Are landlords selling up?/asking prices not met.

ionapaul

Someone recently pointed out to me that unlike most of the pre-90s apartments, modern apartments often are lacking utility rooms, hot presses and other fairly important features that most of us would expect. If supply ever exceeds demand in this country, why would any choose to live in these properties?

Culchie

ionapaul wrote:

Check out www.askaboutmoney.com for all the threads going 'My partner and I are planning to trade up, should we keep our existing residence as a rental property?' - even if there are not a huge amount of these 'amateur' landlords on the ground, many MANY Irish people now have swallowed the get-rich-quick as a landlord idea and are becoming heavily involved (and endebted) in a business / investment they mightn't have much fundamental knowledge of. I also know a few friends in their late 20s who have bought a PPR here, and recently have bought abroad in Eastern Europe, markets they know absolutely nothing about! Crazy. There seems a mania for property in this country, despite most agreeing that equities deliver a better ROI in the long term. The building trade will only be happy when each and every Irish person owns their own home and has a property or two to invest out!

Hmmmm.

There has to be a balance, I agree with some of what you say Paul, but not with other parts of your post.

It is estimated that 95,000 people from the new EU states have come into Ireland (43,000 poles !) since November of last year.
These people require accommodation as well, so the rental sector has a role t play for quite a while yet, if well located.

Properties will go up in Eastern Europe, the same way as they did in Western Europe, however you have got to do your homework, and the hardest thing is establishing a trustworthy contact and developer, which gives you the same protection as you would get here in the Irish Market.

I purchased a property in Croatia right on the sea, June 2004 prices €1800 per sq m - price August 2005 €3000 per sq m. = 66% increase. (A real increase, not sales talk increase)
This was financed by equity from another investment property from a house here in Ireland, I felt this money had reached it's peak in terms of return on investment, so time to put it somewhere else and re-invest it. It wasn't an overnight decision and I spent 6 months studying the options.
One looks at these things from a business point of view, and when it is the right time, and the right property, you re-invest.

I have my own home which is kept seperately to the property business, and would not at any time risk that on any business venture.

Whilst equities have been proven to be a better return on property on average, this comparison is based against a national property indexation figure, not what actually happens with property at a local level, nor does it take into account, property surges that can come about through key drivers such as tax designated areas, or EU Entry for a country etc....
In fact the only money I ever lost on investments was with shares, when the bloody stockbroker went bust !!! Morroghs in Cork.


Property is about location and saleability. As the saying goes .. "the day you buy, is the day you sell".

ionapaul

I have my own home which is kept seperately to the property business, and would not at any time risk that on any business venture.

That level of business acumen is laudable, but I think it is lacking in MANY of our amateur landlords. Again, just review www.askaboutmoney.com for all of the 'I bought my house for €200,000, the value has increased to €300,000, how do I release this equity to buy another [investment] property?' What are these people thinking? I have a fair amount invested in the American and British stockmarkets, but haven't leveraged one investment to borrow money for another! I really feel that if and when the worldwide property boom goes a bit flat, many people indebted way past their comfort level are going to get very very badly burned.

Thomond Pk

Culchie wrote:

Hmmmm.


I purchased a property in Croatia right on the sea, June 2004 prices €1800 per sq ft - price August 2005 €3000 per sq ft. = 66% increase.

Don't you mean per square metre?

I agree with a lot of what you are both saying, the market fundamentals are good for rental property in areas that are well served by essential services. The level of leverage does remain fundamental to all business decisions as interest rates can rise and when they do they move very quickly in 0.25-0.50% rises approximately every quarter for 3 to 6 quarters. The interest rate regime we are in was termed 'Monetary Life-support' during 2002 and haven't moved since.

With proper stress testing on the loans and an allowance for a months void per year I wouldn't worry one bit on the income side. What is of concern is that as stockmarkets start to perform again (FTSE at 3 1/2 year high) that other investment mediums will become more attractive, if this happens capital growth will slow in the short to medium term. For this reason it is I feel a risk to rely on capital appreciation if you want to be sure of holding the investment long-term.

