Buying to Let Appartments or Houses

Hook Head

I have a some of money to invest in a property and I would appreciate advice on which you feel is a better option an appartment in a rentable location or a house.
I have heard different opinions about appartments bieng less hassle to maintain and house always appreciating better. My budget is a property in the 300k-400k range.
The amount I have to invest is 200k capital and I intent to take an interest only loan on the balance to ensure all expenses are well covered and I can make a profit each month.
I am Interested in your comments.

RainyDay

Why did you choose property as being the best investment bet for you? What non-property options did you consider?

Hook Head

Rainy day, the only non property investments I have considered is Rado Direct
deposit account banking. I am not to familiar with shares or other investments and I am find it hard to get independant advise. I probaly feel in a comfort zone with property.
I would appreciate suggestions on better ways to invest with good returns.

RainyDay

Hook Head wrote:

Rainy day, the only non property investments I have considered is Rado Direct
deposit account banking. I am not to familiar with shares or other investments and I am find it hard to get independant advise. I probaly feel in a comfort zone with property.
I would appreciate suggestions on better ways to invest with good returns.

You're not unusual, in that many people feel that they are in their comfort zone in property - but how much do they really know? Do they understand how to calculate their yield, and why this is important? Do they understand the basics of rental income taxation? Do they understand maintenance costs? Do they understand typical rental levels? Do they understand the impact of future interest rate increases? Do they understand how much of their own personal time is going to go into managing the investment?

Have a read of the Askaboutmoney guide to Savings & Investment to get a feel for other options open to you.

For independant advice, go to an Authorised Advisor (IFSRA will provide you a list if requested). Be prepared to pay for the advice - but with 200k to invest, it is well worth paying a few hundred quid up front.

Hook Head

Thanks for the web sites. Do you have any thoughts on section 23 investments. There are some in Smithfield and Spencer Dock. Do you think the capital appreciation will hold onnthese long term over 10 years?

D'Peoples Voice

Hook Head wrote:

Thanks for the web sites. Do you have any thoughts on section 23 investments. There are some in Smithfield and Spencer Dock. Do you think the capital appreciation will hold onnthese long term over 10 years?

From what I hear about Section 23, their prices already build in the future tax benefits. In other words, you pay over the odds at the start, so what you earn on tax breaks only really covers the margin you paid at outset.

Also, please check out the expected rental yields on the IAVI website, make sure you are aware that rental yields have fallen since 2002, and with record house construction this year and next, rents are expected to keep falling, irrespective of the number of eastern europeans we are told are coming into the country(remember many of them are in low-paid jobs that can't afford high rents).

Remember when buying a house, if you are not GUARANTEED house price growth, then the return from your investment must come from the rent. Bearing in mind the house price survey carried out by the ESRI/Irish Permanent say house price growth year will be approx 5%, next year 2%-3%, and perhaps lower again the following year, that means say in 5 years time house price growth could be pretty low.
therefore if you want 3% p.a. return, then you need your rental income/price to be as follows.
For example if you can command EUR1,000 per month rent,
that's EUR12,000p.a.,
after 42% tax due on rental income,
that's EUR6,960p.a. net to you.(I've not allowed for any deducting maintenacne expenses etc)
If your interest/rent to you is EUR6,960, then the house price has to be EUR232,000, if you are to be earning 3%p.a.
anything over EUR 232,000 and your interest rate will be below 3%p.a.

Personally I would look at commercial property with a life assurance company. They screw you for 0.75% mgt charges each year, but commercial rents/yields are still around 7%/8% in many places, so it may be worth your while.

MorningStar

D'Peoples Voice wrote:

Personally I would look at commercial property with a life assurance company. They screw you for 0.75% mgt charges each year, but commercial rents/yields are still around 7%/8% in many places, so it may be worth your while.

I am not sure on commercial property at all. There are a lot of vacant commercial properties and it appears the rent is artificially high. Investemnt companies and the like are not dropping rent in the market to rent out all property instead they rent few and keep it high. With building restrictions many appartment blocks have office space and shops in the design but no tenants.
Appartments are good for city centre rental but if they are low quailty/size they may be hardest hit in any form of drop in the rental or property market. A house close to a college, hospital and transport will be a good bet as there should be a constant demand in the long term ownership involved in property. It might not be a sexy investment but can work.
Either way property is big work. A good investment if you have children as the next generation my not be able to afford property and you may be able to help them if you have a property.
Looking at it purely as money it might not be the best investment but there are other possible benifits. Extending a rental property can be a great way to add value and increase income.

D'Peoples Voice

MorningStar wrote:

There are a lot of vacant commercial properties and it appears the rent is artificially high. Investemnt companies and the like are not dropping rent in the market to rent out all property instead they rent few and keep it high.

Very true. I don't disagree at all!
If Hook Head was to look at so called professionally managed property funds, do they not tend to restrict themselves to large retail stores, because buying a whole heap of small stores is too much hassle to manage. If that was the case, then I'd imagine the advantage of large retail stores is that you can be sure a large multinational will want it, whereas a little corner store on an appartment block may be harder to rent.
Of course, these so called professionally managed property funds also invest in industrial outlets ,which have been going through the doldrums because of our recession in the manufacturing industry. It may be best for him to look at http://www.cbre.com/International/EMEA/Ireland/Dublin/profile.htm?pageid=4 before doing anything to get an idea of the typical returns. As you say, it's less hassle for him to manage, of course he does have to pay well for someone else to do it for him.

By the way, I'm not against investin in personal property but after i read the report below by Threshold,
http://d1099933.u37.eurhost.com/documents/InvestmentReportCompleteFINAL.pdf the findings shocked me! Thankfully not everyone is like me (out to make money). There are some still some people willing to invest in personal property to provide accommodation for our refugees. They are a credit to us all, put me to shame.

MorningStar

I think we do actually disagree.
The Dublin office market is artificially high from my experience. Many offices aren't let yet rents have not gone down. This is in the big developments.
Many reports have vested interests too. Threshold are interested in tenants not the market as such.
They aren't our refugees and while there is a housing problem for refugees at present if EU legislation goes through the problem will leave little demand for such housing in the long term. There are a lot of financial migrants and considering there are no direct routes to Ireland from certain countries if they were real refugees they would ask for asylum in the first EU country they land. I have no problem with refugees but the system here can't cope and is being taken advantage of. Certain "refugees" are actual the rich people from their countries as the poor people couldn't afford to get here. Not saying the life here as a refugee is good. I am more conerened about imigrant worker accomadation as that is not as regulated as the state funded refugee accomadation.

nesf

Discussing refugees is not relevant to this forum.

I do appreciate the topic, but it's a very sensitive one and I'd prefer if people kept their opinions on refugees off here.

Cheers.

Feidhlim

property: try around castleknock area. buy a HOUSE. loads of apartments after going up there. young couples moving in. IMO give it ~5 years and they will be making babies like theres no tomorrow and willing to pay top dollar for a garden.

also house prices i expect to rise ~may when SSIAs begin to mature. thatll be lots of peoples deposit...


non-property. i know TSB in blanch village have some scheme that you can get between 5% and 40%. i assume thats for all TSBs. they invest in various things with property being a big one.

RainyDay

Feidhlim wrote:

non-property. i know TSB in blanch village have some scheme that you can get between 5% and 40%. i assume thats for all TSBs. they invest in various things with property being a big one.

I presume these are projected rates of return, not guaranteed - right?

Feidhlim

of course. i think there is a definate minimum you will recieve.

and you have a choice of low, medium and high risk investments