Am I crazy for considering this one bed apartment?

VonLuck

I'm caught in a bit of a bind. A couple of years ago I was intending on purchasing a two bed house or apartment, but I hesitated because I was waiting for the perfect property, which obviously was never going to come along. Now I've waited too long and property prices have increased beyond what I can afford.

I certainly can't afford a two bedroom home in a location I would like to live in Dublin. The only remaining option is a one bed apartment if I choose to stay here.

I've thought about this and I don't intend on having a family and am happy to live on my own. The only reason I was originally looking for a two bedroom place was for resale-ability and the option to rent out a room for added income.

I've seen a one bed apartment in the city centre for ?200k, but I expect to sell for at least ?220k. It is modern and in great condition and is in a location that appears to be becoming gentrified. The only downside, beside the price (which I can almost afford), is that there is no parking. I have a car, but do not need it to commute and barely put 8000km on it in a year.

I've done a detailed cost analysis based on my current renting circumstances and expected costs from home ownership. If I take into account all these expenses (bills, insurance, maintenance, management fees etc.) plus the mortgage interest I would be paying, it matches almost exactly what I am paying in bills and rent at the moment. There is also the added expenditure for the part of my mortgage which is the capital repayment, but I would see that as an investment and is comparable to my current savings (although a lesser amount).

Also, if I do decide to move on to somewhere else after a few years and rent out the property, I would expect a rental income of ?1250 which gives a gross yield of roughly 6.75%. This seems to be a decent yield, but I'm sure there are more profitable properties out there.

My only other alternative to all of the above is to stay renting and save up enough for a two bed apartment or house, which I could safely say would set me back at least 5 years to be able to afford properties at current market prices.

I know a good part of this decision is what I personally feel is best for me, but from an objective view, is this a worthwhile opportunity?

asteroids over berlin

VonLuck wrote: »

I'm caught in a bit of a bind. A couple of years ago I was intending on purchasing a two bed house or apartment, but I hesitated because I was waiting for the perfect property, which obviously was never going to come along. Now I've waited too long and property prices have increased beyond what I can afford.

I certainly can't afford a two bedroom home in a location I would like to live in Dublin. The only remaining option is a one bed apartment if I choose to stay here.

I've thought about this and I don't intend on having a family and am happy to live on my own. The only reason I was originally looking for a two bedroom place was for resale-ability and the option to rent out a room for added income.

I've seen a one bed apartment in the city centre for ?200k, but I expect to sell for at least ?220k. It is modern and in great condition and is in a location that appears to be becoming gentrified. The only downside, beside the price (which I can almost afford), is that there is no parking. I have a car, but do not need it to commute and barely put 8000km on it in a year.

I've done a detailed cost analysis based on my current renting circumstances and expected costs from home ownership. If I take into account all these expenses (bills, insurance, maintenance, management fees etc.) plus the mortgage interest I would be paying, it matches almost exactly what I am paying in bills and rent at the moment. There is also the added expenditure for the part of my mortgage which is the capital repayment, but I would see that as an investment and is comparable to my current savings (although a lesser amount).

Also, if I do decide to move on to somewhere else after a few years and rent out the property, I would expect a rental income of ?1250 which gives a gross yield of roughly 6.75%. This seems to be a decent yield, but I'm sure there are more profitable properties out there.

My only other alternative to all of the above is to stay renting and save up enough for a two bed apartment or house, which I could safely say would set me back at least 5 years to be able to afford properties at current market prices.

I know a good part of this decision is what I personally feel is best for me, but from an objective view, is this a worthwhile opportunity?

Honest cost analysis i hope

I think your emotions are getting in your way. What is the complex like? 200k for a 1 bed in the city sounds cheap, hence my question, what is the complex like/area, people living in the complex etc, should be your no.1 quesion. No parking - i bet you will miss the car, not all the time but a lot of the time, having said that the city would be on your doorstep. Personally my preference would be just outside the city centre with at least 1 car space near dart or luas etc

tina1040

Can you really live long term without the car? 8000km is quite a bit for social driving so it sounds like you would miss it for certain trips. Ok for a while maybe, but for years....?

CeilingFly

On the car side of things you have GoCar the var sharing system.

Perfect for you I reckon.

On the apartment, size matters especially with one beds - if its at least 50sqm / 550 sq ft. then you won't feel like a sardine.

In terms of saleability, once it's in Dublin and close enough to ifsc or grand canal docks, you're safe. Plenty of tech / financial people to keep the market buoyant.

Banks tend to give lower ltv for one beds.

gizmo81

I see lots of terrace houses come up in D1 and D3 for under or around 200,000.00.

