Future of property investment

dufferman

is there a future for investing in property? i have recently been looking out for houses in wexford/wicklow area, i reckon now is a good time to get a bargain, there was a house in gorey on the market for 170k,very close to main street with a large side garden, its a 3 bed semi D but needs new electrics,plumbing and furnishings.i put an offer in for 110k and the agent told me id get it for 125k. i got approved for an investment morgage with aib for 125k so i was ready to go. my plan was to turn it into 2 one bed apartments and rent them to the social,i would also have the side garden which i could look for planning later on, the repayments would have been 600 per month and i reckon i could get 450e for each flat per month. but recently i have been doubting wether its a good idea or not, if interest rates go up it eats my profit,at the moment theres a demand for 1 beds but im afraid if all these foreigners start going home il be left with 2 empty flats. are any of u guys in the property game and if so where do u see the future for it? iv always been interested in proprty and would love to start a portfollio.also how do people with several properties guard against interest rate hikes and other pit falls? thanks for your time

gurramok

Classic post

You do realise interest rates are abnormal since Otcober and will start rising(doubling) within the year?
You want to invest in rural Wexford, where is your guaranteed tenant coming from?

"repayments would have been 600 per month and i reckon i could get 450e for each flat per month"

Can you not see the loss making exercise here alone?!

Ste.phen

I think he meant he'd pay 600 a month in total, but get 450 a month each.
The margin on that probably wouldn't stand up to an interest rate rise, and there's probably other costs I'm not considering (vacant periods, maintenance, tax, insurance).
it doesn't look like the *worst* investment idea i've ever seen but I an't help shake the feeling you'd get a better return by just dumping the 600 a month into a decent saving account...

ZYX

dufferman wrote: »

is there a future for investing in property? i have recently been looking out for houses in wexford/wicklow area, i reckon now is a good time to get a bargain, there was a house in gorey on the market for 170k,very close to main street with a large side garden, its a 3 bed semi D but needs new electrics,plumbing and furnishings.i put an offer in for 110k and the agent told me id get it for 125k. i got approved for an investment morgage with aib for 125k so i was ready to go. my plan was to turn it into 2 one bed apartments and rent them to the social,i would also have the side garden which i could look for planning later on, the repayments would have been 600 per month and i reckon i could get 450e for each flat per month. but recently i have been doubting wether its a good idea or not, if interest rates go up it eats my profit,at the moment theres a demand for 1 beds but im afraid if all these foreigners start going home il be left with 2 empty flats. are any of u guys in the property game and if so where do u see the future for it? iv always been interested in proprty and would love to start a portfollio.also how do people with several properties guard against interest rate hikes and other pit falls? thanks for your time

Financially it sounds like a poor idea.
If you are buying for €125k, lets say you can do plumbing, electrics and convert for €25k (which is conservative) then it is costing you €150k. If you assume average interest rates of 6% then it will cost you €9,000 a year. On top of this you have to pay for legal fees, furniture, repairs, insurance, property tax, etc. A basic rule of thumb for these costs is 2% of property value or €3000.
Your income will be 900 per month. Allow for a generous occupancy of 11 months per year. that means your income is 10k a year, if you are very lucky.
Based on these generous figures, if you are very lucky owning this property will cost you €2000 per year. You will be extremely unlikely to make a profit in the long term unless one of two things happen. Either property prices rise substantially above inflation or, rents rise above inflation. Considering you are talking about one bedroomed flats in Gorey, I think the chance of either of these happening is very small.