On another matter it would be good to see Shell go to Sea, Rossport isn't much of a letting location.

Culchie

Thomond Pk wrote:

Don't you mean per square metre?

I agree with a lot of what you are both saying, the market fundamentals are good for rental property in areas that are well served by essential services. The level of leverage does remain fundamental to all business decisions as interest rates can rise and when they do they move very quickly in 0.25-0.50% rises approximately every quarter for 3 to 6 quarters. The interest rate regime we are in was termed 'Monetary Life-support' during 2002 and haven't moved since.

With proper stress testing on the loans and an allowance for a months void per year I wouldn't worry one bit on the income side. What is of concern is that as stockmarkets start to perform again (FTSE at 3 1/2 year high) that other investment mediums will become more attractive, if this happens capital growth will slow in the short to medium term. For this reason it is I feel a risk to rely on capital appreciation if you want to be sure of holding the investment long-term.

On another matter it would be good to see Shell go to Sea, Rossport isn't much of a letting location.

Sorry yes Square Meter.... agree with your other points.

garred

ionapaul wrote:

That level of business acumen is laudable, but I think it is lacking in MANY of our amateur landlords. Again, just review www.askaboutmoney.com for all of the 'I bought my house for €200,000, the value has increased to €300,000, how do I release this equity to buy another [investment] property?' What are these people thinking? I have a fair amount invested in the American and British stockmarkets, but haven't leveraged one investment to borrow money for another! I really feel that if and when the worldwide property boom goes a bit flat, many people indebted way past their comfort level are going to get very very badly burned.

Don't know, I'd actually feel the oppostie. If you have equity in a property get it working for you. Would it not be better to release and invest it rather than leave it tied up in your house doing nothing for you.

Bluehair

garred wrote:

Don't know, I'd actually feel the oppostie. If you have equity in a property get it working for you. Would it not be better to release and invest it rather than leave it tied up in your house doing nothing for you.

I'm not sure I understand the sanity behind this (no offence) but hidden behind all the "equity in your property" and "getting it working for you" you do appreciate that what you are talking about is getting a loan and then attempting to invest that loan to beat the interest you're repaying on it?

"Leaving it tied up in your house doing nothing for you" sounds like a fine idea to me seeing as YOU LIVE THERE! . It's hardly doing nothing for you.

garred

Fair point Bluehair (no offence taken ) I know what you mean by the whole loan aspect. But if I had 100k in equity in a house I'd rather use that as payment towards/of an investment property, which is what I mean by working for you (hope that does'nt sound patronising).
Not necessarily here but certainly abroad where you can get in on a growing market and have repayments covered and with a profit by tennants. Your initial loan is being paid and also the fact that the property is going up in value. I know that the "bubble" could burst, which I'm not going into as its been done to the death, but it has'nt.
I know technically its a loan your getting but its cash that you can access and use and of course the repayments are lower (short term) than a bank loan.
Maybe its just me.

Bluehair

garred wrote:

abroad where you can get in on a growing market and have repayments covered and with a profit by tennants.

Are you sure? Regardless of where does your own independent research show this to be the case or are you just going on the agents info?

garred wrote:

Your initial loan is being paid and also the fact that the property is going up in value. I know that the "bubble" could burst, which I'm not going into as its been done to the death, but it has'nt.

Can you be sure of that capital appreciation? Without a crystal ball no-one can and as is often said time and again in financial markets "previous results are not a prediction of future results". The bubble arguement has indeed been done to death but having researched it at length I'm firmly in the "get the hell out of property asap" camp. I've just sold my own property.

Btw Sunday Indo has an interesting piece today about 10 reasons to postpone buying a property in Ireland.

garred wrote:

I know technically its a loan your getting but its cash that you can access and use and of course the repayments are lower (short term) than a bank loan.

