an apartment?

Annual Rent €3600
Service charge - €900
Insurance - €320
Repairs / maintenance €???
Tax - €1,000 (ish)
Property Tax - €???
Interest - €???
Profit - €SFA (pocket money if you're lucky)
Hassle - fairly significant

riclad

Add on 1 per cent stamp duty ,legal fees to buy the apartment,
=at least 1500 euro .
and the cost of a 35 k loan at btl rate of 4.5 per cent.

Lux23

I think you would be better off putting that kind of money into one of the post office accounts that seem to have a fairly high return, that is if you're too worried about using it on the stock market.