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Purchasing a Buy to Let

Darren456

Hey guys,

As the title suggests I am interested in purchasing a buy to let an a few years time. I am well aware that I should talk to a financial advisor about these sort of things but im just asking the general public out of interest and opinion.

So I am currently 23 and living at home, my situation is that I am in no big rush to move out and have no intention of renting anywhere. I currently Have 0 costs bar the upkeep costs of my car. I am fortunate enough that I will possess a site as we have a family farm so my aim is to build my own house one day.

So I had the idea of getting into the property rental game, and I am well aware that prices and all that for purchasing housing at the moment are mad and what not but im not here to discuss that.

My plan is to obtain a property against a mortgage (with 30% down). My goal is to actually pay off the mortgage as quickly as possible instead of just making a couple hundred into the back pocket each month. My situation is that I can afford to pay give or take €1,000 a month towards the mortgage as well as €12,000 every 12-15 Months from another annual investment.

So what I am laying out is basically say the mortgage is €390 a month. tenant is paying €750 a month rent, as well as my own contribution of €1000 a month.

So we are looking at €750+€1000=€1750/pm

+€12,000 Every 12-15 Months (other investment income)

please bear in mind these are just ball park figures (Im well aware there is other factors like insurance,stamp duties, taxes etc etc to be factored in.)

What I am getting at is. If you were to get into this type investment, Is it a good idea (If feasible) to pay off the mortgage as quickly as possible so that eventually you will owe no mortgage & fully own the house. Also if eventually wanna sell it in a few years if it has appreciated in value that's an option without any outstanding payments.

From there you could either invest in more properties of just use the rent from this property to help pay off your own mortgage.

As I stated before these are just extreme ball park figures in terms of not factoring in the tax, and other expenditures. but in terms of my own contributions that is realistic hence why Im even asking.

Just in terms of rules against the thread to any moderators, I am not seeking any financial/legal advice, I am just asking out of pure interest.

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Comments

Brego888

Small time landlords are leaving in their droves. Myself included. Its a horrible enough game.

I know you've said you haven't included tax but it makes your ballpark figures nowhere near the ball park. You'll lose 40 - 50% of you rental income on tax.

Plus you'll pay captain gains tax when you plan on selling it at 33% on the profit.

Personally I'd either save for your own house build or invest you money in another long term bond/investment.

Darren456

https://www.boards.ie/discussion/comment/118791682#Comment_118791682

Really appreciate the insight, especially coming from someone who's in the game. Will definitely do some more research into other possible investments.

Do you think however, this type of business has the possibility to grow to say multiple properties or for all its worth might there be better/ safer returns with other investments? Just your opinion nothing to serious. Im just curious. thanks

Caranica

https://www.boards.ie/discussion/comment/118791732#Comment_118791732

Being a small time landlord is not financially safe. I wouldn't recommend it to my worst enemy. Yes, it seems like a guaranteed money maker but it's far from it and as someone has pointed out, your ballpark figures aren't remotely in the ballpark.

20 years ago maybe but tenant rights, a culture of overholding etc mean it can be a nightmare. I and others on here have experienced non paying tenants who've done tens of thousands of euro of damage too. Don't do it.

Cal4567

100% save for your own house. If you are happy to continue with family, it might also be best to wait until we see the results of the present crisis and the knock on effect to the economy and if that feeds into a correction in property values.

Also, I have seen too many cases where someone becomes a landlord, focused entirely on their own circumstances, forgetting completely that the person their are letting to, its their home. Your property, but their home.

If I was you, I would go and sound out landlords, face to face. There's enough evidence out there that will make you form your own opinion. Good luck.

JimmyVik

I was going to invest in property a few years ago. Did my homework and spoke to dozens of landlords. All of whom, bar 3, have sold up in the last few years and got out. Of the 3 remaining, 2 are trying to get non paying tenants to leave for about 4 years now. If they ever get them to leave they will be selling too.

The other has rented to the council and is having a nightmare with them. He wants to sell too, but cant now.

So after years of research my conclusion is - I wouldnt recommend it to my worst enemy.

DubCount

https://www.boards.ie/discussion/comment/118791732#Comment_118791732

To answer this specific question - simply no.

In other parts of the world, you can grow a property portfolio in this kind of way, but not in Ireland. Thats because the deposit levels for Buy2Let property are high (30%+), and interest-only buy2let mortgages are not available (long term) here. Banks here are no keen on additional borrowing from equity gained from price rises either. Also, banks will be cautious about your overall indebtedness, so multiple buy2let mortgages will be difficult to obtain even if you have relevant property assets to cover the debt.