Sorry to be pedantic but it's not 'technically' a loan it IS a loan plain and simple. Repayments are lower primarely because of the term (30 years?) and historically low interest rates. The real question is can you afford to keep that up if your investment doesn't work out perfectly?

garred wrote:

Maybe its just me.

Thats the scarey thing Garred. It's not just you. It seems to me that most of my own generation in particular (I'm 30) have some very bizarre notions about finances that have been supported by years of interest rate cuts and soaring house prices all supporting people living for today and not thinking about tomorrow.

After all nothing can go wrong right?

cuckoo

One thing not mentioned so far in this thread is the recent changes to the law regarding security of tenancy in the Tenancies Act of 2004. A lot of landlords who might have been thinking of selling up a property may have been galvanised by this. Yeah, landlords can terminate a tenancy if they they're selling the place, but if a tenant wants to play awkward about leaving things get complicated and the PRTB is still a bit of an unknown quantity.

MorningStar

cuckoo wrote:

Yeah, landlords can terminate a tenancy if they they're selling the place, but if a tenant wants to play awkward about leaving things get complicated and the PRTB is still a bit of an unknown quantity.

They always could have been awkward. The change in laws makes little or no difference IMHO. I mean a tenants could always stop paying the rent and legally it is very difficult to get them out. Starting with the fact the court doesn't sit all year around.
Many new landlords have no idea of the reality of the law. The film "Pacific Heights" isn't far off what a tenant could do if they wanted to. I have had tenants change the locks on the house because they lost theirs and then refuse to give me a copy because there is "no need for me to have them" :eek: Not sure what happened but apparently somebody broke into their flat and luckily I was close by and able to call the cops but we missed the robbers and nothing was taken. Lucky them! I go the locks replaced with in an hour for them because I am nice guy.

soma

Bluehair wrote:

Btw Sunday Indo has an interesting piece today about 10 reasons to postpone buying a property in Ireland.

It could have been an interesting piece, but it was a jokey/half-arsed piece of crap that it is fairly typical of the sunday independent's brand of 'journalism' - I mean what self respecting paper would often run pics of it's "journalists" bikini-clad & half naked. (serious comments only :rolleyes: )

garred

Bluehair wrote:

Are you sure? Regardless of where does your own independent research show this to be the case or are you just going on the agents info??

Nope its fact. Any survey will tell you that over the last couple of years. Prices are even rising in Iraq. Its all been done on another thread, but here's some links from the numerous out there:

http://www.finfacts.com/irelandbusinessnews/publish/article_10002284.shtml

http://archives.tcm.ie/businesspost/2005/03/13/story3047.asp

Bluehair wrote:

Can you be sure of that capital appreciation? Without a crystal ball no-one can and as is often said time and again in financial markets "previous results are not a prediction of future results". The bubble arguement has indeed been done to death but having researched it at length I'm firmly in the "get the hell out of property asap" camp. I've just sold my own property.

Nope no one can predict the future. As with all investments its a gamble to whether it pays off. Based on current figures it would be a good investment but again it's always down to the investor to do their homework.

Bluehair wrote:

Sorry to be pedantic but it's not 'technically' a loan it IS a loan plain and simple. Repayments are lower primarely because of the term (30 years?) and historically low interest rates. The real question is can you afford to keep that up if your investment doesn't work out perfectly?

Yeah fair enough, but it is also a source of cash that may not of been available to them. If they did'nt have the equity in their house and were on low incomes, they more than likely would not get the cash. It comes down to the old saying "it takes money to make money", which I'm a believer of.

Bluehair wrote:

Thats the scarey thing Garred. It's not just you. It seems to me that most of my own generation in particular (I'm 30) have some very bizarre notions about finances that have been supported by years of interest rate cuts and soaring house prices all supporting people living for today and not thinking about tomorrow.

After all nothing can go wrong right?

Yeah its not me and it has paid of for numerous people.

