What should I offer?

Stacksey

So i viewed a place yesterday in blanchardstown, i quiet like it so thinking of putting in an offer, They are looking for €219,000, estate agent said that is negotiable, what offer do you reckon i should put in? thanks

Rory1

What is it? e.g. 2 bed modern apartment?

Stacksey

its a 2 bedroom, 2 bathroom duplex near coolmine train station

ArraMusha

wan forty

Da GOAT

u gotta post a link dude to the property so we can see it.

Stacksey

Sorry this is the link: http://www.property.ie/property-for-sale/4-Anfield-Crescent-Castleknock-Dublin-15/485541/

Diarmuid

Recent rental in the same place for €850. So a 6% yield would put the price at €170k. The asking price would be a yield of 4.6%. This is assuming the rentee paid the asking price. I don't think I'd take less than 6% on a risky (2 bed apartment in the 'burbs) investment. Probably more.

Stacksey

Diarmuid wrote: »

Recent rental in the same place for €850. So a 6% yield would put the price at €170k. The asking price would be a yield of 4.6%. This is assuming the rentee paid the asking price. I don't think I'd take less than 6% on a risky (2 bed apartment in the 'burbs) investment. Probably more.

Thanks for this, so maybe an offer of €160,000?

Diarmuid

Stacksey wrote: »

Thanks for this, so maybe an offer of €160,000?

Sorry but can't help you with that, I was just point out a way to evaluate the price.

stepbar

Diarmuid wrote: »

Recent rental in the same place for €850. So a 6% yield would put the price at €170k. The asking price would be a yield of 4.6%. This is assuming the rentee paid the asking price. I don't think I'd take less than 6% on a risky (2 bed apartment in the 'burbs) investment. Probably more.

What about mgt fees and other expenses?

OP at a rent of 850 p.m (which is fanciful IMO) the price would be as follows:

850 x 12 less 10% expenses (which I'd say wouldn't even cover the mgt fee but anyhow) / 6% x 100 = 153k. In fact I'd say closer to 750 p.m would be acceptable which would reduce the price to 135k. To be fair it's not in Castleknock either more like Carpenterstown (I HATE When EA's do that :mad:). So I guess bid what's it worth to you but you have been warned.

Eglinton

Diarmuid wrote: »

Recent rental in the same place for €850. So a 6% yield would put the price at €170k. The asking price would be a yield of 4.6%. This is assuming the rentee paid the asking price. I don't think I'd take less than 6% on a risky (2 bed apartment in the 'burbs) investment. Probably more.

I think €850 is generous rent for the location. You can get apartments of similar size/standard in the city centre and Dublin 6 for that. I'd say €700 is much more realistic these days. You can get 3 bed houses for that in Galway, Limerick, Sligo etc...

But for the sake of argument lets say €750 rent per month.

OP - Some economists like to use algorithms like the 12/20 princple to determine house price estimates. This works well in places like the US and continental Europe. Ireland over the last 15 years has broken all the normal 'rules'. However, with the bubble well and truly bust, we'll return to the norm, if not below the norm.

So let's work it out:

12/20
Blanchardstown is by no means a bad area but it is a far cry from salubrious.
If we use 12 as the multiple we get €750 x 12 months x 12 factor = €108,000
Even using 20 as the multiple we get €180,000. I would only use 20 for a very salubrious area such as Dublin 4 though. I think 12-15 is more suitable for Blanchardstown and I think rents will drop more than 750 for a place like this.

Now 108-180 is pretty wide band but it's at least an indictator of where the price should be.

Now lets look at if from a different perspective:

Mortgages and Salary
Banks at the moment will only give a multiple of 5 times a person's or couples' combined salary.

No offence (and I don't know what you earn or if you're single) but someone looking to buy a 2 bed apartment in a recession in the far suburbs of County Dublin is probably not on a huge salary, possibly quite young and has no immediate plans for children. (Feel free to give us the details to make the following more accurate)

In my opinion, Blanchardstown is a very working class area and the average person looking to buy such a property is on maybe, 25k to 30k per annum. If you're single then the bank will only lend you a max of €150k (92%) and you will need an additional 14K yourself to make up the rest meaning the most you can afford is €164K. That's not including conveyancing, furniture and other fees.

A mortgage of 150K will cost you about €1,150 (@4% interest) rising to 1,350 (@7% interest). Can you afford repayment within this band? (I've assumed a 15 year mortgage as a I believe any more than that for a 2 bed apartment is insane.Even 15 is probably too long)

FYI, I know that apartments in Sandyford are not shifting for 180K and it's arguably more desirable than Blanchardstown.

So OP, as my figure for how much this place is worth currently, I would pick the mid point of 142K. Certainly not much more and possibly a good bit less. But if you can afford €142K easily, then let that be your guide. Go in at 135K, then 140K and a final offer of 142K. I believe you'll be in negative equity pretty quick if you go much more than that.

Good luck.

EDIT: Not sure where I read Blanchardstown but for Carpenterstown I think the same would apply.

Eglinton

stepbar wrote: »

What about mgt fees and other expenses?