Wouldn't that be a better investment?

There's only one on Daft now but they seem to be coming up a bit

Mrs OBumble

Car ownership is not a necessity. Look at GoCar for short term trips and regular rentals eg Enterprise or Budget) for longer runs.

jamesthepeach

Hard to say.

On the one hand lots of investors are selling up so you would expect prices to come down
On the other hand there are lots of people like yourself who waited and now realise last chance is to go for it now before they are out of the market altogether.
That might explain the huge jump in selling prices for 1 and 2 bed apartments since Christmas. There are also rumours that reits are bidding up on all the 1 and 2 bed apartments that come up.

Then you have the RTB report coming out saying rents in Dublin are falling, if they do say so themselves. I'm skepticle. If they published numbers and the rest of the info they used to arrive at their number I think it would be full of holes. Not least.that their is sweet fa for rent in dublin, so I don't know how they can get a figure.

I was in the same situation as you a long time ago and just went for it while I could. It worked out fine for me. The only people it didn't work.out are the ones who bought 2004 to 2007. But even they are now sitting pretty if they wish to sell. Even last year it didn't look so rosy for them.

I think if I were you I would carefully consider it and definitely not buy a 1 bed with less than 50sq m. That wouldn't shift as easily as a 1 bed >50sq m. And it's nearly as big as a standard 2 bed. Sometimes.you can rejig the I terior and make two rooms for yourself temporarily. Get that checked out if that's possible.

GingerLily

The banks will look for more then a 10% deposit for a one bed, 25% is the number I commonly hear thrown around, I assume you've accounted for this?

LirW

gizmo81 wrote: »

I see lots of terrace houses come up in D1 and D3 for under or around 200,000.00.

Wouldn't that be a better investment?

There's only one on Daft now but they seem to be coming up a bit

Those "lots of terrace houses in D1 and D3 for under or around 200.000" are usually in quite a state and really really small. With bad energy rating.

gizmo81

Ah ok fair enough.

LirW wrote: »

Those "lots of terrace houses in D1 and D3 for under or around 200.000" are usually in quite a state and really really small. With bad energy rating.

LirW

Also the areas of these are usually not the nicest, if OP would opt for an apartment he's probably getting more out of it.

If you can afford a one bed and you can see yourself there for the next few years without feeling imprisoned then totally go for it. With a reasonable size you can even live there for a while in case you find a partner and want to move together.

Cuddlesworth

Since you seem to be maths and logic orientated, you would want to put a risk factor onto that investment.

Tenants can do serious damage. Bills of 5k to 40k are not that uncommon at the end of a band tenancy.
Being a landlord involves your work and time, so take that into account. Management agency's tend to lean towards doing the least amount of work and quite a few make bad choices.
Government intervention seems to be a guarantee in messing with future yields.

Eric Cartman

1) One bed appt.'s are harder to get mortgages on , harder to sell on and can be a noose around your neck if life circumstances change (whereas 2 bed suits for kids, more storage room, starting a business/home office , renting out the second room if you lost your job etc.. to cover rent)

2) Even if you don't need a car, I think everyone needs a parking space, what if a relative comes to stay, a workman comes to do work, you get a job that does need a car to get to, you need to get a skip in and have somewhere to put it, or even more rental income letting it out. Parking spaces are always valuable and endlessly useful.

I'd much rather move further out for a 2 bed with parking than be right in the city in a 1 bed with no parking,

Samuel T. Cogley

€1250 on a one bed apartment at that purchase price is the height of optimism. I'd redo the sums with an income of about €800 per month bearing in mind the implications of tax and a change of mortgage type to BTL.

Current rents are not sustainable and if the who sector doesn't have a massive crash once supply comes on stream, rents certainly will.

Sleepy

220k would get you a 2 or 3 bedroom house in much of North County Dublin.

VonLuck

VonLuck wrote: »

............

I've seen a one bed apartment in the city centre for ?200k, but I expect to sell for at least ?220k..................I would expect a rental income of ?1250 which gives a gross yield of roughly 6.75%. This seems to be a decent yield, but I'm sure there ................. but from an objective view, is this a worthwhile opportunity?

I posted this weeks back and probably before too.
http://www.boards.ie/vbulletin/showpost.php?p=103731960&postcount=39

"..........Gross rental income x 15 = purchase price; that was the rule of thumb years back........... approx 6.7% ..........."

So ignoring parking, size, location etc etc

Now I presume as that's an old rule of thumb the presumption was you wouldn't be borrowing most of the money being used to "invest"
Also might be prudent to consider the rent is now above boomtime levels.

waraf

Sleepy wrote: »

220k would get you a 2 or 3 bedroom house in much of North County Dublin.