Anyway my point is I'm a believer of using the equity in property to invest. My example is reinvesting in foreign property but obviously there are other ways of investing this money and making it "work" for you. Whether its over the long term or short term, equity is a form of cash that you can invest wisely.

Zaph0d

garred wrote:

Anyway my point is I'm a believer of using the equity in property to invest. My example is reinvesting in foreign property but obviously there are other ways of investing this money and making it "work" for you. Whether its over the long term or short term, equity is a form of cash that you can invest wisely.

Do you believe in borrowing against all your assets to invest? For example, if you owned a painting worth 20K, would you then take out a 20K loan, using the painting as security, and invest the proceeds hoping to make a return higher than the interest rate on your loan?

just curious.

MorningStar

Zaph0d wrote:

Do you believe in borrowing against all your assets to invest? For example, if you owned a painting worth 20K, would you then take out a 20K loan, using the painting as security, and invest the proceeds hoping to make a return higher than the interest rate on your loan?

just curious.

You know what they say the poor have no money and the rich are in debit! It is a standrad business practice to borrow on assets. It's the basics of the stock market. It's a gamble but the whole economy is based on it, communism has proved to successful so what are you suggesting

Zaph0d

MorningStar wrote:

It is a standrad business practice to borrow on assets.

It's standard to borrow on assets to finance the ongoing enterprises of a business but less common to borrow on assets to make non-strategic investments outside of the business such as purchasing foreign property or other shares of unrelated companies.

It's the basics of the stock market.

Is it? I thought the stock market was based on the sale of tradable shares in companies. Are you talking about margin trading?

It's a gamble but the whole economy is based on it, communism has proved to successful so what are you suggesting

I'm not sure what you're saying here. Do you mean that the alternative to 100% gearing is communism?

MorningStar

Zaph0d wrote:

It's standard to borrow on assets to finance the ongoing enterprises of a business but less common to borrow on assets to make non-strategic investments outside of the business such as purchasing foreign property or other shares of unrelated companies. Is it?

Yes it is what just happened to Superquinns? Diversification anyone? Costello Doors went into foriegn property.

Zaph0d wrote:

I thought the stock market was based on the sale of tradable shares in companies. Are you talking about margin trading?

Where do the shares come from? :rolleyes:

Zaph0d wrote:

I'm not sure what you're saying here. Do you mean that the alternative to 100% gearing is communism?

I was asking what do you think is the way to go I am not the one complaining about the practice but I don't see what your suggestion is.

Zaph0d

MorningStar wrote:

Costello Doors went into foriegn property.

Yup I just said it was less common.

Where do the shares come from? :rolleyes:

The shares are just that, portions of the company that are sold off rather than borrowed against. There is a difference between selling off a portion of an asset you own and taking out a loan using that asset as security. In the latter case you have to make interest payments. Dividends are optional.

I was asking what do you think is the way to go I am not the one complaining about the practice but I don't see what your suggestion is.

I am not making a suggestion or complaint. I am asking whether people believe they should fully leverage their assets for reinvestment puposes. I am curious because I would not trust my ability to get more than 3.5% return on an investment, so I would not borrow money at 3.5% secured on my assets to make this investment. I would only borrow money to as a means of getting a house or to reinvest in my own business or education. Everything else looks to risky to me. What do the rest of you think- is 3.5% dead easy to get?

To put it another way, if returns over 3.5% are a sure thing on eastern european property why does AIB bother lending money at 3.5% when it could just buy up that property directly?

MorningStar

Zaph0d wrote:

Yup I just said it was less common.

I don't think is that uncommon at all. It's a common business model was what I said.

Zaph0d wrote:

The shares are just that, portions of the company that are sold off rather than borrowed against. There is a difference between selling off a portion of an asset you own and taking out a loan using that asset as security. In the latter case you have to make interest payments. Dividends are optional.

Many share sales are to get investment into the company. AFAIK it is the most common. Companies sell a portion off to get the investment. Venture captialists! Again it is a common business model it doesn't need to be the most popular.