OP at a rent of 850 p.m (which is fanciful IMO) the price would be as follows:

850 x 12 less 10% expenses (which I'd say wouldn't even cover the mgt fee but anyhow) / 6% x 100 = 153k. In fact I'd say closer to 750 p.m would be acceptable which would reduce the price to 135k. To be fair it's not in Castleknock either more like Carpenterstown (I HATE When EA's do that :mad:). So I guess bid what's it worth to you but you have been warned.

Snap!

Stacksey

Eglinton wrote: »

I think €850 is generous rent for the location. You can get apartments of similar size/standard in the city centre and Dublin 6 for that. I'd say €700 is much more realistic these days. You can get 3 bed houses for that in Galway, Limerick, Sligo etc...

But for the sake of argument lets say €750 rent per month.

OP - Some economists like to use algorithms like the 12/20 princple to determine house price estimates. This works well in places like the US and continental Europe. Ireland over the last 15 years has broken all the normal 'rules'. However, with the bubble well and truly bust, we'll return to the norm, if not below the norm.

So let's work it out:

12/20
Blanchardstown is by no means a bad area but it is a far cry from salubrious.
If we use 12 as the multiple we get €750 x 12 months x 12 factor = €108,000
Even using 20 as the multiple we get €180,000. I would only use 20 for a very salubrious area such as Dublin 4 though. I think 12-15 is more suitable for Blanchardstown and I think rents will drop more than 750 for a place like this.

Now 108-180 is pretty wide band but it's at least an indictator of where the price should be.

Now lets look at if from a different perspective:

Mortgages and Salary
Banks at the moment will only give a multiple of 5 times a person's or couples' combined salary.

No offence (and I don't know what you earn or if you're single) but someone looking to buy a 2 bed apartment in a recession in the far suburbs of County Dublin is probably not on a huge salary, possibly quite young and has no immediate plans for children. (Feel free to give us the details to make the following more accurate)

In my opinion, Blanchardstown is a very working class area and the average person looking to buy such a property is on maybe, 25k to 30k per annum. If you're single then the bank will only lend you a max of €150k (92%) and you will need an additional 14K yourself to make up the rest meaning the most you can afford is €164K. That's not including conveyancing, furniture and other fees.

A mortgage of 150K will cost you about €1,150 (@4% interest) rising to 1,350 (@7% interest). Can you afford repayment within this band? (I've assumed a 15 year mortgage as a I believe any more than that for a 2 bed apartment is insane.Even 15 is probably too long)

FYI, I know that apartments in Sandyford are not shifting for 180K and it's arguably more desirable than Blanchardstown.

So OP, as my figure for how much this place is worth currently, I would pick the mid point of 142K. Certainly not much more and possibly a good bit less. But if you can afford €142K easily, then let that be your guide. Go in at 135K, then 140K and a final offer of 142K. I believe you'll be in negative equity pretty quick if you go much more than that.

Good luck.

EDIT: Not sure where I read Blanchardstown but for Carpenterstown I think the same would apply.

Thanks very much for this information, its been very insightful, i'm actually on 40k per year, 28 years old and have mortgage approval for €210,000, your right about sandyford, its a nicer area and is easier to get to with the luas than to carpenterstown , i'm going to sit back and wait a bit longer,

Juwwi

Hi I bought a duplex 5 years ago and if I had the chance again I would'nt of.
There is lots of negatives about duplex's and apartments with very few positives I'd think strongly about a 2 bed house if I was you.

Diarmuid

Eglinton wrote: »

I think €850 is generous rent for the location.

Hey! Don't shoot the messenger! Look at the link I provided. The apartment was removed from daft two days after it was advertised at 850. Now that does not mean it was rented at 850 but it wasn't far from that IMHO.

EDIT:
As for the 12/20 rule of thumb, from my point of view it's easier to quantify that in terms of yield, 12=8.3%, 20=5%. As I said I would want a good return on a 2 bed apartment in this climate. 7%+

Diarmuid

stepbar wrote: »

What about mgt fees and other expenses

Well the yield is just that. If your expenses are high then you need to factor in that in your calculation. I'm not saying the price is good or not, just trying help out the OP with a starting point in how to evaluate the asking price.

stepbar

Diarmuid wrote: »

Well the yield is just that. If your expenses are high then you need to factor in that in your calculation. I'm not saying the price is good or not, just trying help out the OP with a starting point in how to evaluate the asking price.

Not disagreeing with you there. Depending on the mood I'm in I might be ultra negative and go (mgt fees 1.8k, that's coming off...). It really all depends on a number of things and the yield I'm "prepared" to accept is based on that....

There's no exact science to any of this but at the end of the day it boils down to what value the individual places on the property in question. To me a house is where I eat, drink and sleep. I have no real attachment to a house per se, more the area it's in. Everytime I mention yield to an EA, the next question is.. "So this is an investment property purchase?"... "Yeah, mate it is.... an investment in my future!"

But one thing's for sure..... NEVER NEVER EVER LET YOUR HEART RULE YOUR HEAD WHEN IT COMES TO PROPERTY!