I would seriously recommend that you take a look at houses a little further out (no harm in looking right?). I bought my apartment in 2006 and the thing I miss the most is a garden. I'm lucky enough to have private parking but I'd love a garden to sit out in on sunny days. Just something to consider before you take the leap...

VonLuck

I would certainly be making compromises if I purchased a 1 bed apartment, but I feel like I'm left with no choice.

Ideally I would like a 2 bed terraced or semi-detached house within the M50, but I realistically would have to look for a place that is on offer for ?200k as I know it will sell for higher. The only houses in that price bracket are in areas everyone tells me to avoid!

It's either purchase a house now in a place where I don't really want to live, or wait 5 years when I have enough savings to buy somewhere more in line with what I really want, although I would be losing a lot of money I could have been using to pay off a mortgage in rent during that period.

Is it foolish to buy a place now, just to get on the property ladder before it's too late?

LuckyLloyd

Before it's too late for what? A lot will change in five years. Keep saving, keep an eye out. Something else will present itself in due course.

Masala

Never underestimate the need for a parking space.....it could be a the icing on a property when moving on a property.

April 73

VonLuck wrote: »

I would certainly be making compromises if I purchased a 1 bed apartment, but I feel like I'm left with no choice.

Ideally I would like a 2 bed terraced or semi-detached house within the M50, but I realistically would have to look for a place that is on offer for ?200k as I know it will sell for higher. The only houses in that price bracket are in areas everyone tells me to avoid!

It's either purchase a house now in a place where I don't really want to live, or wait 5 years when I have enough savings to buy somewhere more in line with what I really want, although I would be losing a lot of money I could have been using to pay off a mortgage in rent during that period.

Is it foolish to buy a place now, just to get on the property ladder before it's too late?

You always have a choice. It reads to me like you have no real love or desire for this apartment. You're just trying to avoid a feeling that if you don't buy something, anything, right now that you're screwed for property ownership forever. The market is ever-changing - don't lock yourself into something you actually don't want.

4ensic15

Samuel T. Cogley wrote: »

€1250 on a one bed apartment at that purchase price is the height of optimism. I'd redo the sums with an income of about €800 per month bearing in mind the implications of tax and a change of mortgage type to BTL.

Current rents are not sustainable and if the who sector doesn't have a massive crash once supply comes on stream, rents certainly will.

1 bed apartments are the most stable element of the rental market. When rents are weak a single person will take them. When they are high a couple will rent them. If the o/p buys and saves another deposit, it will be no big deal to buy another place and keep it on as an investment.

Pelvis

I think I would pass based on the lack of parking, but also it would depend on how losing the car would affect you. What would your commute be like etc? GoCars are mainly only useful for short trips.

As someone who has lived in places for a number of years it can be a real pain at times, and I don't even own a car! But when friends or family visit what do they do? On street parking is expensive, assuming you can get it.

You didn't want a 1 bed in the first place, so why settle for it now? Yes prices have gone up but what goes up must come down. Keep building up your deposit imo.

Peter File

4ensic15 wrote: »

1 bed apartments are the most stable element of the rental market. When rents are weak a single person will take them. When they are high a couple will rent them. If the o/p buys and saves another deposit, it will be no big deal to buy another place and keep it on as an investment.

Be very careful as prices for rents and property can and will rise and fall.
As lots of people discovered after the last property price bubble blew up.

4ensic15

Peter File wrote: »

Be very careful as prices for rents and property can and will rise and fall.
As lots of people discovered after the last property price bubble blew up.

Yes., but 1 beds are the least risky. The void periods are always less.

MysticMonk

You can buy a three bedroomed house in a good part of dublin 11 for that sort of money,with a driveway

4ensic15

MysticMonk wrote: »

a good part of dublin 11

Ha.

LirW

If you consider Finglas East as the good part of D11, no way, that got horribly expensive. I've been looking a lot in D11, it's around the corner where I currently live and 220k doesn't buy you 3bed there. Even if that's the asking, you'll get it nowhere near that.

LirW

4ensic15 wrote: »

Ha.

Honestly, Ballygall, Glasnevin North and parts of Santry are really, really nice.

MagicHumanDoll

Personal opinion;

Avoid the 1 bed.
Save for the next few years like a lunatic. Set yourself a goal of having a certain amount of savings and do your calculations to make sure it's attainable. Your heart doesn't sound in it, sounds like you're settling in fear of the prices ballooning again. Rent, cut as much expenses as you are willing to and fingers crossed reap the rewards in a few years time!

MysticMonk

4ensic15 wrote:

Ha.

Do you have anything to add?