Zaph0d wrote:

To put it another way, if returns over 3.5% are a sure thing on eastern european property why does AIB bother lending money at 3.5% when it could just buy up that property directly?

AIB make a profit with 3.5% with less risk so they are happy with theat. Bear in mind it has been suggested another bank is coming in with a 2.5% rate to the irish market.

garred

Zaph0d wrote:

Do you believe in borrowing against all your assets to invest? For example, if you owned a painting worth 20K, would you then take out a 20K loan, using the painting as security, and invest the proceeds hoping to make a return higher than the interest rate on your loan?

just curious.

Yep, of course. Using the example earlier (foreign property) you could not only cover you repayments but also:
1. Your repayments are covered for 10 years (guaranteed rental income of 10% of property value).
2. You will also make a profit on the rental income.
3. Your initial 100k topup is being reduced.
4. The property might go up in value as it is and has for the last 5 years.

Sounds a bit like I work for a foreign property company but I don't, honest.

Some people may call it being too hungry for money, but I've been bitten by the bug and no doctor can cure me.

Bluehair

garred wrote:

1. Your repayments are covered for 10 years (guaranteed rental income of 10% of property value).

I must admit curiosity at this point. Can you specify which development exactly provides the above scheme?

garred wrote:

Some people may call it being too hungry for money, but I've been bitten by the bug and no doctor can cure me.

I genuinely hope it never happens to you but you may just find unexpected losses and debt upto your ears might cure you :eek:

This isn't directed at you but I'm of the opinion that there's an incredible naivety in Irish society today about easy returns from property and many are literally betting their homes on it.

I hope it works out for them but I won't be shedding any tears in a few years if the "no-one warned me" brigade starts crying about repayments they can't meet etc.

garred

Bluehair wrote:

I must admit curiosity at this point. Can you specify which development exactly provides the above scheme?.

http://www.meddreams.ie/orient_palace_bodrum_turkey.htm

Thats just one of them that do it. Personally I think 10 yrs is a bit long cause remember that 10% is on the original purchase price. There are plenty of other companies doing the guaranteed rental income.
It really does sound like I'm pimping here.

Bluehair wrote:

I genuinely hope it never happens to you but you may just find unexpected losses and debt upto your ears might cure you :eek: ?.

That'll do it alright, but an investment is a risk. Your roll the dice and take your chances, well, ah you know what I mean.

MorningStar

Bluehair wrote:

I hope it works out for them but I won't be shedding any tears in a few years if the "no-one warned me" brigade starts crying about repayments they can't meet etc.

I agree it is a possibility but weird things are a foot. It looks like competition in the Irish banking market is about to heat up. Apparently banks offering lower rates are coming in and the American stable intrest rates might come in too with in 5 years. IN the US you borrow at one rate say 3% and that's it! THe rate goes up you stay the same the rate goes down you can saty the same or you can refinance to get the new reduced rate and then stick with that. There seems to be a lot of talk about how this would be really good for the EU to stabalise economic differences between states.

ionapaul

What I would be more worried about should any future problems crop up is the efforts the "no-one warned me" brigade would go to to get the rest of us (the taxpayers who didn't take on so much debt) to bail them out! I think if enough people got into enough trouble, the Government (well, FF would, I doubt the PDs would go along with this!) would bail them out rather than lose votes.

I am worried in the same way Bluehair is worried - we all know friends and colleagues who, without any fundamental knowledge of property investment, are diving headfirst into risky investments secure in the knowledge that buy owning as much property as possible (whether in Ireland or abroad), you are guaranteed to get rich. How could anyone not be worried when faced with this?

ionapaul

I would love it if truly fixed rates came in throughout the EU. Anyone have any links on this news?

Bluehair

ionapaul wrote:

What I would be more worried about should any future problems crop up is the efforts the "no-one warned me" brigade would go to to get the rest of us (the taxpayers who didn't take on so much debt) to bail them out! I think if enough people got into enough trouble, the Government (well, FF would, I doubt the PDs would go along with this!) would bail them out rather than lose votes.

