property question

Dumplin

If someone buys a house and then rents it out, should they expect to make a profit or just pay the morgage?

astrofool

They should expect to get the going rate in the area, whatever that is. A property bought today will not pay off the mortgage in rent, but if you bought say, 10 years ago, you should be making a healthy profit.

Buying a property to let is a business, and should be run like one.

Dumplin

what I want to do is get on the market with my first property and buy a 2 bedroom apartment which I would live in myself and then rent out one of the rooms

ballooba

Dumplin wrote: »

what I want to do is get on the market with my first property and buy a 2 bedroom apartment which I would live in myself and then rent out one of the rooms

Rent should cover the cost of the interest portion of the mortgage plus any sundry expenses such as management fees.

For the purpose of your excercise you should assume you are matching the rent your lodger is paying.

johnnyskeleton

Here's an example:

2 Bed apartment in IFSC

Asking price to buy €378-445k.

90% Mortgage repayments over 20 years €2217.08-2610.05 per month, over 30 years €1795.21-2113.41 per month.

Room rental €700-900 (although there are higher and lower, these are the more realistic).

So in the best of all worlds renting a room would pay half the mortgage (€900 out of 1795.21) in the worst it would pay just over a quarter (€700 out of 2610.05). (rates are from ptsb).

You could probably get better value in an area where house prices are relatively cheap and rents are at a premium, but in all the circumstances you would be very lucky to get a tenant who will pay half your mortgage. What's more, you as the landlord should have to pay for managment fees, bin charges, furniture and repairs etc, and as a general rule of thumb you should allow for one month where the room is vacant every year (when it's between tenants, if the tenant doesn't pay etc).

Moreover, if you are thinking of buying in a small town, you should check to see if there is anyone interested in renting, because there are thousands of rental properties lying vacant across the country due to tax schemes and easy planning permisison.

Dumplin

looking to buy a 2 bed apartment in waterford city for 150k

can you do the above calc based on that

johnnyskeleton

Dumplin wrote: »

looking to buy a 2 bed apartment in waterford city for 150k

can you do the above calc based on that

You can do it yourself using daft and whatever bank you are considering getting a loan off. €150,000 in a mortgage would be about €750-€1,000 per month depending on the length, interest rate etc.

The rental price will vary depending on where in Waterford city you want to buy (e.g. fancy new apartment or converted part of an old house, etc).

Plus, you should bear in mind that interest rates can go up or down, as can rents.