Others here have already pointed out that residential property letting is a difficult way to make money. Rogue tenants, ever-changing legislation, high interest rates on buy2let mortgages.... there are lots of reasons this is a bad idea. Read back previous threads on here and you'll soon get the picture.

If I were you, I'd look to buy a house for yourself to live in yourself. You could even use the rent a room scheme to generate up to 14k tax free. No RTB and licensee rights are nowhere near tenant rights. Plus, no capital gains tax if you sell up in a few years time as you have Principal Private Residence exemption.

Your first post started with suggesting speaking to a financial advisor. Just do that - you'll never regret it.

Darren456

Really appreciate the insight here guys, I guess looking from an outsider has hindered the cons heavily for me. Thanks again 😉

https://www.boards.ie/discussion/comment/118792198#Comment_118792198

https://www.boards.ie/discussion/comment/118792183#Comment_118792183

https://www.boards.ie/discussion/comment/118792127#Comment_118792127

https://www.boards.ie/discussion/comment/118792087#Comment_118792087

Taylor365

Always take worst case figures in to account, i say worst case - they are more an average. Worst case is your asset is worthless after being burnt out and you are financially ruined, but i digress. I have never owned a property, but have researched and researched over 10 years. God i wish i had the capital that i have now in 2014!

You do not want to throw all your capital at one illiquid asset that caries aggravated risk within this country. You can easily be ruined by something you cannot control or exit from.

You want to put in as little cash as possible, and rate the return based on what you put in (mortgage principle + cash flow..... cash flow is a funny one in this country!)

Right.

750pm rent. Mortgage of 390pm? If you're thinking of a mortgage of 100,000, it would actually be around 500. BTL mortgages are x2-x3 higher interest rate. So 33% down is 50k.

Also, add in 10k for buying costs.

750 x 10 = 7500 rental income per annum avg

Expenses avg 5500 per annum for first 20 years (This include 100% mortgage interest, eventual big repairs, etc.)

Pre tax profit - 2000

After tax gross profit: 1000

After mortgage principle net profit: -500 (Increases by about 100 every year til 2051)

So on 60k invested, your return is about 1000 per annum, or 1.6%

MAX Net profit per annum with no mortgage: 3500

As above poster suggest, consider an owner occupier, more expensive, more bedrooms. 3 students would net at least 10k per annum net. 90k in and your already at 11% return.

the 12 th man

Not with a barge pole,the numbers just don't add up.Did it for about 12 years and couldn't wait to get out of it.Talk about small money for big risk/work and then the Govt put their hand out for 50% of profits (if there is any).

You are responsible for so much being the landlord both materials in the property and fee wise (Maintenance fees,sinking fund,insurance,white goods failure,damp,property tax,income tax,prsi,usc,neighbour noise,PRTB, blah blah) that you get tied up in knots.

J_1980

I bought a Btl in Dublin 4 /grand canal in 2017 and contrary to others it worked great. Loan was a business loan from Germany at 1.7% interest (40% ltv). Rented as corporate let initially and now on a long term lease to a professional (uk redbrick uni background). Yield is 6% and Managed to pay off 2/5 of the loan plus the place probably gained in value. Tenant will likely stay another 5years and then I’m outright owner.

property prices are broadly increasing with M3 money supply. So given the current central bank policy will only go up. Don’t buy any bonds or similar. Yields are hugely negative.

https://tradingeconomics.com/euro-area/money-supply-m3

The only advice I have is:

1.rather pay a bit more for a good area where you are guaranteed to get professional tenants. Check linkedIn etc once you have their name. If the work in an accounting/ law/ college job in a science/professional subject they are unlikely to not be able to pay any court imposed fines/repayments.

2.massive preference for international/European tenant over Irish person. Sounds harsh but reality is Irish people have a massive entitlement sponger attitude. Even those in white collar jobs. Much rather rent to an Indian IT guy.

MakersMark

As a landlord of more than one property, I wouldn't buy another.

In fact I've just sold one.

Doesn't make financial sense, and with a Sinn Fein government looming itll get even worse.

The only properties I'll be keeping are those with no mortgage and those in which i have no intention of living in.

MakersMark

There's also a reason why 80 small landlords a week are selling their property.

Its not because its a gravy train!

Despite what the Shinbots say.

J_1980

Actually reading about your situation living at home :

i would buy a property with multiple bedrooms. As your living at home, you cAn make this your “primary address”. Occupy the smallest bedroom yourself and rent out the 2 other bedrooms as a room let. Up to 14k is tax free (rent a room relief) and you’ll have no issues with bad tenants as rotten apples can be kicked out with no notice.

KevRossi

https://www.boards.ie/discussion/comment/118797077#Comment_118797077

^This.