This concerns me too. So much for being financially prudent :rolleyes: If this happens then I'm getting the hell out of here.

ionapaul wrote:

I am worried in the same way Bluehair is worried - we all know friends and colleagues who, without any fundamental knowledge of property investment, are diving headfirst into risky investments secure in the knowledge that buy owning as much property as possible (whether in Ireland or abroad), you are guaranteed to get rich. How could anyone not be worried when faced with this?

"Because the naysayers have been predicting a property crash for years now and they've always been wrong","because the Tiger Economy is different", "because it can never happen to me"... etc.. etc...

ionapaul wrote:

I would love it if truly fixed rates came in throughout the EU. Anyone have any links on this news?

Wasn't aware this was on the way. Btw 30 year fixed rate in the US are averaging 5.18% right now far from "say, 3%". If the rate changes you stay with your fixed rate but if the rate goes down significantly and you want to refinance to the lower rate you pay huge penalties to break out of the loan youre in (hence 'fixed'). Similarely if your circumstances changed and you wanted to pay off the loan early you face very significant penalties.

MorningStar

Bluehair wrote:

Wasn't aware this was on the way. Btw 30 year fixed rate in the US are averaging 5.18% right now far from "say, 3%". If the rate changes you stay with your fixed rate but if the rate goes down significantly and you want to refinance to the lower rate you pay huge penalties to break out of the loan youre in (hence 'fixed'). Similarely if your circumstances changed and you wanted to pay off the loan early you face very significant penalties.

They aren't fixed like here where they charge you an extra % amount to have it fixed. You take out a mortgage at the current rate and as that is the rate you borrow it at as does the bank that is your rate. The rate goes up it doesn't effect you or the bank. There is a charge but not a penalty of any size AFAIK. Are you sure you aren't mixing European practices of penalties up with the US system? The banks competed and offered to pay penalties so eventually they got rid of them is the way I think it happened.
This isn't news it's a bit like the EU saying they plan to be environmentally friendly. They plan on promoting competion and removing banking restrictions. It's all that they need to do.

hmmm

garred wrote:

http://www.meddreams.ie/orient_palace_bodrum_turkey.htm

Thats just one of them that do it. Personally I think 10 yrs is a bit long cause remember that 10% is on the original purchase price. There are plenty of other companies doing the guaranteed rental income.
It really does sound like I'm pimping here.

Would you be able to enlighten us as to what position an investor is in if this (or a similar company) ceases trading after year 1? Who's going to guarantee your investment then?

On the other hand I am so tired of the clueless "investing" in property without the slightest notion of what is involved that I don't care if they lose everything. I used to care, but not any more.

garred

hmmm wrote:

Would you be able to enlighten us as to what position an investor is in if this (or a similar company) ceases trading after year 1? Who's going to guarantee your investment then?

On the other hand I am so tired of the clueless "investing" in property without the slightest notion of what is involved that I don't care if they lose everything. I used to care, but not any more.

If, could, would.....as with any investment there are risks. I hate to keep repeating myself. Hardly call it clueless. You investigate your investment as best you can and do your homework.
On this particular investment your lawyer is your representative who will look after the legal aspect of it, I'm not doing this particular one but one similar.
The Dutch bank are the guarantors for the investment (hardly think they will cease trading after 1 year).
I have checked out the developer, site, and have a contact in Turkey (working for government) who says that for the forseeable future the property will rise. You look at the market and see that the demand for the property is there. Its a recognised and established tourist location, etc, etc, etc.
Please give people some credit. I think they do homework on investments.

Property is one type of investment. I think on a similar thread someone mentioned banks in Ecquador that is giving 7/8% on savings accounts to foreign investors. There are other opportunities to invest that will cover the cost of the topup and give you a good return.

hmmm

Jaysus that single post sums up everything that makes me shake my head at the current overseas property mania. Well done.