Don't do it unless you're leasing to a corporation, or better still, also living in the place.

My brother has rented the same house for 25 years, he always has it as his home address and he keeps the box room for himself. Rarely had trouble, but once in a while someone shows up living there who is just trouble. He gives them a couple of weeks notice and that's it. Only way to do it IMO.

MakersMark

https://www.boards.ie/discussion/comment/118797131#Comment_118797131

If its not his genuine primary residence, he's taking a chance with both Revenue and the RTB.

Just takes one tenant who knows the rules.

ballyharpat

https://www.boards.ie/discussion/comment/118792690#Comment_118792690

I've been a landlord since 2012, started with one, now have 5.

When I asked questions on here, I was given the same negative experiences, reasons why property is not a safe investment , tenants not paying rent etc.

So, here's the negatives I've experienced-I had a tenant that was supposed to stay for 5 years, she moved out after 18 months, and I had not checked on the property, after the first 6 months, as I said, after 5 years, I'll just renovate. She didn't 'damage' anything, but left it so filthy, I had to sugar soap the walls and remove stickers from paint, meaning I had to fill the paint 'holes'. I had to repaint everything as well. I was working full time as well, so it was a bit of stress.

I had 2 tenants in the pandemic that tried to take advantage of the 'moratorium' on mortgage for landlords and decided that since I did not have to pay a mortgage, they did not have to pay rent. It took 2 months to get the paperwork together to give them their eviction notices, upon receiving them, they paid all rent and arrears and I issued each a rent increase as much as was legal. They've paid every week since.

I had a 'lease' to the council for 5 years, she changed the locks and caused minor damage in the house, after 5 years. But I had stopped communicating with her as I wanted her out, she was making stuff up about the house to get a council house-which she did. The house was vacant for one month while I did renovations myself-I no longer work, just maintain the properties.

I do not have a mortgage on any property, I paid cash, things were cheap in 2012, and in 2014 I got a cheap fixer upper, in 2016 I bought a fixer upper from the bank and in 2021 I bought a house from the bank that was in ok condition and just needed 2 weeks work and e5000 put into it. I had to borrow money from friends to pay for some of the last one, as I had not enough cash and my rental incomes is not'strong' enough to get a mortgage, I paid back the loans in 4 months. I invest in stocks and has been good , which pays for the properties, but I've also gotten burnt and lost over 90% of my portfolio in one event.

If you are halfway decent with tools, can set boundaries and read and follow through on legal paperwork, as well as be fair and consistent, being a landlord can be profitable, or, it has been for me.

So, just to balance things out a bit-there's the positives. I'm under 50, I'm not sure if I will buy another property or not, I'll see what happens. I like it, I like doing work on them, and it adds a bit of excitement.

The only way I would consider selling one currently, would be if I had another plan for the money, but I cant see that happening.

Wanderingmind

https://www.boards.ie/discussion/comment/118792183#Comment_118792183

How is it taking 4 years to get a tenant to leave?

Claw Hammer

https://www.boards.ie/discussion/comment/118804262#Comment_118804262

Tenant gets the notice they are entitled to which can be up to 8 months. The tenants doesn't leave. Application to the RTB. Adjudication. Appeal to the Tribunal. Possible appeal to the High Court. Determination order. Application to the District Court. Appeal to the circuit court. Send out the Sherriff to take possession. Luck to do it in 4 years. That does not count a potential judicial review of the adjudicator, tribunal, district or circuit court.

PSFarrell

As director of the management company in the complex I own in I hear alot of horror stories from landlords. One entered into a longterm lease to DCC and a mother with 2 teenage kids moved in. Almost immediatly problems started for example the teenagers had a party when the mother was away and a guest spraypainted the common areas and a few cars in the carpark. With all the appeals it took over 2 years to evict them. With high taxes and potetially dodgy tenants it seems a tough business to make good returns.

JimmyVik

https://www.boards.ie/discussion/comment/118806412#Comment_118806412

Anbd dont forget that they all got a stay of execution during the pandemic too, just to add to it.

the 12 th man

https://www.boards.ie/discussion/comment/118804219#Comment_118804219

Glad it's working out for you I guess it's for some people and not others,I was looking after 2 apartments and my head was turned into scrambled egg with the amount of crap associated with them,do you know that something like 80% of damp in apartments is tenant produced (Cooking,drying clothes,bathing etc and not ventilating the place whilst doing it)

JimmyVik

https://www.boards.ie/discussion/comment/118815669#Comment_118815669

Thats true about the damp. I remember year ago we bought an apartment full of damp from a guy at a cheap price to flip. The tenants had just moved out and into the apartment across the hall owned by the guy who sold the apartment to us. It took 6 weeks to do it up as we were working full time in our real jobs.

The told tenant used to wander in every day for a nose into their old apartment. Invited me in one day for a cup of tea and was moaning about the mold that was everywhere in the old apartment (thats why we got it cheap). Now she had only invited me in really to get me to fix a tap, which i fixed. But I was also in that apartment 4 weeks later. She was asking me how to get rid of the mold.

Her new place was now covered in mold.

Two apartments in the same building, exactly the same. Tenant leaves one mold infested one to a lovely clean apartment. 4 weeks later mold everywhere in that new apartment. Lifestyle is nearly always the cause of mold.

Even in my parents house we get mold in the corners of some rooms, especially the bathroom. Once you see it you get up and clean it and its gone for months. Then repeat when it appears again. If you leave it it will just get worse. Clean it as soon as you see it and you will be fine.

BnB

https://www.boards.ie/discussion/comment/118804219#Comment_118804219

Very interesting read.

If you break it down though, I wonder are you making money from being a landlord or are you actually making money out of buying at the right time (in 2012 & 2014) and subsequently, buying smartly and not being afraid to get your hands dirty.

Ultimately, what I am getting at is, would you actually make a lot more money, selling on a few of those properties now and focusing on seeking out and buying those under valued do'er upper type properties around the place. Doing your few months work on them with a bit of investment in materials and specialist labor if required, and getting them back on the market as soon as they are ready ?

I am not in the business myself so I haven't a clue - genuinely just interested in what you think

ballyharpat

https://www.boards.ie/discussion/comment/118815669#Comment_118815669

Oh, I'm definitely aware of that... it seems to be the biggest problem in rental properties.

My tenants had a damp problem in a house, but I had lived in that house for 6 years, never had a problem-turns out they were drying clothes in the sitting room, they were pulling out the part for the extractor, but not turning it on-When I explained it to them, and they stopped doing it, it hasnt happened since, that was 6 years ago.

I went to a rental this year, tore the place apart looking for why there was damp, I arrived unanounced one day to service the boiler, they had a clothes line strung across the living room-this woman was 48 with 3 teenage daughters-imagine the amount of clothes they were drying? it was frustrating that I had to go to so much problem, but I thought a 48 year old woman that has lived in Ireland for 20 years would know better, obviously not.

I sent her on articles to explain the problem as she did not believe me when I said it to her. So she has stopped now, again, damp problem gone. but, really some people 🤯

I consider them teething problems, and I advise them, if they dont listen to me, I have a professional advise them and I let them know that since they are the cause of the problem, they have to pay for the professional-it works :)

ballyharpat

https://www.boards.ie/discussion/comment/118818251#Comment_118818251

Hmmm, you make sense, I guess that 2 would have been bought at the right time-before the increase in price of 2014.

The other 2 were bought in 2017 and 2021, houses were back up in price. One of them, just meant that it had been sitting on the market and was a bank sale, it needed to be practically gutted and a little bit of brute force and pure ignorance, along with 6 weeks of 12 hour days and a bit of know how. it helped that i had tradesmen that did stuff for me and gave me up to 12 months credit, many of them just knew me by word of mouth and were just amazed how I'd transform a place on a low budget, so they were giving me a 'dig out'. I'm getting 15% return on the original price.

The last one I bought was just a pure rental, everything in it was put in to be durable, not to 'look' great, but to look 'good' and be durable and easy to maintain. It was sitting on the market for 18 months. I'm now getting 12% return on the purchase price.

I think some people look for a 'home' when they are looking for a rental property-but then it's hard to get a return, plus, along with being expensive and having nice decor-this has to then be maintained. you do not get a return on it. I put in good showers, good stoves/fridges etc, and get a 5 year warranty on them-this way, they are unlikely to break, and if they do, it's either warranty, or tenants problem.

When something does break, i fix it straight away, and every year, i put in a new floor or something to the properties, I do it myself, so it costs very little, it helps to show the tenant I care about the property, and they are more likely, I find. to maintain it.

I could make more money by selling and buying another fixer upper, or 2 even. but that would mean working-that's something I don't want to be doing too often lol, hence the rentals.

You make some valid points, and as I said to a friend today, if you are not handy, do not go into rentals.The price is one thing, but also the length of time to get a tradesman is brutal, your property could be sitting idle for 12 months or more. I asked a tiler to do a kitchen for me when a tenant moved out, he said it would be 3 months, I went in and had to do it myself.

Other advice I would give, do not buy a crap house and do not have crap items in the house, you will just get crap tenants, if you do it right, and take care of it, the tenants will stay.

Sorry for the long winded answer, I was on a roll 😜

redarmyblues

The day of little buy to let empires is over, the future is institutional.